GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2011

GOODWILL AND INTANGIBLE ASSETS [Abstract]

GOODWILL AND INTANGIBLE ASSETS [Text Block]

9. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill resulting from the Company's acquisitions consisted of the following at September 30, 2011 and December 31, 2010 (in thousands):

	September 30, 2011			December 31, 2010
Goodwill	$	418,558		$	418,897
Accumulated impairment losses		(171,900	)		(171,900	)
	$	246,658		$	246,997

Changes in the carrying amount of the Company's goodwill during the nine months ended September 30, 2011 consisted of the following (in thousands):

		Total
Goodwill balance at December 31, 2010	$	246,997
Blue Order acquisition purchase accounting allocation adjustments		(105	)
Euphonix acquisition purchase accounting allocation adjustments		(176	)
Foreign exchange and other adjustments		(58	)
Goodwill balance at September 30, 2011	$	246,658

The Company performs its annual goodwill impairment analysis in the fourth quarter of each year. In accordance with ASC Subtopic 350-20, Intangibles - Goodwill and Others - Goodwill, a two-step process is used to test for goodwill impairment. The first step determines if there is an indication of impairment by comparing the estimated fair value of the Company's single reporting unit to its carrying value including existing goodwill. Upon an indication of impairment from the first step, a second step is performed to determine if goodwill impairment exists.

To estimate the fair value of its single reporting unit for step one, the Company utilizes a combination of market and income approaches. Since the Company has one reporting unit, it believes that the direct market capitalization approach, which considers the Company's market capitalization including an implied control premium, is the most relevant measure and is weighted most heavily. The Company also uses other market approaches including the guideline public company market approach, under which the Company identifies similar public companies and derives estimated market multiples of revenue and earnings before interest, taxes, depreciation, and amortization ("EBITDA") and applies those multiples to the Company's historical and forecasted results to estimate the fair value of its single reporting unit, and the guideline transaction market approach, under which the Company identifies recent sale transactions involving similar companies and derives estimated transaction multiples of revenue and EBITDA and applies those multiples to the Company's historical and forecasted results to estimate the fair value of its single reporting unit. The income approaches, specifically discounted cash flow methodologies, include assumptions for, among others, forecasted revenues, gross profit margins, operating profit margins, working capital cash flows, capital expenditures, growth rates, income tax rates, expected tax benefits, terminal values and long term discount rates, all of which require significant judgments by management.

Goodwill is also tested for impairment when events and circumstances occur that indicate that the recorded goodwill may be impaired. At September 30, 2011, as a result of a decline in the Company's stock price since its fourth quarter 2010 goodwill impairment testing, lower than expected year-to-date 2011 revenues and operating results, and a reduction in forecasted 2011 results, the Company performed an interim step one goodwill impairment test. The interim step one test at September 30, 2011 indicated that the estimated fair value of the Company's single reporting unit (approximately $530 million) exceeded its carrying value of $414.9 million by approximately 28%. Therefore, no goodwill impairment existed at September 30, 2011, and the Company was not required to perform step two. In connection with its interim goodwill step one impairment test at September 30, 2011, the Company has weighted the direct market capitalization approach at 67%, the income approaches at 11%, the guideline public company market approaches at 11%, and the guideline transaction market approaches at 11%. The estimated fair value under the direct market capitalization approach was calculated by applying control premiums of approximately 45% to the Company's market capitalization. The Company's market capitalization was calculated using the average stock price of the Company's common stock for the 20 trading days prior to September 30, 2011 ($8.73 per share). If the Company used the closing stock price of its common stock on September 30, 2011 ($7.74 per share) in the direct market capitalization described above and applied similar weightings described above, the estimated fair value of the Company's single reporting would have exceeded its carrying value by approximately 20%.

At September 30, 2011, the Company's market capitalization based on the closing stock price of $7.74 per share at that date was approximately $298.6 million compared to the carrying value of the Company's single reporting unit of $414.9 million. This implies a control premium of approximately 39%. Subsequent to September 30, 2011, the volatility of the price of our stock has continued. On November 8, 2011, the closing price of the Company's common stock was $7.15 per share.

The Company will perform its annual goodwill impairment test during the fourth quarter of 2011. Given the recent decline and continued volatility in the price of the Company's common stock, it is possible that the Company will fail the step one goodwill impairment test and will be required to perform step two of the goodwill impairment test. Step two would require the Company to perform a hypothetical purchase price allocation for its single reporting unit, allocating the reporting unit's estimated fair value to its assets and liabilities, and to determine the implied fair value of goodwill. If the implied fair value of goodwill is less than the carrying amount of goodwill, an impairment loss would be recognized for the difference. While the Company cannot make a determination at this time, it is possible that a goodwill impairment loss will be recorded in the fourth quarter of 2011.

In connection with the Company's interim goodwill impairment test at September 30, 2011, the Company performed an impairment analysis of its long-lived assets, including its intangible assets, in accordance with ASC Section 360-10-35, Property, Plant and Equipment - Overall - Subsequent Measurement. This analysis included grouping the intangible assets with other operating assets and liabilities that would not otherwise be subject to impairment testing because the grouped assets and liabilities represent the lowest level for which cash flows are largely independent of the cash flows of other groups of assets and liabilities within the Company. The analysis determined that the undiscounted cash flows of the long-lived assets were significantly greater than their carrying value, indicating no impairment existed.

Acquisition- Related Identifiable Intangible Assets

Identifiable intangible assets resulting from the Company's acquisitions consisted of the following at September 30, 2011 and December 31, 2010 (in thousands):

	September 30, 2011						December 31, 2010
	Gross		Accumulated Amortization		Net(a)		Gross		Accumulated Amortization		Net
Completed technologies and patents	$	74,703	$	(69,934)	$	4,769	$	74,820	$	(68,026)	$	6,794
Customer relationships		68,313		(52,655)		15,658		68,330		(47,344)		20,986
Trade names		14,770		(14,429)		341		14,772		(13,737)		1,035
License agreements		560		(560)		-		560		(560)		-
Non-compete agreements (b)		1,409		(850)		559		1,576		(641)		935
	$	159,755	$	(138,428)	$	21,327	$	160,058	$	(130,308)	$	29,750

(a)	The September 30, 2011 net amounts include foreign currency translation changes of approximately $0.1 million from the December 31, 2010 amounts.

(b)	During the nine months ended September 30, 2011, the Company wrote-off a fully amortized non-compete agreement with a gross value of approximately $0.2 million.

Amortization expense related to all intangible assets in the aggregate was $2.8 million and $3.0 million for the three-month periods ended September 30, 2011 and 2010, respectively, and $8.5 million and $10.2 million for the nine-month periods ended September 30, 2011 and 2010, respectively. The Company expects amortization of these intangible assets to be approximately $3 million for the remainder of 2011, $7 million in 2012, $5 million in 2013, $3 million in 2014, $2 million in 2015 and $1 million in 2016.

- Definition

Discloses 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 or 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. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables.

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