GOODWILL AND OTHER INTANGIBLE ASSETS

We had intangible assets with a net book value of $78.8 million and $84.6 million as of June 24, 2012 and December 25, 2011, respectively.

The following table reflects the components of intangible assets as of June 24, 2012 and December 25, 2011:



		June 24, 2012				December 25, 2011
(amounts in thousands)	Amortizable Life (years)	Gross Amount		Gross Accumulated Amortization		Gross Amount		Gross Accumulated Amortization
Finite-lived intangible assets:
Customer lists	6 to 20	$	80,250	$	45,978	$	81,348	$	43,945
Trade name	1 to 30	29,095		18,029		30,007		18,237
Patents, license agreements	3 to 14	59,134		47,782		60,249		47,704
Other	2 to 6	7,150		6,504		7,160		5,830
Total amortized finite-lived intangible assets		175,629		118,293		178,764		115,716

Indefinite-lived intangible assets:
Trade name		21,506		—		21,509		—
Total identifiable intangible assets		$	197,135	$	118,293	$	200,273	$	115,716

Amortization expense for the three and six months ended June 24, 2012 was $2.5 million and $5.1 million, respectively.

Amortization expense for the three and six months ended June 26, 2011 was $2.8 million and $5.2 million, respectively.

Estimated amortization expense for each of the five succeeding years is anticipated to be:



(amounts in thousands)
2012	$	10,496
2013	$	8,780
2014	$	8,290
2015	$	8,133
2016	$	7,870

The changes in the carrying amount of goodwill are as follows:



(amounts in thousands)	Shrink Management Solutions			Apparel Labeling Solutions			Retail Merchandising Solutions			Total
Balance as of December 26, 2010	$	165,324		$	3,915		$	62,086		$	231,325
Acquired during the year	—			58,008			—			58,008
Discontinued operations	(3,782		)	—			—			(3,782		)
Translation adjustments	269			661			(378		)	552
Balance as of December 25, 2011	$	161,811		$	62,584		$	61,708		$	286,103
Purchase accounting adjustment	—			1,624			—			1,624
Impairment losses	—			(64,437		)	—			(64,437		)
Translation adjustments	(2,805		)	229			(2,197		)	(4,773		)
Balance as of June 24, 2012	$	159,006		$	—		$	59,511		$	218,517

The following table reflects the components of goodwill as of June 24, 2012 and December 25, 2011:



	June 24, 2012						December 25, 2011
(amounts in thousands)	Gross Amount		Accumulated Impairment Losses		Goodwill, Net		Gross Amount		Accumulated Impairment Losses		Goodwill, Net
Shrink Management Solutions	$	207,382	$	48,376	$	159,006	$	213,836	$	52,025	$	161,811
Apparel Labeling Solutions	83,236		83,236		—		81,662		19,078		62,584
Retail Merchandising Solutions	127,467		67,956		59,511		130,640		68,932		61,708
Total goodwill	$	418,085	$	199,568	$	218,517	$	426,138	$	140,035	$	286,103

On January 28, 2011, Checkpoint Systems, Inc. and certain of its direct subsidiaries (collectively, the “Company”) entered into a Master Purchase Agreement. The Master Purchase Agreement outlines the general terms and conditions pursuant to which the Company agreed to acquire, through the acquisition of equity and/or assets, a retail apparel and footwear product identification business which designs, manufactures and sells tags and labels, brand protection, and EAS solutions/labels (collectively, the “Shore to Shore businesses” or "Shore to Shore"). The acquisition was settled on May 16, 2011 for approximately $78.7 million, net of cash acquired of $1.9 million and the assumption of debt of $4.2 million. The purchase price was funded by $66.7 million of cash from operations and $9.2 million of borrowings under our Senior Secured Credit Facility, and includes the acquisition of the following:


•	100% of the voting equity interests of J&F International, Inc. (U.S.), Shore to Shore Far East (Hong Kong), Shore to Shore MIS (India), Shore to Shore Lacar SA (Guatemala), Adapt Identification (HK) Ltd., and W Print Europe Ltd. (UK);


•	Assets of Shore to Shore, Inc. (U.S.), Shanghai WH Printing Co. Ltd., Wing Hung (Dongguan) Printing Co., Ltd., and Wing Hung Printing Co., Ltd. (U.S.);


•	51% of the voting equity interests of Shore to Shore PVT Ltd. (Sri Lanka);


•	50% of the voting equity interests of the Cybsa Adapt SA de CV (El Salvador) joint venture. In accordance with ASC 323 “Investments—Equity Method and Joint Ventures”, we have applied the Equity Method in recording this joint venture.

During the second quarter of 2012, we finalized the purchase accounting of the acquisition of the Shore to Shore businesses. At June 24, 2012, the financial statements reflect the final allocation of the purchase price based on estimated fair values at the date of acquisition, including $17.1 million in Property, Plant, and Equipment, $7.1 million in Accounts Receivable, and $2.2 million in Inventories. This final allocation resulted in acquired goodwill of $59.7 million, of which $9.8 million is tax deductible, and intangible assets of $10.5 million. The intangible assets were composed of a non-compete agreement ($0.3 million), customer lists ($9.8 million), and trade names ($0.4 million). The useful lives were 5 years for the non-compete agreement, 10 years for the customer lists, and 7.5 months for the trade names.

The purchase price included a payment to escrow of $17.5 million related to the 2010 performance of the acquired business. This amount is subject to adjustment pending final determination of the 2010 performance and could result in an additional purchase price payment of up to $6.3 million. We are currently involved in an arbitration process in order to require the seller to provide audited financial information related to the 2010 performance. When this information is received, the final adjustment to the purchase price will be recognized through earnings.

