Harbinger Group Inc.
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SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 08/09/2016
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(8) Goodwill and Intangibles
A summary of the changes in the carrying amounts of goodwill and intangible assets are as follows:
 
 
 
Intangible Assets
 
Goodwill
 
Indefinite Lived
 
Definite Lived
 
Total
Balance at September 30, 2015 (As Adjusted)
$
2,487.4

 
$
1,490.3

 
$
990.0

 
$
2,480.3

Adjustments
3.4

 
1.0

 
2.0

 
3.0

Impairments
(10.7
)
 
—

 
—

 
—

Periodic amortization
—

 
—

 
(70.5
)
 
(70.5
)
Effect of translation
(0.4
)
 
(12.4
)
 
(0.8
)
 
(13.2
)
Balance at June 30, 2016
$
2,479.7

 
$
1,478.9

 
$
920.7

 
$
2,399.6

Goodwill and indefinite lived trade name intangibles are not amortized and are tested for impairment at least annually at the Company’s August financial period end, or more frequently if an event or circumstance indicates that an impairment loss may have been incurred between annual impairment tests.
During the three and nine months ended June 30, 2016, the Company concluded that an interim impairment test of goodwill for its CorAmerica reporting unit was necessary. This conclusion was based on certain indicators of impairment, primarily related to an amendment, which becomes effective September 1, 2016, to an investment management agreement (“IMA”) to which CorAmerica is a party. The amendment changes the asset management fee structure, which is expected to result in a significant decrease to CorAmerica’s projected future revenues. In addition, the counterparty has reduced its allocation of investments into commercial mortgage loans, which is expected to reduce new loan originations by CorAmerica and reduce CorAmerica’s projected future revenues.
Goodwill Impairment Test
As noted above, during the three and nine months ended June 30, 2016, the Company determined that sufficient indicators of potential impairment existed to require an interim goodwill impairment analysis for the CorAmerica reporting unit. The Company estimated the fair value of the CorAmerica reporting unit using the income approach. Under the income approach, the Company calculated the fair value of the CorAmerica reporting unit based on the present value of estimated future cash flows. The Company’s estimate of discounted cash flows for each reporting unit required significant judgment. Cash flow projections are based on management’s estimates of revenue and operating margins, taking into consideration existing agreements, industry and market conditions. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to CorAmerica’s ability to execute on the projected cash flows. The evaluation was management’s best estimate of projected fair values. Management’s estimate of implied fair value of goodwill was zero and, consequently, resulted in a goodwill impairment charge of $10.7. The goodwill impairment charge was reflected in “Impairments and bad debt expense” on the accompanying Condensed Consolidated Statements of Operations.
Definite Lived Intangible Assets
The range and weighted average useful lives for definite lived intangible assets are as follows:
 
June 30, 2016
 
September 30, 2015
 
Cost
 
Accumulated Amortization
 
Net
 
Cost
 
Accumulated Amortization
 
Net
Customer relationships
$
984.0

 
$
(288.7
)
 
$
695.3

 
$
985.2

 
$
(247.4
)
 
$
737.8

Technology assets
236.3

 
(91.0
)
 
145.3

 
238.6

 
(78.1
)
 
160.5

Trade names
165.4

 
(85.3
)
 
80.1

 
165.4

 
(73.7
)
 
91.7

 
$
1,385.7

 
$
(465.0
)
 
$
920.7

 
$
1,389.2

 
$
(399.2
)
 
$
990.0

At June 30, 2016, the range and weighted average useful lives for definite-lived intangibles assets were as follows:
Asset Type
 
Range
 
Weighted Average
Customer relationships
 
2 to 20 years
 
18.5 years
Technology assets
 
4 to 18 years
 
11.1 years
Trade names
 
8 to 17 years
 
16.2 years

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