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Goodwill and Intangible Assets
3 Months Ended
Mar. 25, 2012
Goodwill and Intangible Assets  
Goodwill and Intangible Assets

Note 3. Goodwill and Intangible Assets

 

(a)                                 Goodwill

 

The Company performs its annual impairment test for goodwill in accordance with ASC Topic 350, Intangibles—Goodwill and Other (“Topic 350”) as of the last day of each fiscal year or when evidence of potential impairment exists.

 

The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company determines its reporting units by first identifying its operating segments, and then assessing whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. The Company aggregates components within an operating segment that have similar economic characteristics. For the annual and, if necessary, interim impairment assessment the Company identified its reporting units to be its KGS and PSS operating segments.

 

In order to test for potential impairment, the Company estimates the fair value of each of its reporting units based on a comparison and weighting of the income approach, specifically the discounted cash flow method and the market approach, which estimates the fair value of its reporting units based upon comparable market prices and recent transactions and also validates the reasonableness of the implied multiples from the income approach. The Company reconciles the fair value of its reporting units to its market capitalization by calculating its market capitalization based upon an average of its stock price prior to and subsequent to the date the Company performs its analysis and assuming a control premium. The Company uses these methodologies to determine the fair value of its reporting units for comparison to their corresponding book values because there are no observable inputs available (Level 3 hierarchy as defined by FASB ASC Topic 820 Fair Value Measurements and Disclosures (“Topic 820”)).  If the book value exceeds the estimated fair value for a reporting unit, a potential impairment is indicated and Topic 350 prescribes the approach for determining the impairment amount, if any.

 

In June of 2012, the Company committed to a plan to sell certain lines of business associated with antennas, satellite-cased products and fly-away terminals of the non-core businesses acquired in the Integral acquisition. These operations were previously reported in the KGS segment, and in accordance with FASB ASC Topic 205, Presentation of Financial Statements (“Topic 205”), these businesses  have been classified as held for sale and reported in discontinued operations in the accompanying consolidated financial statements.

 

The changes in the carrying amount of goodwill for the three months ended March 25, 2012 are as follows (in millions):

 

 

 

Public
Safety &
Security

 

Government
Solutions

 

Total

 

 

 

 

 

 

 

 

 

Balance as of December 25, 2011

 

$

33.0

 

$

539.0

 

$

572.0

 

Retrospective adjustments

 

 

(0.4

)

(0.4

)

Balance as of December 25, 2011 after retrospective adjustments

 

33.0

 

538.6

 

571.6

 

Additions due to business combinations

 

3.8

 

 

3.8

 

Balance as of March 25, 2012

 

$

36.8

 

$

538.6

 

$

575.4

 

 

The accumulated impairment losses as of December 25, 2011 and March 25, 2012 were $165.4 million; $147.1 million associated with the KGS segment and $18.3 million associated with the PSS segment.

 

(b)                                 Purchased Intangible Assets

 

The following table sets forth information for finite-life intangible assets subject to amortization (in millions):

 

 

 

As of December 25, 2011

 

As of March 25, 2012

 

 

 

Gross
Value

 

Accumulated
Amortization

 

Net
Value

 

Gross
Value

 

Accumulated
Amortization

 

Net
Value

 

Acquired finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

78.1

 

$

(19.8

)

$

58.3

 

$

79.2

 

$

(23.5

)

$

55.7

 

Contracts and backlog

 

60.1

 

(39.6

)

20.5

 

61.0

 

(45.7

)

15.3

 

Developed technology and technical know-how

 

22.1

 

(4.1

)

18.0

 

22.1

 

(4.7

)

17.4

 

Trade names

 

2.6

 

(0.8

)

1.8

 

2.6

 

(0.9

)

1.7

 

Favorable operating lease

 

1.8

 

(0.3

)

1.5

 

1.8

 

(0.3

)

1.5

 

Total

 

$

164.7

 

$

(64.6

)

$

100.1

 

$

166.7

 

$

(75.1

)

$

91.6

 

 

In addition to the finite-life intangible assets listed in the table above, the Company has $24.5 million of indefinite-life intangible assets consisting of trade names at both December 25, 2011 and March 25, 2012.

 

Consolidated amortization expense related to intangible assets subject to amortization was $3.4 million and $10.5 million for the three months ended March 27, 2011 and March 25, 2012, respectively.

 

The estimated future amortization expense of purchased intangible assets with finite lives as of March 25, 2012 is as follows (in millions):

 

Fiscal Year

 

Amount

 

2012 (remaining nine months)

 

$

25.4

 

2013

 

18.5

 

2014

 

16.8

 

2015

 

11.0

 

2016

 

6.3

 

Thereafter

 

13.6

 

Total

 

$

91.6