Goodwill and Other Intangible Assets

3 Months Ended

Sep. 30, 2013

Note 7.

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill are as follows ($000):


	Three Months Ended September 30, 2013
	Infrared Optics		Near- Infrared Optics		Military & Materials		Advanced Products Group			Active Optical Products			Total

Balance – beginning of period	$	9,677	$	60,269	$	30,712	$	22,694		$	—		$	123,352
Goodwill acquired		—		—		—		—			39,041			38,994
Goodwill adjustment		—		—		—		(516	)		—			(516	)
Foreign currency translation		56		165		—		—			(47	)		221


Balance – end of period	$	9,733	$	60,434	$	30,712	$	22,178		$	38,994		$	162,051

The Company reviews the recoverability of goodwill at least annually and any time business conditions indicate a potential change in recoverability. The measurement of a potential impairment begins with comparing the current fair value of the Company’s reporting units to the recorded value (including goodwill). The Company uses a discounted cash flow model (“DCF model”) and a market analysis to determine the current fair value of its reporting units. A number of significant assumptions and estimates are involved in estimating the forecasted cash flows used in the DCF model, including markets and market shares, sales volume and pricing, costs to produce, working capital changes and income tax rates. Management considers historical experience and all available information at the time the fair values of the reporting units are estimated. However, actual fair values that could be realized could differ from those used to evaluate the impairment of goodwill.

In connection with the acquisition of Laser Enterprise in September 2013, the Company recorded the excess purchase price over the net assets of the business acquired as goodwill in the accompanying Condensed Consolidated Balance Sheet, based on the preliminary purchase price allocation.

During the quarter ended September 30, 2013, the Company recorded an adjustment to the goodwill associated with the November 2012 acquisition of M Cubed. This adjustment related to a change in deferred income tax assets and was recorded in conjunction with the finalization and filing of the M Cubed final tax return.

The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of September 30, 2013 and June 30, 2013 was as follows ($000):


	September 30, 2013							June 30, 2013
	Gross					Net		Gross					Net
	Carrying		Accumulated			Book		Carrying		Accumulated			Book
	Amount		Amortization			Value		Amount		Amortization			Value

Patents	$	54,749	$	(11,343	)	$	43,406	$	39,659	$	(10,455	)	$	29,204
Trademarks		17,872		(980	)		16,892		17,855		(963	)		16,892
Customer Lists		69,769		(13,552	)		56,217		52,614		(12,189	)		40,425
Other		2,094		(1,429	)		665		1,580		(1,400	)		180

Total	$	144,484	$	(27,304	)	$	117,180	$	111,708	$	(25,007	)	$	86,701

In conjunction with the acquisition of Laser Enterprise, the Company recorded $15.0 million of patents, $17.1 million of customer lists and $0.5 million related to non-compete agreements. These intangibles assets were recorded based on the Company’s preliminary purchase price allocation which is expected to be finalized during fiscal year 2014.

Amortization expense recorded on the Company’s intangible assets was $2.2 million and $1.1 million, for the three months ended September 30, 2013 and 2012, respectively. The patents are being amortized over a range of 120 to 240 months with a weighted average remaining life of approximately 125 months. The customer lists are being amortized over a range of approximately 120 months to 192 months with a weighted average remaining life of approximately 126 months. The gross carrying amount of trademarks includes $16.4 million of acquired trade names with indefinite lives that are not amortized but tested annually for impairment or more frequently if a triggering event occurs. Included in the gross carrying amount and accumulated amortization of the Company’s intangible assets is the effect of foreign currency translation on that portion of the intangible assets relating to the Company’s German subsidiaries, Photop, AOFR Pty. Ltd. (“Photop AOFR”) and Laser Enterprise.

At September 30, 2013, the estimated amortization expense for existing intangible assets for each of the five succeeding fiscal years is as follows ($000):


Year Ending June 30,

Remaining 2014	$	8,396
2015		10,575
2016		10,508
2017		10,499
2018		10,023

- 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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