Goodwill and Other Intangible Assets

12 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 7: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Intangible Asset Balances

The following table presents the balance of each major class of indefinite-lived intangible asset:



	September 30,
	2017		2016

	(in thousands)
Pawn licenses	$	9,535	$	8,836
Trade name	4,000		4,000
	$	13,535	$	12,836

The following table presents the changes in the carrying value of goodwill by segment, in addition to discontinued operations:



	U.S. Pawn		Mexico Pawn			Discontinued Operations			Consolidated Including Held for Sale

	(in thousands)
Balances as of September 30, 2015	$	244,330	$	7,316		$	79,133		$	330,779
Acquisitions	3,208		—			—			3,208
Goodwill impairment	—		—			(73,244		)	(73,244		)
Effect of foreign currency translation changes	—		(878		)	(5,889		)	(6,767		)
Balances as of September 30, 2016	$	247,538	$	6,438		$	—		$	253,976
Acquisitions	356		—			—			356
Effect of foreign currency translation changes	—		428			—			428
Balances as of September 30, 2017	$	247,894	$	6,866		$	—		$	254,760

In August 2017, we acquired certain assets of two pawn stores in Central Texas and one pawn store in Las Vegas, Nevada and recorded $0.4 million in goodwill. On February 1, 2016, we acquired six pawn stores in the Houston, Texas area doing business under the "Pawn One" brand and recorded $3.2 million in goodwill. These acquisitions were made as part of our continuing strategy to enhance our earnings over the long-term. The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits we expect to realize from the acquisitions. These benefits include a greater presence in the Central Texas and Las Vegas markets, as well as the ability to further leverage our expense structure through increased scale. Goodwill from these acquisitions was recorded in the U.S. Pawn segment. We expect substantially all goodwill attributable to the fiscal 2017 acquisitions will be deductible and none of the goodwill attributable to the “Pawn One” acquisition will be deductible for tax purposes. See Note 2 for additional information regarding these acquisitions.

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset:



	September 30,
	2017							2016
	Carrying Amount		Accumulated Amortization			Net Book Value		Carrying Amount		Accumulated Amortization			Net Book Value

	(in thousands)
Real estate finders’ fees	$	1,167	$	(847	)	$	320	$	1,902	$	(796	)	$	1,106
Non-compete agreements	3,659		(3,102		)	557		3,581		(2,920		)	661
Favorable lease	1,102		(708		)	394		909		(637		)	272
Internally developed software	29,741		(12,597		)	17,144		23,503		(8,674		)	14,829
Other	879		(409		)	470		1,362		(385		)	977
	$	36,548	$	(17,663	)	$	18,885	$	31,257	$	(13,412	)	$	17,845

Impairment of Goodwill and Intangible Assets

We test goodwill and intangible assets with an indefinite useful life for potential impairment annually, or more frequently when there are events or circumstances that indicate that it is more likely than not that an impairment exists. During the fourth quarter of fiscal 2017, we performed our required annual impairment test for all reporting units utilizing the income approach. The income approach uses future cash flows and estimated terminal values (discounted using a market participant perspective) to determine the fair value of each intangible asset. We performed a quantitative analysis and determined that the fair value of each of our reporting units exceeded their carrying value. As of September 30, 2017, the calculated fair value of the U.S. Pawn and Mexico Pawn reporting units exceeded their carrying values by approximately 18% and 95%, respectively.

During the second quarter of fiscal 2016, we recorded an impairment of $73.2 million included under "Loss from discontinued operations, net of tax" in our consolidated statements of operations, the entire amount of the goodwill associated with our previous Grupo Finmart reporting unit. During the fourth quarter of fiscal 2015, we recorded an impairment of $1.7 million included under “Operations” expense in our consolidated statements of operations, the entire amount of the goodwill associated with our previous TUYO reporting unit. During the third quarter of fiscal 2015, we recorded an impairment of $10.6 million, included under "Loss from discontinued operations, net of tax" in our consolidated statements of operations, the entire amount of the goodwill associated with our previous USFS reporting unit. In the fourth quarter of fiscal 2015, we recorded a $3.7 million impairment of internally developed software, included under corporate “Administrative” expenses in our consolidated statements of operations.

Amortization of Definite-Lived Intangibles

The amortization of most definite-lived intangible assets is recorded as amortization expense. The favorable lease asset and other intangibles are amortized to operations expense over the related lease terms.

The following table presents the amount and classification of amortization recognized as expense:



	Fiscal Year Ended September 30,
	2017		2016		2015

	(in thousands)
Amortization expense in continuing operations	$	4,184	$	4,742	$	3,875
Amortization expense in discontinued operations	—		2,055		2,397
Operations expense	90		87		103
	$	4,274	$	6,884	$	6,375

The following table presents our estimate of future amortization expense for definite-lived intangible assets:



Fiscal Year Ended September 30,	Amortization expense		Operations expense

	(in thousands)
2018	$	4,006	$	23
2019	3,772		23
2020	3,343		23
2021	2,310		22
2022	1,390		2

As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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