Matthews International Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

9 Months Ended

Jun. 30, 2015

Goodwill and Other Intangible Assets [Abstract]

Note 13. Goodwill and Other Intangible Assets

Goodwill related to business combinations is not amortized, but is subject to annual review for impairment. In general, when the carrying value of a reporting unit exceeds its implied fair value, an impairment loss may need to be recognized. For purposes of testing for impairment, the Company uses a combination of valuation techniques, including discounted cash flows. A number of assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including sales volumes and pricing, costs to produce, tax rates, capital spending, working capital changes, and discount rates. The Company estimates future cash flows using volume and pricing assumptions based largely on existing customer relationships and contracts, and operating cost assumptions management believes are reasonable based on historical performance and projected future performance as reflected in its most recent operating plans and projections. The discount rates used in the discounted cash flow analyses were developed with the assistance of valuation experts and management believes the discount rates appropriately reflect the risks associated with the Company's operating cash flows. In order to further validate the reasonableness of the estimated fair values of the reporting units as of the valuation date, a reconciliation of the aggregate fair values of all reporting units to market capitalization was performed using a reasonable control premium. The Company performed its annual impairment review in the second quarter of fiscal 2015 and determined that the estimated fair value for all reporting units exceeded carrying value, therefore no adjustments to the carrying value of goodwill were necessary at March 31, 2015.

Trade names with indefinite lives are tested for impairment annually in the second quarter. In connection with the integration of Schawk, the Company discontinued the use of certain trade names and recognized write-offs of approximately $4,842 in the SGK Brand Solutions segment during the second quarter of fiscal 2015.

A summary of the carrying amount of goodwill attributable to each segment as well as the changes in such amounts are as follows:


	SGK Brand Solutions			Memorialization			Industrial			Consolidated

Goodwill	$	501,050		$	278,282		$	50,887		$	830,219
Accumulated impairment losses		(5,752	)		(5,000	)		-			(10,752	)
Balance at September 30, 2014		495,298			273,282			50,887			819,467

Additions during period		-			-			2,226			2,226
Translation and other adjustments		(29,094	)		(3,556	)		(107	)		(32,757	)
Goodwill		471,956			274,726			53,006			799,688
Accumulated impairment losses		(5,752	)		(5,000	)		-			(10,752	)
Balance at June 30, 2015	$	466,204		$	269,726		$	53,006		$	788,936

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of June 30, 2015 and September 30, 2014, respectively.

	Carrying		Accumulated
	Amount		Amortization			Net
June 30, 2015:
Trade names	$	137,927	$	-	*	$	137,927
Trade names		1,806		(1,687	)		119
Customer relationships		244,049		(37,123	)		206,926
Copyrights/patents/other		11,480		(10,136	)		1,344
	$	395,262	$	(48,946	)	$	346,316

September 30, 2014:
Trade names	$	142,529	$	-	*	$	142,529
Trade names		2,854		(2,121	)		733
Customer relationships		258,441		(24,785	)		233,656
Copyrights/patents/other		14,528		(9,584	)		4,944
	$	418,352	$	(36,490	)	$	381,862
* Not subject to amortization

The net change in intangible assets during the nine months ended June 30, 2015 included the impact of foreign currency fluctuations during the period, additional amortization, and trade name write-offs of approximately $4,842 in the SGK Brand Solutions segment. In addition, the Company completed the sale of a majority ownership in its Schawk Digital Solutions business, which was acquired in 2014 as part of the Schawk acquisition. Net proceeds from this transaction totaled approximately $10,400, and the sale primarily resulted in the disposal of working capital and intangible assets, and the recognition of a cost-basis investment in this business. No gain or loss was recognized on the sale.

Amortization expense on intangible assets was $4,651 and $901 for the three-month periods ended June 30, 2015 and 2014, respectively. For the nine month periods ended June 30, 2015 and 2014, amortization expense was $13,872 and $3,284, respectively. Amortization expense is estimated to be $4,615 for the remainder of 2015, $18,137 in 2016, $17,157 in 2017, $16,018 in 2018 and $15,131 in 2019.

- 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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