Goodwill and Intangible Assets

12 Months Ended

Jul. 31, 2014

(6) GOODWILL AND INTANGIBLE ASSETS

The Company conducts its annual goodwill impairment test on July 31 of each fiscal year. In addition, if and when events or circumstances change that would more likely than not reduce the fair value of any of its reporting units below its carrying value, an interim test would be performed. In making this assessment, the Company relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, transactions and marketplace data. The Company’s reporting units are the same as the operating segments: Americas, Asia, Europe, e-Business, and ModusLink PTS. As disclosed in Note 18, the Company disposed of its TFL operating segment during the second quarter of fiscal year 2013. Impairment charges related to TFL for all periods presented have been classified within discontinued operations within the accompanying consolidated statements of operations.

The Company’s remaining goodwill of $3.1 million as of July 31, 2014 and 2013, relates to the Company’s e-Business reporting unit. During the fourth quarter of fiscal year 2014, the Company completed its annual impairment analysis of goodwill. The Company concluded that its goodwill was not impaired as of July 31, 2014.

The estimated fair values of our reporting units for the goodwill impairment test were evaluated using an income approach by calculating the present value of estimated future cash flows. We believe the use of the income approach is appropriate due to lack of comparability to guideline companies and the lack of comparable transactions under the market approach. The income approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. In developing an appropriate discount rate to apply in its estimated cash flow models the Company developed an estimate of its weighted-average cost of capital.

The changes in the carrying amount of goodwill allocated to the Company’s operating segments are as follows:


	Americas			Asia			Europe			All Other			Consolidated Total
	(in thousands)
Balance as of July 31, 2012
Goodwill	$	94,477		$	73,948		$	30,108		$	5,857		$	204,390
Accumulated impairment charges		(94,477	)		(73,948	)		(30,108	)		(2,799	)		(201,332	)

	$	—		$	—		$	—		$	3,058		$	3,058

Balance as of July 31, 2013
Goodwill	$	94,477		$	73,948		$	30,108		$	5,857		$	204,390
Accumulated impairment charges		(94,477	)		(73,948	)		(30,108	)		(2,799	)		(201,332	)

	$	—		$	—		$	—		$	3,058		$	3,058

Balance as of July 31, 2014
Goodwill	$	94,477		$	73,948		$	30,108		$	5,857		$	204,390
Accumulated impairment charges		(94,477	)		(73,948	)		(30,108	)		(2,799	)		(201,332	)

	$	—		$	—		$	—		$	3,058		$	3,058

The components of intangible assets are as follows:


	July 31, 2014								July 31, 2013
	(in thousands)								(in thousands)
	Gross Carrying Amount		Accumulated Amortization/ Impairment		Net Book Value		Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization/ Impairment		Net Book Value		Weighted Average Amortization Period
Client Relationships	$	4,399	$	4,002	$	397		7 years	$	4,399	$	3,374	$	1,025		7 years
Developed Technology		5,092		4,859		233		3 to 7 years		5,092		4,475		617		3 to 7 years
Trade Names		1,515		1,478		37		3 to 7 years		1,515		1,393		122		3 to 7 years
Non-Competes		83		83		—		1 to 5 years		83		83		—		1 to 5 years

Total	$	11,089	$	10,422	$	667			$	11,089	$	9,325	$	1,764

Amortization expense for intangible assets for the fiscal years ended July 31, 2014, 2013, and 2012 totaled $1.1 million, $1.1 million and $1.1 million, respectively.

Estimated annual amortization expense for intangible assets in future periods, is as follows:


Fiscal Year	Amount
	(in thousands)
2015	$	667

- 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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