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Goodwill and Intangible Assets | 12 Months Ended
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May 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Intangible assets other than goodwill and indefinite lived intangible assets are amortized over their estimated useful lives, which range between three and twenty years, on either a straight-line basis over the expected period of benefit or as revenues are earned from the sales of the related products. We periodically review the estimated useful lives of our intangible assets and review such assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Our determination of impairment is based on estimates of future cash flows. If an intangible asset is considered to be impaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset. Goodwill and intangible assets that have indefinite useful lives are not amortized, but rather, are tested for impairment annually or more frequently if impairment indicators arise. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. Goodwill and intangible assets have been recorded at either incurred or allocated cost. Allocated costs were based on respective fair market values at the date of acquisition. We have one intangible asset which has been assigned an indefinite life, the NAMIC trademark, which was acquired as part of our acquisition of Navilyst, and is valued at $28.6 million. We test goodwill for impairment during the third quarter of every fiscal year, and when an event occurs or circumstances change such that it is reasonably possible that impairment exists. For goodwill, the impairment test requires a comparison of the estimated fair value of the reporting unit to which the goodwill is assigned to the sum of the carrying value of the assets and liabilities of that unit. If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the fair value of the reporting unit, the carrying value of the reporting unit’s goodwill is reduced to its implied fair value through an adjustment to the goodwill balance, resulting in an impairment charge. Our determination of impairment is based on estimates of future cash flows. Effective June 1, 2012, we consider our business to be a single segment entity – the development, manufacture and sale on a global basis of medical devices for vascular access, surgery, peripheral vascular disease and oncology. Our chief operating decision maker (CEO) evaluates the various global product portfolios on a net sales basis. Executives reporting in to the CEO include those responsible for operations and supply chain management, research and development, sales, franchise marketing and certain corporate functions. The CEO evaluates profitability, investment and cash flow metrics on a consolidated worldwide basis due to shared infrastructure and resources. Prior to fiscal year 2013, our business was organized as two segments: Vascular and Oncology/Surgery, each under the direction of a general manager with direct responsibility for all sales, marketing and product development activities. To determine fair value, we considered two market-based approaches and an income approach. Under the market-based approaches, we utilized information regarding our own as well as publicly available industry information to determine earnings multiples and sales multiples. Under the income approach, we determined fair value based on estimated future cash flows of the reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. We determined the discounted cash flow as the best indicator to determine fair value and therefore assigned a weight of 75% with the remaining 25% assigned to the market approach. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others. These assumptions are highly sensitive and changes in these estimates could result in impairment. Solely for purposes of establishing inputs for the fair value calculations, we assumed that the current economic conditions would continue through fiscal year 2014, followed by a recovery thereafter. In addition, we applied gross margin assumptions consistent with our historical trends at various revenue levels and used an EBITDA exit multiple of 7.0 to calculate the terminal value of the reporting unit. In addition, we used a discount rate of 12.0% to calculate the fair value of our reporting unit. We completed our annual goodwill impairment test as of December 31, 2013. Our assessment of goodwill impairment indicated that the fair value of our reporting unit exceeded its carrying value and therefore goodwill was not impaired. The fair value of our reporting unit exceeded its carrying value by 7%. The fair value of the reporting unit was reconciled to our current stock market capitalization as of December 31, 2013. Since early November 2008, our stock market capitalization has at times been lower than our shareholders’ equity or book value. However, our reporting unit has continued