Goodwill and long-lived assets

9 Months Ended

Mar. 31, 2018

4. Goodwill and long-lived assets

Goodwill

The following table presents the change in goodwill by reportable segment for the nine months ended March 31, 2018.


	Electronic		Premier
	Components		Farnell		Total
	(Thousands)
Carrying value at July 1, 2017 (1)	$	635,048	$	513,299	$	1,148,347
Additions from acquisitions		19,725		—		19,725
Impairment of goodwill		(181,440)		—		(181,440)
Foreign currency translation		12,532		40,176		52,708
Measurement period adjustments		2,530		(15,328)		(12,798)
Carrying value at March 31, 2018 (2)	$	488,395	$	538,147	$	1,026,542

⁽¹⁾ Includes accumulated impairment of $1,045,110 from fiscal 2009

⁽²⁾ Includes accumulated impairment of $1,045,110 from fiscal 2009 and $181,440 from fiscal 2018

As of December 30, 2017, the $181.4 million of goodwill related to the Electronic Components Americas core reporting unit (the “Americas”) primarily represented goodwill allocated from the acquisitions of Bell Micro, G2 and Round 2, all of which occurred prior to fiscal 2011. The allocation of goodwill to the Americas represented the expected synergies the Americas would realize from these historical acquisitions. Once goodwill has been assigned to a reporting unit, for accounting purposes, the goodwill is no longer directly associated with the underlying acquisitions that the goodwill originated from, but rather the reporting unit to which it has been allocated. In accordance with ASC 350, the Company has been monitoring the Americas each quarter for the potential need to perform an interim goodwill impairment test.

In the third quarter of fiscal 2018, in conjunction with the commencement of the Company’s annual long-term planning process, it became apparent that lower cash flows are expected from the Americas over such planning horizon compared to prior year long-term cash flow expectations. As a result of the lower expected cash flows as well as certain other factors, the Company concluded that an interim quantitative goodwill impairment test for the Americas was necessary in the third quarter of fiscal 2018.

In assessing the Americas goodwill for impairment in the third quarter of fiscal 2018, the Company was required to make significant judgments related to the fair value of the Americas. The Company used a combination of an income approach, specifically a discounted cash flow methodology, and a market approach to estimate the fair value of the Americas. The discounted cash flow methodology includes market participant assumptions for, among other factors, forecasted sales, gross profit margins, operating expenses, cash flows, perpetual growth rates and long-term discount rates, all of which required judgments and estimates by management which are inherently uncertain. The market approach methodology required significant assumptions related to comparable transactions, market multiples, capital structure and control premiums.

As a result of the impairment testing and related fair value estimate of the Americas in the third quarter of fiscal 2018, the Company impaired all of the goodwill in the Americas and recorded $181.4 million of goodwill impairment expense, which is classified within goodwill impairment expense in the Consolidated Statements of Operations.

Intangible Assets

The following table presents the Company’s acquired intangible assets at March 31, 2018, and July 1, 2017, respectively.


	March 31, 2018						July 1, 2017
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount		Amortization		Value
	(Thousands)
Customer related	$	319,744	$	(139,888)	$	179,856	$	277,865	$	(79,578)	$	198,287
Trade name		58,382		(15,470)		42,912		46,915		(6,720)		40,195
Technology and other		56,489		(20,990)		35,499		50,369		(11,560)		38,809
	$	434,615	$	(176,348)	$	258,267	$	375,149	$	(97,858)	$	277,291

Intangible asset amortization expense from continuing operations was $22.6 million and $22.4 million for the third quarters of fiscal 2018 and 2017, respectively, and $69.9 million and $34.2 million for the first nine months of fiscal 2018 and 2017, respectively. Intangible assets have a weighted average remaining useful life of approximately 3 years. The following table presents the estimated future amortization expense for the remainder of fiscal 2018, the next five fiscal years and thereafter (in thousands):


Fiscal Year
Remainder of fiscal 2018	$	22,711
2019		89,330
2020		87,010
2021		41,902
2022		13,212
2023		3,854
Thereafter		248
Total	$	258,267

- 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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