Harbinger Group Inc.
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10-K
HRG GROUP, INC. filed this Form 10-K on 11/23/2016
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Spectrum Brands recorded an allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the January 16, 2015 acquisition date. The excess of the purchase price over the fair value of the net tangible assets and identifiable intangible assets was recorded as goodwill, which includes value associated with the assembled workforce including an experienced research team. The calculation of the purchase price and purchase price allocation is as follows:
 
 
Purchase Price
Cash consideration
 
$
146.8

Contingent consideration
 
1.5

Total purchase price
 
$
148.3

 
 
 
 
 
Purchase Price Allocation
Cash and cash equivalents
 
$
0.5

Receivables, net
 
10.7

Inventories, net
 
17.0

Properties, plant and equipment net
 
1.2

Goodwill
 
71.5

Intangibles, net
 
55.5

Other assets
 
2.5

Accounts payable and other current liabilities
 
(8.5
)
Other liabilities
 
(2.1
)
Total net assets acquired
 
$
148.3

The purchase price allocation resulted in goodwill of $71.5 of which $24.7 is deductible for tax purposes. The values allocated to intangible assets and the weighted average useful lives are as follows:
 
 
Carrying Amount
 
Weighted Average Useful Life (Years)
Tradenames
 
$
17.0

 
Indefinite
Technology
 
2.1

 
17
Definite-lived tradenames
 
1.0

 
13
Customer relationships
 
35.4

 
13
Total intangibles acquired
 
$
55.5

 
 
Spectrum Brands performed a valuation of the acquired inventories, property, plant and equipment, tradenames, customer relationships and non-compete agreement. A summary of the significant inputs to the valuation is as follows:
Inventories - The replacement cost approach was applied to estimate the fair value of the raw materials and unbranded finished goods inventory. Branded finished goods were valued based on the comparative sales method, which estimates the expected sales price of the finished goods inventory, reduced for all costs expected to be incurred in its completion or disposition and a profit on those costs.
Property, plant and equipment - The cost approach was utilized to estimate the fair value of approximately 98.0% of the property, plant and equipment. The sales comparison approach was used to estimate the fair value of the remaining 2.0% of the property, plant and equipment.
Tradenames - Spectrum Brands valued indefinite-lived trade names using an income approach, the relief from royalty method. Under this method, the asset value was determined by estimating the hypothetical royalties that would have to be paid if the trade names were not owned. Royalty rates were selected based on consideration of several factors, including prior transactions, related trademarks and trade names, other similar trademark licensing and transaction agreements and the relative profitability and perceived contribution of the trade names.
Technology - Spectrum Brands valued technology using an income approach, the relief from royalty method. Under this method, the asset value was determined by estimating the hypothetical royalties that would have to be paid if the technology was not owned. Royalty rates were selected based on consideration of several factors, including prior transactions, related licensing agreements and the importance of the technology and profit levels, among other considerations. Spectrum Brands anticipates using these technologies through the legal life of the underlying patents; therefore, the expected useful life of these technologies is based on the remaining life of the underlying patents.
Customer relationships - Spectrum Brands valued customer relationships using an income approach, the multi-period excess earnings method. In determining the fair value of the customer relationships, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the customer relationship

F-27
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