Note 7 - Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2012

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

In accordance with ASC Topic 350, Intangibles – Goodwill and Other, the Company is required to perform an annual impairment test of its goodwill and indefinite-lived intangible assets. The Company previously performed this test as of July 1st of each fiscal year, with the last test performed using this date as of July 1, 2010. The Company decided to change the annual testing from July 1st to March 1st in order to reduce administrative burden. The change from a testing date of July 1st to March 1st resulted in two impairment tests in fiscal 2011 that were eight months apart. The Company also performs the test on an interim basis when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company uses a combination of the market approach and the income (discounted cash flow) approach in determining the fair value of its reporting units. Under ASC Topic 350, the goodwill impairment test is a two-step process. Under the first step, the fair value of the Company’s reporting unit is compared to its respective carrying value. An indication that goodwill is impaired occurs when the fair value of a reporting unit is less than the carrying value. When there is an indication that goodwill is impaired, the Company is required to perform a second step. In step two, the actual impairment of goodwill is calculated by comparing the implied fair value of the goodwill with the carrying value of the goodwill.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing.  The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing.  These include operating results, forecasts, anticipated future cash flows and marketplace data, to name a few.  There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

Based upon the Company’s analysis as of July 1, 2010, it was determined that the goodwill associated with the four reporting units that contained goodwill was not impaired.  The goodwill impairment test in the Electronic Components Segment passed with an estimated business enterprise value that was $2.2 million or 10% above the carrying value of this reporting unit.  The goodwill impairment test in the All Other Category passed with an estimated business enterprise value that was $0.9 million or 84% above the carrying value of the reporting unit.  The goodwill impairment tests in the Lighting and Graphics Segments passed with a margin in excess of 600% and 150%, respectively.

The Company performed a second annual goodwill impairment test, as of March 1, 2011, as a result of the change in the timing of the performance of the annual test as noted above.  Based upon the Company’s analyses as of March 1, 2011, it was determined that the goodwill associated with the four reporting units that contained goodwill was not impaired.  The goodwill impairment test in the Electronic Components Segment passed with an estimated business enterprise value that was $16.5 million or 69% above the carrying value of this reporting unit.  The goodwill impairment test of the Lighting Segment passed with an estimated business enterprise value that was $134.7 million or 42% above the carrying value of the reporting unit.  The goodwill impairment test of the Graphics Segment passed with an estimated business enterprise value that was $22.0 million or 91% above the carrying value of this reporting unit.  The goodwill impairment test in the All Other Category passed with a margin in excess of 265%.

The continuing effects of the recession on some of the Company’s markets, the decline in discounted cash flows associated with these markets, and the decline in the Company’s stock price led management to believe that an additional goodwill impairment test was required for three of the four reporting units that contain goodwill as of September 30, 2011. As a result of the test, it was determined that the goodwill associated with the Graphics Segment was fully impaired. It was also determined that the goodwill associated with the other reporting units tested was not impaired. Because the test was not complete, an estimate of the goodwill impairment was recorded in the first quarter of fiscal year 2012 totaling $258,000. This goodwill impairment test was completed in the second quarter with no change to the impairment that was recorded.

As of March 1, 2012, the company performed its annual goodwill impairment test on the three reporting units that contain goodwill. While the impairment test is not complete, management believes that the goodwill on the balance sheets at the three reporting units is not impaired. The impairment test is expected to be complete in the fourth quarter of fiscal 2012.

The following table presents information about the Company's goodwill on the dates or for the periods indicated, including the estimated goodwill associated with the acquisition of Virticus Corporation currently valued at $3.1 million (refer to Note 13).

Goodwill
(In thousands)							Electronic
	Lighting			Graphics			Components		All Other
	Segment			Segment			Segment		Category			Total
Balance as of June 30, 2011
Goodwill	$	34,913		$	24,959		$	9,208	$	6,850		$	75,930
Accumulated impairment losses		(34,778	)		(24,701	)		--		(5,685	)		(65,164	)
	$	135		$	258		$	9,208	$	1,165		$	10,766
Balance as of March 31, 2012
Goodwill	$	34,913		$	24,959		$	12,318	$	6,850		$	79,040
Accumulated impairment losses		(34,778	)		(24,959	)		--		(5,685	)		(65,422	)
	$	135		$	--		$	12,318	$	1,165		$	13,618

Based upon the Company’s analysis as of July 1, 2010, it was determined that its indefinite-lived intangible assets were not impaired. The Company performed a second annual indefinite-lived intangible asset impairment test, as of March 1, 2011, as a result of the change in the timing of the performance of the annual test. Based upon the Company’s analysis as of March 1, 2011, it was determined that its indefinite-lived intangible assets were not impaired.  A similar impairment test was performed as of March 1, 2012 as part of its annual review of indefinite-lived intangible assets. While the impairment test is not complete, management believes that the indefinite-lived intangible assets are not impaired. The impairment test is expected to be complete in the fourth quarter of fiscal 2012.

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

	March 31, 2012
Other Intangible Assets	Gross
	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	10,352	$	6,338	$	4,014
Patents		70		50		20
LED technology firmware, software		11,228		8,793		2,435
Trade name		460		247		213
Non-compete agreements		890		420		470
		23,000		15,848		7,152
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
		3,422		--		3,422
Total Other Intangible Assets	$	26,422	$	15,848	$	10,574

	June 30, 2011
	Gross
	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	10,352	$	5,745	$	4,607
Patents		70		46		24
LED technology firmware, software		11,228		7,614		3,614
Trade name		460		178		282
Non-compete agreements		890		325		565
		23,000		13,908		9,092
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
		3,422		--		3,422
Total Other Intangible Assets	$	26,422	$	13,908	$	12,514

(In thousands)	Amortization Expense of Other Intangible Assets
	March 31, 2012		March 31, 2011
Three Months Ended	$	648	$	646
Nine Months Ended	$	1,940	$	1,941

The Company expects to record amortization expense as follows:  balance of fiscal 2012 -- $648,000; 2013 -- $2,323,000; 2014 -- $619,000; 2015 -- $533,000; 2016 -- $527,000; 2017 -- $432,000; and after 2017 -- $2,070,000.