A-Mark Precious Metals, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

Goodwill and Intangible Assets

3 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

In connection with the acquisition of A-Mark by Former Parent on July 1, 2005, the accounts of the Company were adjusted using the push down basis of accounting to recognize the allocation of the consideration paid to the respective net assets acquired. In accordance with the push down basis of accounting, the Company's net assets were adjusted to their fair values as of the date of the acquisition based upon an independent appraisal.

Due to the Company's business combination with AMST that closed on August 31, 2016, the Company recorded an additional $2.5 million and $4.3 million of identifiable intangible assets and goodwill, respectively; these values were based upon an independent appraisal. The Company’s investment in AMST has resulted in synergies between the acquired minting operation and the Company’s established distribution network by providing a more steady and reliable fabricated source of silver during times of market volatility. The Company considers that much of the acquired goodwill relates to the “ready state” of AMST's established minting operation with existing quality processes, procedures and ability to scale production to meet market needs.

Due to the Company's acquisition of Goldline (see Note 1), the Company recorded $5.0 million and $1.4 million of additional identifiable intangible assets and goodwill, respectively; these values were based upon an independent appraisal and represents their fair values at the acquisition date. The Company’s investment in Goldline created synergies between Goldline's direct marketing operation and the Company’s established distribution network, secured storage and lending operations that is expected to lead to increased product margin spreads, lower distribution and storage costs for Goldline, and a larger customer base for the Company's secured lending operations.

The carrying value of goodwill and other purchased intangibles as of September 30, 2018 and June 30, 2018 is as described below:



dollar amounts in thousands
		September 30, 2018										June 30, 2018
	Estimated Useful Lives (Years)	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Identifiable intangible assets:
Existing customer relationships	5 - 15	8,848		(5,694		)	—			3,154		8,848		(5,467		)	—			3,381
Non-compete and other	3 - 5	2,300		(2,072		)	—			228		2,300		(2,056		)	—			244
Employment agreement	3	295		(231		)	—			64		295		(222		)	—			73
Intangibles subject to amortization		11,443		(7,997		)	—			3,446		11,443		(7,745		)	—			3,698

Trade name	Indefinite	$	4,454	$	—		$	(1,291	)	$	3,163	$	4,454	$	—		$	(1,291	)	$	3,163

Identifiable intangible assets		$	15,897	$	(7,997	)	$	(1,291	)	$	6,609	$	15,897	$	(7,745	)	$	(1,291	)	$	6,861

Goodwill	Indefinite	$	10,245	$	—		$	(1,364	)	$	8,881	$	10,245	$	—		$	(1,364	)	$	8,881

The Company's intangible assets are subject to amortization except for trade-names, which have an indefinite life. Intangible assets subject to amortization are amortized using the straight-line method over their useful lives, which are estimated to be three to fifteen years. Amortization expense related to the Company's intangible assets for the three months ended September 30, 2018 and 2017 was $252,000 and $157,000, respectively.

Impairment

The accumulated impairment charge of $2.7 million (goodwill and indefinite-lived intangible assets) was a one-time charge for fiscal 2018. No further impairment of goodwill or intangible assets has occurred for the three months ended September 30, 2018.

Estimated Amortization

Estimated amortization expense on an annual basis for the succeeding five years is as follows (in thousands):



Fiscal Year Ending June 30,	Amount
2019 (9 months remaining)	$	759
2020	1,011
2021	599
2022	571
2023	128
Thereafter	378
Total	$	3,446

- 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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