GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Jun. 01, 2013

7.	GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is initially recorded based on the premium paid for acquisitions and is subsequently tested for impairment. We test goodwill for impairment annually and whenever events or circumstances indicates an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit. As of the fiscal year ended June 1, 2013, our goodwill balance was $1.5 million and represents the premium we paid for Powerlink of $1.3 million during our second quarter of fiscal 2012, adjusted for foreign currency translation, and the premium we paid for D and C of $0.2 million during our second quarter of fiscal 2013.

During the fourth quarter of each fiscal year, our goodwill balances are reviewed for impairment through the application of a fair-value based test, using the third quarter as the measurement date. In performing our annual review of goodwill balances for impairment, we estimate the fair value of each of our reporting units based primarily on projected future operating results, discounted cash flows, and other assumptions. Projected future operating results and cash flows used for valuation purposes may reflect considerable improvements relative to historical periods with respect to, among other things, revenue growth and operating margins. Although we believe our projected future operating results and cash flows and related estimates regarding fair values are based on reasonable assumptions, historically, projected operating results and cash flows have not always been achieved. In accordance with ASC 350 “Intangibles - Goodwill and Other”, if indicators of impairment are deemed to be present, we would perform an interim impairment test and any resulting impairment loss would be charged to expense in the period identified.

The results of our goodwill impairment tests as of March 2, 2013, and March 1, 2012, indicated no goodwill impairment as estimated fair value of each reporting unit exceeded the carrying value.

Changes in the carrying value of goodwill are as follows (in thousands):


	Powerlink		D and C		TOTAL

Balance at June 2, 2012	$	1,261	$	—	$	1,261

Premium Paid for D and C Acquisition		—		230		230
Foreign currency translation		28		—		28

Balance at June 1, 2013	$	1,289	$	230	$	1,519

Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized on a straight-line basis over their useful lives.

Our intangible assets represent the fair value for trade name, customer relationships, and non-compete agreements acquired in connection with the acquisition of Powerlink during the second quarter of fiscal 2012 and the acquisition of D and C during the second quarter of fiscal 2013.

Intangible assets subject to amortization as well as amortization expense are as follows (in thousands):


	Intangible Assets Subject to Amortization as of
	June 1, 2013		June 2, 2012
Gross Amounts:
Trade Name - D and C	$	29	$	—
Customer Relationship:
D and C		633		—
Powerlink		314		363
Non-compete Agreements - D and C		47		—

Total Gross Amounts	$	1,023	$	363


Accumulated Amortization:
Trade Name - D and C	$	8	$	—
Customer Relationship:
D and C		24		—
Powerlink		77		8
Non-compete Agreements - D and C		6		—

Total Accumulated Amortization	$	115	$	8

The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):


	Amortization Expense
Fiscal Year
2014	$	85
2015		80
2016		66
2017		57
2018		55
Thereafter		565

The weighted average number of years of amortization expense remaining is 17.

- 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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