to generate significant cash flows from operations, and we expect to continue to do so in fiscal 2015 and beyond. Furthermore, we believe that a reasonable potential buyer would offer a control premium for our business that would adequately cover the difference between our stock market capitalization and our book value. We also completed our annual indefinite lived asset (NAMIC trademark) test as of December 31, 2013 using the income approach to determine fair value. Our assessment of the NAMIC trademark indicated that the fair value exceeded the carrying value and therefore the asset was not impaired. Even though we determined that there was no goodwill impairment as of December 31, 2013, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal factors or business climate, an adverse action or assessment by a regulator, unanticipated competition, a material negative change in relationships with significant customers, strategic decisions made in response to economic or competitive conditions, loss of key personnel or a more-likely-than-not expectation that the reporting unit or a significant portion of the reporting unit will be sold or disposed of, would require an interim assessment for the reporting unit prior to the next required annual assessment as of December 31, 2014. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material. Events that could, in the future, result in impairment include, but are not limited to, declining sales for a significant product or in a significant geographic region. Adjustments to goodwill for the fiscal year ended May 31, 2014 and May 31, 2013 are as follows (in thousands):
| Total
Balance, May 31, 2012 | $ | 309,091 |
Goodwill recognized from Vortex business combination | 29,519 |
Goodwill recognized from Microsulis asset acquisition | 19,284 |
Adjustments to Navilyst purchase price allocation | (2,257 | )
Balance, May 31, 2013 | $ | 355,637 |
Acquisition of Clinical Devices B.V. | 4,836 |
Balance, May 31, 2014 | $ | 360,473 |
During fiscal 2014, the change in the carrying value of goodwill is the result of the acquisition of Clinical Devices, B.V. (See Note B.) During the fourth quarter of fiscal 2014, there was an adjustment of $0.5 million to the carrying value of such goodwill related to working capital. During fiscal 2013, the $2.3 million reduction in the carrying value of goodwill is primarily the result of a $0.9 million payment from former stockholders of Navilyst and a $1.6 million increase in the value of deferred tax assets from the Navilyst acquisition, net of $0.2 million of preacquisition Navilyst tax adjustments. As of May 31, 2014 and 2013, intangible assets consisted of the following:
| May 31, 2014
| Gross carrying value |  | Accumulated amortization |  | Net carrying value |  | Weighted average useful life
| (in thousands) |  | (years)
Product technologies | $ | 150,298 |  |  | $ | (32,930 | ) |  | $ | 117,368 |  |  | 10.2
Customer relationships | 86,645 |  |  | (37,848 | ) |  | 48,797 |  |  | 11.9
Trademark—NAMIC | 28,600 |  |  | — |  |  | 28,600 |  |  | Indefinite
In process R&D Acquired | 3,600 |  |  | — |  |  | 3,600 |  |  | Indefinite
Licenses | 7,639 |  |  | (5,211 | ) |  | 2,428 |  |  | 8.4
Trademarks | 6,345 |  |  | (1,882 | ) |  | 4,463 |  |  | 8.0
Distributor relationships | 900 |  |  | (900 | ) |  | — |  |  | 3.0
| $ | 284,027 |  |  | $ | (78,771 | ) |  | $ | 205,256 |  |  |
| May 31, 2013
| Gross carrying value |  | Accumulated amortization |  | Net carrying value |  | Weighted avg useful life
| (in thousands) |  | (years)
Product technologies (1) | $ | 150,181 |  |  | $ | (24,835 | ) |  | $ | 125,346 |  |  | 10.6
Customer relationships (1) | 84,479 |  |  | (30,770 | ) |  | 53,709 |  |  | 14.8
Trademark—NAMIC | 28,600 |  |  | — |  |  | 28,600 |  |  | Indefinite
Licenses | 6,302 |  |  | (4,501 | ) |  | 1,801 |  |  | 9.0
Trademarks | 6,275 |  |  | (1,058 | ) |  | 5,217 |  |  | 9.9
Distributor relationships | 900 |  |  | (900 | ) |  | — |  |  | 3.0
| $ | 276,737 |  |  | $ | (62,064 | ) |  | $ | 214,673 |  |  |
(1) | The Company has revised the previously reported disclosure to appropriately classify the components of intangible assets.
Amortization expense was $16.6 million, $16.6 million and $9.3 million for fiscal 2014, 2013 and 2012, respectively. Annual amortization of these intangible assets is expected to approximate the following amounts for each of the next five fiscal years (in thousands):
2015 | $ | 15,693 |
2016 | 15,696 |
2017 | 16,355 |
2018 | 17,385 |
2019 | 19,928 |

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- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16323-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13816-109267 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16265-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16373-109275 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267 + Details
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