Acquisitions, Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Acquisitions, Goodwill and Other Intangible Assets

ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS:

Acquisition of Woodway Financial Advisors

Westwood completed the acquisition of Woodway Financial Advisors Inc ("Woodway") on April 1, 2015, as part of our strategy to grow our private wealth business. The total Merger consideration consisted of (i) $30.6 million in cash and stock, as described below, and (ii) contingent consideration equal to the annualized revenue from the post-closing business of Woodway for the twelve-month period ending March 31, 2016 (the “Earn-Out Period”), adjusted for certain clients or accounts that have terminated, and capped at $15 million (the “Earn-Out Amount”). The final Earn-Out Amount of $9.3 million (discounted from $10.1 million due to certain required holding periods on the Westwood shares) was paid 54.84% in cash and 45.16% in shares of Westwood common stock, valued using the average closing price during the last 30 calendar days of the Earn-Out Period. In relation to the Merger, Westwood entered into employment agreements with certain Woodway employees that, among other things, provided for specified compensation and benefits for the related employees.

“Professional services” on our Consolidated Statements of Comprehensive Income includes $732,000 of transaction costs related to the Woodway acquisition for the year ended December 31, 2015.

Pro Forma Financial Information

The following unaudited pro forma results of operations for the twelve months ended December 31, 2015 assume that the Woodway acquisition had occurred on January 1, 2015, after giving effect to acquisition accounting adjustments relating to amortization of the valued intangible assets and to record additional compensation costs related to employment contracts entered into as a result of the acquisition. These unaudited pro forma results exclude one-time, non-recurring costs related to the acquisition, including $1.1 million of transaction costs. This unaudited pro forma information should not be relied upon as being necessarily indicative of the historical results that would have been obtained if the Merger had actually occurred on that date, nor of the results that may be obtained in the future.



Pro Forma Results (in thousands)	Year Ended December 31, 2015
Total revenues	$	133,628
Net income	$	28,080

Goodwill

Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying identifiable assets at the date of acquisition. Changes in goodwill are as follows (in thousands):



	As of December 31,
	2017		2016
Beginning balance	$	27,144	$	27,144
Acquired goodwill	—		—
Ending balance	$	27,144	$	27,144

Goodwill is not amortized but is tested for impairment at least annually. We completed our annual goodwill impairment assessment during the third quarter of 2017 and determined that no impairment loss was required. No impairments were recorded during the years ended December 31, 2017, 2016 or 2015.

Other Intangible Assets

Our intangible assets represent the acquisition date fair value of acquired client relationships, trade names, non-compete agreements and internally-developed software and are reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition. The following is a summary of intangible assets at December 31, 2017 and 2016 (in thousands, except years):



	Weighted Average Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
2017
Client relationships	14.8	$	25,396	$	(6,302	)	$	19,094
Trade names	4.2	942		(633		)	309
Non-compete agreements	2.9	283		(262		)	21
Internally developed software	7.0	418		(38		)	380
		$	27,039	$	(7,235	)	$	19,804
2016
Client relationships	14.8	$	25,396	$	(4,672	)	$	20,724
Trade names	4.2	942		(496		)	446
Non-compete agreements	2.9	283		(176		)	107
Internally developed software	7.0	136		(19		)	117
		$	26,757	$	(5,363	)	$	21,394

Amortization expense, which is included in “General and administrative” expense on our Consolidated Statements of Comprehensive Income, was $1.9 million, $2.0 million and $1.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Estimated amortization expense for intangible assets over the next five years is as follows (in thousands):



	Estimated Amortization Expense
For the year ending December 31,
2018	$	1,672
2019	1,651
2020	1,530
2021	1,419
2022	1,419

- 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.

+ References + Details