Goodwill and Other Intangible Assets |
Goodwill and Other Intangible Assets
Goodwill
The Company performed its annual goodwill impairment test for each of the reporting units on October 1, 2015. Based on the results of the step one test, the Company determined that the fair value was in excess of the carrying value and a step two test was not required. The Company used varying approaches to determine the fair value that includes one or more of the following:
| | • | Income-based approach looking at the most current financial projections available to determine the outlook for future income generation. Estimates of future income were projected for a five year forecast period after which assumptions were made relative to a terminal period. These estimates of forecast and terminal income were then discounted to determine an enterprise value using a discounted cash flow method (“DCF”); |
| | • | Market-based approach under the guideline public company (“GPCM”) and guideline transaction method (“GTM”). The GPCM reviews the performance of several related companies within the same industry and applies similar income measurements of those companies to our reporting units to calculate fair value. The GTM reviews a list of completed transactions within the same industry and applies similar income measurement used to value those transactions to our reporting units to calculate fair value; and |
| | • | Cost approach using the carrying value as an approximation of fair value. |
The following is a summary of the approaches used for each reporting unit:
| | • | Schuff was valued using a combination of market and income-based approaches. Under the market approach, valuation multiples were selected based on an analysis of the operating and valuation metrics of comparable publicly-traded companies and also for relevant market transactions over the past three years. The income approach was based on a DCF using financial estimates prepared by the company applying a discount rate of 14.0%; |
| | • | GMSL was valued using a combination of market and income-based approaches. Under the market approach, valuation multiples were selected based on an analysis of the operating and valuation metrics of comparable publicly-traded companies and also for relevant market transactions over the past three years. The income approach was based on a DCF using financial estimates prepared by the company applying a discount rate of 15.5% |
| | • | ICS was valued with an income approach based on a DCF using financial estimates prepared by the company applying a discount rate of 16.5%; |
| | • | ANG was valued with a combination of cost and market-based approaches. Under the cost approach, an adjusted net assets value was prepared using the balance sheet of the company. Under the market approach, valuation multiples were selected based on an analysis of the operating and valuation metrics of comparable publicly-traded companies; |
| | • | CIG was not included in the Company's annual goodwill impairment testing. Completion of the acquisition of the Insurance Companies occurred December 24, 2015 and there no adverse changes in conditions as of December 31, 2015 that would indicate a need for an out of cycle testing of the reporting unit. |
| | • | Other includes DMi and was valued with a combination of cost and income-based approaches. Under the cost approach, an adjusted net assets value was prepared using the balance sheet of the company. The income approach was based on a DCF using financial estimates prepared by the company applying a discount rate of 45.0%. |
The changes in the carrying amount of goodwill by reporting unit for the years ended December 31, 2015 and 2014 are as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Schuff | | GMSL | | ICS | | ANG | | CIG | | Other | | Total | Balance as of January 1, 2014 | $ | — |
| | $ | — |
| | $ | 3,378 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3,378 |
| Effect of change in foreign currency exchange rates | — |
| | (190 | ) | | — |
| | — |
| | — |
| | — |
| | (190 | ) | Acquisition of business | 24,612 |
| | 1,366 |
| | — |
| | 1,374 |
| | — |
| | — |
| | 27,352 |
| Balance as of December 31, 2014 | $ | 24,612 |
| | $ | 1,176 |
| | $ | 3,378 |
| | $ | 1,374 |
| | $ | — |
| | $ | — |
| | $ | 30,540 |
| Effect of change in foreign currency exchange rates | — |
| | (56 | ) | | — |
| | — |
| | | | — |
| | (56 | ) | Reclassification | — |
| | — |
| | — |
| | — |
| | — |
| | 1,781 |
| | 1,781 |
| Acquisition of business | (122 | ) | | 554 |
| | — |
| | — |
| | 29,021 |
| | — |
| | 29,453 |
| Impairment of goodwill | — |
| | (540 | ) | | — |
| | — |
| | — |
| | — |
| | (540 | ) | December 31, 2015 | $ | 24,490 |
| | $ | 1,134 |
| | $ | 3,378 |
| | $ | 1,374 |
| | $ | 29,021 |
| | $ | 1,781 |
| | $ | 61,178 |
|
Indefinite-lived Intangible Assets
The acquisition of the Insurance Companies resulted in state licenses which are considered indefinite-lived intangible assets not subject to amortization of $4.9 million as of December 31, 2015.
