General Dynamics 2013 Annual Report Download - page 46

•Fidelis Security Systems, Inc., a company that provides cyber
security tools that offer real-time network visibility and analysis (on
August 27).
In 2011, we acquired six businesses for an aggregate of $1.6
billion, funded by cash on hand:
Combat Systems
•Force Protection, Inc., a provider of wheeled vehicles, survivability
solutions and vehicle sustainment services for the armed forces of
the United States and its allies (on December 19).
Marine Systems
•Metro Machine Corp., a surface-ship repair business in Norfolk,
Virginia, that supports the U.S. Navy fleet (on October 31).
Information Systems and Technology
•A provider of enterprise services and cloud computing to the U.S.
Department of Defense (on July 15).
•A provider of secure wireless networking equipment for the U.S.
military and other government customers (on July 22).
•A provider of information assurance and security software (on
August 12).
•Vangent, Inc., a provider of health information technology services
and business systems to federal agencies (on September 30).
The operating results of these acquisitions have been included with
our reported results since their respective closing dates. The purchase
prices of these acquisitions have been allocated to the estimated fair
value of net tangible and intangible assets acquired, with any excess
purchase price recorded as goodwill.
In 2011, we sold a business in our Combat Systems group. The
pretax gain of $38 on the sale was reported in other income in the
Consolidated Statements of Earnings (Loss). The proceeds from the sale
are included in other investing activities on the Consolidated Statements
of Cash Flows.
Goodwill
The changes in the carrying amount of goodwill by reporting unit during 2012 and 2013 were as follows:
Aerospace
Combat
Systems
Marine
Systems
Information
Systems and
Technology
Total
Goodwill
December 31, 2011 $ 2,644 $ 2,839 $ 229 $ 7,864 $ 13,576
Impairment – – – (1,994) (1,994)
Acquisitions (a) 11 86 61 221 379
Other (b) 42 36 – 9 87
December 31, 2012 $ 2,697 $ 2,961 $ 290 $ 6,100 $ 12,048
Acquisitions (a) – 2 (1) 1 2
Other (b) 44 (69) – (48) (73)
December 31, 2013 $ 2,741 $ 2,894 $ 289 $ 6,053 $ 11,977
(a) Includes adjustments during the purchase price allocation period.
(b) Consists primarily of adjustments for foreign currency translation and allocations of goodwill associated with asset sales.
We completed the required annual goodwill impairment test as of
December 31, 2013. The first step of the goodwill impairment test
compares the fair values of our reporting units to their carrying values.
Our reporting units are consistent with our business groups. We
estimate the fair values of our reporting units primarily based on the
discounted projected cash flows of the underlying operations. For our
Aerospace, Combat Systems and Marine Systems reporting units, the
estimated fair values were at least double their respective carrying
values as of December 31, 2013. The fair value of our Information
Systems and Technology reporting unit, for which we recorded a
goodwill impairment in 2012 discussed below, exceeded its carrying value
by a smaller margin of approximately 15 percent. While the projected
cash flows have not changed materially from 2012, the carrying value of
the reporting unit has increased, largely due to improvement in the funded
status of the unit’s defined-benefit retirement plans (see Note P for a
discussion of our defined-benefit retirement plans). The reporting unit
remains at risk for a future goodwill impairment should there be further
significant increases in the carrying value of the reporting unit or
deterioration in the projected cash flows.
42 General Dynamics Annual Report 2013