Goodwill and Identifiable Intangible Assets

9 Months Ended

Sep. 30, 2011

Goodwill and Identifiable Intangible Assets [Abstract]

Goodwill and Identifiable Intangible Assets


7.	Goodwill and Identifiable Intangible Assets

Goodwill. In accordance with the accounting standards for business combinations, the Company records the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation).

In addition, we test goodwill for our reporting units for impairment at least annually as of November 30. The accounting standard for goodwill also requires testing each reporting unit’s goodwill for impairment between annual test dates if changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Accordingly, the Company determined that it was necessary to test goodwill for impairment for the Government Services reporting unit for the reasons listed below.


	•	continued decline in business volumes due to the accelerated pace of the drawdown of U.S. military forces from Iraq and Afghanistan occurring from 2011 to 2014,

	•	recently not winning certain new business pursuits,

	•	continued increased competition putting pressure on operating margins and cash flow, and

	•	due to the DoD’s efficiency and affordability initiatives, resulting in a faster than expected transition to: (1) cost reimbursable type contracts from time-and-material type contracts, and (2) multiple-award contracts from single-award contracts, where several contractors compete for individual task orders.

The Company concluded that the Government Services reporting unit’s goodwill was not impaired based on the impairment test completed as of September 30, 2011. The Company did not test its other reporting units’ goodwill for impairment as it does not believe that there have been any events or changes in circumstances since November 30, 2010 that make it more likely than not that the fair value of those units have decreased below their carrying amount.

The table below presents the changes in goodwill applicable to the Company’s reporting units in each segment.


				Government						Electronic			Consolidated
	C³ISR			Services			AM&M			Systems			Total
	(in millions)

Balance at December 31, 2010	$	868		$	2,285		$	1,172		$	4,405		$	8,730
Business acquisitions⁽¹⁾		3			—			2			12			17
Foreign currency translation adjustments⁽²⁾		1			—			(8	)		(5	)		(12	)
Segment reclassification⁽³⁾		(5	)		(94	)		—			99			—

Balance at September 30, 2011	$	867		$	2,191		$	1,166		$	4,511		$	8,735


⁽¹⁾		The increase in goodwill for the Electronic Systems segment is primarily due to the acquisition of ComHouse. See Note 4 for further discussion regarding this acquisition.
⁽²⁾		The decrease in goodwill presented in the AM&M and Electronic Systems segments was due primarily to the strengthening of the U.S. dollar against the Canadian dollar during the year-to-date period ended September 30, 2011.
⁽³⁾		As a result of re-alignments of business units in the Company’s management and organizational structure as discussed in Note 2, goodwill was reclassified on a relative fair value basis among the C³ISR, Government Services and Electronic Systems segments during the quarter ended April 1, 2011.

Identifiable Intangible Assets. Information on the Company’s identifiable intangible assets that are subject to amortization is presented in the table below.


	September 30, 2011								December 31, 2010
	Weighted
	Average		Gross				Net		Gross				Net
	Amortization		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Period		Amount		Amortization		Amount		Amount		Amortization		Amount
	(in years)		(in millions)

Customer contractual relationships		23	$	585	$	237	$	348	$	584	$	205	$	379
Technology		11		147		84		63		145		72		73
Other		15		29		12		17		28		10		18

Total		21	$	761	$	333	$	428	$	757	$	287	$	470

Amortization expense recorded by the Company for its identifiable intangible assets is presented in the table below.


	Third Quarter Ended				Year-to-Date Ended
	September 30,		September 24,		September 30,		September 24,
	2011		2010		2011		2010
	(in millions)

Amortization expense	$	15	$	18	$	45	$	45

Based on gross carrying amounts at September 30, 2011, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2011 through 2015 are presented in the table below.


	Year Ending December 31,
	2011		2012		2013		2014		2015
	(in millions)

Estimated amortization expense	$	61	$	54	$	43	$	44	$	39

- 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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