Amortizable Intangible Assets
The changes in the carrying amount of amortizable intangible assets by reporting unit for the years ended December 31, 2015 and 2014 are as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Schuff | | GMSL | | ANG | | Pansend | | Other | | Non-operating Corporate | | Total | Trade names | | | | | | | | | | | | | | Balance as of December 31, 2013 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Effect of change in foreign currency exchange rates | — |
| | (49 | ) | | — |
| | — |
| | — |
| | — |
| | (49 | ) | Amortization | (174 | ) | | (91 | ) | | (263 | ) | | — |
| | — |
| | — |
| | (528 | ) | Acquisition of business | 4,478 |
| | 1,137 |
| | 6,300 |
| | — |
| | — |
| | — |
| | 11,915 |
| Balance as of December 31, 2014 | $ | 4,304 |
| | $ | 997 |
| | $ | 6,037 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 11,338 |
| Effect of change in foreign currency exchange rates | — |
| | (51 | ) | | — |
| | — |
| | — |
| | — |
| | (51 | ) | Amortization | (299 | ) | | (345 | ) | | (630 | ) | | — |
| | — |
| | — |
| | (1,274 | ) | Balance as of December 31, 2015 | $ | 4,005 |
| | $ | 601 |
| | $ | 5,407 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 10,013 |
| Customer relationships | | | | | | | | | | | | | | Balance as of December 31, 2013 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Effect of change in foreign currency exchange rates | — |
| | (353 | ) | | — |
| | — |
| | — |
| | — |
| | (353 | ) | Amortization | — |
| | (129 | ) | | (151 | ) | | — |
| | — |
| | — |
| | (280 | ) | Acquisition of business | — |
| | 8,121 |
| | 5,032 |
| | — |
| | — |
| | — |
| | 13,153 |
| Balance as of December 31, 2014 | $ | — |
| | $ | 7,639 |
| | $ | 4,881 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 12,520 |
| Reclassification | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Effect of change in foreign currency exchange rates | — |
| | (351 | ) | | — |
| | — |
| | — |
| | — |
| | (351 | ) | Amortization | — |
| | (494 | ) | | (437 | ) | | — |
| | — |
| | — |
| | (931 | ) | Balance as of December 31, 2015 | $ | — |
| | $ | 6,794 |
| | $ | 4,444 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 11,238 |
| Developed technology | | | | | | | | | | | | | | Balance as of December 31, 2013 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of change in foreign currency exchange rates | — |
| | (57 | ) | | — |
| | — |
| | — |
| | — |
| | (57 | ) | Amortization | — |
| | (78 | ) | | — |
| | — |
| | — |
| | — |
| | (78 | ) | Acquisition of business | — |
| | 1,299 |
| | — |
| | — |
| | — |
| | — |
| | 1,299 |
| Balance as of December 31, 2014 | $ | — |
| | $ | 1,164 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,164 |
| Reclassification | — |
| | — |
| | — |
| | — |
| | 4,195 |
| | — |
| | 4,195 |
| Effect of change in foreign currency exchange rates | — |
| | (58 | ) | | — |
| | — |
| | — |
| | — |
| | (58 | ) | Amortization | — |
| | (296 | ) | | — |
| | — |
| | (1,916 | ) | | — |
| | (2,212 | ) | Balance as of December 31, 2015 | $ | — |
| | $ | 810 |
| | $ | — |
| | $ | — |
| | $ | 2,279 |
| | $ | — |
| | $ | 3,089 |
| Other | | | | | | | | | | | | | | Balance as of December 31, 2013 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Amortization | — |
| | — |
| | — |
| | (1 | ) | | — |
| | — |
| | (1 | ) | Acquisition of business/development | — |
| | — |
| | — |
| | 115 |
| | 6,000 |
| | 22 |
| | 6,137 |
| December 31, 2014 | $ | — |
| | $ | — |
| | $ | — |
| | $ | 114 |
| | $ | 6,000 |
| | $ | 22 |
| | $ | 6,136 |
| Reclassification | — |
| | — |
| | — |
| | — |
| | (6,000 | ) | | — |
| | (6,000 | ) | Amortization | — |
| | — |
| | — |
| | (2 | ) | | — |
| | — |
| | (2 | ) | Asset acquisition | — |
| | — |
| | 20 |
| | 65 |
| | — |
| | — |
| | 85 |
| Balance as of December 31, 2015 | $ | — |
| | $ | — |
| | $ | 20 |
| | $ | 177 |
| | $ | — |
| | $ | 22 |
| | $ | 219 |
| Total amortizable intangible assets | | | | | | | | | | | | | | Balance as of December 31, 2013 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Effect of change in foreign currency exchange rates | — |
| | (459 | ) | | — |
| | — |
| | — |
| | — |
| | (459 | ) | Amortization | (174 | ) | | (298 | ) | | (414 | ) | | (1 | ) | | — |
| | — |
| | (887 | ) | Acquisition of business | 4,478 |
| | 10,557 |
| | 11,332 |
| | 115 |
| | 6,000 |
| | 22 |
| | 32,504 |
| Balance as of December 31, 2014 | $ | 4,304 |
| | $ | 9,800 |
| | $ | 10,918 |
| | $ | 114 |
| | $ | 6,000 |
| | $ | 22 |
| | $ | 31,158 |
| Reclassification | — |
| | — |
| | — |
| | — |
| | (1,805 | ) | | — |
| | (1,805 | ) | Effect of change in foreign currency exchange rates | — |
| | (460 | ) | | — |
| | — |
| | — |
| | — |
| | (460 | ) | Amortization | (299 | ) | | (1,135 | ) | | (1,067 | ) | | (2 | ) | | (1,916 | ) | | — |
| | (4,419 | ) | Asset acquisition | — |
| | — |
| | 20 |
| | 65 |
| | — |
| | — |
| | 85 |
| Balance as of December 31, 2015 | $ | 4,005 |
| | $ | 8,205 |
| | $ | 9,871 |
| | $ | 177 |
| | $ | 2,279 |
| | $ | 22 |
| | $ | 24,559 |
|
Amortization expense for amortizable intangible assets for the years ended December 31, 2015, 2014 and 2013 was $4.4 million, $0.9 million and $0, respectively. The Company expects amortization expense for its amortizable intangible assets for the years ending December 31, 2016, 2017, 2018, 2019, 2020 and thereafter to be approximately $3.9 million, $3.5 million, $2.2 million, $1.9 million, $1.9 million and $11.2 million, respectively.
The Value of Business Acquired
VOBA is amortized in relation to the projected future premium of the acquired long term care blocks of business and recorded amortization increases net income for the respective period. Total amortization recorded for the year ended December 31, 2015 was $0.1 million. The Company expects VOBA amortization for the years ending December 31, 2016, 2017, 2018, 2019, 2020 and thereafter to be approximately $5.0 million, $4.1 million, $3.8 million, $3.7 million, $3.4 million and $30.8 million, respectively.
|