Goodwill and Other Intangibles

9 Months Ended

Sep. 30, 2011

Goodwill and Other Intangibles

Goodwill and Other Intangibles

(9) Goodwill and Other Intangibles

The following table presents the changes in the carrying amount of goodwill by reportable segment for the period ended September 30, 2011 (dollars in thousands):

	U.S. Operations			European Operations		Asia Pacific Operations		Total
Balance as of December 31, 2010	$	439,294		$	28,484	$	701	$	468,479
Impairment loss	(225,035		)	—		—		(225,035		)
Acquisition of Ross Smith Energy	30,715			—		—		30,715
ITG Investment Research price adjustment	144			—		—		144
Currency translation adjustment	(20		)	1		—		(19		)
Balance as of September 30, 2011	$	245,098		$	28,485	$	701	$	274,284

Goodwill impairment

The Company tests the carrying value of goodwill for impairment at least annually and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

During 2010, indicators of potential impairment prompted the Company to perform goodwill impairment tests at the end of each quarterly interim period. These indicators included a prolonged decrease in market capitalization, a decline in recent operating results in comparison to prior years, and the significant near-term uncertainty related to both the global economic recovery and the outlook for the Company’s industry.  As the indicators of potential impairment have not improved, the Company continued to perform interim goodwill impairment testing at the end of each quarter during 2011.  The interim impairment tests apply the same valuation techniques and sensitivity analyses used in the Company’s prior annual impairment test to updated cash flow and profitability forecasts.

Based upon tests performed for the June 30, 2011 interim test, the Company recorded an impairment charge of $225.0 million in connection with the goodwill allocated to its U.S. Operations reporting unit. This impairment charge reflects continued weakness in institutional trading volumes, which lowered estimated future cash flows of the U.S. Operations reporting unit, and a decline in industry market multiples.

Based on the results of the September 30, 2011 step one interim testing, no further impairment was indicated for the U.S Operations reporting unit, as its fair value was determined to be in excess of its carrying value by 29%. There was also no impairment indicated for the European or Hong Kong Operations as the fair values of these reporting units were determined to be in excess of their respective carrying values by 29% and 233%. In addition, none of the outcomes of the Company’s sensitivity analyses performed led to a conclusion that goodwill was further impaired.

Although no further impairment of goodwill was indicated during the September 30, 2011 interim testing, the Company recognizes the reasonable possibility of additional goodwill impairment charges in future periods given the persistently unfavorable environment for the Company’s business. It is not possible at this time to determine if any such future impairment charges would result or, if it does, whether such charges would be material. The use of the term “reasonable possibility” refers to a potential occurrence that is more than remote, but less than probable in management’s judgment. The Company will continue to monitor economic trends related to its business as well as re-examine the key assumptions used in its impairment testing.

Other Intangible Assets

Acquired other intangible assets consisted of the following at September 30, 2011 and December 31, 2010 (dollars in thousands):

	September 30, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Useful Lives (Years)
Trade names	$	10,400	$	1,229	$	10,400	$	1,036	5.0
Customer related intangibles	27,851		3,943		20,901		2,571		7.8
Proprietary software	20,876		13,527		20,876		12,001		17.6
Trading rights	242		—		165		—		—
Other	50		—		50		—		—
Total	$	59,419	$	18,699	$	52,392	$	15,608

During 2011, the Company recorded a $7.0 million customer related intangible asset with a useful life of 10 years related to the acquisition of RSEG.

At September 30, 2011, other intangibles not subject to amortization amounted to $8.7 million, of which $8.4 million related to the POSIT trade name.

Amortization expense of other intangibles was $1.1 million and $3.1 million for the three months and nine months ended September 30, 2011, respectively, compared with $0.7 million and $2.1 million in the respective prior year periods. These amounts are included in other general and administrative expense in the Condensed Consolidated Statements of Operations.

During the nine months ended September 30, 2011, no other intangible assets were deemed impaired, and accordingly, no adjustment was required.