Goodwill and Intangibles, net

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

11. Goodwill and Intangibles, net

HC2 is required to assess goodwill and indefinite-intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units. Further, the Company assessed the current market capitalization, forecasts and the amount of headroom in the 2019 impairment test.

As a result of this assessment, the Company determined that a “triggering event” had occurred relative to its Broadcasting segment and, as required, performed a quantitative analysis, with the assistance of a third-party valuation firm, of the value of the Broadcasting reporting unit and its indefinite-lived intangible assets. Based on the analysis, the Company determined that the fair value of the Broadcasting reporting unit and the related indefinite-lived intangible assets continue to exceed their carrying values and were not impaired as of March 31, 2020.

Determining the fair value of the Broadcasting reporting unit and indefinite-lived intangible assets requires significant judgment and estimates by management, utilizing the income-approach, which utilizes several key inputs, including future cash flows consistent with management’s strategic plans, sales growth rates and a discount rate, amongst others. Estimating sales growth rates requires significant judgment by management in areas such as future economic conditions, growth rates, pricing, and consumer tastes and preferences. Given the inherent uncertainties in estimating the future impacts of the COVID-19 pandemic on global macroeconomic conditions and interest rates in general and on the Broadcasting business, actual results may differ from management’s current estimates and could have an adverse impact on one or more of the assumptions used in our quantitative models related to the Broadcasting reporting unit, resulting in potential impairment charges in subsequent periods. As of March 31, 2020, while the fair value of the Broadcasting reporting unit declined, the fair value of the Broadcasting reporting unit continued to exceed its carrying value.

The COVID-19 pandemic could cause a further and sustained decline in the value of our reporting units or other triggering event that could cause the Company to perform a goodwill impairment test and result in an impairment charge being recorded in a future period.

Goodwill

The carrying amount of goodwill by segment was as follows (in millions):


	Construction					Energy	Broadcasting				Total
Balance at December 31, 2019		$	89.0	$	2.1		$	21.4	$	112.5




Translation		(0.5)		—			—		(0.5)
Balance at March 31, 2020		$	88.5	$	2.1		$	21.4	$	112.0

Indefinite-lived Intangible Assets

The carrying amount of indefinite-lived intangible assets were as follows (in millions):


	March 31,		December 31,
	2020		2019
FCC licenses	$	136.6	$	136.2
State licenses	2.5		2.5
Total	$	139.1	$	138.7

Definite Lived Intangible Assets

The gross carrying amount and accumulated amortization of amortizable intangible assets by major intangible asset class were as follows (in millions):


	Weighted-Average Original Useful Life	March 31, 2020													December 31, 2019
				Gross Carrying Amount	Accumulated Amortization						Net			Gross Carrying Amount	Accumulated Amortization		Net
Trade names	13 Years	$	24.2		$	(7.1)	$	17.1	$	24.2		$	(6.6)		$	17.6
Customer relationships	10 Years	48.3			(14.1)		34.2		48.6			(13.1)			35.5
Channel sharing arrangements	35 Years	27.2			(1.1)		26.1		27.2			(0.9)			26.3

Other	7 Years	5.6			(2.0)		3.6		5.5			(1.9)			3.6
Total		$	105.3		$	(24.3)	$	81.0	$	105.5		$	(22.5)		$	83.0

Amortization expense for definite lived intangible assets was $2.0 million and $3.1 million for the three months ended March 31, 2020 and 2019, respectively, and was included in Depreciation and amortization in our Condensed Consolidated Statements of Operations.

Excluding the impact of any future acquisitions, dispositions or change in foreign currency, the Company estimates the annual amortization expense of amortizable intangible assets for the next five fiscal years will be as follows (in millions):


2020	$	6.0
2021	7.8
2022	7.6
2023	7.5
2024	7.0
Thereafter	45.1
Total	$	81.0