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Goodwill and Intangible Assets | 12 Months Ended
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May 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill Goodwill is not amortized, but rather, is 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. The Company has historically performed its annual goodwill assessment during the third quarter of each fiscal year. During the fourth quarter of fiscal year 2022, the Company changed its annual impairment assessment date from December 31 to April 30 to more closely align the impairment assessment date with the Company's long term planning and forecasting process. Prior to the first quarter of fiscal year 2023, the Company managed its operations as one reporting unit. At the beginning of the first quarter of fiscal year 2023, the Company began to manage its operations as two operating segments and two reporting units, namely Med Tech and Med Device (see Note 18 "Segments and Geographic Information" set forth in the Notes to our consolidated financial statements included in this Annual Report on Form 10-K). As a result of this change, goodwill was required to be allocated to each reporting unit and an interim goodwill impairment assessment was performed at the Company and reporting unit levels. To determine the fair value of the individual reporting units and the entire company as of June 1, 2022, the Company utilized the income approach. The income approach is based on the projected cash flows discounted to their present value using discount rates, that in the Company's judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Other significant assumptions include revenue growth rates, profitability projections, and terminal value growth rates. The market approach was also considered; however, the income approach was chosen as the Company determined it is a better representation of both the Med Tech and Med Device reporting units' projected long-term performance. The fair value of each reporting unit and the Company as a whole was assessed to determine if there was any impairment. The Company compared each reporting unit's fair value to the adjusted carrying value to conclude that there was no impairment for either reporting unit or the Company as a whole. The adjusted carrying value of each reporting unit was used to calculate the Company's book value to compare to its market capitalization at the assessment date. Based on the results of this evaluation, there were no adjustments to goodwill for either reporting unit or the Company as a whole as of August 31, 2022. The Company's annual testing for impairment of goodwill was completed as of April 30, 2023. To determine the fair value of the two reporting units as of April 30, 2023, the Company utilized the income approach for Med Tech and a combination of the income approach and market approach for Med Device. The income approach is based on the projected cash flows discounted to their present value using discount rates, that in the Company's judgment, consider the timing and risk of the forecasted cash flows using internally developed forecasts and assumptions. Under the income approach, the discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Other significant assumptions include revenue growth rates, profitability projections, and terminal value growth rates. The market approach estimates fair values based on the determination of appropriate publicly traded market comparison companies and market multiples of revenue and earnings derived from those companies with similar operating and investment characteristics. The market approach was also considered; however, the income approach was chosen as the Company determined it is a better representation of the Med Tech reporting units' projected long-term performance. For Med Device, both the income and market approaches were considered. The fair value of each reporting unit was assessed to determine if there was any impairment. The Company compared each reporting unit's fair value to the adjusted carrying value to conclude that there was no impairment for either reporting unit. Based on the results of this evaluation, there were no adjustments to goodwill for either reporting unit as of April 30, 2023. The Company concluded that the sale of the dialysis product portfolio and BioSentry tract sealant system biopsy businesses to Merit Medical Systems, Inc. was a triggering event for the Med Device report unit. As the Company concluded that this was the sale of a business, goodwill was allocated to the sale based on the relative fair value of the dialysis and BioSentry businesses and is included in assets held for sale as of May 31, 2023. To determine the fair value of the remaining Med Device reporting unit as of May 31, 2023, the Company utilized the income approach, as it was determined to be a better representation of the remaining Med Device reporting unit's projected long-term performance. Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $14.5 million for the year ended May 31, 2023 to write down the carrying value of the Med Device reporting unit to fair value. The impairment loss is disclosed separately on the face of the accompanying consolidated statements of operations. There were no adjustments to goodwill for the Med Tech reporting unit for the year ended May 31, 2023 other than foreign currency translation adjustments. There were no adjustments to goodwill for the year ended May 31, 2022 other than foreign currency translation adjustments. Goodwill for each reporting unit is allocated as follows:
| Year ended May 31, 2023
(in thousands) | Med Tech |  | Med Device |  | Total
Balance June 1, 2022 | $ | 160,529 |  |  | $ | 40,529 |  |  | $ | 201,058 |
Goodwill impairment | — |  |  | (14,549) |  |  | (14,549) |
Assets held for sale | — |  |  | (25,980) |  |  | (25,980) |
Foreign currency translation adjustments | (1,291) |  |  | — |  |  | (1,291) |
Balance May 31, 2023 | $ | 159,238 |  |  | $ | — |  |  | $ | 159,238 |
Even though the Company determined that there was no goodwill impairment as of April 30, 2023 for the Med Tech reporting unit, the future occurrence of a potential indicator of impairment, such as a significant adverse change in legal, regulatory, business or economic conditions 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 April 30, 2024. Definite Lived Intangible Assets Intangible assets other than goodwill are amortized over their estimated useful lives on a straight-line basis. Useful lives range from two to eighteen years. The Company periodically reviews, and adjusts, if necessary, the estimated useful lives of its intangible assets and reviews such assets or asset groups for impairment whenever events or changes in circumstances indicate that the carrying value of the assets or asset groups may not be recoverable. If an intangible asset or asset group 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. In connection with the triggering event for the Med Device reporting unit as of May 31, 2023, long-lived assets were tested for impairment. As a result of the undiscounted cash flow analysis that was performed, there were no impairments identified as of May 31, 2023. During the fourth quarter of fiscal year 2021, the Company made the decision to abandon the OARtrac product technology and trademark. This resulted in an impairment charge of $14.0 million. The impairment charge is recorded in "Acquisition, restructuring and other items, net", on the Consolidated Statements of Operations (see Note 19 "Acquisition, restructuring and other items, net" as set forth in the Notes to the consolidated financial statements in this Annual Report on Form 10-K). Intangible assets consisted of the following:
| May 31, 2023
(in thousands) | Gross carrying value |  | Accumulated amortization |  | Net carrying value |  |
Product technologies | $ | 211,751 |  |  | $ | (118,314) |  |  | $ | 93,437 |  |  |
Customer relationships | 57,509 |  |  | (40,755) |  |  | 16,754 |  |  |
Trademarks | 7,450 |  |  | (6,660) |  |  | 790 |  |  |
Licenses | 4,837 |  |  | (4,674) |  |  | 163 |  |  |
| $ | 281,547 |  |  | $ | (170,403) |  |  | $ | 111,144 |  |  |
| May 31, 2022
(in thousands) | Gross carrying value |  | Accumulated amortization |  | Net carrying value
Product technologies | $ | 239,467 |  |  | $ | (112,141) |  |  | $ | 127,326 |
Customer relationships | 60,115 |  |  | (38,003) |  |  | 22,112 |
Trademarks | 9,950 |  |  | (7,185) |  |  | 2,765 |
Licenses | 4,837 |  |  | (4,660) |  |  | 177 |
| $ | 314,369 |  |  | $ | (161,989) |  |  | $ | 152,380 |
Amortization expense was $18.8 million, $19.5 million and $18.1 million for fiscal years 2023, 2022 and 2021, respectively. Expected future amortization expense related to the intangible assets for each of the following fiscal years is as follows:
(in thousands) |
2024 | $ | 14,399 |
2025 | 14,380 |
2026 | 14,199 |
2027 | 14,057 |
2028 | 10,827 |
2029 and thereafter | 43,282 |
| $ | 111,144 |

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