Property and Equipment

6 Months Ended

Jun. 30, 2012

8.	Property and Equipment

Property and equipment, net consists of (in thousands):


	June 30, 2012			December 31, 2011
Land, building and leasehold improvements	$	1,842		$	2,277
Furniture, fixtures and office equipment		3,507			5,755
Plant and machinery		3,300			5,255
Purchased software		719			1,299

Total (1)		9,368			14,586
Accumulated depreciation (2)		(5,445	)		(7,887	)

Property and equipment, net	$	3,923		$	6,699

(1)	Amounts shown are net of $0.4 million for land, building and leasehold improvements, $2.6 million for furniture, fixture and office equipment, $3.6 million for plant and machinery and $0.5million for purchased software, which were impaired during the second quarter of 2012.

(2)	Amounts shown in accumulated depreciation are net of reversal of amounts of accumulated depreciation totaling $3.1 million related to assets impaired. Additional information is provided below.

As described below in Note 9, the Company performed an interim goodwill impairment analysis as of June 30, 2012. In conjunction with its goodwill impairment test, the Company also performed an impairment analysis for its long-lived assets in accordance with its accounting policy for reviewing long-lived assets for impairment. Management determined the estimated undiscounted cash flows and the fair value of the identified long-lived assets to measure the impairment loss and in doing so relied in part upon an independent third-party valuation report. The impairment analysis for long-lived assets indicated that some of the long-lived assets are not recoverable as the sum of estimated future undiscounted cash flows were below the assets’ carrying value. Accordingly, the Company estimated the fair value of these long-lived assets using a discounted cash flow analysis to measure the impairment loss. The discounted cash flow analysis requires estimates of items such as expected revenue, gross margin and operating expenses in order to discount the sum of future independent cash flows, using discount rates which were determined based on an analysis of each individual long-lived asset group and consideration of the aggregate business of the Company. The discount rates used in the present value calculations were in the range of 16% to 20%, except for one asset group where it was 50%. The discount rates were derived from a weighted average cost of capital (“WACC”) analysis, adjusted to reflect additional risks related to each asset’s characteristics. The Company tested the reasonableness of the inputs and outcomes of its discounted cash flow analysis by comparing these items to available market data. As a result of this analysis, the Company concluded that certain of its long-lived assets, specifically property and equipment, were impaired as of June 30, 2012, and recorded an impairment charge of $4.0 million, which is included as part of operating expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2012. Based on this analysis, the Company expects to recover the remaining balance of property and equipment of $3.9 million.

The Company recorded depreciation expense, including amortization expense on capitalized leased assets, in the amount of approximately $0.6 million and $1.1 million during the three and six months ended June 30, 2012, respectively. The net decrease of $2.4 million in accumulated depreciation is due to reversal of amounts of accumulated depreciation totaling $3.1 million related to assets impaired, reduction in accumulated depreciation of $0.2 million related to fixed assets disposed during the six months ended June 30, 2012, reduction in accumulated depreciation of $0.2 million for the change in foreign exchange rates between the balance sheet dates, offset by depreciation expense of $1.1 million recorded during the six months ended June 30, 2012.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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