Note 8—Goodwill and Intangible Assets, Net

Goodwill

In September 2011, we adopted ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350),” under which an entity may first assess qualitative factors in determining whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. In fiscal years 2016 and 2015, we did not elect to first assess the qualitative factors in evaluating our goodwill for impairment; therefore, we proceeded with our quantitative goodwill impairment test.

We test for impairment at the reporting unit level on an annual basis as of April 30^th of every year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. Refer to Note 1—Summary of Significant Accounting Policies for more information on how we test goodwill for impairment. The annual goodwill impairment tests were conducted as of April 30, 2016 and 2015. For the impairment test conducted as of April 30, 2016, all of our reporting units passed step one of our annual impairment testing; however, we identified one reporting unit for which the fair value was not substantially in excess of its carrying value. Our Professional Solutions reporting unit was determined to have a fair value in excess of its carrying value by approximately 8 percent. Goodwill associated with this reporting unit was $383.2 million at June 30, 2016, representing approximately 27 percent of our total goodwill. While the goodwill of this reporting unit is not currently impaired, there could be an impairment in the future as a result of changes in certain estimates and assumptions. For example, this reporting unit’s fair value could be adversely affected and result in an impairment of goodwill if actual cash flows are below estimated cash flows, the estimated cash flows are discounted at a higher risk-adjusted rate or market multiples decrease. For the impairment test conducted as of April 30, 2015, the test indicated that the fair value of each reporting unit was substantially in excess of its carrying value and, as such, no impairments were deemed to exist. Our accumulated amount of goodwill impairment recorded in prior fiscal years is $330.0 million.

Goodwill was $1.510 billion at June 30, 2016 compared with $1.287 billion at June 30, 2015. The increase in goodwill in the fiscal year ended June 30, 2016 versus the prior fiscal year was primarily associated with the following: increases of $74.5 million, $69.7 million, $69.5 million, $17.5 million and $1.5 million in connection with the acquisitions of innovative Systems GmbH (“IS”), STC, TowerSec Ltd. (“TowerSec”), Redbend and Southern Vision Systems, Inc. (“SVSI”), respectively, and reductions of $4.3 million, $3.7 million and $0.2 million in connection with the acquisitions of I.P.S.G International Product Solution Group Pty Ltd. and VFX Systems Pty Ltd. (collectively “IPSG/VFX”), certain assets and liabilities of yurbuds and certain automotive assets and liabilities of B&O, respectively, partially offset by unfavorable foreign currency translation of $1.5 million.

Goodwill was $1.287 billion at June 30, 2015 compared with $541.0 million at June 30, 2014. The increase in goodwill in the fiscal year ended June 30, 2015 versus the prior fiscal year was primarily associated with the following: an increase of $13.2 million in connection with the acquisition of SVSI, an increase of $13.2 million in connection with the acquisition of certain automotive assets and liabilities of B&O, an increase of $529.4 million in connection with the acquisition of STC, an increase of $187.0 million in connection with the acquisition of Redbend, an increase of $20.3 million in connection with the acquisition of S1nn, an increase of $8.0 million in connection with the acquisition of IPSG/VFX, an increase of $5.4 million in connection with the acquisition of certain assets and liabilities of yurbuds and a reduction of $1.9 million in connection with the acquisition of AMX.

The contingent purchase price associated with the acquisition of IS is calculated pursuant to the terms of an agreement between the parties. Certain terms of the agreement are currently subject to a dispute between the parties and the matter has been submitted to arbitration. On November 5, 2013, the arbitration panel reached a partial judgment on some of the disputed matters covering the period from February 2009 through January 2012 awarding €16.3 million to the IS sellers. We contested the enforcement of the partial award. During the fiscal year ended June 30, 2014, we recorded approximately $8.1 million of additional contingent purchase price to accrue for this partial award. In July 2014, the partial award was upheld. During the fiscal year ended June 30, 2015, we paid the €16.3 million partial award.

