Note 7 - Goodwill And Other Intangible Assets

6 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 7 -  GOODWILL AND OTHER INTANGIBLE ASSETS

Carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with ASC Topic 350, “Intangibles – Goodwill and Other.”  The Company will first assess qualitative factors in order to determine if goodwill is impaired in accordance with ASU 2011 – 08, “Intangible – Goodwill and Other (Topic 350).” If through the qualitative assessment it is determined that it is more likely than not that goodwill is not impaired, no further testing is required. If it is determined more likely than not that goodwill is impaired, the Company’s impairment testing continues with the estimation of the fair value of goodwill and indefinite-lived intangible assets using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level, that requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment.  The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge.  Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests.  Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.  

The Company identified its reporting units in conjunction with its annual goodwill impairment testing.  The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing.  These include operating results, forecasts, anticipated future cash flows and marketplace data, to name a few.  There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

The Company performed an interim goodwill impairment test as of September 30, 2011.  The continuing effects of the recession on some of the Company’s markets, the decline in discounted cash flows associated with these markets, and the decline in the Company’s stock price led management to believe that an other than annual goodwill impairment test was required for three of the four reporting units that contain goodwill. As a result of the test, it was determined that the goodwill associated with the Graphics Segment was fully impaired. It was also determined that the goodwill associated with the other reporting units tested was not impaired. Because the test was not complete, an estimate of the goodwill impairment was recorded in the first quarter of fiscal year 2012 totaling $258,000. This goodwill impairment test was completed in the second quarter of fiscal 2012 with no change to the impairment that was recorded.

As of March 1, 2012, the Company performed its annual goodwill impairment test on the three reporting units that contain goodwill. The goodwill impairment test in the Electronic Components Segment passed with an estimated business enterprise value that was $7.7 million or 33% above the carrying value of this reporting unit.  The goodwill impairment test in the All Other Category passed with an estimated business enterprise value that was $1.8 million or 155% above the carrying value of the reporting unit.  The goodwill impairment test in the Lighting Segment passed with a margin in excess of $28.8 million or 32% above the carrying value of this reporting unit.

The Company performed an interim goodwill impairment test as of December 31, 2012 on LSI Virticus, one of its reporting units that contains goodwill. (Virticus was acquired March 19, 2012 and is part of the Electronic Components Segment.) The reduction of the sales forecast that was originally used to value the Earn-Out liability related to the Virticus acquisition and which ultimately led to an adjustment to the earn-out liability in the second quarter of fiscal 2013 (see Note 12), led management to conclude that an interim goodwill impairment test was required on the Virticus reporting unit. As a result of the test, it was determined that goodwill associated with this reporting unit was impaired. Of the original goodwill of $2,413,000, it was determined that $2,141,000 or 89% of the original goodwill value was impaired. This reporting unit’s goodwill will be tested again as of March 1, 2013 as part of the annual goodwill impairment test. A similar test was not performed on the three other reporting units that contain goodwill because the triggering events that indicate the potential impairment of goodwill did not exist.

The following table presents information about the Company's goodwill on the dates or for the periods indicated.

Goodwill

(In thousands)	Lighting Segment			Graphics Segment			Electronic Components Segment			All Other Category			Total
Balance as of June 30, 2012
Goodwill	$	34,913		$	24,959		$	11,621		$	6,850		$	78,343
Accumulated impairment losses		(34,778	)		(24,959	)		--			(5,685	)		(65,422	)
Goodwill, net as of June 30, 2012		135			--			11,621			1,165			12,921
Fiscal 2013 Activity
Goodwill acquired during year		--			--			--			--			--
Impairment losses		--			--			(2,141	)		--			(2,141	)
Balance as of December 31, 2012
Goodwill		34,913			24,959			11,621			6,850			78,343
Accumulated impairment losses		(34,778	)		(24,959	)		(2,141	)		(5,685	)		(67,563	)
Goodwill, net as of December 31, 2012	$	135		$	--		$	9,480		$	1,165		$	10,780

The Company performed its annual review of indefinite-lived intangible assets as of March 1, 2012 and determined there was no impairment.

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

Other Intangible Assets

(In thousands)	December 31, 2012
	Gross Carrying Amount		Accumulated Amortization		Net Amount
Amortized Intangible Assets
Customer relationships	$	10,352	$	6,897	$	3,455
Patents		70		53		17
LED technology firmware, software		12,361		10,091		2,270
Trade name		460		316		144
Non-compete agreements		948		523		425
Total Amortized Intangible Assets		24,191		17,880		6,311
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	27,613	$	17,880	$	9,733

	June 30, 2012
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Amount
Amortized Intangible Assets
Customer relationships	$	10,352	$	6,538	$	3,814
Patents		70		51		19
LED technology firmware, software		12,361		9,225		3,136
Trade name		460		270		190
Non-compete agreements		948		455		493
Total Amortized Intangible Assets		24,191		16,539		7,652
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	27,613	$	16,539	$	11,074

(In thousands)	Amortization Expense of Other Intangible Assets
	December 31, 2012		December 31, 2011
Three Months Ended	$	652	$	646
Six Months Ended	$	1,341	$	1,292

The Company expects to record amortization expense as follows:

2013	$	2,495
2014	$	791
2015	$	705
2016	$	699
2017	$	604
After 2017	$	2,358