Note 6 - Goodwill and Other Intangible Assets

12 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 6 — GOODWILL AND OTHER INTANGIBLE ASSETS

Carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment in accordance with ASC Topic 350, “Intangibles – Goodwill and Other.”  The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of goodwill and indefinite-lived intangible assets using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level, that requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate.  The estimates of fair value of reporting units are based on the best information available as of the date of the assessment.  The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge.  Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests.  Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

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.

The Company performed an interim goodwill impairment test as of December 31, 2012 on LSI Controls (formerly LSI Virticus), one of its reporting units that contain goodwill. LSI Controls was acquired March 19, 2012 and is part of the Electronic Components Segment. The reduction of the sales forecast that was originally used to value the Earn-Out liability related to the LSI Controls acquisition and which ultimately led to an adjustment to the Earn-Out liability in the second quarter of fiscal 2013 (see Note 13), led management to conclude that an interim goodwill impairment test was required on the LSI Controls reporting unit. As a result of the test, it was determined that goodwill associated with this reporting unit was impaired. Of the original goodwill of $2,413,000, it was determined that $2,141,000 or 89% of the original goodwill value was impaired. (As part of the annual goodwill test performed as of March 1, 2013, the remaining $272,000 of goodwill associated with LSI Controls was found to be fully impaired.) A similar test was not performed on the three other reporting units that contain goodwill because the triggering events that indicate the potential impairment of goodwill did not exist.

As of March 1, 2013, the Company performed its annual goodwill impairment test on the four reporting units that contain goodwill. The goodwill impairment test of one of the reporting units in the Electronic Components Segment that contains goodwill passed with an estimated business enterprise value that was $10.5 million or 42% above the carrying value of this reporting unit. The goodwill impairment test of a reporting unit in the All Other Category passed with an estimated business enterprise value that was $2.1 million or 182% above the carrying value of the reporting unit. The goodwill impairment test of a reporting unit in the Lighting Segment passed with a margin in excess of $8.5 million or 10% above its carrying value. The fourth reporting unit that contains goodwill that is also in the Electronic Components Segment, LSI Controls, was found to be fully impaired. It was this same reporting unit that incurred an impairment loss of $2,141,000, or 89% of the original goodwill value, as of December 31, 2012. The remaining $272,000 of goodwill associated with LSI Controls was found to be fully impaired, primarily as a result of a decline in the discounted cash flows related to this reporting unit.  

As of March 1, 2014, the Company performed its annual goodwill impairment test on the three reporting units that contain goodwill. The goodwill impairment test of one of the reporting units in the Electronic Components Segment that contains goodwill passed with an estimated business enterprise value that was $18.2 million or 71% above the carrying value of this reporting unit. The goodwill impairment test of a reporting unit in the All Other Category passed with an estimated business enterprise value that was $2.5 million or 453% above the carrying value of the reporting unit. The goodwill impairment test of a reporting unit in the Lighting Segment passed with a business enterprise value that was $2.5 million or 3% above its carrying value.

The following table presents information about the Company's goodwill on the dates or for the periods indicated.

Goodwill
(In thousands)							Electronic
	Lighting			Graphics			Components			All Other
	Segment			Segment			Segment			Category			Total
Balance as of June 30, 2013
Goodwill	$	34,913		$	24,959		$	11,621		$	6,850		$	78,343
Accumulated impairment losses		(34,778	)		(24,959	)		(2,413	)		(5,685	)		(67,835	)
Goodwill, net as of June 30, 2013	$	135		$	--		$	9,208		$	1,165		$	10,508
Balance as of June 30, 2014
Goodwill	$	34,913		$	24,959		$	11,621		$	6,850		$	78,343
Accumulated impairment losses		(34,778	)		(24,959	)		(2,413	)		(5,685	)		(67,835	)
Goodwill, net as of June 30, 2014	$	135		$	--		$	9,208		$	1,165		$	10,508

The Company performed its annual review of indefinite-lived intangible assets as of March 1, 2013 and 2014 and determined there was no impairment. As of June 30, 2014, the Company performed an impairment test on two definite-lived intangible assets at the LSI Controls reporting unit (formerly LSI Virticus) in the Electronic Components Segment. The triggering event for this impairment analysis was the shortfall in lighting control sales relative to forecast. The income (discounted cash flow) approach was used to determine the fair market value of the intangible assets. As a result of the analysis, it was determined that two definite-lived intangible assets were fully impaired, totaling $805,000 of impairment expense.

In the first quarter of fiscal 2014, the Company purchased intellectual property related to certain lighting control systems. The cost of this intellectual property was $268,000 and it is being amortized over a nine year period.

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

	June 30, 2014
Other Intangible Assets	Gross
	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	10,352	$	7,412	$	2,940
Patents		338		84		254
LED technology firmware, software		11,228		10,832		396
Trade name		460		454		6
Non-compete agreements		710		501		209
Total Amortized Intangible Assets		23,088		19,283		3,805
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	26,510	$	19,283	$	7,227

	June 30, 2013
Other Intangible Assets	Gross
	Carrying		Accumulated		Net
(In thousands)	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	10,352	$	7,068	$	3,284
Patents		70		55		15
LED technology firmware, software		12,361		10,958		1,403
Trade name		460		362		98
Non-compete agreements		948		591		357
Total Amortized Intangible Assets		24,191		19,034		5,157
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	27,613	$	19,034	$	8,579

	Amortization Expense of Other Intangible Assets
(In thousands)	2014		2013		2012
Amortization Expense	$	815	$	2,495	$	2,631

The Company expects to record amortization expense as follows:

(In thousands)
2015	$	564
2016	$	557
2017	$	460
2018	$	452
2019	$	452
After 2019	$	1,320