On June 22, 2016, we executed an agreement with certain parties that previously owned 80.05% of IS (the “80.05% Shareholders”) to settle the remaining disputed matters with the 80.05% Shareholders that had been submitted to arbitration related to the contingent purchase price associated with our acquisition of IS. Under the terms of the agreement, we will pay the 80.05% Shareholders €76.8 million ($85.3 million) (the “IS Obligation”), with an initial payment of €11.8 million ($13.3 million) due in July 2016 and five installment payments of €13 million ($14.4 million) due every July 1^st from 2016 through 2020. We recorded approximately $74.5 of additional contingent purchase price for this IS Obligation as an increase to goodwill. The agreement includes an option that if exercised by the 80.05% Shareholders would require us to make selected installment payments early, subject to an eight percent discount rate. The existence of this option effectively makes this obligation due on demand and it has therefore been included in our Consolidated Balance Sheets in Current portion of long-term debt. Until such time as the disputed matters with the remaining shareholders that previously owned 19.95% of IS are resolved, we cannot calculate the contingent purchase price related to the acquisition of IS. Refer to Note 9—Debt for more information.

The changes in the carrying value of goodwill by business segment for the fiscal years ended June 30, 2015 and 2014 were as follows:

	Connected Car			Lifestyle Audio			Professional Solutions			Connected Services			Other			Total
Balance, June 30, 2014	$	17,080		$	137,950		$	385,922		$	-		$	-		$	540,952
Acquisitions⁽²⁾		10,209			28,809			19,225			529,367			187,031			774,641
Realignment adjustment ⁽¹⁾		(3,673	)		(6,738	)		-			196,853			(186,442	)		-
Other adjustments⁽³⁾		(2,867	)		(7,671	)		(17,286	)		-			(589	)		(28,413	)
Balance, June 30, 2015	$	20,749		$	152,350		$	387,861		$	726,220		$	-		$	1,287,180
Acquisitions ⁽²⁾		69,538			(3,863	)		(2,775	)		87,118			-			150,018
Contingent purchase price consideration associated with the acquisition of IS ⁽⁴⁾		74,540			-			-			-			-			74,540
Other adjustments⁽³⁾		(56	)		(510	)		523			(1,416	)		-			(1,459	)
Balance, June 30, 2016	$	164,771		$	147,977		$	385,609		$	811,922		$	-		$	1,510,279

⁽¹⁾	The realignment adjustments reallocate our goodwill based on our new reporting structure based on the relative fair value of each reporting unit.

⁽²⁾	Refer to Note 2—Acquisitions for more information.

⁽³⁾	The other adjustments to goodwill primarily consist of foreign currency translation adjustments.

⁽⁴⁾	Refer to Note 9—Debt for more information.

Intangible Assets, Net

Net intangible assets were $476.3 million and $669.7 million at June 30, 2016 and 2015, respectively and were comprised of the following:

		June 30, 2016							June 30, 2015
	Weighted Average Amortization	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
Customer relationships	12 Years	$	386,787	$	(75,957	)	$	310,830	$	503,928	$	(30,924	)	$	473,004
Technology	6 Years		75,431		(27,645	)		47,786		87,090		(17,653	)		69,437
Patents	15 Years		7,256		(1,584	)		5,672		5,136		(1,265	)		3,871
Trade names⁽¹⁾	2 Years		100,617		(26,231	)		74,386		100,827		(15,282	)		85,545
Non-compete agreement	4 Years		3,146		(2,060	)		1,086		3,168		(1,543	)		1,625
Software	5 Years		45,682		(11,945	)		33,737		42,013		(6,863	)		35,150
Other	4 Years		10,490		(7,703	)		2,787		7,242		(6,207	)		1,035
Total		$	629,409	$	(153,125	)	$	476,284	$	749,404	$	(79,737	)	$	669,667

⁽¹⁾	Includes $55.7 million and $18.5 million of indefinite-lived intangible assets related to the acquisition of AMX LLC and AMX Holding Corporation (collectively “AMX”) and Martin Professional A/S, respectively.

Amortization expense related to intangible assets was $72.6 million, $37.3 million and $13.2 million for the fiscal years ended June 30, 2016, 2015 and 2014, respectively.

Amortization expense is expected to approximate the following:

2017	$	64,309
2018		61,906
2019		56,577
2020		51,577
2021		48,344
Thereafter		119,221
Total	$	401,934