32
A summary of the impairment charge recorded in 2013 is as follows:
Carrying
Value
Fair Value
Impairment
Charge
Goodwill – Platforms and Applications............................................. $
36.1 $
27.9 $
8.2
Property and equipment, including capitalized software for internal
use....................................................................................................
18.1
5.5
12.6
Software development costs ..............................................................
9.3
—
9.3
Other assets........................................................................................
1.3
—
1.3
Acquired intangible assets .................................................................
0.6
—
0.6
$
65.4 $
33.4 $
32.0
In the second quarter of 2012, we received notice from a significant navigation application customer that it intended to adjust
pricing for TCS services. Management considered this to be an indicator that we should evaluate the long-lived assets (including
goodwill and other intangible assets) related to the Company’s 2009 acquisition of Networks In Motion, operating as the Company’s
Navigation reporting unit, for potential impairment. No triggering events occurred with regard to other reporting units, so an interim
analysis of other units was not completed.
We completed Step 1 of the goodwill impairment testing for the Navigation reporting unit using a discounted cash flow (“DCF”)
method supported by a market comparable approach. The DCF model was based on our updated long-range forecast for the
Navigation reporting unit. For years beyond the forecast, our estimated terminal value was based on a discount rate of approximately
12% and a perpetual cash flow growth rate of 3%. For the market comparable approach, we evaluated comparable company public
trading values, using sales and EBITDA multiples. The estimated fair value of the Navigation reporting unit was compared to the
carrying amount including goodwill, and the results of the Step 1 goodwill testing indicated a potential impairment.
Accordingly, we proceeded with Step 2 of the impairment test to measure the amount of potential impairment. We allocated the
fair value of the Navigation reporting unit to its assets and liabilities as of the date of the impairment analysis. As a result of our
analysis as described above, an impairment charge of $86.3 million was recorded in 2012 for the excess of the carrying value of
goodwill over the estimated fair value.
Our Navigation reporting unit’s goodwill, acquired intangibles, capitalized software development costs, and long-lived assets
with a carrying value of $164.5 million were written down to estimated fair value of $38.8 million, resulting in a total impairment
charge of $125.7 million. We engaged a third party valuation firm to assist in the determination of the fair value of goodwill, acquired
intangibles, capitalized software, and long-lived assets.
A summary of the impairment charge recorded in the second quarter of 2012 is as follows:
Carrying
Value
March 31,
2012
Fair Value
June 30,
2012
Total
Impairment
Charge
Property and Equipment, including capitalized software for
internal use......................................................................................
$
23.3
$
10.3
$
13.0
Software development costs .............................................................
18.8
6.4
12.4
Acquired intangible assets ................................................................
14.0
—
14.0
Goodwill – Navigation......................................................................
108.4
22.1
86.3
$
164.5 $
38.8 $
125.7
We performed our annual fourth quarter 2012 goodwill Step 1 testing and there was no indication of any further impairment in
any of our reporting units, so the second step of the goodwill impairment analysis was not performed. For all reporting units, we used
a market approached based on observable public comparable company multiples. For our Navigation and Cyber Intelligence reporting
units, we also used a DCF analysis. Where multiple approaches were used, we weight the results from different methods to estimate
the reporting unit’s fair value. The cash flows employed in 2012 DCF analyses were based on our most recent long-range forecast and,
for years beyond the forecast, we estimated terminal value based on estimated exit multiples ranging from 6 to 7 times the final
forecasted year earnings before interest, taxes, depreciation and amortization. The discount rates used in the DCF analyses were
intended to reflect the risks inherent in the future cash flows of the respective reporting units and were approximately 12%. For the
market comparable approaches, we evaluated comparable company public trading values, using multiples of earnings before interest,
taxes, depreciation and amortization ranging from 6 to 12 times and multiples of revenue ranging from 1 to 2 times.
For 2011, all of our reporting units passed the first step of the goodwill impairment testing, indicating no impairments.
