Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2011

Goodwill and Other Intangible Assets [Abstract]

(2) GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is assigned to our reporting units, which are defined as the domestic and international operating segments. We evaluate goodwill for impairment annually, as of December 31, or more frequently if events or changes in circumstances indicate that the asset might be impaired. During the second quarter of 2011, a decrease in the NASDAQ market price of the Company’s Common Stock indicated an impairment of goodwill may exist. As a result, we evaluated goodwill for impairment as of June 30, 2011. During the second quarter of 2011, we estimated fair value for each reporting unit utilizing two valuation approaches: (1) the income approach and (2) the market approach. The income approach measures the present worth of anticipated future net cash flows generated by the reporting unit. Net cash flows are forecast for an appropriate period and then discounted to present value using an appropriate discount rate. Net cash flow forecasts require analysis of the significant variables influencing revenues, expenses, working capital and capital investment and involve a number of significant assumptions and estimates. The market approach is performed by observing the price at which companies comparable to the reporting unit, or shares of those guideline companies, are bought and sold. Adjustments are made to the data to account for operational and other relevant differences between the reporting unit and the guideline companies. To arrive at estimated fair value of each reporting unit, we assigned an appropriate weighting to the value of the reporting unit calculated under each of the two valuation approaches. The aggregate weighted fair value under the two valuation approaches is the estimated fair value of the reporting unit.

The impairment evaluation includes a comparison of the carrying value of the reporting unit (including goodwill) to that reporting unit’s fair value. If the reporting unit’s estimated fair value exceeds the reporting unit’s carrying value, no impairment of goodwill exists. If the fair value of the reporting unit does not exceed the unit’s carrying value, then an additional analysis is performed to allocate the fair value of the reporting unit to all of the assets and liabilities of that unit as if that unit had been acquired in a business combination. If the implied fair value of the reporting unit goodwill is less than the carrying value of the unit’s goodwill, an impairment charge is recorded for the difference.

Primarily as a result of a $7.4 million decline in the international reporting unit’s revenue, for the twelve months ended June 30, 2011 compared to fiscal 2010, which occurred within our 51%-owned joint venture, Castmaster Mobitec, partially offset by increases in sales in the remaining international markets within the international reporting unit, we determined it was more likely than not that the international reporting unit’s fair value had declined below its carrying value during the second quarter of fiscal 2011. An analysis was prepared to compute the fair value of the international reporting unit, which confirmed such value had declined below that unit’s carrying value. An additional analysis was performed to allocate the fair value of the international reporting unit to all of the assets and liabilities of that unit as if the unit had been acquired in a business combination. Based on the preliminary results of this analysis, the Company believed it was more likely than not that the fair value of the international reporting unit’s goodwill was below its carrying amount, which indicated full impairment of the carrying value of the international reporting unit’s goodwill as of June 30, 2011 of approximately $9.9 million. The estimated impairment charge was therefore recorded as of June 30, 2011.

Estimating the fair value of a reporting unit involves the use of estimates and significant judgments that are based on a number of factors including actual operating results, future business plans, economic projections and market data. Actual results may differ from forecasted results. The Company finalized its goodwill impairment analysis during the third quarter of 2011 using only the market approach to estimate fair value of the international reporting unit. The results of the final analysis supported the preliminary analysis that full impairment of the carrying value of the international reporting unit’s goodwill did exist and no adjustment to the impairment charge recorded as of June 30, 2011 was necessary. The goodwill impairment charge is included in operating expenses in the accompanying consolidated statements of operations for the nine months ended September 30, 2011.

The change in the carrying amount of goodwill for the nine months ended September 30, 2011, is as follows:


	(In thousands)
Balance as of December 31, 2010	$	10,398
Goodwill impairment		(9,911	)
Effect of exchange rates		690

Balance as of September 30, 2011	$	1,177

The composition of the Company’s intangible assets and the associated accumulated amortization as of September 30, 2011, and December 31, 2010, is as follows:

September 30, 2011

December 31, 2010

Weighted Average

Gross

Net

Gross

Net

Remaining Life

Carrying

Accumulated

Carrying

Accumulated

Carrying

(Years)

Amount

Amortization

Amount

Amortization

Amount

(In thousands)

Intangible assets subject to amortization:

Customer lists

4.80

1,756

1,194

562

1,759

1,108

651

The Company periodically evaluates the recoverability of its intangible assets. If facts and circumstances suggest that the intangible assets will not be recoverable, as determined based upon the undiscounted cash flows expected to be generated, the carrying value of the intangible assets will be reduced to its fair value. The Company evaluated the recoverability of its intangible assets as of June 30, 2011 and determined that no impairment exists.

Amortization expense is estimated to be approximately $117,000 for each of the years ending December 31, 2011 through December 31, 2015.

- 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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