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Goodwill And Intangible Assets
 3 Months Ended
Jul. 31, 2011
Goodwill And Intangible Assets  
Goodwill And Intangible Assets

4.      Goodwill and Intangible Assets

 

The following tables present details of the Company's goodwill and intangible assets as of July 31, 2011 and April 30, 2010 (in thousands).

 

    Gross       Net    
    carrying   Accumulated   carrying   Estimated
July 31, 2011   amount   amortization   amount   useful life
Indefinite Lives:                
Goodwill    $                   25,161    $                          —     $                   25,161   —  
Finite Lives:                
Customer-related                           6,236                           (2,432)                           3,804    5 to 10 years 
Technology-based                           4,838                           (1,934)                           2,904    0.5 to 6 years 
Trademarks                           5,900                              (904)                           4,996    0.5 to 10 years 
Trade name                              100                              (100)                                  -    2 years 
Non-compete                              200                                (72)                              128    3 to 3.3 years 
Total    $                   42,435    $                     (5,442)    $                   36,993    
                 
    Gross       Net    
    carrying   Accumulated   carrying   Estimated
April 30, 2011   amount   amortization   amount   useful life
Indefinite Lives:                
Goodwill    $                   25,161    $                          —     $                   25,161   —  
Finite Lives:                
Customer-related                           6,236                           (2,187)                           4,049    5 to 10 years 
Technology-based                           4,838                           (1,777)                           3,061    0.5 to 6 years 
Trademarks                           5,900                              (758)                           5,142    0.5 to 5 years 
Trade name                              100                              (100)                                  -    2 years 
Non-compete                              200                                (56)                              144    3 to 3.3 years 
Total    $                   42,435    $                     (4,878)    $                   37,557    

 

Acquired finite-lived intangibles are generally amortized on a straight line basis over their estimated useful life. The useful life of finite-lived intangibles is the period over which the asset is expected to contribute directly or indirectly to future cash flows of the Company.  Intangible assets amortization expense for the three months ended July 31, 2011 was $565,000. Amortization expense for the three months ended July 31, 2010 was $835,000. The estimated future amortization expense related to intangible assets as of July 31, 2011 is as follows (in thousands):

 

Fiscal Year Ending April 30,   Amount
Remainder of 2012         1,550
2013         1,934
2014         1,878
2015         1,841
2016         1,425
Thereafter         3,204
    Total    $ 11,832

 

The following table summarizes the activity in the Company's goodwill account during the three months ended July 31, 2011 and 2010:

 

    Three months ended July 31,
    2011 2010
Balance, beginning of the period                      25,161                      17,928
Goodwill added through acquisition                             -                        15,074
Ciphersoft royalty payments                             -                                 8
Balance, end of period                      25,161                      33,010

 

Goodwill at July 31, 2011, represents the excess of purchase prices over the sum of the amounts assigned to assets acquired less liabilities assumed.  The Company believes these acquisitions will produce the following results:

 

  • Increased Market Presence and Opportunities: The addition of the acquired companies should increase the combined company's market presence and opportunities for growth in sales and earnings.

 

  • Enhanced Product Mix: The complementary nature of the Company's products with its acquisitions should benefit current customers and provide the combined company with the ability to access new customers.

  

  • Operating Efficiencies: The combination of the Company with its acquisitions provides the opportunity for potential economies of scale and cost savings.

 

The Company believes these primary factors support the amount of goodwill recognized as a result of the purchase price for companies it has acquired. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. 

 

Pursuant to the accounting guidance for goodwill and other intangible assets, the measurement of impairment of goodwill consists of two steps. In the first step, the fair value of the Company is compared to its carrying value. The Company determined that the asset group to be tested for recoverability is at the business unit level as it was the lowest level at which cash flows were identifiable.  The seconds step is to determine the implied fair values of the business units' goodwill, and to compare them to the carrying values of the business units' goodwill. This second step includes valuing all of the tangible and intangible assets and liabilities of the business units as if they had been acquired in a business combination to determine the implied fair values of goodwill.  The business units that contain goodwill and intangible assets are Unify, Daegis, AXS-One, and CipherSoft.