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Goodwill and Other Intangible Assets | 9 Months Ended
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Sep. 30, 2013
Goodwill and Other Intangible Assets | 9. Goodwill and Other Intangible Assets The changes in the carrying amounts of goodwill by operating segment for the nine months ended September 30, 2013, are as follows:
|  | Corporate Finance/ Restructuring |  |  | Forensic and Litigation Consulting |  |  | Economic Consulting |  |  | Technology |  |  | Strategic Communications |  |  | Total |
Balances at December 31, 2012: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 469,050 |  |  | $ | 198,957 |  |  | $ | 247,718 |  |  | $ | 118,035 |  |  | $ | 336,662 |  |  | $ | 1,370,422 |
Accumulated goodwill impairment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (110,387 | ) |  |  | (110,387 | )
Goodwill, net as of December 31, 2012 |  |  | 469,050 |  |  |  | 198,957 |  |  |  | 247,718 |  |  |  | 118,035 |  |  |  | 226,275 |  |  |  | 1,260,035 |
Acquisitions(1) |  |  | 18,839 |  |  |  | 1,050 |  |  |  | 944 |  |  |  | — |  |  |  | 4,961 |  |  |  | 25,794 |
Foreign currency translation adjustment and other |  |  | (4,630 | ) |  |  | (349 | ) |  |  | (1 | ) |  |  | (1 | ) |  |  | (2,682 | ) |  |  | (7,663 | )
Intersegment transfers in/(out)(2) |  |  | (31,471 | ) |  |  | 31,471 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Goodwill impairment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (83,752 | ) |  |  | (83,752 | )
Balances at September 30, 2013 |  | $ | 451,788 |  |  | $ | 231,129 |  |  | $ | 248,661 |  |  | $ | 118,034 |  |  | $ | 144,802 |  |  | $ | 1,194,414 |
(1) | Includes adjustments during the purchase price allocation period.
(2) | Includes the reclassification of the Company’s Corporate Finance/Restructuring segment’s healthcare and life sciences practices into the Forensic and Litigation Consulting segment. See Note 15 “Segment Reporting” for information on this segment reclassification.
During the third quarter of 2013, in addition to reduced levels of mergers and acquisitions activity, our Strategic Communications segment has continued to experience pricing pressure for certain discretionary communications services, including initial public offering support services where there is volume but also increasing competition. This has compressed segment margins and contributed to a change in the Company’s near-term outlook for this segment. This was considered an interim impairment indicator for the Strategic Communications segment at the Strategic Communications reporting unit level. As a result, we performed an interim impairment analysis with respect to the carrying value of goodwill in our Strategic Communications reporting unit. There were no interim impairment indicators identified for the goodwill in any other of the Company’s reporting units. For the interim impairment test performed as of September 30, 2013, the fair value was estimated using a combination of appropriately weighted income and market approaches. The cash flow projections are based on our most recent forecasts and near term business plans developed in the third quarter, as well as various growth rate assumptions for years beyond the nine-month period. In the income approach, the cash flows were discounted using an estimated weighted average cost of capital “(WACC”) based on our assessment of the risk inherent in the future revenue streams and cash flows and our WACC. The WACC is comprised of (1) a risk free rate of return, (2) an equity risk premium that is based on the rate of return on equity of publicly traded companies with business characteristics comparable to our reporting units, (3) the current after-tax market rate of return on debt of companies with business characteristics similar to our reporting units, each weighted by the relative market value percentages of our equity and debt, and (4) an appropriate size premium. In the market approach, we utilize market multiples derived from comparable guideline companies and comparable market transactions to the extent available. These valuations are based on estimates and assumptions including projected future cash flows and the determination of appropriate market comparables and determination of whether a premium or discount should be applied to such comparables. The results of the Step 1 goodwill impairment analysis indicated that the estimated fair value of our Strategic Communications reporting unit was less than its carrying value. Because our Strategic Communications reporting unit’s fair value estimate was lower than its carrying value, we applied the second step of the goodwill impairment test. The second step of the goodwill impairment analysis indicated that the carrying values of the goodwill associated with the Strategic Communications reporting unit exceeded its implied fair value, resulting in an $83.8 million non-deductible goodwill impairment charge which was recorded as a separate line item within operating income (loss) within the Condensed Consolidated Statements of Comprehensive Income (Loss). The impairment charge is non-cash in nature and does not affect the Company’s current liquidity, nor does it impact the debt covenants under the Company’s existing credit facility and the Indentures for the 2020 and 2022 Notes. Other intangible assets with finite lives are amortized over their estimated useful lives. For intangible assets with finite lives, we recorded amortization expense of $5.8 million and $17.3 million for the three and nine months ended September 30, 2013, respectively, and $5.8 million and $16.9 million for the three and nine months ended September 30, 2012, respectively. Based solely on the amortizable intangible assets recorded as of September 30, 2013, we estimate amortization expense to be $5.7 million during the remainder of 2013, $13.5 million in 2014, $11.8 million in 2015, $10.2 million in 2016, $9.5 million in 2017, $7.9 million in 2018, and $28.5 million in years after 2018. Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, finalization of asset valuations for newly acquired assets, changes in useful lives, changes in value due to foreign currency translation, and other factors.
|  | Useful Life in Years |  | September 30, 2013 |  |  | December 31, 2012 |
|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |
Finite lived intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  | 1 to 15 |  | $ | 153,063 |  |  | $ | 70,106 |  |  | $ | 151,990 |  |  | $ | 64,095 |
Non-competition agreements |  | 1 to 10 |  |  | 11,020 |  |  |  | 8,890 |  |  |  | 15,184 |  |  |  | 11,158 |
Software |  | 3 to 10 |  |  | 33,953 |  |  |  | 32,075 |  |  |  | 33,979 |  |  |  | 27,424 |
Tradenames |  | 1 to 2 |  |  | 450 |  |  |  | 277 |  |  |  | 180 |  |  |  | 75 |
|  |  |  |  | 198,486 |  |  |  | 111,348 |  |  |  | 201,333 |  |  |  | 102,752 |
Indefinite-lived intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tradenames |  | Indefinite |  |  | 5,600 |  |  |  | — |  |  |  | 5,600 |  |  |  | — |
|  |  |  | $ | 204,086 |  |  | $ | 111,348 |  |  | $ | 206,933 |  |  | $ | 102,752 |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16323-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13816-109267 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16373-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16265-109275 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13854-109267 + Details
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