  
     
      
 |
|
|
|
SFAS 142 requires the use of a nonamortization approach to account
for goodwill and indefinite-lived intangible assets. Under the
nonamortization approach, goodwill and indefinite-lived intangible
assets will not be amortized but instead will be reviewed for
impairment and written down with a resulting charge to operations
in the period in which the recorded value of goodwill and indefinite-lived
intangible assets exceeds its fair value. The adoption of SFAS
142 required the Company to reassess the useful lives and residual
values of all intangible assets and make any necessary amortization
adjustments. Based on that assessment, no adjustments were made
to the amortization period or residual values of our intangible
assets. Additionally, SFAS 142 requires the Company to perform
an evaluation of whether goodwill and indefinite-lived intangible
assets are impaired as of January 1, 2002, the effective date
of the statement for the Company.
SFAS 142 provided a six-month transitional period from the effective
date of adoption to perform an initial assessment of whether
an indication of goodwill impairment exists. This initial assessment
compared the fair value of the reporting unit to its carrying
value, including goodwill. Fair value was determined using a
combination of discounted cash flows and multiple of earnings
valuation techniques. To the extent that the fair value was
less than the carrying value, the Company was required to perform
a second test to measure the amount of the goodwill impairment,
if any.
During the second quarter of 2002, the Company completed its
transitional assessment in accordance with these tests to determine
if goodwill was impaired as of January 1, 2002. As a result,
the Company recorded a noncash charge of $63.8 million ($46.1
million, net of tax) in the Company’s statement of operations,
reflecting the cumulative effect of the accounting change to
adjust goodwill to fair value. The international distribution
segment and laboratory workstations segment accounted for $19.7
million and $44.1 million of the charge, respectively.
The impairment charge in the international distribution segment
related to certain of the Company’s smaller-market distribution
businesses where current operating performance was lower than
the original forecast. The Company’s laboratory workstations
segment is sensitive to changes in capital spending and several
of the markets the laboratory workstations segment sells to,
including the technology industry, were impacted by the significant
economic slowdown causing a reduction in spending in those markets.
As a result, sales growth was less than originally forecasted,
resulting in decreased profitability.
SFAS 142 also requires that goodwill be tested annually and
between annual tests if events occur or circumstances change
that would more likely than not reduce the fair value of a reporting
unit below its carrying amount. The Company has elected to perform
its annual test for indications of goodwill impairment as of
October 31 of each year.
In accordance with SFAS 142, the Company discontinued the amortization
of goodwill effective January 1, 2002. The following is a reconciliation
of net income, as reported, to net income and net income per
share for the years ended December 31, 2002, 2001 and 2000,
excluding goodwill amortization (in millions, except per share
amounts):
|
 |
|
|
