These excerpts taken from the CSPI 10-K filed Dec 29, 2008.
8. Goodwill and Other Intangibles
At September 30, 2008 the goodwill balance of $3.9 million consisted of approximately $2.8 million in connection with the acquisition of certain assets of Technisource Hardware, Inc. (Technisource) on May 30, 2003 and approximately $1.1 million in connection with the acquisition of substantially all the assets of R2 (see Note 2). As of September 30, 2007, goodwill of $2.8 million related solely to the acquisition of Technisource. All of the goodwill as of September 30, 2008 and 2007 was within the Service and System Integration segment. The reporting unit for purposes of evaluating goodwill impairment was the Modcomp U.S. Systems and Solutions division. The Company concluded there was no impairment of goodwill for this reporting unit based upon its annual assessments in 2008 and 2007.
The estimated fair value of the reporting unit with goodwill was based on a combination of discounted projected cash flows and observable market price-to-earnings multiples of relevant, comparable peer companies. At September 30, 2008, the Companys market capitalization was less than its book value, which management attributes to both industry-wide and Company-specific factors. If the Companys common stock price continues to trade below book value per common share, the Company may have to recognize an impairment of all, or some portion of, its goodwill and other intangible assets. There is no assurance that: (1) valuation multiples will not decline, (2) discount rates will not increase or (3) the earnings, book values or projected earnings and cash flows of the Companys individual reporting units will not decline. Accordingly, an impairment charge to goodwill and other intangible assets may be required in the foreseeable future if the book equity value exceeds the estimated fair value of the enterprise or of an individual segment.
As of September 30, 2008, intangible assets totaled approximately $913 thousand, which consisted of customer lists and non-compete agreements totaling approximately $820 thousand and $93 thousand, respectively. The weighted average amortization period in the aggregate, for the customer lists and non-compete agreements were 9.3 years, 10 years and 3 years, respectively. These intangible assets were acquired with the purchase of R2 (see Note 2). Amortization expense on these intangible assets for fiscal 2008 was negligible due to
CSP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
YEARS ENDED SEPTEMBER 30, 2008 and 2007
the acquisition occurring within 6 days of the fiscal year end. Therefore the intangible assets are recorded at their acquisition value, because amortization as of September 30, 2008 was immaterial. Annual amortization expense related to intangible assets for each of the following successive fiscal years is as follows:
8. Goodwill and Other IntangiblesSTYLE="margin-top:0px;margin-bottom:-6px">
At September 30, 2008 the goodwill balance of $3.9 million consisted of approximately $2.8 million in connection with
The estimated fair value of the reporting unit with goodwill was based on a
As of September 30, 2008, intangible assets totaled approximately
CSP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)ALIGN="center">YEARS ENDED SEPTEMBER 30, 2008 and 2007