Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS

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GOODWILL AND OTHER INTANGIBLE ASSETS
12 Months Ended
Sep. 30, 2014
GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract]  
GOODWILL AND OTHER INTANGIBLE ASSETS
19. 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 discounted cash flow technique.  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 rate.  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 rate used in the discounted cash flow analysis was developed with the assistance of valuation experts and management believes it appropriately reflects 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 2014 and fiscal 2013 and determined that for all reporting units, except Graphics Imaging, the estimated fair value significantly exceeded carrying value so no adjustments to the carrying value of goodwill were necessary. Recent economic conditions in Europe have unfavorably impacted the operating results of the Graphics Imaging business. For the Graphics Imaging reporting unit, the estimated fair value exceeded its carrying value by less than 10%, resulting in no goodwill impairment for the unit.  While the Graphics Imaging reporting unit passed the first step of the impairment test, if its operating profits or another significant assumption were to deteriorate in the future, it could adversely affect the estimated fair value of the reporting unit.  Factors that could have a negative impact on the estimated fair value of the Graphics Imaging reporting unit include a further delay in the recovery of the European market, continued pricing pressure, declines in expected volumes, and an increase in discount rates.  If the Company is unsuccessful in its plans to recover the profitability of this business, the estimated fair value could decline and lead to a potential goodwill impairment in the future.  Changes to goodwill during the years ended September 30, 2014 and 2013, follow.


                 
   
SGK Brand Solutions
   
Memorialization
   
Industrial
   
Consolidated
 
                 
Goodwill
 
$
178,312
   
$
277,805
   
$
30,816
   
$
486,933
 
Accumulated impairment losses
   
(5,752
)
   
(5,000
)
   
-
     
(10,752
)
Balance at September 30, 2012
   
172,560
     
272,805
     
30,816
     
476,181
 
                                 
Additions during period
   
21,361
     
1,382
     
19,677
     
42,420
 
Translation and other adjustments
   
4,658
     
1,139
     
153
     
5,950
 
Goodwill
   
204,331
     
280,326
     
50,646
     
535,303
 
Accumulated impairment losses
   
(5,752
)
   
(5,000
)
   
-
     
(10,752
)
Balance at September 30, 2013
   
198,579
     
275,326
     
50,646
     
524,551
 
                                 
Additions during period
   
312,403
     
-
     
288
     
312,691
 
Translation and other  adjustments
   
(15,684
)
   
(2,044
)
   
(47
)
   
(17,775
)
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
 
 
In fiscal 2014, the addition to goodwill primarily reflects the acquisition of Schawk.

In fiscal 2013, the addition to SGK Brand Solutions goodwill primarily reflects the acquisition of Wetzel; the addition to Industrial goodwill reflects the acquisition of Pyramid; the addition to Memorialization goodwill reflects the acquisition of two small manufacturers in Europe, and the effect of an adjustment to the purchase price for a small casket distributor.

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of September 30, 2014 and 2013, respectively.
   
Carrying
   
Accumulated
   
Impairment
     
   
Amount
   
Amortization
   
Loss
   
Net
 
September 30, 2014:
               
Trade names
 
$
144,150
   
$
-
*
 
$
(1,621
)
 
$
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
 
   
$
419,973
   
$
(36,490
)
 
$
(1,621
)
 
$
381,862
 
                                 
September 30, 2013:
                               
Trade names
 
$
24,496
   
$
-
*
 
$
(1,618
)
 
$
22,878
 
Trade names
   
3,034
     
(2,142
)
   
-
     
892
 
Customer relationships
   
59,061
     
(19,099
)
   
-
     
39,962
 
Copyrights/patents/other
   
10,116
     
(8,746
)
   
-
     
1,370
 
   
$
96,707
   
$
(29,987
)
 
$
(1,618
)
 
$
65,102
 
*Not subject to amortization
                               

The net change in intangible assets during fiscal 2014 included an increase for the acquisition of Schawk, foreign currency fluctuations during the period and additional amortization.  The net change in intangible assets during fiscal 2013 included an increase for the acquisitions of Wetzel and Pyramid of $12,027, offset by an impairment loss in the SGK Brand Solutions segment, the impact of changes in foreign currency exchange rates and additional amortization.

Amortization expense on intangible assets was $7,318, $4,156, and $3,886 in fiscal 2014, 2013 and 2012, respectively. Fiscal year amortization expense is estimated to be $20,517 in 2015, $19,654 in 2016, $18,671 in 2017, $17,513 in 2018 and $16,513 in 2019.