Goodwill and Other Intangibles

9 Months Ended

Sep. 30, 2012

Goodwill and Other Intangibles

Goodwill and Other Intangibles

(8) 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, 2012 (dollars in thousands):

	U.S. Operations			European Operations			Asia Pacific Operations			Total
Balance as of December 31, 2011	$	245,105		$	28,486		$	701		$	274,292
Impairment losses	(245,103		)	(28,481		)	(701		)	(274,285		)
Currency translation adjustment	(2		)	(5		)	—			(7		)
Balance as of September 30, 2012	$	—		$	—		$	—		$	—

Goodwill impairment

Prior to the full goodwill impairment charge taken in the second quarter of 2012, the Company tested the carrying value of goodwill for impairment at least annually and more frequently if an event occurred or circumstances changed that indicated a potential impairment had occurred. The impairment tests were conducted at the reporting unit level, which for the Company is based on geographic segments and not products and services.

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 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 did not improve, the Company continued to perform interim goodwill impairment testing at the end of each quarterly period through the second quarter of 2012.  All interim impairment tests applied the same valuation techniques and sensitivity analyses used in the Company’s annual impairment tests to updated cash flow and profitability forecasts.

Based upon tests performed during the second quarter of 2012, the Company recorded an impairment charge of $274.3 million in connection with the goodwill allocated to its U.S., European and Asia Pacific reporting units. This impairment charge reflects continued weakness in global institutional trading volumes and an increasingly uncertain outlook on near-term business fundamentals as well as the length and severity of the decline in global institutional equity market activity.  Consequently, the Company downwardly revised its earnings and cash flow forecasts to reflect adjusted expectations for a significantly slower recovery and more prolonged downturn in its global businesses and reduced the multiple used in its market approach to reflect the decline in industry market multiples. Although the revised forecasts continued to result in a fair value for the Canadian reporting unit that was well in excess of its carrying value (which does not include goodwill), the fair values for the U.S., European and Asia Pacific reporting units were determined to be below their carrying values, indicating potential impairment of the goodwill held in these units and requiring step two impairment testing.  The step two valuation test yielded aggregate fair values for the tangible and (non-goodwill) intangible assets in each of these reporting units above their aggregate carrying values, which reduced the amount of the implied fair value attributable to goodwill.  As a result, goodwill in each of these reporting units was determined to be fully impaired requiring the Company to record a goodwill impairment charge in the second quarter of 2012.

Other Intangible Assets

Acquired other intangible assets consisted of the following at September 30, 2012 and December 31, 2011 (dollars in thousands):

	September 30, 2012				December 31, 2011
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Useful Lives (Years)
Trade names	$	10,400	$	1,767	$	10,400	$	1,293	4.0
Customer-related intangibles	27,851		6,158		27,851		4,497		13.1
Proprietary software	21,501		15,584		20,876		14,036		6.6
Trading rights	243		—		243		—		—
Other	50		—		50		—		—
Total	$	60,045	$	23,509	$	59,420	$	19,826

At September 30, 2012, indefinite-lived 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 $1.3 million and $3.7 million for the three months and nine months ended September 30, 2012, respectively, compared with $1.1 million and $3.1 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, 2012, no other intangibles were deemed impaired, and accordingly, no adjustment was required.