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SEC Filings

10-K
DITECH HOLDING CORP filed this Form 10-K on 04/16/2019
Entire Document
 

Intangible assets, net consist of the following (in thousands):
 
 
Successor
 
 
Predecessor
 
 
December 31, 2018
 
 
December 31, 2017
 
 
Gross Carrying Amount (1)
 
Accumulated Amortization
 
Accumulated Impairment
 
Net Carrying Amount
 
 
Gross Carrying Amount
 
Accumulated Amortization
 
Accumulated Impairment
 
Net Carrying Amount
Institutional and customer relationships
 
$
24,000

 
$
(13,640
)
 
$

 
$
10,360

 
 
$
41,041

 
$
(30,793
)
 
$
(6,340
)
 
$
3,908

Trademarks and trade names
 
20,000

 

 
(14,700
)
 
5,300

 
 
10,000

 
(4,780
)
 
(395
)
 
4,825

Other
 
650

 
(541
)
 

 
109

 
 

 

 

 

Total intangible assets
 
$
44,650

 
$
(14,181
)
 
$
(14,700
)
 
$
15,769

 
 
$
51,041

 
$
(35,573
)
 
$
(6,735
)
 
$
8,733

__________
(1)
In connection with the adoption of fresh start accounting, the Company revalued its intangible assets to their estimated fair value at February 9, 2018. This resulted in an increase to intangible assets totaling $35.5 million, which included $20.2 million for institutional and customer relationships and $15.2 million for trade names. Refer to Note 2 for additional information regarding fresh start accounting adjustments.
Based on the balance of the definite-lived intangible assets, net at December 31, 2018, the following is an estimate of amortization expense for each of the next five years and thereafter (in thousands):
 
 
Amortization Expense 
2019
 
$
8,076

2020
 
3,121

2021
 
850

2022
 
542

2023
 
530

Thereafter
 
2,650

Total
 
$
15,769

In March 2018, the Company recorded an impairment charge of $1.0 million related to the trade names of the Servicing reporting unit, and in June 2018, the Company recorded an impairment charge of $1.0 million related to the trade names of the Originations reporting unit. The Company tested these intangible assets for recoverability due to changes in facts and circumstances associated with rising mortgage interest rates and lower projected originations business financial performance. Based on the testing results, it was determined that the carrying value of the intangible assets was not fully recoverable and an impairment charge was recorded to the extent that carrying value exceeded estimated fair value.
In December 2018, the Company recorded additional intangible assets impairment of $6.4 million and $6.3 million related to trade names of the Servicing and Originations segments, respectively, as a result of actual and forecasted business declines. The forecasted revenues used in the December 2018 relief-from-royalty method were based on two scenarios, revenue associated with the recapitalization of the Company and revenue associated with the sale of the Company. The recapitalization scenario revenue was calculated by using a probability-weighted average of the revenue associated with the recapitalization of the Company under the proposed terms of the DHCP RSA and revenue extrapolated from the recent actual results as adjusted for known subsequent events, with both scenarios given equal weight. The sale scenario revenue was based on the DHCP RSA revenue reduced in a manner to reflect a sale scenario based on known third-party bids. The trade name fair value was calculated by using a probability-weighted average of the estimated fair value from both the recapitalization and sale scenarios, with equal weight given to each.
Changes in circumstances, existing at the measurement date or at other times in the future, or in the numerous estimates associated with the Company's judgments, assumptions and estimates made in performing the impairment assessments, could result in further impairment charges in the future. The Company will continue to monitor all significant estimates and impairment indicators, and will perform interim impairment reviews as necessary.

F-53