Note 6 - Goodwill and Other Intangible Assets, Net

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

All of our goodwill and other intangible assets relate to our Services segment. The following table shows the changes in the carrying amount of goodwill for the year-to-date periods ended March 31, 2017 and December 31, 2016:



(In thousands)	Goodwill		Accumulated Impairment Losses			Net
Balance at December 31, 2015	$	197,265	$	(2,095	)	$	195,170
Goodwill acquired	—		—			—
Impairment losses	—		—			—
Balance at December 31, 2016	197,265		(2,095		)	195,170
Goodwill acquired	126		—			126
Impairment losses	—		—			—
Balance at March 31, 2017	$	197,391	$	(2,095	)	$	195,296

Goodwill is an asset representing the estimated future economic benefits arising from the assets we have acquired that were not individually identified and separately recognized, and includes the value of the discounted expected future cash flows, the workforce, expected synergies with our other affiliates and other unidentifiable intangible assets. Goodwill is deemed to have an indefinite useful life and is subject to review for impairment annually, or more frequently, whenever circumstances indicate potential impairment. Events that could result in an interim assessment of goodwill impairment and/or a potential impairment loss include, but are not limited to: (i) significant under-performance relative to historical or projected future operating results; (ii) significant changes in the strategy for the Services segment; (iii) significant negative industry or economic trends; and (iv) a decline in market capitalization below book value attributable to the Services segment. The value of goodwill is primarily supported by revenue projections, which are primarily driven by projected transaction volume and margins. Management regularly updates certain assumptions related to our projections, including the likelihood of achieving the assumed potential revenues from new initiatives and business strategies, and if these or other items have a significant negative impact on the reporting unit’s projections we may perform additional analysis to determine whether an impairment charge is needed. Lower earnings over sustained periods also can lead to impairment of goodwill, which could result in a charge to earnings.

We conducted our most recent annual goodwill impairment analysis in the fourth quarter of 2016. For purposes of performing our annual goodwill impairment tests, we concluded that the Services segment constitutes one reporting unit to which all of our recorded goodwill is related. As part of this annual goodwill impairment assessment, we estimated the fair value of the reporting unit using primarily an income approach and, to a lesser extent, a market approach. The key factor in our fair value analysis was forecasted future cash flows, which were less than originally had been expected at the acquisition dates. Given that the current goodwill impairment analysis relies significantly on our achieving high growth rates in our projected future cash flows, failure to meet those projections may result in an impairment in a future period.

In our annual goodwill analysis in the fourth quarter of 2016, we considered both positive and negative factors and concluded that, after considering all of the factors and evidence available, there was no impairment of goodwill as of December 31, 2016. The goodwill impairment test is a two-step process as required by the accounting standard related to intangible assets. Step one compares a reporting unit’s estimated fair value to its carrying value. If the carrying amount exceeds the estimated fair value, the second step must be completed to measure the amount of the reporting unit’s goodwill impairment loss, if any. At December 31, 2016, the estimated fair value of the Services reporting unit exceeded our carrying amount.

We performed a qualitative assessment in the first quarter of 2017, and considered factors such as: (i) the decline in and timing of revenues during the first quarter of 2017 (as compared to the forecasted amounts for the same period); (ii) the low gross margin results during the first quarter of 2017 (as compared to the forecasted growth in margins); (iii) the recent improvements in revenue and gross margins throughout 2016; and (iv) our recent annual goodwill impairment test and conclusion that the estimated fair value of the Services reporting unit exceeded our carrying amount. Based on our qualitative assessment in the first quarter of 2017, we concluded that it is not “more likely than not” that the fair value of the Services reporting unit is less than its carrying amount as of March 31, 2017. We monitor the performance of the Services segment each quarter, including through our annual impairment assessment planned for the fourth quarter of 2017. For our next quantitative impairment assessment, we intend to adopt the January 2017 FASB update to the accounting standard regarding goodwill and other intangibles. See Note 1—“Accounting Standards Not Yet Adopted” for more information.

The following is a summary of the gross and net carrying amounts and accumulated amortization of our other intangible assets as of the periods indicated:



	March 31, 2017
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Client relationships	$	83,329	$	(21,952	)	$	61,377
Technology	15,250		(6,125		)	9,125
Trade name and trademarks	8,340		(2,346		)	5,994
Client backlog	6,680		(5,427		)	1,253
Non-competition agreements	185		(162		)	23
Total	$	113,784	$	(36,012	)	$	77,772

	December 31, 2016
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Client relationships	$	83,316	$	(19,696	)	$	63,620
Technology	15,250		(5,497		)	9,753
Trade name and trademarks	8,340		(2,125		)	6,215
Client backlog	6,680		(5,235		)	1,445
Non-competition agreements	185		(160		)	25
Total	$	113,771	$	(32,713	)	$	81,058

The estimated aggregate amortization expense for the remainder of 2017 and thereafter is as follows (in thousands):



2017	$	9,351
2018	12,054
2019	10,795
2020	9,186
2021	7,376
2022	6,533
Thereafter	22,477
Total	$	77,772

Generally, for tax purposes, substantially all of our goodwill and other intangible assets are deductible and will be amortized over a period of 15 years from acquisition.

- 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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