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GOODWILL AND OTHER INTANGIBLES
 12 Months Ended
May 31, 2011
Goodwill and Intangible Assets Disclosure [Text Block]

8. GOODWILL AND OTHER INTANGIBLES


Goodwill and other intangible assets with indefinite lives are reviewed for impairment annually or more frequently if impairment indicators arise.


The following table summarizes the activity in Goodwill for the fiscal years ended May 31:


 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

Gross beginning balance

 

$

174.0

 

$

174.0

 

Accumulated impairment

 

 

(17.4

)

 

(17.0

)

Beginning balance

 

 

156.6

 

 

157.0

 

Additions due to acquisition

 

 

1.0

 

 

—

 

Impairment charge

 

 

(3.4

)

 

(0.4

)

Gross ending balance

 

 

175.0

 

 

174.0

 

Accumulated impairment

 

 

(20.8

)

 

(17.4

)

Ending balance

 

$

154.2

 

$

156.6

 


On September 9, 2010, the Company purchased the assets of Math Solutions, an education resources and professional development company focusing on K-12 math instruction, for $8.2, net of cash acquired. The Company has integrated this business with its existing educational technology businesses. The Company utilized Level 3 fair value measurement inputs, using its own assumptions, including internally-developed discounted cash flow forecasts, to determine the fair value of the assets acquired and the amount of goodwill to be allocated to the Math Solutions business. As a result, the Company recognized $0.8 of goodwill and $5.6 of amortizable intangible assets. In the second quarter of fiscal 2011, the Company also recognized $0.2 of goodwill associated with a previously acquired international entity.


As of May 31, 2011, the Company determined the carrying value of its Scholastic Library Publishing and Classroom Magazines business within the Educational Publishing segment exceeded the fair value of this reporting unit. The Company employed internally-developed discounted cash flow forecasts and market comparisons to determine the fair value of the reporting unit and the implied fair value of the reporting unit’s assets and liabilities. Accordingly, the Company recognized an impairment charge of $3.4 at May 31, 2011.


As of May 31, 2010, the Company determined the carrying value of its direct-to-home catalog business specializing in toys exceeded the fair value of this reporting unit. The Company employed internally-developed discounted cash flow forecasts and market comparisons to determine the fair value of the reporting unit and the implied fair value of the reporting unit’s assets and liabilities. Accordingly, the Company recognized an impairment charge of $0.4 at May 31, 2010.


The following table summarizes Other intangibles subject to amortization as of May 31:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

Beginning balance-Customer lists

 

$

0.8

 

$

0.1

 

Additions

 

 

—

 

 

5.1

 

Impairment charge

 

 

—

 

 

(3.8

)

Other adjustments

 

 

—

 

 

(0.3

)

Amortization expense

 

 

(0.2

)

 

(0.2

)

Foreign currency translation

 

 

0.1

 

 

(0.1

)

 

 

 

 

 

 

 

 

Customer lists, net of accumulated amortization of $1.1 and $0.9, respectively

 

$

0.7

 

$

0.8

 

Beginning balance-Other intangibles

 

$

2.2

 

$

2.8

 

Additions due to acquisition

 

 

5.6

 

 

—

 

Reclassified from indefinite-lived intangible assets

 

 

10.7

 

 

—

 

Amortization expense

 

 

(1.2

)

 

(0.6

)

Other intangibles, net of accumulated amortization of $4.2 and $3.0, respectively

 

$

17.3

 

$

2.2

 

Total

 

$

18.0

 

$

3.0

 


Amortization expense for Other intangibles totaled $1.4, $0.8 and $0.6 for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. Amortization expense for these assets is currently estimated to total $1.7 for each of the fiscal years ending May 31, 2012 and 2013, $1.2 for the fiscal year ending May 31, 2014, $1.1 for the fiscal year ending May 31, 2015 and $1.0 for the fiscal year ending May 31, 2016. Intangible assets with definite lives consist principally of customer lists and covenants not to compete. Intangible assets with definite lives are amortized over their estimated useful lives. The average remaining useful lives of all amortizable intangible assets is 7 years.


In fiscal 2011, the Company recognized $5.6 of amortizable intangible assets as a result of the Math Solutions acquisition. The Company utilized Level 3 fair value measurement inputs, using its own assumptions including internally-developed discounted cash flow forecasts and market comparisons, to determine the fair value of the intangible assets acquired.


In fiscal 2011, the Company determined that certain intangible assets associated with publishing and trademark rights, which were previously accounted for as indefinite-lived assets, were no longer indefinite-lived. Accordingly, the Company assessed these assets for impairment as of September 1, 2010, and subsequently commenced amortization of the assets. The Company determined that the fair value of the assets exceeded their carrying value as of September 1, 2010, and therefore no impairment was recognized. The Company employed Level 3 fair value measurement techniques to determine the fair value of these assets as of September 1, 2010, including the relief from royalty method.


In the fourth quarter of fiscal 2010, the Company determined that the fair value of the trademark associated with the Company’s direct-to-home catalog business specializing in toys was less than the carrying value of the trademark. The Company used historical and projected results while applying a residual income fair value method to make this determination and recognized an impairment of this trademark of $2.6.


During the first quarter of fiscal 2010, the Company and its joint venture partner terminated a book distribution joint venture in the United Kingdom. As a result of this transaction, the Company received a portion of the business and a related customer list previously held by the joint venture, in exchange for the partial forgiveness of amounts owed to the Company by the joint venture and related entities. The Company recognized this customer list in the first quarter of fiscal 2010 with a carrying value of $5.1, which the Company intended to operate apart from its existing customer list. In the second quarter of fiscal 2010, the Company determined that, to maximize profitability, the acquired customer list should ultimately be combined with its existing customer list. As a result, the Company assessed this customer list for impairment and determined that the customer list was impaired based upon the highest and best use for this asset. This assessment incorporated internally-developed cash flow projections to measure fair value, as market data for this asset is not readily available. Accordingly, the Company recognized an impairment charge in the second quarter of fiscal 2010 related to this asset of $3.8.


The following table summarizes Other intangibles not subject to amortization as of May 31:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

Net carrying value by major class:

 

 

 

 

 

 

 

Trademarks and other

 

$

1.8

 

$

12.5

 

Total

 

$

1.8

 

$

12.5