Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets (Notes)

12 Months Ended

Jul. 31, 2014

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill by reportable segment for the years ended July 31, 2014 and 2013, were as follows:



	IDS			WPS			Die-Cut			Total
Balance as of July 31, 2012	$	367,893		$	276,941		$	31,957		$	676,791
Current year acquisitions	170,180			—			—			170,180
Current year divestitures	(2,882		)	—			—			(2,882		)
Reclassification to assets held for sale	(4,129		)	—			(33,218		)	(37,347		)
Impairment charge	(18,225		)	(172,280		)	—			(190,505		)
Translation adjustments	4,192			(4,454		)	1,261			999
Balance as of July 31, 2013	$	517,029		$	100,207		$	—		$	617,236
Impairment charge	(100,412		)	—			—			(100,412		)
Purchase accounting adjustments	(2,168		)	—			—			(2,168		)
Translation adjustments	(2,160		)	2,508			—			348
Balance as of July 31, 2014	$	412,289		$	102,715		$	—		$	515,004

Goodwill decreased by $102,232 during fiscal 2014. The decline in the balance consisted of an impairment charge of $100,412 recognized on the Company's PeopleID reporting unit, and purchase accounting adjustments of $2,168 for the deferred tax impact primarily related to the release of escrow from the fiscal 2013 acquisition of Precision Dynamics Corporation ("PDC"). These decreases were partially offset by the positive effects of foreign translation of $348.

Goodwill at July 31, 2014 included $118,637 and $172,280 of accumulated impairment losses within the IDS and WPS segments, respectively, for a total of $290,917. Goodwill at July 31, 2013 included $18,225 and $172,280 of accumulated impairment losses within the IDS and WPS segments, respectively, for a total of $190,505.

The annual impairment testing performed on May 1, 2014, in accordance with ASC 350, “Intangibles - Goodwill and Other” (“Step One”) indicated that each of the following reporting units had a fair value substantially in excess of its carrying value: IDS Americas & Europe, IDS APAC, WPS Americas, WPS Europe, and WPS APAC. The results of the Step One analysis completed over the Company's People ID reporting unit indicated that it was potentially impaired.

PeopleID Goodwill Impairment

The PeopleID reporting unit consists primarily of the Company's acquisition of PDC from fiscal 2013, as well as the existing Brady PeopleID business. Organic sales within the PDC business declined in the low single digit percentages from fiscal 2013 to fiscal 2014. Hospital admission rates are the primary driver of PDC's sales under its existing strategy, and there was a decline of approximately 2% in these rates during fiscal 2014. Management has revisited its planned growth and profit for the PDC business and concluded that the growth may not materialize as expected given slower than anticipated industry growth and fewer sales synergies than originally planned.

Management believes that strategy modifications will improve organic sales and profit within the PeopleID business in future years, but there is inherent risk in the revised strategy and the changing healthcare industry. As such, the Company's annual goodwill impairment analysis ("Step One") reflected the risk in the strategy and the decline in fiscal 2014 sales and profitability, which occurred during a period of time in which hospital admission rates were declining. In addition, the PDC business fell short of internal forecasts, resulting in the conclusion that the PeopleID reporting unit failed Step One as the resulting fair value was less than the carrying value of the reporting unit.

The Company proceeded to measure the amount of the potential impairment ("Step Two") with the assistance of a third party valuation firm utilizing a discounted cash flow model and market multiples approach. In Step Two of the goodwill impairment test, the Company determined the implied fair value of the goodwill and compared it to the carrying value. The Company allocated the fair value of the PeopleID reporting unit to its assets and liabilities as if the reporting unit had been acquired in a business combination. The excess fair value of the reporting unit over the fair value of its identifiable assets and liabilities was the implied fair value of goodwill. Upon completion of the assessment, the Company recognized a goodwill impairment charge of $100,412 during fiscal 2014.

Other Intangible Assets

Other intangible assets include patents, tradenames, customer relationships, non-compete agreements and other intangible assets with finite lives being amortized in accordance with the accounting guidance for other intangible assets. The net book value of these assets was as follows:



	July 31, 2014								July 31, 2013
	Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Amortized other intangible assets:
Patents	5	$	11,656	$	(10,160	)	$	1,496	5	$	11,053	$	(9,597	)	$	1,456
Tradenames and other	5	15,366		(10,706		)	4,660		5	15,289		(8,398		)	6,891
Customer relationships	7	168,525		(114,363		)	54,162		8	261,076		(144,620		)	116,456
Non-compete agreements and other	4	10,089		(9,622		)	467		4	14,942		(14,215		)	727
Unamortized other intangible assets:
Tradenames	N/A	30,229		—			30,229		N/A	31,321		—			31,321
Total		$	235,865	$	(144,851	)	$	91,014		$	333,681	$	(176,830	)	$	156,851

The value of goodwill and other intangible assets in the consolidated balance sheets at July 31, 2014 and 2013, differs from the value assigned to them in the original allocation of purchase due to the effect of fluctuations in foreign exchange rates. In conjunction with the goodwill impairment test of the PeopleID reporting unit, finite and indefinite-lived other intangible assets associated with the reporting unit were written down to fair value. As a result, the Company recognized an impairment charge of $48,139 during fiscal 2014.

Amortization expense on intangible assets during fiscal 2014, 2013, and 2012 was $17,871, $17,148 and $10,576, respectively. The amortization over each of the next five fiscal years is projected to be $12,474, $10,267, $7,747, $6,850 and $6,305 for the fiscal years ending July 31, 2015, 2016, 2017, 2018 and 2019, respectively.

- 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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