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

9 Months Ended

Oct. 31, 2017

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. At October 31, 2017 and January 31, 2017, we had goodwill of $24.5 million and $23.3 million, respectively. The change in the carrying amount of goodwill for the nine months ended October 31, 2017 is due to the impact of foreign currency translation adjustments related to goodwill balances that are recorded in currencies other than the U.S. dollar. The following table represents the changes in the carrying amount of goodwill for the nine months ended October 31, 2017 (amounts in thousands):

Balance as of February 1, 2017:
Goodwill, gross	$	62,566
Accumulated impairment losses		(39,279	)
Goodwill, net		23,287
Cumulative translation adjustment		1,219
Balance as of October 31, 2017:
Goodwill, gross		63,785
Accumulated impairment losses		(39,279	)
Goodwill, net	$	24,506

We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year or sooner if an indicator of impairment occurs. In the third quarter of fiscal 2018, we finalized the “Step 1” analysis of our annual goodwill impairment test for fiscal 2018. Based on this analysis, we determined that fair value of our reporting unit exceeded its carrying value, which was $64.2 million at August 1, 2017. As a result, no impairment charge was required related to the annual test. See “Critical Accounting Policies and Significant Judgment and Estimates – Goodwill,” in Part I, Item 2 of this Form 10-Q for more information.

During the third quarter of fiscal 2018, we determined that there was a significant decrease in fair value of the Corporate Headquarters (see Note 2, “Significant Accounting Policies – Impairment of Assets,” for more information). We considered this significant decrease in fair value a triggering event. As a result, we were required to complete an additional goodwill impairment test as of the date of the triggering event. We completed the additional goodwill impairment test and determined that the implied fair value of the reporting unit exceeds its carrying value as of the date of the triggering event. Accordingly, no impairment charge was recognized as of October 31, 2017

Other than the potential impairment indicator of goodwill mentioned above, we noted no other indicators that would require us to perform an impairment test in the fiscal third quarter ended October 31, 2017.

Intangible Assets

Intangible assets, net, consisted of the following at October 31, 2017 and January 31, 2017:

			As of October 31, 2017							As of January 31, 2017
	Weighted average remaining life (Years)		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(Amounts in thousands)
Finite-life intangible assets:
Customer contracts		2.3	$	30,982	$	(29,743	)	$	1,239	$	30,056	$	(28,019	)	$	2,037
Non-compete agreements		0.5		2,517		(2,509	)		8		2,374		(2,356	)		18
Completed technology		2.6		11,024		(10,697	)		327		10,496		(9,997	)		499
Trademarks, patents and other		2.5		7,159		(7,117	)		42		7,125		(7,076	)		49
Total finite-life intangible assets		2.4	$	51,682	$	(50,066	)	$	1,616	$	50,051	$	(47,448	)	$	2,603

As of October 31, 2017, the estimated future amortization expense for our finite-life intangible assets is as follows (amounts in thousands):

	Estimated
	Amortization
Fiscal Year Ended January 31,	Expense
2018 (for the remaining three months)	$	478
2019		873
2020		260
2021		5
2022		—
2023 and thereafter		—
Total	$	1,616

- 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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