Note 7. Other Intangible Assets

Other intangible assets comprise the following:


(in millions)	2013			2012
Gross cost:
– Product rights	$	34.0		$	0.0
– Brand names		2.9			0.0
– Technology		33.9			25.4
– Customer relationships		58.7			44.2
– Patents		2.9			2.9
– Internally developed software and other costs		19.5			10.1
– Non-compete agreements		1.5			1.5
– Marketing related		22.1			22.1

		175.5			106.2

Accumulated amortization:
– Product rights		(1.3	)		0.0
– Brand names		(0.1	)		0.0
– Technology		(7.9	)		(6.0	)
– Customer relationships		(16.8	)		(12.7	)
– Patents		(2.6	)		(2.3	)
– Internally developed software and other costs		(1.0	)		0.0
– Non-compete agreements		(0.7	)		0.0
– Marketing related		(18.3	)		(16.6	)

		(48.7	)		(37.6	)

	$	126.8		$	68.6

Product rights

Following the acquisition of Chemsil on August 30, 2013, the Company has recognized an intangible asset of $34.0 million in respect of Chemsil’s product rights portfolio. This asset has an expected life of 9 years and is being amortized on a straight-line basis over this period. An amortization expense of $1.3 million was recognized in 2013 (2012 – $0.0 million) in cost of goods sold. No residual value is anticipated.

Brand names

Following the acquisition of Bachman on November 4, 2013, the Company recognized an intangible asset of $2.9 million in respect of Bachman’s brand names. This asset has an expected life of 5 years and is being amortized on a straight-line basis over this period. An amortization expense of $0.1 million was recognized in 2013 (2012 – $0.0 million) in selling, general and administrative expenses. No residual value is anticipated.

Technology

Following the acquisition of Bachman on November 4, 2013, the Company recognized an intangible asset of $8.5 million in respect of Bachman’s core chemistry know-how of oilfield chemicals. This asset has an expected life of 15 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

Following the acquisition of Strata on December 24, 2012, the Company recognized an intangible asset of $18.3 million in respect of technological know-how of the mixing and manufacturing process, patents which protect the technology and the associated product branding. This asset has an expected life of 16.5 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

Following the acquisition of the remaining 50% of Innospec Fuel Specialties LLC on July 8, 2004, the Company recognized an intangible asset of $2.3 million in respect of various technological approvals the business has received from certain military and civilian authorities. The approvals act as a barrier to entry to any potential competitor in the market who would wish to supply these products. This asset has an expected life of 10 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

An intangible asset of $4.8 million was recognized in respect of a number of specialized manufacturing processes carried out by Innospec Widnes Limited following the acquisition of that entity in August 2004. This asset has an expected life of 10 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

An amortization expense of $1.9 million was recognized in 2013 (2012 – $0.7 million) in cost of goods sold.

Customer relationships

Following the acquisition of Bachman on November 4, 2013, the Company recognized an intangible asset of $14.5 million in respect of Bachman’s long-term customer relationships. This asset has a weighted average expected life of 14.5 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

Following the acquisition of Strata on December 24, 2012, the Company recognized an intangible asset of $28.2 million in respect of long-term customer relationships. This asset has an expected life of 11.5 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

Following the acquisition of Finetex (now merged into Innospec Active Chemicals LLC) in January 2005, the Company recognized an intangible asset totaling $7.1 million, $4.2 million of which was in relation to customer lists acquired. This asset has an expected life of 13 years and is being amortized on a straight-line basis over this period. No residual value is anticipated.

Intangible assets were recognized in 2004 in respect of both the Innospec Fuel Specialties LLC ($9.0 million) and Innospec Widnes Limited ($2.8 million) acquisitions, and relate to ongoing customer relationships. These assets have an expected life of 10 years and are being amortized on a straight-line basis over this period. No residual value is anticipated.

An amortization expense of $4.1 million was recognized in 2013 (2012 – $1.5 million) in selling, general and administrative expenses.

Patents

Following the acquisition of Finetex, the Company recognized an intangible asset of $2.9 million in respect of patents and trademarks. These have an expected life of 10 years and are being amortized on a straight-line basis over this period. No residual value is anticipated. An amortization expense of $0.3 million was recognized in 2013 (2012 – $0.3 million) in cost of goods sold.

Internally developed software and other costs

We are continuing with the implementation of our new, company-wide, information system platform, following the successful deployment at the majority of our U.S. sites in the third quarter of 2013. At December 31, 2013 we had capitalized $19.5 million (2012 – $10.1 million) in relation to this internally developed software. This asset has an expected life of 5 years and is being amortized on a straight-line basis over this period. No residual value is anticipated. An amortization expense of $1.0 million was recognized in 2013 (2012 – $0.0 million) in selling, general and administrative expenses.

Non-compete agreements

Following the acquisition of Strata on December 24, 2012, the Company recognized an intangible asset of $1.5 million in respect of a non-compete agreement. This asset has an expected life of 2 years and is being amortized on a straight-line basis over this period. No residual value is anticipated. An amortization expense of $0.7 million was recognized in 2013 (2012 – $0.0 million) in selling, general and administrative expenses.

Marketing related (formerly Ethyl)

An intangible asset of $28.4 million was recognized in the second quarter of 2007 in respect of Ethyl Corporation foregoing their entitlement effective April 1, 2007 to a share of the future income stream under the sales and marketing agreements to market and sell TEL. In 2008, contract provisions no longer deemed necessary of $6.3 million were offset against the intangible asset. The amount attributed to the Octane Additives reporting segment was being amortized straight-line to December 31, 2012 and the amount attributed to the Fuel Specialties reporting segment is being amortized straight-line to December 31, 2017. Effective October 1, 2011, the Company extended its estimate for the future life of the Octane Additives segment from December 31, 2012 to December 31, 2013 and therefore prospectively adjusted the amortization period for the amount attributed to the Octane Additives segment. An amortization expense of $1.7 million was recognized in 2013 (2012 – $1.6 million) in cost of goods sold.

Amortization expense

The aggregate of other intangible asset amortization expense was $11.1 million, $4.1 million and $4.4 million in 2013, 2012 and 2011, respectively, of which $3.8 million, $2.6 million and $2.9 million, respectively, was recognized in cost of goods sold, and the remainder was recognized in selling, general and administrative expenses.

Future amortization expense is estimated to be as follows for the next five years:


(in millions)
2014	$	16.6
2015	$	16.6
2016	$	16.6
2017	$	16.6
2018	$	14.3