Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Note 5. Goodwill and Intangible Assets

Intangible Assets

The following table presents the Company’s purchased intangible assets as of September 30, 2015 (in thousands):


	Gross Intangibles		Accumulated Amortization		Net Intangibles		Weighted Average Amortization Period (years)
Customer relationships	$	103,294	$	(55,414)	$	47,880		8
Trade names and trademarks		11,701		(5,132)		6,569		8
Non-compete agreements		1,193		(1,193)		-		2
Proprietary software		850		(850)		-		2
Favorable lease agreement		449		(449)		-		2
Content library		504		(50)		454		2

	$	117,991	$	(63,088)	$	54,903		8

The following table presents the Company’s purchased intangible assets as of December 31, 2014 (in thousands):
	Gross Intangibles		Accumulated Amortization		Net Intangibles		Weighted Average Amortization Period (years)
Customer relationships	$	100,719	$	(47,571)	$	53,148		8
Trade names and trademarks		11,600		(4,128)		7,472		8
Non-compete agreements		1,209		(1,209)		-		2
Proprietary software		850		(850)		-		2
Favorable lease agreement		449		(449)		-		2

	$	114,827	$	(54,207)	$	60,620		8

The Company’s estimated future amortization expense for the succeeding years relating to the purchased intangible assets resulting from acquisitions completed prior to September 30, 2015, is as follows (in thousands):


Years Ending December 31,	Amount

2015 (remaining three months)	$	3,557
2016		14,587
2017		14,461
2018		8,242
2019		7,644
2020		5,138
2021 and thereafter		1,274

Goodwill

Changes in goodwill consist of the following (in thousands):


	January 1, 2015		Acquisition ⁽¹⁾		Effect of Foreign Currency		September 30, 2015
Americas	$	193,831	$	-	$	(6,390)	$	187,441
EMEA		-		9,574		(103)		9,471

	$	193,831	$	9,574	$	(6,493)	$	196,912

⁽¹⁾ See Note 2, Acquisition of Qelp, for further information.

The Company has five reporting units with goodwill and performs its annual goodwill impairment test during the third quarter, or more frequently, if indicators of impairment exist.

For the annual goodwill impairment test, the Company elected to forgo the option to first assess qualitative factors and performed its annual two-step goodwill impairment test as of July 31, 2015. Under ASC 350, the carrying value of assets is calculated at the reporting unit level. The quantitative assessment of goodwill includes comparing a reporting unit’s calculated fair value to its carrying value. The calculation of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth, the useful life over which cash flows will occur and determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. If the fair value of the reporting unit is less than its carrying value, goodwill is considered impaired and an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than its carrying value.

The process of evaluating the fair value of the reporting units is highly subjective and requires significant judgment and estimates as the reporting units operate in a number of markets and geographical regions. The Company used an average of the income and market approaches to determine its best estimates of fair value which incorporated the following significant assumptions:

●

Revenue projections, including revenue growth during the forecast periods;

●

EBITDA margin projections over the forecast periods;

●

Estimated income tax rates;

●

Estimated capital expenditures; and

●

Discount rates based on various inputs, including the risks associated with the specific reporting units as well as their revenue growth and EBITDA margin assumptions.

As of July 31, 2015, the Company concluded that goodwill was not impaired for all five of the reporting units. While the fair values of four of the reporting units were substantially in excess of their carrying value, the Qelp reporting unit’s fair value approximated its carrying value due to the proximity to the acquisition date of July 2, 2015. The newly acquired Qelp reporting unit’s carrying value was $15.6 million at July 31, 2015, including $9.4 million of goodwill. The estimate of fair value was based on generally accepted valuation techniques and the significant assumptions outlined above.

- 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 + Details