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Goodwill And Other Long-Lived Assets (Policy)
3 Months Ended
Apr. 01, 2012
Goodwill And Other Long-Lived Assets [Abstract]  
Goodwill

Goodwill

We assign goodwill to our reporting units based on the expected benefit from the growth and synergies arising from each business combination. We have three reportable segments: Intermec-branded products, Intermec-branded services and Voice solutions. Intermec-branded services and Voice solutions each comprise two reporting units. Intermec-branded services are divided into: Core Service and Integrated Global Services ("IGS"). Voice solutions contains the Supply Chain and Healthcare reporting units.

Goodwill impairment

Goodwill is tested for impairment annually, in the fourth quarter, or more frequently when events or circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. In the first quarter of 2012, we determined that certain economic circumstances had changed sufficiently to require an interim impairment testing of goodwill. Specifically, our stock price declined due to the performance of our business operations and we revised our long-term plan and budget. Accordingly, management concluded that it was appropriate to perform an interim goodwill impairment review since it was more likely than not that the fair value of goodwill was less than the book value.

Accounting rules require a two-step goodwill impairment test whereby the first step, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount including goodwill. If the estimated fair value of a reporting unit is less than its carrying amount, goodwill of the reporting unit is potentially impaired, thus the second step of the goodwill impairment test is used to quantify the actual amount of any impairment that exists. We completed step 1 of our interim tests for impairment of goodwill for the quarter ended April 1, 2012, and determined goodwill associated with our Voice solutions Supply Chain ("VSC") reporting unit was potentially impaired. For step 1 of the goodwill impairment test we determined that the carrying value of the VSC reporting unit exceeded its fair value by $14.9 million and recorded an estimated impairment charge based on the results of the step 1 test. Due to the timing and complexity of this analysis, step 2 of the impairment test to determine the actual impairment will be completed in the second quarter of 2012 and any necessary adjustments to this impairment charge will be recorded at that time.

In testing goodwill for impairment the analysis utilized various combinations of the discounted cash flow approach and market approach to determine the fair value of the reporting units for the first step. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. The fair value measurement was calculated using unobservable inputs to the discounted cash flow approach and the market approach. The key inputs we used in the discounted cash flow approach include risk adjusted discount rates and estimated future cash flows, which include estimates of future revenues, operating costs and operating capital related cash flows. The estimates of future cash flow takes into consideration factors such as growth rates and economic and market information. The key inputs in the market approach include our historical and forecast financial data and multiples that were selected based on data observed from publicly traded comparable companies. These key inputs, for both the discounted cash flow approach and the market approach, are classified as Level 3 within the fair value hierarchy. See Note 3. Fair Value Measurements for further details of these inputs.

The fair value for the Intermec Global Services reporting unit and the Healthcare reporting unit exceeded their carrying value by approximately 28.4% and 5.8%, respectively and therefore are not impaired. Our stock price could continue to decline or performance of our business operations could lag behind our forecast, which in turn could impact the fair value of our reporting units.

We assessed the reasonableness of our valuation by considering other information available such as the market capitalization of Intermec, the performance of other public companies in our industry compared with our own performance, projected industry and economic trends, investment analyst reports on us and other public companies in our industry, and information regarding recent acquisitions in our industry. Additionally, we engaged an independent third party specialist to assist with our goodwill impairment valuation. We have reviewed and approved their work and the overall valuation for reasonableness.

Valuation Of Long-Lived Assets