Goodwill and Other Intangible Assets, Net

9 Months Ended

Oct. 02, 2011

Goodwill and Other Intangible Assets, Net [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

7. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Adjustments to goodwill

During the thirteen weeks ended October 2, 2011, the Company retrospectively adjusted a portion of its goodwill with respect to the BI Acquisition to reflect changes in provisional amounts recognized at February 10, 2011 based on new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Refer to Note 2. Such adjustments resulted in a net decrease to goodwill of $6.8 million and $7.0 million for the thirteen and thirty-nine weeks ended October 2, 2011, respectively. These adjustments are included in total Acquisitions for the thirty-nine weeks ended October 2, 2011 in the table below.

During the thirteen weeks ended October 2, 2011, the Company completed its purchase accounting relative to the Cornell Acquisition after making adjustments to taxes, which was the only area of the purchase price allocation not yet finalized. As a result of these adjustments, the Company has retrospectively adjusted a portion of its goodwill with respect to the Cornell acquisition to reflect changes in the provisional amounts recognized at January 2, 2011 based on new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Refer to Note 2. Such adjustments resulted in a net decrease to goodwill of $7.5 million and $8.4 million for the thirteen and thirty-nine weeks ended October 2, 2011, respectively. These adjustments are included in the balance as of January 2, 2011 in the table below.

Changes in the Company’s goodwill balances for the thirty-nine weeks ended October 2, 2011 were primarily related to the BI Acquisition and are as follows (in thousands):

	January 2, 2011		Acquisitions		Foreign currency translation			October 2, 2011
U.S. Detention & Corrections	$	170,376	$	—	$	—		$	170,376
GEO Care		65,456		276,117		—			341,573
International Services		762		—		(42	)		720
Total Goodwill	$	236,594	$	276,117	$	(42	)	$	512,669

On February 10, 2011, the Company acquired BI and recorded goodwill representing the strategic benefits of the Acquisition including the combined Company’s increased scale and the diversification of service offerings. Goodwill resulting from business combinations includes the excess of the Company’s purchase price over net assets of BI acquired of $276.1 million.

Identifiable intangible assets

Intangible assets consisted of the following (in thousands):

	Useful Life in Years	U.S. Detention  & Corrections			International Services			GEO Care			Total
Finite-lived intangible assets:
Management contracts	1-17	$	49,850		$	2,754		$	41,300		$	93,904
Covenants not to compete	1-4		4,349			—			2,821			7,170
Gross carrying value of January 2, 2011			54,199			2,754			44,121			101,074
Changes to gross carrying value during the thirty-nine weeks ended October 2, 2011:
Finite-lived intangible assets:
Management contracts - BI Acquisition	11-14		—			—			65,200			65,200
Covenants not to compete - BI Acquisition	2		—			—			1,400			1,400
Technology - BI Acquisition	7		—			—			21,200			21,200
Foreign currency translation			—			(501	)		—			(501	)
Indefinite-lived intangible assets:
Trade names - BI Acquisition	Indefinite		—						44,000			44,000
Gross carrying value as of October 2, 2011			54,199			2,253			175,921			232,373
Accumulated amortization expense			(14,561	)		(358	)		(12,323	)		(27,242	)
Net carrying value at October 2, 2011		$	39,638		$	1,895		$	163,598		$	205,131

On February 10, 2011, the Company acquired BI and recorded identifiable intangible assets related to management contracts, existing technology, non-compete agreements for certain former BI executives and for the trade name associated with BI’s business which is now part of the Company’s GEO Care reportable segment. The weighted average amortization period in total for these acquired intangible assets is 11.4 years and for the acquired management contracts is 13.0 years. As of October 2, 2011, the weighted average period before the next contract renewal or extension for the intangible assets acquired from BI was approximately 1.4 years.

Accumulated amortization expense for the Company’s finite-lived intangible assets in total and by asset class as of October 2, 2011 is as follows (in thousands):

	U.S. Detention  & Corrections		International Services		GEO Care		Total
Management contracts	$	12,710	$	358	$	8,117	$	21,185
Technology		—		—		1,943		1,943
Covenants not to compete		1,851		—		2,263		4,114
Total accumulated amortization expense	$	14,561	$	358	$	12,323	$	27,242

Amortization expense was $5.0 million and $14.1 million for the thirteen and thirty-nine weeks ended October 2, 2011, respectively and primarily related to the amortization of intangible assets for acquired management contracts. Amortization expense was $1.8 million and $2.9 million for the thirteen and thirty-nine weeks ended October 3, 2010, respectively and primarily related to the amortization of intangible assets for acquired management contracts. As of October 2, 2011, the weighted average period before the next contract renewal or extension for all of the Company’s facility management contracts was approximately 1.4 years. Although the facility management contracts acquired have renewal and extension terms in the near term, the Company has historically maintained these relationships beyond the contractual periods.

Estimated amortization expense related to the Company’s finite-lived intangible assets for the remainder of fiscal year 2011 through fiscal year 2015 and thereafter is as follows (in thousands):

Fiscal Year	U.S. Detention  & Corrections - Expense Amortization		International Services - Expense Amortization		GEO Care - Expense Amortization		Total  Expense Amortization
Remainder of 2011	$	1,368	$	63	$	3,392	$	4,823
2012		4,894		123		13,090		18,107
2013		3,556		123		11,517		15,196
2014		3,556		123		11,301		14,980
2015		3,556		123		11,270		14,949
Thereafter		22,708		1,340		69,028		93,076
	$	39,638	$	1,895	$	119,598	$	161,131

The table above includes the estimated amortization of the finite-lived intangible assets acquired from BI on February 10, 2011. As discussed in Note 2, the preliminary allocation of the purchase price is based on the best information available and is provisional pending, among other things, the finalization of the valuation of intangible assets, including the estimated useful lives of the finite-lived intangible assets. The finalization of fair value assessments relative to the finite-lived intangible assets may have an impact on the Company’s estimated future amortization expense.