EchoStar CORPSATS
EchoStar CORP Goodwill & Intangibles Disclosure
GOODWILL, REGULATORY AUTHORIZATIONS AND OTHER INTANGIBLE ASSETS
Goodwill
The excess of the cost of an acquired business over the fair values of net tangible and identifiable intangible assets at the time of the acquisition is recorded as goodwill. Goodwill is assigned to the reporting units within our operating segments and is subject to impairment testing annually, or more frequently when events or changes in circumstances indicate the fair value of a reporting unit is more likely than not less than its carrying amount.
As of December 31, 2018 and 2017, all of our goodwill was assigned to reporting units of our Hughes segment. We test this goodwill for impairment annually in the second quarter. Based on our impairment testing in the second quarter of 2018, our goodwill is considered to be not impaired.
Regulatory Authorizations
Regulatory Authorizations included amounts with both finite and indefinite useful lives, as follows:
As of December 31, 2017 | Additions | Impairment | Currency Translation Adjustment | As of December 31, 2018 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Finite useful lives: | ||||||||||||||||||||
Cost | $ | 92,621 | $ | — | $ | (37,476 | ) | $ | (8,358 | ) | $ | 46,787 | ||||||||
Accumulated amortization | (21,342 | ) | (5,190 | ) | 7,848 | 1,894 | (16,790 | ) | ||||||||||||
Net | 71,279 | (5,190 | ) | (29,628 | ) | (6,464 | ) | 29,997 | ||||||||||||
Indefinite lives | 465,657 | — | — | — | 465,657 | |||||||||||||||
Total regulatory authorizations, net | $ | 536,936 | $ | (5,190 | ) | $ | (29,628 | ) | $ | (6,464 | ) | $ | 495,654 | |||||||
Amortization expense for the Regulatory Authorizations with finite lives was $5 million for each of the years ended December 31, 2018, 2017 and 2016, respectively.
Prior to the fourth quarter of 2017, our Regulatory Authorizations with indefinite lives included $6 million for contractual rights to utilize certain frequencies, in addition to those specified in the Brazilian license, at the 45 degree west longitude orbital location. We acquired such contractual rights in 2012 and have evaluated potential opportunities to utilize the frequencies in conjunction with our Brazilian license. We determined in the fourth quarter of 2017 that certain actions required to utilize the frequencies had become impractical with the passage of time. As a result of these circumstances, we determined that the fair value of such contractual rights was de minimis and we recognized a $6 million impairment loss in our ESS segment in the fourth quarter of 2017.
In January 2019, we determined that we are not able to develop a business using our 45 degree west longitude regulatory authorization. We determined that the fair value of this authorization and certain related ground infrastructure have a fair value that is de minimus and we have recognized a loss on those assets of $33 million. In addition we have included a loss related to foreign currency of $32 million as a result of the in-substance liquidation of our business related to the 45 degree west longitude regulatory authorization.
Other Intangible Assets
Our other intangible assets, which are subject to amortization, consisted of the following:
Weighted Average Useful Life (in Years) | As of December 31, | |||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||||
Cost | Accumulated Amortization | Carrying Amount | Cost | Accumulated Amortization | Carrying Amount | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Customer relationships | 8 | $ | 270,300 | $ | (244,787 | ) | $ | 25,513 | $ | 270,300 | $ | (231,642 | ) | $ | 38,658 | |||||||||||
Technology-based | 6 | 61,283 | (61,004 | ) | 279 | 61,300 | (60,927 | ) | 373 | |||||||||||||||||
Trademark portfolio | 20 | 29,700 | (11,261 | ) | 18,439 | 29,700 | (9,776 | ) | 19,924 | |||||||||||||||||
Total other intangible assets | $ | 361,283 | $ | (317,052 | ) | $ | 44,231 | $ | 361,300 | $ | (302,345 | ) | $ | 58,955 | ||||||||||||
Customer relationships are amortized predominantly in relation to the expected contribution of cash flow to the business over the life of the intangible asset. Other intangible assets are amortized on a straight-line basis over the periods the assets are expected to contribute to our cash flows. Intangible asset amortization expense, including amortization of regulatory authorizations with finite lives and externally marketed capitalized software, was $43 million, $47 million and $54 million for the years ended December 31, 2018, 2017 and 2016, respectively.
Future Amortization
As of December 31, 2018, our estimated future amortization of intangible assets, including regulatory authorizations with finite lives, was as follows:
Amount | |||
(In thousands) | |||
For the years ending December 31, | |||
2019 | $ | 18,304 | |
2020 | 14,663 | ||
2021 | 8,029 | ||
2022 | 5,065 | ||
2023 | 5,065 | ||
Thereafter | 23,102 | ||
Total | $ | 74,228 | |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2018 | Feb 21, 2019 | Showing above |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 24, 2016 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.