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Goodwill
12 Months Ended
Jun. 30, 2012
Goodwill

Note 8 – Goodwill

In September 2011, we adopted ASU 2011-08, under which an entity may first assess qualitative factors in determining whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Adoption of this guidance had no impact on our financial condition or results of operations as no events came to our attention indicating that the fair values of our reporting units might be less than their carrying values. Refer to Note 1 – Summary of Significant Accounting Policies for more information. In fiscal year 2012, we did not elect to first assess the qualitative factors in evaluating our goodwill for impairment; therefore, we proceeded with our quantitative goodwill impairment test.

We test for impairment at the reporting unit level on an annual basis as of April 30th of every year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. Refer to Note 1 – Summary of Significant Accounting Policies for more information on how we test goodwill for impairment. The annual goodwill impairment tests conducted as of April 30, 2012 and 2011 indicated that the fair value of each reporting unit was substantially in excess of its carrying value and, as such, no impairments were deemed to exist.

Effective July 1, 2011, we revised our business segments in order to better align them with our strategic approach to the markets and customers we serve. Under this new structure, our reportable segments consist of the Infotainment, Lifestyle, Professional and Other segments. Our reporting units are the same as our reportable segments with the exception of our Lifestyle segment, which consists of two reporting units, automotive audio and home audio. In connection with this realignment, we reallocated our goodwill to our new reporting units based on each reporting unit’s relative fair value. We also performed a goodwill impairment test as of July 1, 2011 using our new reporting units and determined that the fair value of each of our reporting units exceeded its carrying value, therefore, no impairments were deemed to exist as of this date. Refer to Note 17 – Business Segment Data for more information.

During the first half of fiscal year 2010, we determined that goodwill related to our Infotainment segment and a reporting unit within our Lifestyle segment were impaired and we recognized impairment charges of $7.4 million and $4.9 million, respectively, in our Consolidated Statement of Income for the fiscal year ended June 30, 2010. During the second half of fiscal year 2010, as a result of the sustained improvements in the operating results of these reporting units due to improvements in economic conditions and realized savings resulting from our cost cutting initiatives, we performed a goodwill impairment test which demonstrated that the calculated fair value of our reporting units exceeded the respective carrying values and therefore no impairments existed in any of our reporting units. As a result, we ceased recognizing goodwill impairment charges associated with incremental goodwill that was recognized related to contingent purchase price arrangements.

 

Goodwill was $180.8 million at June 30, 2012 compared with $119.4 million at June 30, 2011. The increase in goodwill in the fiscal year ended June 30, 2012 versus the prior fiscal year is primarily related to goodwill associated with the MWM Acquisition of $79.8 million offset to a certain extent by foreign currency translation. Refer to Note 2 – Acquisitions for more information.

Goodwill was $119.4 million at June 30, 2011 compared with $105.9 million at June 30, 2010. The increase in goodwill in the fiscal year ended June 30, 2011 versus the prior fiscal year is primarily related to foreign currency translation, contingent purchase price consideration associated with the acquisition of innovative Systems GmbH (“IS”) of $5.7 million and goodwill related to the acquisition of 3dB of $0.6 million, offset by approximately $4.5 million of purchase price adjustments for prior year acquisitions, primarily related to the acquisition of Selenium. Refer to Note 2 – Acquisitions for more information. The contingent purchase price consideration associated with the acquisition of IS is calculated pursuant to the terms of an agreement between the parties. On March 31, 2011, the IS sellers sent us a letter to exercise their option to have the value of the future contingent purchase consideration determined by a major international accounting firm. The parties are currently disputing certain terms under such agreement and until such time as the dispute is resolved we will not be able to calculate the final purchase price.

The changes in the carrying amount of goodwill by business segment for the fiscal years ended June 30, 2012 and 2011 were as follows:

 

     Infotainment     Lifestyle     Professional     Other      Total  

Balance, June 30, 2010

   $ 3,701      $ 33,112      $ 69,109      $ 0       $ 105,922   

Acquisitions and adjustments

     0        (1,476     (2,426     0         (3,902

Contingent purchase price consideration associated with the acquisition of IS

     3,465        2,272        0        0         5,737   

Other adjustments(1)

     903        5,259        5,438        0         11,600   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance, June 30, 2011

   $ 8,069      $ 39,167      $ 72,121      $ 0       $ 119,357   

Acquisitions and adjustments

     0        79,757        0        0         79,757   

Contingent purchase price consideration associated with the acquisition of IS

     (1,258     (825     0        0         (2,083

Other adjustments(1)

     (955     (8,154     (7,111     0         (16,220
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance, June 30, 2012

   $ 5,856      $ 109,945      $ 65,010      $ 0       $ 180,811   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

(1) 

The other adjustments to goodwill primarily consist of foreign currency translation adjustments.