Goodwill and Intangible Assets

9 Months Ended

Jun. 29, 2014

4.Goodwill and Intangible Assets

The following table summarizes the changes in the carrying value of goodwill:

	ECS		TSS		RCM		Total
	(in thousands)

Balance at September 29, 2013	$	353,608	$	177,579	$	191,605	$	722,792
Goodwill additions	11,472		–		–		11,472
Foreign exchange impact	(8,725)		51		(3,482)		(12,156)
Goodwill adjustments	–		161		314		475
Balance at June 29, 2014	$	356,355	$	177,791	$	188,437	$	722,583

Goodwill additions are attributable to an acquisition completed in the first quarter of fiscal 2014. Substantially all of the goodwill additions are not deductible for income tax purposes. The foreign exchange impact relates to our foreign subsidiaries with functional currencies that are different than our reporting currency. The gross amounts of goodwill for ECS were $413.9 million and $411.1 million at June 29, 2014 and September 29, 2013, respectively, excluding $57.5 million of accumulated impairment.

We test our goodwill for impairment on an annual basis, and more frequently when an event occurs or circumstances indicate that the carrying value of the asset may not be recoverable. We perform our annual goodwill impairment review at the beginning of our fiscal fourth quarter. Our last annual review at July 1, 2013, indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill. During this review we identified three operating units (with goodwill totaling $214.0 million as of June 29, 2014) in the ECS segment and two recently acquired reporting units (with goodwill totaling $138.7 million as of June 29, 2014) in the RCM segment with fair values in excess of their carrying values of less than 20%. The goodwill related to the three reporting units in the ECS segment was adjusted to fair value in the third quarter of fiscal 2013, and a $56.6 million impairment charge was recorded. The two reporting units in the RCM segment were acquired at fair value in the second quarter of fiscal 2013. In addition, we regularly evaluate whether events and circumstances have occurred that may indicate a potential change in recoverability of goodwill. Based on these assessments as of June 29, 2014, we also determined that all of our reporting units had estimated fair values in excess of their carrying values, including goodwill as of June 29, 2014. However, four of the five aforementioned reporting units had fair value in excess of carrying value of less than 20%. Although we believe that our estimates of fair value for these reporting units are reasonable, if the financial performance for these reporting units falls significantly below our expectations or market prices for similar businesses decline, the goodwill for these reporting units could become impaired.

The gross amount and accumulated amortization of our acquired identifiable intangible assets with finite useful lives included in “Intangible assets - net” on the condensed consolidated balance sheets, were as follows:

	June 29, 2014					September 29, 2013
	Weighted- Average Remaining Life (in Years)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
	($ in thousands)

Non-compete agreements	2.3	$	2,150	$	(1,456)	$	6,160	$	(5,247)
Client relations	4.0	121,612		(58,214)		128,839		(49,189)
Backlog	0.4	1,459		(927)		68,968		(64,675)
Technology and trade names	2.3	3,300		(1,809)		4,204		(2,131)
Total		$	128,521	$	(62,406)	$	208,171	$	(121,242)

The gross amount and accumulated amortization for acquired identifiable intangible assets decreased due to the full amortization of assets in fiscal 2014. The fiscal 2014 acquisition added $2.2 million of identifiable intangible assets. Amortization expense for the identifiable intangible assets for the three and nine months ended June 29, 2014 was $6.1 million and $21.4 million, respectively, compared to $9.6 million and $24.2 million for the prior-year periods. Estimated amortization expense for the remainder of fiscal 2014 and succeeding years is as follows:

	Amount
	(in thousands)

2014	$	5,988
2015	19,688
2016	15,742
2017	13,426
2018	6,312
Beyond	4,959
Total	$	66,115

- 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.

+ References+ Details