Stratasys Ltd. Current report of foreign issuer pursuant to Rules 13a-16 and 15d-16 Amendments

Current report of foreign issuer pursuant to Rules 13a-16 and 15d-16 Amendments

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Note 4. Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of the Companys goodwill for the six months ended June 30, 2016, were as follows:

	(U.S. $ in millions)
Goodwill as of January 1, 2016	$	383.9
Translation differences		2.4
Goodwill as of June 30, 2016	$	386.3

Interim goodwill assessment for the second quarter of 2016

During the second quarter of 2016, the Company determined that certain indicators of potential impairment that required an interim goodwill impairment analysis for its Stratasys-Objet reporting unit existed as of June 30, 2016. These indicators included a further decrease in the Companys share price for a sustained period and lower than expected revenues of its Stratasys-Objet reporting unit for the second quarter of 2016, as well as the current trends and challenges in the evolving 3D printing industry. Accordingly, the Company performed a quantitative assessment for goodwill impairment for its Stratasys-Objet reporting unit.

The Company estimated the fair value of its Stratasys-Objet reporting unit by using an income approach based on discounted cash flows, which utilized Level 3 measures that represent unobservable inputs into the Companys valuation method. The assumptions used to estimate the fair value of the reporting unit were based on expected future cash flows and an estimated terminal value using a terminal year growth rate based on the growth prospects for Stratasys-Objet reporting unit. The Company used an applicable discount rate which reflected the associated specific risks for its Stratasys-Objet reporting unit future cash flows.

The Company concluded that the fair value of its Stratasys-Objet reporting unit exceeds its carrying amount by more than 10%. The carrying amount of goodwill which is assigned to this reporting unit is $386 million.

When evaluating the fair value of Stratasys-Objet reporting unit the Company used a discounted cash flow model. Key assumptions used to determine the estimated fair value include: (a) expected cash flow for 4.5 years following the testing date (including market share, sales volumes and prices, costs to produce and estimated capital needs); (b) an estimated terminal value using a terminal year growth rate of 3.3% determined based on the growth prospects of the reporting unit; and (c) a discount rate of 13.0% based on managements best estimate of the after-tax weighted average cost of capital.

A decrease in the growth rate of 1% or an increase of 1% to the discount rate would reduce the fair value of Stratasys-Objet reporting unit by approximately $69 million and $105 million, respectively.

Based on the Companys assessment as of June 30, 2016, no goodwill was determined to be impaired.

The Company will continue to monitor its Stratasys-Objet reporting unit to determine whether events and changes in circumstances such as significant adverse changes in business climate or operating results, further significant decline in the Companys market capitalization, changes in management's business strategy or changes of management's cash flows projections, warrant further interim impairment testing.

Other Intangible Assets

Other intangible assets consisted of the following:

	June 30, 2016							December 31, 2015
	Carrying Amount,					Net		Carrying Amount,					Net
	Net of		Accumulated			Book		Net of		Accumulated			Book
	Impairment		Amortization			Value		Impairment		Amortization			Value
	U.S. $ in thousands
Developed technology	$	304,754	$	(178,339	)	$	126,415	$	306,657	$	(157,862	)	$	148,795
Patents		18,606		(10,953	)		7,653		17,785		(10,008	)		7,777
Trademarks and trade names		32,506		(15,677	)		16,829		32,443		(14,463	)		17,980
Customer relationships		116,087		(48,035	)		68,052		115,957		(41,708	)		74,249
Non-compete agreements		5,874		(5,874	)		-		5,874		(5,874	)		-
Capitalized software development costs		20,176		(17,809	)		2,367		20,010		(17,351	)		2,659
In process research and development		1,008		-			1,008		1,008		-			1,008
	$	499,011	$	(276,687	)	$	222,324	$	499,734	$	(247,266	)	$	252,468

Amortization expense relating to intangible assets for the three-month periods ended June 30, 2016 and 2015 was approximately $14.5 million and $18.5 million, respectively.

Amortization expense relating to intangible assets for the six-month periods ended June 30, 2016 and 2015 was approximately $29.2 million and $40.5 million, respectively.

As of June 30, 2016, estimated amortization expense relating to intangible assets currently subject to amortization for each of the following periods were as follows:

	Estimated
	amortization expense
	(U.S. $ in thousands)
Remainning 6 months of 2016	$	29,350
2017		58,338
2018		55,602
2019		42,363
2020		15,636
Thereafter		20,027
Total	$	221,316

- 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.

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