Goodwill and Intangible Assets

12 Months Ended

Sep. 30, 2011


7.	Goodwill and Intangible Assets

The Company performs an annual impairment test of its goodwill on September 30 of each fiscal year unless interim indicators of impairment exist. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value. Fair values are estimated using a discounted cash flow methodology. Discounted cash flows are based on the businesses’ strategic plans and management’s best estimate of revenue growth and gross profit by each reporting unit. The Company recorded charges for the impairment of goodwill at March 31, 2009. The Company performed its goodwill impairment test as of September 30, 2011, 2010 and 2009, and determined that no adjustment to goodwill was necessary.

The Company experienced a weakness in demand for its products from the fourth quarter of fiscal year 2007 through the second quarter of fiscal year 2009. In response to this downturn, management restructured the business, which resulted in a change in reporting units and operating segments. The Company reallocated goodwill to each of its newly formed reporting units as of March 31, 2009, based on such factors as the relative fair values of each reporting unit. Goodwill was reallocated to five of the Company’s seven reporting units as of March 31, 2009. This reallocation, in conjunction with a continued downturn in the semiconductor markets indicated that a potential impairment may exist. As such, the Company tested goodwill and other long-lived assets for impairment at March 31, 2009.

The Company determined the fair value of each reporting unit as of March 31, 2009 using the Income Approach, specifically the DCF Method. The material assumptions used in the DCF Method include: discount rates and revenue forecasts. Discount rates are based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity capital. The WACC used to test goodwill is derived from a group of comparable companies. The average WACC used in the March 31, 2009 reallocation of goodwill was 16.2%. Management determines revenue forecasts based on its best estimate of near term revenue expectations which are corroborated by communications with customers, and longer-term projection trends, which are validated by published independent industry analyst reports. Revenue forecasts materially impact the amount of cash flow generated during the five year discrete cash flow period, and also impact the terminal value as that value is derived from projected revenue. The revenue forecasts used in the reallocation and assessment of goodwill as of March 31, 2009 were decreased from previously forecasted levels due to further market deterioration.

For three of the five reporting units containing goodwill at March 31, 2009, the Company determined that the carrying amount of their net assets exceeded their respective fair values, indicating that a potential impairment existed for each of those three reporting units. After completing the required steps of the goodwill impairment test, a goodwill impairment of $71.8 million was recorded as of March 31, 2009.

Under GAAP, the Company is required to test certain long-lived assets when indicators of impairment are present. The Company determined that impairment indicators were present for certain of our long-lived assets as of March 31, 2009. The long-lived assets in question were tested for recoverability by comparing the sum of the undiscounted cash flows attributable to each respective asset group to their carrying amounts, which resulted in the determination that the carrying amounts were not recoverable. The fair values of each potentially impaired long-lived asset group were then evaluated to determine the amount of the impairment, if any. The fair value of each intangible asset was based primarily on an income approach, which is a present value technique used to measure the fair value of future cash flows produced by the asset. The Company estimated future cash flows over the remaining useful life of each intangible asset, which ranged from approximately 3 to 8 years, and used a discount rate of approximately 16%. As a result of this analysis, management determined that an impairment loss of $35.1 million had occurred as of March 31, 2009, and allocated that loss among the long-lived assets of the impaired asset group based on the carrying value of each asset, with no asset reduced below its respective fair value. The impairment charge was allocated as follows: $19.6 million related to completed technology intangible assets; $1.2 million to trade name intangible assets; $13.4 million to customer relationship intangible assets and $0.9 million to property, plant and equipment. Further, during the three months ended June 30, 2009, the Company recorded an additional impairment charge of $0.4 million for property, plant and equipment related to the closure and outsourcing of a small manufacturing operation located in the United States. The total impairment charges related to long-lived assets for fiscal 2009 are summarized as follows (in thousands):


	Year Ended
	September 30,
	2009

Reported as cost of sales:
Completed technology intangible asset impairment	$	19,608
Property, plant and equipment impairment		1,316

Subtotal, reported as cost of sales		20,924

Reported as operating expense:
Trade name intangible asset impairment		1,145
Customer relationship intangible asset impairment		13,443

Subtotal, reported as operating expense		14,588

	$	35,512

The components of the Company’s goodwill by business segment at September 30, 2011 and 2010 are as follows (in thousands):


	Brooks			Brooks			Brooks
	Products			Global			Life Science		Contract
	Solutions			Services			Systems		Manufacturing			Other			Total

Gross goodwill at September 30, 2009	$	485,844		$	151,238		$	—	$	18,593		$	7,421		$	663,096
Acquisitions and adjustments during fiscal 2010		—			—			—		—			—			—

Gross goodwill at September 30, 2010		485,844			151,238			—		18,593			7,421			663,096
Acquisitions and adjustments during fiscal 2011		—			—			36,589		—			—			36,589

Gross goodwill at September 30, 2011	$	485,844		$	151,238		$	36,589	$	18,593		$	7,421		$	699,685

Accumulated goodwill impairments at September 30, 2009	$	(437,706	)	$	(151,238	)	$	—	$	(18,593	)	$	(7,421	)	$	(614,958	)
Impairments recorded during fiscal 2010		—			—			—		—			—			—

Accumulated goodwill impairments at September 30, 2010		(437,706	)		(151,238	)		—		(18,593	)		(7,421	)		(614,958	)
Impairments recorded during fiscal 2011		—			—			—		—			—			—

Accumulated goodwill impairments at September 30, 2011	$	(437,706	)	$	(151,238	)	$	—	$	(18,593	)	$	(7,421	)	$	(614,958	)

Goodwill, less accumulated impairments at September 30, 2010	$	48,138		$	—		$	—	$	—		$	—		$	48,138

Goodwill, less accumulated impairments at September 30, 2011	$	48,138		$	—		$	36,589	$	—		$	—		$	84,727

Components of the Company’s identifiable intangible assets are as follows (in thousands):


	September 30, 2011						September 30, 2010
			Accumulated		Net Book				Accumulated		Net Book
	Cost		Amortization		Value		Cost		Amortization		Value

Patents	$	7,808	$	6,989	$	819	$	7,808	$	6,886	$	922
Completed technology		50,975		39,235		11,740		43,502		37,108		6,394
Trademarks and trade names		3,941		3,719		222		3,779		3,379		400
Customer relationships		49,029		17,496		31,533		18,860		15,453		3,407

	$	111,753	$	67,439	$	44,314	$	73,949	$	62,826	$	11,123

In connection with the acquisitions of Nexus and RTS during fiscal year 2011, the Company allocated a portion of the purchase price to the following intangible assets: Completed Technology — $7.5 million, Customer Relationships - $31.6 million and Trademarks and Trade Names — $0.2 million. For details regarding these intangible assets see Note 3. These intangible assets will support the products and services provided by the Brooks Life Science Systems segment.

During fiscal year 2010, the Company acquired certain patents and other intellectual property from an entity that had ceased operations. This intellectual property supports certain products in the Company’s Brooks Product Solutions segment. The total cost of this property was $0.9 million, and this cost will be amortized to cost of sales over a ten year life.

Amortization expense for intangible assets was $4.6 million, $3.9 million and $10.2 million for the years ended September 30, 2011, 2010 and 2009, respectively.

Estimated future amortization expense for the intangible assets recorded by the Company as of September 30, 2011 is as follows (in millions):


Year ended September 30,
2012	$	7.8
2013		5.9
2014		5.2
2015		5.1
2016		4.5
Thereafter		15.8

	$	44.3

- 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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