Goodwill and Intangible Assets

9 Months Ended

Nov. 01, 2013

Goodwill and Intangible Assets:

The changes in the carrying value of goodwill for Health and Engineering (HES) and National Security Solutions (NSS) were as follows:



	HES			NSS		Total
	(in millions)
Goodwill at January 31, 2013	$	985		$	719	$	1,704
Corporate reorganizations	(69		)	69		—
Goodwill at November 1, 2013	$	916		$	788	$	1,704

In the second and third quarter of fiscal 2014, the Company forecasted a significant decline in revenue and operating income related to the Health Solutions and Engineering reporting units within its HES reporting segment. The Company determined that this decline constituted a significant change in circumstances which could potentially reduce the fair value of the reporting units below their carrying value. As such, an interim goodwill impairment test was performed (see Note 1) and the Company determined that the estimated fair values of the Health Solutions and Engineering reporting units exceeded its book value and therefore no goodwill impairment charge was recorded.

There were no goodwill impairments during the nine months ended November 1, 2013 and October 31, 2012.

Intangible assets consisted of the following:



	November 1, 2013							January 31, 2013
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
	(in millions)
Finite-lived intangible assets:
Customer relationships	$	116	$	(64	)	$	52	$	154	$	(57	)	$	97
Software and technology	66		(35		)	31		97		(30		)	67
Other	4		(1		)	3		1		(1		)	—
Total finite-lived intangible assets	186		(100		)	86		252		(88		)	164
Indefinite-lived intangible assets:
In-process research and development	10		—			10		10		—			10
Trade names	4		—			4		4		—			4
Total indefinite-lived intangible assets	14		—			14		14		—			14
Total intangible assets	$	200	$	(100	)	$	100	$	266	$	(88	)	$	178

Amortization expense related to amortizable intangible assets was $8 million and $31 million for the three and nine months ended November 1, 2013, respectively, and $12 million and $30 million for the three and nine months ended October 31, 2012, respectively.

During the second quarter of fiscal 2014, the Company determined that certain intangible assets consisting of software and technology, associated with the acquisition of Reveal Imaging Technologies, Inc. in fiscal 2011, were not recoverable due to lower projected revenue levels from the associated products and customers. As a result, the Health and Engineering reportable segment recognized an impairment loss within intangible asset impairment losses in the Company's condensed consolidated statements of income of $30 million to reduce the carrying value of these intangible assets to their estimated fair values. Fair value was estimated using the income approach based on management’s forecast of future cash flows to be derived from the assets’ use (Level 3 under the accounting standard for fair value measurement).

During the three months ended November 1, 2013, the Company determined that certain customer relationship intangible assets associated with the acquisitions of Vitalize and maxIT in fiscal 2012 and 2013, respectively, were not recoverable due to lower projected revenue levels from the associated services and customers. As a result, the Health and Engineering reportable segment recognized an impairment loss within intangible asset impairment losses in the Company's condensed consolidated statements of income of $19 million to reduce the carrying value of these intangible assets to their estimated fair values. Fair value was estimated using the income approach based on management’s forecast of future cash flows to be derived from the assets’ use (Level 3 under the accounting standard for fair value measurement).

During the three and nine months ended November 1, 2013, the Company recognized impairment losses for intangible assets of $19 million and $51 million, respectively, reported within intangible asset impairment losses in the Company's condensed consolidated statements of income. During the three and nine months ended October 31, 2012, the Company did not recognize any impairment losses for intangible assets.

The estimated annual amortization expense related to finite-lived intangible assets as of November 1, 2013 was as follows:



Fiscal Year Ending January 31
	(in millions)
2014 (remainder of the fiscal year)	$	6
2015	22
2016	20
2017	17
2018	11
2019 and thereafter	10
	$	86

Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, dispositions, impairments, the outcome and timing of completion of in-process research and development projects (the assets of which will become amortizable upon completion and placement into service, or will be impaired if abandoned), adjustments to preliminary valuations of intangible assets and other factors.

Leidos, Inc.

Goodwill and Intangible Assets

Goodwill and Intangible Assets:

The changes in the carrying value of goodwill for Health and Engineering (HES) and National Security Solutions (NSS) were as follows:



	HES			NSS		Total
	(in millions)
Goodwill at January 31, 2013	$	985		$	719	$	1,704
Corporate reorganizations	(69		)	69		—
Goodwill at November 1, 2013	$	916		$	788	$	1,704

There were no goodwill impairments during the nine months ended November 1, 2013 and October 31, 2012.

Intangible assets consisted of the following:



	November 1, 2013							January 31, 2013
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
	(in millions)
Finite-lived intangible assets:
Customer relationships	$	116	$	(64	)	$	52	$	154	$	(57	)	$	97
Software and technology	66		(35		)	31		97		(30		)	67
Other	4		(1		)	3		1		(1		)	—
Total finite-lived intangible assets	186		(100		)	86		252		(88		)	164
Indefinite-lived intangible assets:
In-process research and development	10		—			10		10		—			10
Trade names	4		—			4		4		—			4
Total indefinite-lived intangible assets	14		—			14		14		—			14
Total intangible assets	$	200	$	(100	)	$	100	$	266	$	(88	)	$	178

The estimated annual amortization expense related to finite-lived intangible assets as of November 1, 2013 was as follows:



Fiscal Year Ending January 31
	(in millions)
2014 (remainder of the fiscal year)	$	6
2015	22
2016	20
2017	17
2018	11
2019 and thereafter	10
	$	86

- 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.

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