Acquisition costs incurred in connection with the transaction are recognized within acquisition costs in the Consolidated Statement of Operations and approximate $0.1 million and $0.1 million for the three and six months ended June 24, 2012 and $2.0 million and $2.2 million for the three and six months ended June 26, 2011, respectively.

As the Company acquired 51% of the outstanding voting shares of Shore to Shore PVT Ltd. (Sri Lanka) in exchange for $1.7 million in cash, we have classified the non-controlling interests as equity on our Consolidated Balance Sheet as of June 24, 2012 and December 25, 2011, and presented net income attributable to non-controlling interests separately on our Consolidated Statement of Operations for the three and six months ended June 24, 2012 and June 26, 2011. The fair value of the non-controlling interest was estimated by applying a market approach. Key assumptions include control premiums associated with guideline transactions of entities deemed to be similar to Shore to Shore PVT Ltd. (Sri Lanka), and adjustments because of the lack of control that market participants would consider when measuring the fair value of the non-controlling interest.

The results from the acquisition for the three and six months ended June 24, 2012 are included in the Apparel Labeling Solutions segment and were not material to the Consolidated Financial Statements (revenues of $14.1 million and $23.8 million and net earnings of $0.4 million and $0.2 million, respectively).

We perform an assessment of goodwill by comparing each individual reporting unit’s carrying amount of net assets, including goodwill, to their fair value at least annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our 2011 annual impairment test indicated no impairment of our goodwill assets.

During the second quarter of 2012, we experienced deterioration in revenues and gross margins in each of our segments. Due to the declines in operating results in our segments, a change in management, and a revised strategic focus, we determined that impairment triggering events had occurred and that an assessment of goodwill was warranted. This resulted in the Company's assessment that the carrying value of the Apparel Labeling Solutions reporting unit exceeded its fair value. The basis of the fair value was determined by projecting future cash flows using assumptions concerning future operating performance and economic conditions that may differ from actual cash flows. Estimated future cash flows are adjusted by an appropriate discount rate derived from our market capitalization plus a suitable control premium at the date of the evaluation. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate and through our stock price that we use to determine our market capitalization. As a result of our interim impairment test, a $64.4 million non-cash impairment charge was recorded as of June 24, 2012 in our Apparel Labeling Solutions segment. The goodwill impairment expense was due to the decline in estimated future Apparel Labeling Solutions cash flow impacted by our plan to refocus the business, coupled with recent declines in revenue and profitability. The impairment charge was recorded in goodwill impairment on the Consolidated Statement of Operations. While we currently believe that our projected results will not result in future impairment, a continued deterioration in results could trigger a future impairment in our reporting units.

Our Shrink Management Solutions (SMS) segment is composed of four reporting units. The fair value of two of the four reporting units, Europe SMS and Asia Pacific SMS, exceeded their respective carrying values as of the date of the interim impairment test by approximately 10% and 8%, respectively. As of June 24, 2012, the goodwill for these two reporting units totaled $72.0 million for Europe SMS and $12.0 million for Asia Pacific SMS. In determining the fair value of these reporting units, our projected cash flows did not contain significant growth assumptions. A 10% decline in operating results, or a 1.10% increase in our discount rates could result in future decreases in the fair values of these reporting units which could result in future impairments. The other reporting units within the SMS segment exceeded their respective carrying values by a significant margin. During the first six months of 2012, we experienced a decline in operating results as compared to the forecasted amounts in the most recent annual impairment test. While we currently believe that our projected results will not result in future impairment, a continued deterioration in results could trigger a future impairment in these reporting units.

Our Retail Merchandising Solutions (RMS) segment is composed of two reporting units. The fair value of one of the two reporting units, Europe RMS, exceeded its respective carrying value as of the date of the interim impairment test by approximately 11%. As of June 24, 2012, the goodwill for the Europe RMS reporting unit totaled $59.3 million. In determining the fair value of this reporting unit, our projected cash flows did not contain significant growth assumptions. A 11% decline in operating results, or a 1.60% increase in our discount rate could result in a future decrease in the fair value of this reporting unit which could result in a future impairment. The other reporting unit within the Retail Merchandising segment exceeded its carrying value by a significant margin. During the first six months of 2012, we experienced a decline in operating results as compared to the forecasted amounts in the most recent annual impairment test. While we currently believe that our projected results will not result in future impairment, a continued deterioration in results could trigger a future impairment in these reporting units.

As a result of interim impairment indicators in the second quarter of 2012, we performed a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the long-lived assets in our Apparel Labeling Solutions reporting unit to their carrying amounts. The undiscounted cash flow analysis resulted in no impairment charge in the quarter ended June 24, 2012. While we currently believe that our projected results will not result in future impairment, a continued deterioration in results could trigger a future impairment.

For the year ended December 25, 2011, we classified our Banking Security Systems Integration business unit as held for sale. The Banking Security Systems Integration business unit had recorded goodwill of $3.8 million related to a series of three acquisitions completed during 2007 and 2008. As a result of the conclusion to report the business as held for sale, we tested the goodwill of the disposal group and determined that there was a $3.4 million impairment charge. We also recorded an impairment of definite-lived customer relationships of $2.8 million as a result of our decision to sell the Banking Security Systems Integration business unit. The impairment charges were recorded in discontinued operations on the Consolidated Statement of Operations during the fourth quarter ended December 25, 2011.