Goodwill and Other Intangible Assets, Net

6 Months Ended

Jul. 03, 2011

Goodwill and Other Intangible Assets, Net [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

7. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The Company has retrospectively adjusted a portion of its goodwill with respect to the Cornell acquisition to reflect changes in the provisional amounts recognized at January 2, 2011 based on new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Refer to Note 2. Such adjustments resulted in a net decrease of $0.9 million in goodwill which is reflected in the balance below as of January 2, 2011. Other than this retrospective adjustment, the Company made no measurement period adjustments to goodwill with respect to the Cornell acquisition in the twenty-six weeks ended July 3, 2011. Changes in the Company’s goodwill balances for the twenty-six weeks ended July 3, 2011 were related to the BI Acquisition and are as follows (in thousands):

					Foreign
					currency
	January 2, 2011		Acquisitions		translation		July 3, 2011
U.S. Detention & Corrections	$	175,990	$	—	$	—	$	175,990
GEO Care		67,257		282,915		—		350,172
International Services		762		—		40		802
Total Goodwill	$	244,009	$	282,915	$	40	$	526,964

On February 10, 2011, the Company acquired BI and recorded goodwill representing the strategic benefits of the Acquisition including the combined Company’s increased scale and the diversification of service offerings. Goodwill resulting from business combinations includes the excess of the Company’s purchase price over net assets of BI acquired of $282.9 million.

Intangible assets consisted of the following (in thousands):

	Useful Life		U.S. Detention &			International
	in Years		Corrections			Services			GEO Care			Total
Finite-lived intangible assets:
Management contracts		1-17	$	49,850		$	2,754		$	41,300		$	93,904
Covenants not to compete		1-4		4,349			—			2,821			7,170
Gross carrying value of January 2, 2011				54,199			2,754			44,121			101,074
Changes to gross carrying value during the twenty-six
weeks ended July 3, 2011:
Finite-lived intangible assets:
Management contracts — BI Acquisition		11-14		—			—			61,000			61,000
Covenants not to compete — BI Acquisition		2		—			—			1,400			1,400
Technology — BI Acquisition		7		—			—			21,800			21,800
Foreign currency translation				—			(41	)		—			(41	)
Indefinite-lived intangible assets:
Trade names — BI Acquisition	Indefinite			—						42,100			42,100
Gross carrying value as of July 3, 2011				54,199			2,713			170,421			227,333
Accumulated amortization expense				(13,135	)		(394	)		(8,831	)		(22,360	)
Net carrying value at July 3, 2011			$	41,064		$	2,319		$	161,590		$	204,973

On February 10, 2011, the Company acquired BI and recorded identifiable intangible assets related to management contracts, existing technology, non-compete agreements for certain former BI executives and for the trade name associated with BI’s business which is now part of the Company’s GEO Care reportable segment. The weighted average amortization period in total for these acquired intangible assets is 10.8 years and for the acquired management contracts is 12.4 years. As of July 3, 2011, the weighted average period before the next contract renewal or extension for the intangible assets acquired from BI was approximately 1.1 years.

Accumulated amortization expense for the Company’s finite-lived intangible assets in total and by asset class is as follows (in thousands):

	U.S. Detention &		International
	Corrections		Services		GEO Care		Total
Management contracts	$	11,639	$	394	$	5,870	$	17,903
Technology		—		—		1,220		1,220
Covenants not to compete		1,496		—		1,741		3,237
Total accumulated amortization expense	$	13,135	$	394	$	8,831	$	22,360

Amortization expense was $5.0 million and $9.1 million for the thirteen and twenty-six weeks ended July 3, 2011, respectively and primarily related to the amortization of intangible assets for acquired management contracts. Amortization expense was $0.6 million and $1.1 million for the thirteen and twenty-six weeks ended July 4, 2010, respectively and primarily related to the amortization of intangible assets for acquired management contracts. As of July 3, 2011, the weighted average period before the next contract renewal or extension for all of the Company’s facility management contracts was approximately 1.3 years. Although the facility management contracts acquired have renewal and extension terms in the near term, the Company has historically maintained these relationships beyond the contractual periods.

Estimated amortization expense related to the Company’s finite-lived intangible assets for the remainder of fiscal year 2011 through fiscal year 2015 and thereafter is as follows (in thousands):

	U.S. Detention &		International
	Corrections —		Services —		GEO Care —
	Expense		Expense		Expense		Total Expense
Fiscal Year	Amortization		Amortization		Amortization		Amortization
Remainder of 2011	$	2,794	$	74	$	6,787	$	9,655
2012		4,894		149		12,982		18,025
2013		3,556		149		11,409		15,114
2014		3,556		149		11,193		14,898
2015		3,556		149		11,162		14,867
Thereafter		22,708		1,649		65,957		90,314
	$	41,064	$	2,319	$	119,490	$	162,873

The table above includes the estimated amortization of the finite-lived intangible assets acquired from BI on February 10, 2011. As discussed in Note 2, the preliminary allocation of the purchase price is based on the best information available and is provisional pending, among other things, the finalization of the valuation of intangible assets, including the estimated useful lives of the finite-lived intangible assets. The finalization of fair value assessments relative to the finite-lived intangible assets may have an impact on the Company’s estimated future amortization expense.