SeaChange International, 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

6 Months Ended

Jul. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

6.	Goodwill and Intangible Assets

Goodwill

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year, or when we identify certain triggering events or circumstances that would more likely than not reduce the estimated fair value of the goodwill of the Company below its carrying amount. Changes in the carrying amount of goodwill for the six months ended July 31, 2016 were as follows (amounts in thousands):


Balance as of February 1, 2016
Goodwill	$	55,962
Accumulated impairment losses		(15,787	)

		40,175
Acquisition of DCC Labs		5,071
Cumulative translation adjustment		561

Balance as of July 31, 2016
Goodwill		61,594
Accumulated impairment losses		(15,787	)

	$	45,807

In the second quarter of fiscal 2017, we recorded preliminary goodwill of $5.1 million related to the acquisition of DCC Labs based on the preliminary allocation of the estimated purchase price. We will continue to evaluate certain assets, liabilities and tax estimates that are subject to change within the measurement period (up to one year from the acquisition date).

In the second quarter of fiscal 2017, a number of triggering events prompted us to perform step one of the goodwill impairment test on our goodwill balance as of July 31, 2016. The triggering events included; a sustained decrease in our stock price during the period, the withdrawal of the permanent reinvestment assertion on earnings generated by our Irish operations (see Note 12, “Income Taxes” to our consolidated financial statements for more information) and a decline in actual revenue for the quarter compared to projected amounts, which was previously reported in a Current Report on Form 8-K furnished to the SEC on August 23, 2016. The outcome of the preliminary step one analysis revealed that fair value exceeded carrying value at July 31, 2016. In aggregate, there was an excess fair value over and above the carrying value of the net assets ranging from $15.4 million to $25.0 million, or 15.0% to 24.4% of the carrying value of our net assets. To the extent that the finalization of this assessment of goodwill requires an impairment charge, such adjustment would be recorded in the third quarter of fiscal 2017.

Intangible Assets

Intangible assets, net, consisted of the following at July 31, 2016 and January 31, 2016:


			As of July 31, 2016							As of January 31, 2016
	Weighted average remaining life (Years)		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(Amounts in thousands)
Finite-life intangible assets:
Customer contracts		4.1	$	31,672	$	(27,475	)	$	4,197	$	29,956	$	(26,284	)	$	3,672
Non-compete agreements		1.8		2,515		(2,429	)		86		2,365		(2,365	)		—
Completed technology		5.6		11,632		(10,023	)		1,609		10,075		(9,621	)		454
Trademarks, patents and other		4.8		7,276		(7,089	)		187		7,068		(7,068	)		—

Total finite-life intangible assets		4.4	$	53,095	$	(47,016	)	$	6,079	$	49,464	$	(45,338	)	$	4,126

As of July 31, 2016, the estimated future amortization expense for our finite-life intangible assets for the remainder of fiscal 2017 and the four succeeding fiscal years is as follows (amounts in thousands):


	Estimated
	Amortization
Fiscal Year Ended January 31,	Expense
2017 (for the remaining six months)	$	1,259
2018		1,729
2019		1,040
2020		555
2021		390
2022 and thereafter		1,106

Total	$	6,079

- 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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