Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets

v2.4.0.6
Goodwill and Intangible Assets
12 Months Ended
Sep. 30, 2012
Goodwill and Intangible Assets [Abstract]  
Goodwill and Intangible Assets
8. Goodwill and Intangible Assets

Goodwill
 
Goodwill represents the excess of cost over the fair value of the net assets acquired from various acquisitions. Goodwill is not amortized.  The Company performs a goodwill impairment test annually, by reporting unit, in the fourth quarter of the fiscal year, or whenever potential impairment triggers occur.  Should the two-step process be necessary, the first step of the impairment test identifies potential impairment by comparing the fair value of a reporting unit to its carrying value including goodwill. In applying a fair-value-based test, estimates are made of the expected future cash flows to be derived from the reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future margins, capital needs, economic trends and other factors. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. An impairment loss would be recognized to the extent the carrying value of goodwill exceeds its implied fair value.
 
The loss of a significant customer by Onsite during the year ended September 30, 2012 had a negative effect on future earnings and cash flows from operations, and is a factor indicating the possibility of future impairment to the Company's goodwill. The Company has determined that based on expected future cash flows there was an impairment of the related intangible assets of $101,000 and goodwill of approximately $173,000.

Intangible Assets

As of September 30, 2012
 
(In Thousands)
 
Cost
 
 
Accumulated Amortization
 
 
Loss on impairment
of Intangible assets
 
 
Net
Book Value
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Compete
 
$
89
 
 
$
48
 
 
 
41
 
 
$
 
Customer Relationships
 
 
2,913
 
 
 
662
 
 
 
60
 
 
 
2,191
 
Management Agreement
 
 
1,396
 
 
 
270
 
 
 
1,126
 
 
 
 
Trade Name
 
 
17
 
 
 
4
 
 
 
 
 
 
13
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
4,415
 
 
$
984
 
 
$
1,227
 
 
$
2,204
 
 
As of September 30, 2011
(In Thousands)
 
Cost
 
 
Accumulated Amortization
 
 
Loss on impairment
of Intangible assets
 
 
Net
Book Value
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Compete
 
$
89
 
 
$
24
 
 
 
 
 
$
65
 
Customer Relationships
 
 
2,913
 
 
 
296
 
 
 
 
 
 
2,617
 
Management Agreement
 
 
1,396
 
 
 
270
 
 
 
1,126
 
 
 
 
Trade Name
 
 
17
 
 
 
 
 
 
 
 
 
17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
4,415
 
 
$
590
 
 
$
1,126
 
 
$
2,699
 

Amortization expense was approximately $394,000 and approximately $537,000 for the years ended September 30, 2012 and 2011, respectively.

Finite life intangible assets are comprised of a non-compete agreement, management agreement, trade name and customer relationships.  The non-compete agreement and trade name are amortized on a straight – line basis over the estimated useful lives of 5 years.  The customer relationships are amortized based on the future undiscounted cash flows over estimated remaining useful lives of three to 10 years.  The management agreement intangible was being amortized over the five year term of the agreement.  Over the next five years, annual amortization expense for these finite life intangible assets will be $393,000 in 2013, $376,000 in 2014, $359,000 in 2015, $340,000 in 2016 and $322,000 in 2017 and $414,000 thereafter.

Long-lived assets, such as purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company evaluates, regularly, whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows.  The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable.

During the year ended, September 30, 2012, the Company recorded an impairment charge of approximately $101,000 for the remaining unamortized amount of the non-compete and a certain amount of the customer relationship intangible asset related to the agricultural operation.  In addition the Company recorded an impairment charge of approximately $173,000 related to the goodwill of the agriculture operation.   The impairment charge represents the difference between the fair value and the carrying value of the intangible assets.  The agricultural operation has limited margins and lost a large customer and management determined that the present value of the future cash flows associated with the operation did not support the recorded value.

During the year ended, September 30, 2011, the Company recorded an impairment charge of $1,126,000 for the remaining unamortized amount of the Management Agreement intangible asset.  The impairment charge represents the difference between the fair value and the carrying value of the intangible asset.  No future cash flows associated with the Management Agreement are expected as the management agreement was effectively terminated as a result of the managed entity, RFFG, ceasing operations in July 2011.