4. Property and Equipment

Property and equipment consist of the following (in thousands):


	Estimated Useful Life (Years)		December 31,
	Estimated Useful Life (Years)		2016			2015
Land		—	$	875		$	3,435
Buildings		39-40		17,389			21,590
Building improvements		5-40		34,957			60,584
Machinery and equipment		3-15		62,992			68,434
Furniture, fixtures and office equipment		5-10		3,556			4,114
Computer equipment and software		3		8,531			9,519
Construction in progress				202			586

				128,502			168,262
Less accumulated depreciation				(99,575	)		(119,513	)

Total property and equipment, net			$	28,927		$	48,749

Depreciation and amortization expense related to property and equipment for the years ended December 31, 2016, 2015 and 2014, was $2.4 million, $11.0 million and $9.8 million, respectively.

The December 31, 2016 amounts do not include the Valencia property because it is classified as held for sale as of that date.

In connection with the Company’s quarterly assessment of impairment indicators, the Company evaluated the continued lower than expected sales of Afrezza as reported by Sanofi throughout the fourth quarter of 2015, revised forecasts for sales of Afrezza provided by Sanofi in the fourth quarter of 2015 and level of commercial production in the fourth quarter of 2015, as well as the uncertainty associated with Sanofi’s announcement during the fourth quarter of their intent to reorganize their diabetes business. These factors indicated potentially significant changes in the timing and extent of cash flows, and the Company therefore determined that an impairment indicator existed in the fourth quarter of 2015 and recorded an impairment for the year ended December 31, 2015. No such indications were identified in the current year ended December 31, 2016.

The Company identified two primary asset groups to be evaluated for impairment: the Danbury manufacturing facility, which currently performs all the manufacturing of Afrezza, and the Valencia facility, which was previously the Company’s corporate headquarters. The Danbury manufacturing facility was the primary asset group that was impacted by the impairment indicators noted above but the Company also evaluated the Valencia facility for potential impairment given the circumstances and identified an impairment charge of $1.8 million based on a valuation utilizing a combination of market, income and cost approaches. Within the Danbury manufacturing facility, the Company identified the machinery and equipment as the primary assets within the asset group as they are associated with the production of Afrezza. As such, the Company performed the fixed asset impairment test and performed the first step to test for recoverability of the Danbury manufacturing facility by utilizing two undiscounted cash flow projections and applying a probability weighted average to those cash flow projections. The first undiscounted cash flow projection was developed under a scenario assuming Sanofi would continue to sell and market Afrezza as the termination of the arrangement by Sanofi was not known as of the balance sheet date. The second undiscounted cash flow projection assumed Sanofi would terminate the Sanofi License Agreement and that the Company would manufacture, sell and market Afrezza independently.

Based on the evaluation performed, the probabilities assigned to the two undiscounted cash flows were not significant to the evaluation due to the projected negative cash flows over the estimation period, and it was determined that the probability weighted undiscounted cash flows were not sufficient to recover the carrying value of the Danbury manufacturing facility. As such, the Company was required to determine the fair value of the Danbury manufacturing facility to recognize an impairment loss if the carrying amount exceeds its fair value. The Company determined the fair value of the Danbury manufacturing facility by applying the highest and best use valuation concept and utilizing the market approach valuation technique to value the machinery and equipment and a combination of the market approach and cost approach in valuing the land, buildings and building improvements. As a result of this assessment, the Company recorded, as of December 31, 2015, an impairment charge of $138.6 million for the Danbury manufacturing facility.

The December 31, 2015 balances have been reclassified to the current year presentation by allocating an impairment of $140.4 million, which was previously disclosed in total, to the individual asset groups. An additional impairment of $0.7 million was charged to the individual asset groups for the year ended December 31, 2016, which is included in property and equipment impairment in the accompany consolidated statements of operations, additionally with a $0.6 million impairment charge related to assets held for sale.