Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Intangible Assets and Goodwill

Intangible Assets

Intangible assets consist of the following:



	Trade Names			Software			Customer Relationships			Other			Total
	(In millions)
December 31, 2011
Cost	$	347.1		$	57.9		$	61.5		$	13.9		$	480.4
Accumulated amortization	(57.5		)	(51.1		)	(45.5		)	(4.6		)	(158.7		)
Net	$	289.6		$	6.8		$	16.0		$	9.3		$	321.7
December 31, 2010
Cost	$	332.4		$	54.2		$	58.8		$	8.3		$	453.7
Accumulated amortization	(44.9		)	(49.1		)	(36.2		)	(3.1		)	(133.3		)
Net	$	287.5		$	5.1		$	22.6		$	5.2		$	320.4

On December 20, 2011, we acquired intellectual property and other assets, including key data deduplication technology, from Nine Technology, LLC, (Nine Technology). This data deduplication software engine eliminates redundant data, enabling shorter backup windows, quicker recovery, lower infrastructure costs and more robust and reliable data protection. The purchase price consisted of a cash payment of $2.0 million, $1.0 million in future contingent payments and $0.5 million in stock. We recorded the payment as an other intangible asset and are amortizing the intangible asset over a five year period.

In 2010 we entered into an amendment to our license agreement with ProStor. Under the terms of the agreement, we paid $5.0 million and will have a semi-exclusive license to manufacture, market and sell RDX removable hard disk systems through 2020. We recorded the payment as an other intangible asset and are amortizing the payment over a five year period. The acquisition of certain ProStor assets on August 29, 2011 excluded the portion of the business to which this license relates.

Amortization expense for intangible assets consisted of the following:



	Years Ended December 31,
	2011		2010		2009
	(In millions)
Amortization expense	$	26.0	$	23.6	$	23.3

Based on the intangible assets in service as of December 31, 2011, estimated amortization expense for each of the next five years ending December 31 is as follows:



	2012		2013		2014		2015		2016
	(In millions)
Amortization expense	$	27.6	$	22.4	$	18.2	$	15.9	$	14.4

Goodwill

The following table presents the changes in goodwill allocated to our reportable segments:



	Americas			Europe			North Asia			South Asia		Electronic Products			Total
	(In millions)
Balance as of December 31, 2009:
Goodwill	$	64.3		$	39.2		$	10.2		$	—	$	38.6		$	152.3
Accumulated impairment losses	(64.3		)	(39.2		)	(10.2		)	—		(15.1		)	(128.8		)
	—			—			—			—		23.5			23.5
Operating segment reclassification:
Goodwill	38.6			—			—			—		(38.6		)	—
Accumulated impairment losses	(15.1		)	—			—			—		15.1			—
Goodwill impairment	(23.5		)	—			—			—		—			(23.5		)
Balance as of December 31, 2010:
Goodwill	$	102.9		$	39.2		$	10.2		$	—	$	—		$	152.3
Accumulated impairment losses	(102.9		)	(39.2		)	(10.2		)	—		—			(152.3		)
	—			—			—			—		—			—

Encryptx acquisition	1.6			—			—			—		—			1.6
MXI Security acquisition	21.9			—			—			—		—			21.9
IronKey acquisition	9.4			—			—			—		—			9.4
Goodwill impairment	(1.6		)	—			—			—		—			(1.6		)
Balance as of December 31, 2011:
Goodwill	$	135.8		$	39.2		$	10.2		$	—	$	—		$	185.2
Accumulated impairment losses	(104.5		)	(39.2		)	(10.2		)	—		—			(153.9		)
	$	31.3		$	—		$	—		$	—	$	—		$	31.3

Our reporting units for goodwill are our operating segments (Americas, Europe, North Asia and South Asia) with the exception of the Americas segment which is further divided between the Americas-Consumer, Americas-Commercial, and Americas-Mobile Security reporting units as determined by sales channel.

