Goodwill and other Identifiable Intangible Assets

9 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

Amortizable identifiable intangible assets were (in thousands):



	June 30, 2012							September 30, 2011
	Gross carrying amount		Accum. amort.			Net		Gross carrying amount		Accum. amort.			Net
Purchased and core technology	$	46,318	$	(43,117	)	$	3,201	$	46,412	$	(41,716	)	$	4,696
License agreements	2,840		(2,664		)	176		2,840		(2,610		)	230
Patents and trademarks	10,732		(8,272		)	2,460		10,341		(7,505		)	2,836
Customer maintenance contracts	700		(700		)	—		700		(674		)	26
Customer relationships	17,304		(11,949		)	5,355		17,437		(10,865		)	6,572
Non-compete agreements	1,035		(1,035		)	—		1,036		(1,036		)	—
Total	$	78,929	$	(67,737	)	$	11,192	$	78,766	$	(64,406	)	$	14,360

Amortization expense was $1.1 million and $1.5 million for the three month periods ended June 30, 2012 and 2011, respectively. Amortization expense was $3.5 million and $4.9 million for the nine months ended June 30, 2012 and 2011, respectively. Amortization expense is recorded on our consolidated statement of operations within cost of sales, primarily within amortization of purchased and core technology, and in general and administrative expense. Estimated amortization expense related to identifiable intangible assets for the remainder of fiscal 2012 and the five succeeding fiscal years is (in thousands):



2012 (three months)	$	939
2013	3,641
2014	2,777
2015	2,108
2016	785
2017	215

The changes in the carrying amount of goodwill were (in thousands):



	Nine months ended June 30,
	2012			2011
Beginning balance, October 1	$	86,012		$	86,210
Foreign currency translation adjustment	(468		)	395
Ending balance, June 30	$	85,544		$	86,605

Goodwill is tested for impairment on an annual basis as of June 30, or more frequently if events or circumstances occur which could indicate impairment. At June 30, 2012, we had approximately $85.5 million of goodwill on our balance sheet, which is held in a single reporting unit, resulting from eight different acquisitions that have taken place over the past twelve years. Historically we have approached our annual goodwill impairment assessment by estimating fair value using our market capitalization, compared to our carrying value. In certain years, a control premium has been included in this analysis. As a result of the lower than anticipated results for our second quarter of fiscal 2012, the lowering of our annual forecast for fiscal 2012 and the subsequent decline in our stock, we performed a control premium study to determine the appropriate control premium to include in the calculation of fair value. We engaged a third party valuation firm to assist us in performing the control premium analysis. In order to estimate the range of control premiums appropriate for us, three methodologies were used, including (1) analysis of individual transactions within our industry; (2) analysis of industry-wide data, and (3) analysis of global transaction data. The control premium analysis resulted in a range of control premium of 30% to 45%. We have further analyzed the data provided and estimated that a 40% control premium best represents the amount an investor would likely pay, over and above market capitalization, in order to obtain a controlling interest given the economic conditions at this time. This control premium approximates the midpoint of the range and is slightly higher than our previous control premium of 35%, reflecting the overall increase in control premiums over the past several years.

7. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS (CONTINUED)

As of June 30, 2012, our market capitalization was $264.3 million compared to our carrying value of $265.7 million. Our market capitalization plus our estimated control premium of 40% resulted in a fair value in excess of our carrying value by a margin of 39% and therefore no impairment was indicated.

We have defined the criteria that could result in additional interim goodwill impairment testing. If these criteria are met, we will undertake the analysis to determine whether a goodwill impairment has occurred. An impairment could have a material effect on our consolidated balance sheet and results of operations. The calculation of asset impairment requires us to make assumptions about future cash flows and revenues. These assumptions require significant judgment and actual results may differ from assumed or estimated amounts.

- 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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