Goodwill and Intangible Assets



3.	Goodwill and Intangible Assets

The change in the carrying value of goodwill for the nine months ended September 30, 2012 is as follows (in thousands):



Balance as of December 31, 2011	$	102,338
AdXpose, Inc. deferred tax adjustments	80
Translation adjustments	(82		)
Balance as of September 30, 2012	$	102,336

During the three months ended March 31, 2012, the Company recorded a reduction in its estimated amount of acquired deferred tax assets associated with the acquisition of AdXpose, Inc., that occurred in August 2011, with an offsetting adjustment to goodwill. During the third quarter of 2012, the Company finalized its purchase accounting for the acquisition of AdXpose, Inc., and no additional adjustments were recorded.

During the three months ended June 30, 2012, the Company noted a significant decline in revenues from ARSgroup (“ARS”), which the Company acquired in February 2010. As a result, the Company performed an impairment test of the long-lived assets of ARS. The long-lived assets of ARS consist of customer relationships and acquired methodologies and technology. The first step in testing the long-lived assets of ARS for impairment was to compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of ARS to the carrying value of ARS’s long-lived assets. Based on this analysis, the Company determined as of June 30, 2012 that the sum of the expected undiscounted cash flows to be generated from ARS was less than the carrying value of the ARS intangible assets. As such, the Company concluded that the ARS intangible assets were impaired as of June 30, 2012. To measure the amount of the impairment, the Company then estimated the fair value of the intangible assets as of June 30, 2012. In determining the fair value of the intangible assets, the Company prepared a discounted cash flow (“DCF”) analysis for each intangible asset. In preparing the DCF analysis, the Company used a combination of income approaches including the relief from royalty approach and the excess earnings approach. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, terminal growth rates, royalty rates and the amount and timing of expected future cash flows. The cash flows employed in the DCF analysis were based on the Company’s most recent budgets, forecasts and business plans as well as growth rate assumptions for years beyond the current business plan period. Significant assumptions used include a discount rate of 18.5%, which is based on an assessment of the risk inherent in the future revenue streams and cash flows of ARS, as well as a royalty rate of 3.0%, which is based on an analysis of royalty rates in similar, market transactions. Based on the DCF analysis, the Company estimated the fair value of the intangible assets of ARS to be $2.5 million as of June 30, 2012, which resulted in an impairment charge of $3.3 million during the three months ended June 30, 2012. The impairment charge had a negative impact on income from continuing operations and net income of $3.3 million and an impact on earnings per share of $0.10 per share during the three and six months ended June 30, 2012 as well as the nine months ended September 30, 2012. In addition, these intangible assets will be amortized over a remaining estimated useful life of eighteen months, beginning July 1, 2012. During the three months ended September 30, 2012 there were no events or circumstances to indicate that the carrying amount of goodwill or intangible assets, including those of ARS, were not recoverable.

Certain of the Company’s intangible assets are recorded in euros, British Pounds and the local currencies of the Company’s South American subsidiaries, and therefore, the gross carrying amount and accumulated amortization are subject to foreign currency translation adjustments. The carrying values of the Company’s amortizable acquired intangible assets are as follows (in thousands):



	September 30, 2012							December 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Acquired methodologies/technology	$	8,360	$	(3,804	)	$	4,556	$	11,244	$	(3,307	)	$	7,937
Customer relationships	35,347		(9,868		)	25,479		38,157		(7,698		)	30,459
Panel	1,639		(1,015		)	624		1,615		(826		)	789
Intellectual property	13,571		(2,074		)	11,497		13,561		(918		)	12,643
Trade names	4,112		(3,541		)	571		4,107		(2,821		)	1,286
	$	63,029	$	(20,302	)	$	42,727	$	68,684	$	(15,570	)	$	53,114

Amortization expense related to intangible assets was approximately $2.4 million and $7.0 million for the three and nine months ended September 30, 2012, respectively, and $2.5 million and $6.9 million for the three and nine months ended September 30, 2011, respectively.

The weighted average remaining amortization period by major asset class as of September 30, 2012, is as follows:



	(In years)
Acquired methodologies/technology	2.5
Customer relationships	6.9
Panel	2.7
Intellectual property	8.5
Trade names	2.7

The estimated future amortization of acquired intangible assets as of September 30, 2012 is as follows:



	(In thousands)
2012	$	2,278
2013	8,984
2014	7,135
2015	6,133
2016	5,143
Thereafter	13,054
	$	42,727

- 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.

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