During 2011 we acquired the assets of MXI Security and assets of IronKey's secure data storage hardware business which resulted in goodwill of $21.9 million and $9.4 million, respectively. These acquired businesses are included in our existing Americas operating segment and function as a business with discrete financial information available. Therefore, these businesses are considered a separate reporting unit (Mobile Security) for the purposes of goodwill impairment testing. In accordance with our policy, goodwill was tested for impairment during the fourth quarter of 2011.

In evaluating whether goodwill was impaired, we compared the fair value of the Mobile Security reporting unit to it's carrying value (Step 1 of the impairment test). In calculating fair value, we used the income approach, a valuation technique under which we estimate future cash flows using the reporting unit's financial forecasts. Future estimated cash flows are discounted to their present value to calculate fair value. In determining the fair value of the Mobile Security reporting unit under the income approach, our expected cash flows are affected by various assumptions. Fair value on a discounted cash flow basis uses forecasts over a 10 year period with an estimation of residual growth rates thereafter. We use our business plans and projections as the basis for expected future cash flows. A discount rate of 16.5 percent was used to reflect the relevant risks of the higher growth assumed for this reporting unit. An increase in the discount rate of one percent would have decreased the reporting unit's fair value by approximately $5.0 million while a decrease in the discount rate by one percent would have increased the reporting unit's fair value by $6.0 million. The revenue growths in 2012 through 2014 are significant assumptions within the projections. If revenue were decreased 10 percent for each year in the plan without a change in projected SG&A costs or other cash flows, the indicated fair value of the reporting unit would be reduced by approximately $11.0 million. Based on the goodwill test performed, we determined that the fair value of the reporting unit exceeded its carrying amount. The indicated excess in fair value over carrying value of the Mobile Security reporting unit in step one of the impairment test at November 30, 2011 and goodwill is as follows:



	Goodwill		Reporting Unit Carrying Amount		Excess of Fair Value Over Carrying Amount		Percentage of Fair Value Over Carrying Amount
	(In millions)
Mobile Security	$	31.3	$	52.0	$	13.0	25	%

While this analysis indicates that this goodwill is not impaired, to the extent that actual results or other assumptions about future economic conditions or potential for our growth and profitability in this business changes, it is possible that our conclusion regarding the remaining goodwill could change, which could have a material effect on our financial position and results of operations.

During 2011 we acquired certain assets of Encryptx which resulted in goodwill of $1.6 million. The goodwill was allocated to our existing Americas-Commercial reporting unit. Goodwill is considered impaired when its carrying amount exceeds its implied fair value. As of March 31, 2011, the carrying amount of all of our reporting units significantly exceeded their fair value and we performed an impairment test. Based on the goodwill test performed as of March 31, 2011, we determined that the carrying amount of the goodwill in the Americas-Commercial reporting unit, including the assets of Encryptx, exceeded the implied fair value and, therefore, the goodwill was fully impaired. As a result, a $1.6 million goodwill impairment charge was recorded during the three months ended March 31, 2011 in the Consolidated Statements of Operations.

During 2009 our reporting units for goodwill were our operating segments (Americas, Europe, Asia Pacific, and Electronic Products) with the exception of the Americas segment which was further divided between the Americas-Consumer and Americas-Commercial reporting units as determined by sales channel. During the second quarter of 2010 we realigned our corporate segments and reporting structure and combined our Electronic Products segment with our Americas segment, and we separated our Asia Pacific segment into North Asia and South Asia regions. As a result of the segment change, the goodwill of $23.5 million which was previously allocated to the Electronics Products segment was merged into the Americas-Consumer reporting unit. The Americas-Consumer reporting unit had a fair value that was significantly less than its carrying amount prior to the combination, which is a triggering event for an interim goodwill impairment test. A two-step impairment test was performed to identify a potential impairment and measure an impairment loss to be recognized. Based on this step of the impairment test, we determined that the full amount of remaining goodwill, $23.5 million, was impaired.

- 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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