Goodwill And Intangible Assets

6 Months Ended

Jun. 30, 2011

Goodwill And Intangible Assets

Goodwill And Intangible Assets

7. Goodwill and Intangible Assets

The Company's business acquisitions have typically resulted in the recognition of goodwill and other intangible assets. The Company follows the provisions under Accounting Standards Codification ("ASC") Topic 350, "Intangibles – Goodwill and Other" ("ASC 350") as it relates to the accounting for goodwill in the Condensed Consolidated Financial Statements. These provisions require that the Company, on at least an annual basis, evaluate the fair value of the reporting units to which goodwill is assigned and attributed and compare that fair value to the carrying value of the reporting unit to determine if an impairment has occurred. The Company performs its annual impairment testing during the fourth quarter. Impairment testing takes place more often than annually if events or circumstances indicate a change in status that would indicate a potential impairment. The Company believes that there have been no events or circumstances which would more likely than not reduce the fair value for its reporting units below its carrying value. A reporting unit is an operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment (a "component"), in which case the component would be the reporting unit. In certain instances, the Company has aggregated components of an operating segment into a single reporting unit based on similar economic characteristics. At June 30, 2011, the Company had twelve reporting units.

When performing its annual impairment assessment, the Company compares the fair value of each of its reporting units to its respective carrying value. Goodwill is considered to be potentially impaired when the net book value of the reporting unit exceeds its estimated fair value. Fair values are established primarily by discounting estimated future cash flows at an estimated cost of capital which varies for each reporting unit and which, as of the Company's most recent annual impairment assessment, ranged between 6.5% and 14%, reflecting the respective inherent business risk of each of the reporting units tested. This methodology for valuing the Company's reporting units (commonly referred to as the Income

Method) has not changed since the adoption of the provisions under ASC 350. The determination of discounted cash flows is based on the businesses' strategic plans and long-range planning forecasts, which change from year to year. The revenue growth rates included in the forecasts represent best estimates based on current and forecasted market conditions. Profit margin assumptions are projected by each reporting unit based on the current cost structure and anticipated net cost increases/reductions. There are inherent uncertainties related to these assumptions, including changes in market conditions, and management's judgment in applying them to the analysis of goodwill impairment. In addition to the foregoing, for each reporting unit, market multiples are used to corroborate its discounted cash flow results where fair value is estimated based on earnings multiples determined by available public information of comparable businesses. While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of its reporting units, it is possible a material change could occur. If actual results are not consistent with management's estimates and assumptions, goodwill and other intangible assets may then be determined to be overstated and a charge would need to be taken against net earnings. Furthermore, in order to evaluate the sensitivity of the fair value calculations on the goodwill impairment test performed during the fourth quarter of 2010, the Company applied a hypothetical, reasonably possible 10% decrease to the fair values of each reporting unit. The effects of this hypothetical 10% decrease would still result in the fair value calculation exceeding the carrying value for each reporting unit.

Changes to goodwill are as follows:

(in thousands)	Six Months Ended June  30, 2011		Year Ended December  31, 2010
Balance at beginning of period	$	810,285	$	761,978
Additions		—		47,469
Adjustments to purchase price allocations		3,932		—
Translation and other adjustments		10,101		838
Balance at end of period	$	824,318	$	810,285

For the six months ended June 30, 2011, the adjustments to purchase price allocations pertain to the December 2010 acquisition of Money Controls and the February 2010 acquisition of Merrimac. The additions to goodwill during the year ended December 31, 2010 principally pertain to the Company's acquisitions of Merrimac and Money Controls.

Changes to intangible assets are as follows:

(in thousands)	Six Months Ended June  30, 2011			Year Ended December 31, 2010
Balance at beginning of period, net of accumulated amortization	$	162,636		$	118,731
Adjustments to purchase price allocations		(2,888	)		62,617
Amortization expense		(10,650	)		(17,126	)
Currency translation		3,587			(1,586	)
Balance at end of period, net of accumulated amortization	$	152,685		$	162,636

For the six months ended June 30, 2011, the adjustments to purchase accounting allocations relate to the December 2010 acquisition of Money Controls. The adjustments to purchase price allocations during the year ended December 31, 2010 principally pertain to the Company's acquisitions of Merrimac and Money Controls.

A summary of intangible assets follows:

(in thousands)	Weighted Average
	Amortization		June 30, 2011						December 31, 2010
	Period		Gross		Accumulated				Gross		Accumulated
	(in years)		Asset		Amortization		Net		Asset		Amortization		Net
Intellectual property rights		10.5	$	120,062	$	60,675	$	59,387	$	118,805	$	57,514	$	61,291
Customer relationships and backlog		6.6		134,811		49,094		85,717		134,401		49,129		85,272
Drawings		0.7		10,825		10,073		752		10,825		10,699		126
Other		4.7		31,928		25,099		6,829		31,692		15,745		15,947
Total		8.0	$	297,626	$	144,941	$	152,685	$	295,723	$	133,087	$	162,636

Amortization expense for these intangible assets is currently estimated to be approximately $9.6 million in total for the remaining two quarters in 2011, $17.1 million in 2012, $16.4 million in 2013, $15.0 million in 2014, $13.2 million in 2015 and $54.0 million in 2016 and thereafter. Of the $152.7 million of net intangible assets at June 30, 2011, $27.4 million of intangibles with indefinite useful lives, consisting of trade names, are not being amortized under the provisions of ASC 350.