Goodwill and Other Identifiable Intangible Assets

12 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Identifiable Intangible Assets

In accordance with ASC 350, Intangibles - Goodwill and Other, the Company performs its annual goodwill impairment test at the end of each fiscal year, or whenever indicators of impairment are present. This testing includes the determination of each reporting unit's fair value using a discounted cash flows model compared to each reporting unit's carrying value. The reporting units utilized for goodwill impairment tests are North America segment and, in our International segment, various components that are a level below.

During fiscal years 2012, 2011 and 2010, no impairment charges related to goodwill were recorded. However, as of the latest annual goodwill impairment test, the estimated fair value of the Company's Brazilian goodwill reporting unit exceeded its carrying value by a smaller margin than the Company's other goodwill reporting units. The Brazilian operations were only recently acquired, resulting in a carrying value that approximates its fair value.

The carrying value of the Brazilian goodwill asset as of June 30, 2012 was $19.8 million. The estimated fair value of the Brazilian goodwill reporting unit exceeded its carrying value by 7% in the most recent annual impairment test. The increase in sensitivity to the Brazilian goodwill reporting unit is driven largely by the general macroeconomic environment and lower expectations for future results in this unit. Key assumptions used in determining fair value include projected growth and operating margin, working capital requirements and discount rates. While the Company does not believe that this goodwill reporting unit is impaired at this time, if the Company is not able to achieve its projected operating margins within the expected working capital requirements and/or there are unfavorable changes to the discount rate, a future impairment of goodwill is at least reasonably possible.

Changes in the carrying amount of goodwill for the years ended June 30, 2012 and 2011, by reporting segment, are as follows:



	North American Distribution Segment		International Distribution Segment			Total
	(in thousands)
Balance as of June 30, 2010	$	20,081	$	13,704		$	33,785
Goodwill acquired during 2011	—		24,643			24,643
Fluctuations in foreign currencies	—		662			662
Balance as of June 30, 2011	20,081		39,009			59,090
CDC measurement period adjustments	—		914			914
Fluctuations in foreign currencies	—		(6,119		)	(6,119		)
Balance as of June 30, 2012	$	20,081	$	33,804		$	53,885

During the fiscal year ended June 30, 2012 , the Company's goodwill balances increased due to the finalization of purchase accounting for CDC from measurement period adjustments. For further information regarding CDC purchase accounting adjustments, please see Note 4, Acquisitions. The remaining change in the goodwill balance is due to foreign currency translation.

During the fiscal year ended June 30, 2011, the Company’s goodwill balances increased due to the acquisition of CDC in April, 2011. The goodwill recognized in conjunction with the CDC acquisition is attributable to the depth and breadth of services that it can provide to Latin America’s largest economy, its vast geographical reach beyond that of other distributors in Brazil and its large, specialty product mix that is atypical for the region. The Company expects all of the goodwill acquired with CDC to be deductible for Brazilian tax purposes.

The following table shows the Company’s identifiable intangible assets as of June 30, 2012 and 2011, respectively. These balances are included on the consolidated balance sheet within other assets:



	June 30, 2012						June 30, 2011
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in thousands)
Amortized intangible assets:
Customer relationships	$	34,483	$	10,864	$	23,619	$	34,515	$	6,989	$	27,526
Debt issue costs	2,499		967		1,532		1,139		625		514
Trade names	2,127		1,285		842		2,743		286		2,457
Non-compete agreements	938		379		559		2,310		1,085		1,225
Distributor agreements	610		105		505		705		74		631
Total	$	40,657	$	13,600	$	27,057	$	41,412	$	9,059	$	32,353

In fiscal 2012, the Company incurred 1.4 million in debt issuance costs related to the negotiation and execution of the new credit facility (see note 6). In addition, during the re-measurement period for the valuation of CDC Brasil, the Company determined that the economic life for customer relationships should be reduced from 7 years to 6 years. The Company cumulatively adjusted all amortization so that the asset reflects the accumulated amortization of a 6 year life from the date of purchase in the first quarter of fiscal 2012. Upon receipt of the final valuation of identifiable intangible assets, the value of CDC's customer relationships were increased by $4.3 million in the third quarter of fiscal 2012. Amortization expense was cumulatively adjusted to reflect the appropriate balances. For further information regarding CDC purchase accounting adjustments, please see Note 4, Acquisitions.

In fiscal 2012, the Company wrote off the gross carrying amount and corresponding accumulated amortization for fully amortized non-compete agreements in the amount of $0.9 million. In fiscal 2011, the Company wrote off the gross carrying amount and corresponding accumulated amortization for fully amortized customer lists, non-compete agreements and trade names in the amounts of $0.3 million, $1.8 million and $1.0 million, respectively.

The weighted average amortization period for all intangible assets for the years ended June 30, 2012, 2011 and 2010 was approximately 10 years, 10 years, and 12 years, respectively. Amortization expense for the years ended June 30, 2012, 2011 and 2010 was $6.4 million, $3.0 million and $2.0 million, respectively. Estimated future amortization expense is as follows:



	Amortization Expense
	(in thousands)
Year Ended June 30,
2013	$	5,217
2014	4,342
2015	4,341
2016	4,312
2017	3,437
Thereafter	5,408
Total	$	27,057

- 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+ Details