Goodwill And Intangible Assets

9 Months Ended

Sep. 30, 2011

6.	Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 30, 2011, by operating segment, were as follows:


	Clinical Development Services
			Laboratory
			Services			Total
Balance as of December 31, 2010	$	106,671	$	184,546		$	291,217
Adjustments to goodwill for prior year acquisitions		—		(825	)		(825	)
Translation adjustments		543		1,979			2,522

Balance as of September 30, 2011	$	107,214	$	185,700		$	292,914

During 2011, the Company recorded a $0.8 million adjustment to goodwill related to X-Chem resulting from information regarding the valuation estimates that became available after the preliminary purchase price allocation was established.

The Company reviews goodwill for impairment annually on October 1st, and more frequently if impairment indicators arise. An impairment indicator represents an event or change in circumstances that would more likely than not reduce the fair value of a goodwill reporting unit below its carrying amount. A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred. The Company monitors events and changes in circumstances in between annual testing dates to determine if any events or changes in circumstances indicate impairment. In connection with the most recent annual impairment test on October 1, 2010, the Company reviewed goodwill for impairment and the analysis indicated a significant amount of fair value in excess of carrying value for each goodwill reporting unit. However, the fair value of goodwill could be impacted by future adverse changes such as a significant decline in operating results, a sustained decline in the valuation of pharmaceutical and biotechnology company stocks, including the valuation of the Company's own common stock, a significant adverse change in legal factors or in the business climate, a further significant slowdown in the worldwide economy or the pharmaceutical and biotechnology industry, or the sustained failure to meet the performance projections included in the forecasts of future operating results for any of the Company's goodwill reporting units. Any adverse change in these factors could have a significant impact on the recoverability of goodwill, and could have a material impact on the Company's consolidated condensed financial statements. There were no such indicators of impairment during the first nine months of 2011.

The Company's amortized intangible assets were composed of the following as of the dates set forth below:


	December 31, 2010							September 30, 2011
	Carrying Amount		Accumulated Amortization			Net		Carrying Amount		Accumulated Amortization			Net
Customer relationships	$	17,658	$	(2,844	)	$	14,814	$	18,013	$	(4,416	)	$	13,597
Non-compete agreements		2,047		(84	)		1,963		1,291		(261	)		1,030
Trade name		150		(150	)		—		140		(140	)		—
Backlog		7,217		(2,770	)		4,447		7,342		(3,982	)		3,360

Total	$	27,072	$	(5,848	)	$	21,224	$	26,786	$	(8,799	)	$	17,987

The Company had total non-amortizing intangible assets of $10.2 million as of December 31, 2010 and September 30, 2011. Unamortized intangible assets consist of $8.2 million of in-process research and development and $2.0 million of other intangible asset.

Amortization expense for the three months ended September 30, 2010 and 2011 was $0.9 million and $1.0 million, respectively. Amortization expense for the nine months ended September 30, 2010 and 2011 was $2.8 million and $3.0 million, respectively. As of September 30, 2011, expected amortization expense for each of the next five years is as follows:


2011 (remaining three months)	$	977
2012		3,274
2013		3,097
2014		2,344
2015		1,769

- 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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PHARMACEUTICAL PRODUCT DEVELOPMENT INC 10-Q