ANNUAL REPORT & ACCOUNTS - Somero Enterprises

4. Goodwill and Intangible Assets
The following table reflects intangible assets that are subject to amortization under the
provisions of SFAS No. 142, Goodwill and Other Intangible Assets:
Weighted average
amortization
period
2007
US$000
2008
US$000
Capitalized cost
Customer relationships 8 years 6,300 6,300
Patents 12 years 18,538 18,538
Other intangibles 3 years 159 4
24,997 24,842
Accumulated amortization
Customer relationships 8 years 1,903 2,691
Patents 12 years 3,735 5,278
Other intangibles 3 years 123 1
5,761 7,970
Net carrying costs
Customer relationships 8 years 4,397 3,609
Patents 12 years 14,803 13,260
Other intangibles 3 years 36 3
19,236 16,872
Amortization expense associated with the intangible assets for the years ended 31 December
2007 and 2008 was approximately US$2,384,000 and US$2,332,000, respectively. Future
amortization on intangible assets is expected to be as follows at:
31 December
US$ 000
2009 2,332
2010 2,332
2011 2,332
2012 2,332
9,328
Thereafter 7,544
16,872
As required, the Company performed its annual goodwill impairment analysis by comparing
the fair value of the reporting unit with its carrying amount. As part of this test, the Company
computed fair value by preparing a discounted cash flow analysis, and a comparison of its
market capitalization to that of other comparable companies.
Under the discounted cash flow analysis, the cash flows were determined based on assumptions
for revenue, expenses, working capital requirements, capital expenditures and were discounted
at a weighted average cost of capital. These estimates were based on historical results and the
available information as of 31 December 2008.
The Company calculated fair value by obtaining market data of comparable companies with
similar assets and liabilities. The companies selected for comparison included AIM listed
companies with proprietary technology and similar gross margins to that of the Company.
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