| Goodwill and Intangible Assets |
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8.
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GOODWILL AND INTANGIBLE ASSETS
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Goodwill is an intangible asset that arises when a company acquires an existing business or assets (net of assumed liabilities) which comprise a business. In general, the amount of goodwill recorded in an acquisition is calculated as the purchase price of the business minus the fair market value of the tangible assets and the identifiable intangible assets, net of the assumed liabilities. Goodwill and intangibles can also be established by push-down accounting. Below is a summary of the significant transactions that generated goodwill and intangible assets of the Company:
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In connection with the acquisition of A-Mark by SGI in July 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.
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In connection with the Company's business combination with AMST in August 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 and represent their fair values at the acquisition date. 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 steadier and more 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.
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In connection with the Company's acquisition of Goldline in August 2017, the Company recorded $5.0 million and $1.4 million of additional identifiable intangible assets and goodwill, respectively; these values were based upon an independent appraisal and represent their fair values at the acquisition date. The Company’s investment in Goldline created synergies between Goldline's direct marketing operation and the Company’s established distribution network, secured storage and lending operations that has led to increased product margin spreads, and lower distribution and storage costs for Goldline.
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Carrying Value
The carrying value of goodwill and other purchased intangibles as of December 31, 2020 and June 30, 2020 is as described below:
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dollar amounts in thousands
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December 31, 2020
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June 30, 2020
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Estimated
Useful
Lives
(Years)
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Gross
Carrying
Amount
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Accumulated
Amortization
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Accumulated
Impairment
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Net
Book
Value
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Gross
Carrying
Amount
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Accumulated
Amortization
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Accumulated
Impairment
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Net
Book
Value
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Identifiable intangible assets:
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Existing customer
relationships
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5 - 15
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$
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8,998
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$
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(7,582
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)
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$
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—
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$
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1,416
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$
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8,998
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$
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(7,307
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)
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$
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—
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$
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1,691
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Non-compete and other
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3 - 5
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2,300
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(2,222
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)
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—
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78
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2,300
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(2,187
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)
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—
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113
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Employment agreement
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3
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295
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(295
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—
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—
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295
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(288
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)
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—
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7
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Intangibles subject to amortization
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11,593
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(10,099
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)
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—
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1,494
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11,593
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(9,782
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)
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—
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1,811
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Trade names and trademarks
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Indefinite
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4,454
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—
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(1,291
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)
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3,163
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4,454
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—
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(1,291
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3,163
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Identifiable intangible assets
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$
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16,047
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$
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(10,099
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$
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(1,291
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4,657
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$
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16,047
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$
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(9,782
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)
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$
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(1,291
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$
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4,974
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Goodwill
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Indefinite
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$
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10,245
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$
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—
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$
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(1,364
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)
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$
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8,881
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$
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10,245
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$
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—
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$
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(1,364
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)
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$
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8,881
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The Company's intangible assets are subject to amortization except for trade-names and trademarks, 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 December 31, 2020 and 2019 was $163,000 and $255,000, respectively. Amortization expense related to the Company's intangible assets for the six months ended December 31, 2020 and 2019 was $317,000 and $508,000, respectively. For the presented periods, no amortization expense was allocated to cost of sales.
Impairment
The accumulated impairment charge of $2.7 million (goodwill and indefinite-lived intangible assets) was a non-recurring charge for fiscal 2018 related to the Direct Sales segment. No further impairment of goodwill or indefinite-lived intangible assets has occurred since fiscal 2018.
Estimated Amortization
Estimated annual amortization expense related to definite-lived intangible assets for the succeeding five years is as follows (in thousands):
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Fiscal Year Ending June 30,
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Amount
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2021 (6 months remaining)
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312
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2022
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601
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2023
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158
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2024
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77
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2025
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60
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Thereafter
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286
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Total
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$
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1,494
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