Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

v3.20.2
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. The Company performs an impairment analysis related to goodwill as of December 31 of each year, or when the Company identifies certain triggering events or circumstances that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount.

In the first quarter of 2020, the Company performed an impairment analysis of goodwill and long-lived assets. This impairment analysis was triggered by the sudden and drastic decline in oil prices in March 2020 and the corresponding decrease in the Company’s stock price, operating results and revised forecasts. The Company performed a quantitative goodwill impairment test utilizing the single-step approach to compare the carrying value of the reporting unit to its estimated fair value. The estimated fair value of the reporting unit was determined using a guideline public company method, a form of the market approach. The guideline public company method utilized the trading multiples of similarly traded public companies as they related to our operating metrics. Based on the impairment test, the Company determined that goodwill was not impaired as the reporting unit’s carrying value, after accounting for the impairment charges of long-lived assets, did not exceed the reporting unit’s fair value.

Intangible Assets

A summary of intangible assets as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

 

 

 

Estimated

Useful

Life (in years)

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Book

Value

 

As of September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

10

 

$

1,415

 

 

$

104

 

 

$

1,311

 

Patents

 

20

 

 

12,776

 

 

 

379

 

 

 

12,397

 

 

 

 

 

$

14,191

 

 

$

483

 

 

$

13,708

 

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

10

 

$

3,132

 

 

$

913

 

 

$

2,219

 

Patents

 

20

 

 

22,955

 

 

 

3,348

 

 

 

19,607

 

 

 

 

 

$

26,087

 

 

$

4,261

 

 

$

21,826

 

 

The intangible assets are amortized over the period the Company expects to receive the related economic benefit. Amortization expense related to amortizable intangible assets for the three months ended September 30, 2020 and 2019 was $0.2 million and $1.9 million, respectively, and was included as part of depreciation and amortization in the condensed consolidated statements of operations. Amortization expense related to amortizable intangible assets for the nine months ended September 30, 2020 and 2019 was $0.8 million and $5.7 million, respectively.

 

As discussed above, the Company identified a triggering event in the first quarter of 2020 and performed a quantitative impairment test on long-lived assets. The expected present value method, a form of the income approach, was utilized to determine the fair value of long-lived assets. This method is based on expected cash flows using a risk-adjusted discount rate, which reflects the weighted average cost of capital of similarly traded public companies. As a result of the impairment test performed, the Company recorded in the first quarter of 2020 an impairment charge of $7.2 million to reduce the carrying value of intangible assets from $21.4 million to $14.2 million, representing its fair value on the date of impairment.

 

The estimated amortization expense for future periods is as follows (in thousands):

 

Fiscal Year

 

Estimated

Amortization

Expense

 

Remainder of 2020

 

$

242

 

2021

 

 

966

 

2022

 

 

966

 

2023

 

 

966

 

2024

 

 

966

 

Thereafter

 

 

9,602

 

Total

 

$

13,708