GOODWILL, BRANDS, AND OTHER INTANGIBLE ASSETS, NET

12 Months Ended

Dec. 31, 2013

GOODWILL, BRANDS, AND OTHER INTANGIBLE ASSETS, NET

GOODWILL, BRANDS, AND OTHER INTANGIBLE ASSETS, NET

NOTE 5. GOODWILL, BRANDS, AND OTHER INTANGIBLE ASSETS, NET

For the years ended December 31, 2013, 2012 and 2011, the Company acquired 16, 29 and 30 franchise stores, respectively. These acquisitions are accounted for utilizing the purchase method of accounting, and the Company records the acquired inventory, fixed assets, franchise rights and goodwill, with an applicable reduction to receivables and cash. For the years ended December 31, 2013, 2012 and 2011, the total purchase prices associated with these acquisitions were $2.9 million, $4.4 million and $3.4 million, respectively, of which $1.7 million, $2.1 million and $1.6 million, respectively, was paid in cash.

On October 2, 2013, the Company acquired the assets and assumed the liabilities of DiscountSupplements.com, which was accounted for as a business combination. The total purchase price for this acquisition was approximately $33.3 million. Of the purchase price, $24.6 million was allocated to goodwill, $9.6 million to amortizable intangibles, $4.9 million of inventory, $0.5 million of accounts receivable, $0.6 million of property, plant and equipment, $0.2 million to current assets, $2.8 million of accounts payable, $2.4 million of deferred tax liabilities, $1.5 million of other current liabilities, and $6.2 million of other long term liabilities.

On August 31, 2011, the Company acquired substantially all of the assets and assumed certain liabilities of LuckyVitamin.com, which was accounted for as a business combination. The total purchase price for this acquisition was approximately $19.8 million. Of the purchase price, $11.5 million was allocated to goodwill, $9.6 million was allocated to amortizable intangible assets, $2.6 million was allocated to current assets acquired, $0.7 million was allocated to property and equipment acquired and $3.9 million was allocated to net assumed current liabilities.

The Company's acquisitions of LuckyVitamin.com and DiscountSupplements.com did not have a material impact on the Company's consolidated financial statements, and therefore pro forma disclosures have not been presented.

The following table summarizes the Company's goodwill activity:

	Retail		Franchising		Manufacturing/ Wholesale		Total

	(in thousands)
Balance at December 31, 2011—Net	$	317,733	$	117,303	$	202,841	$	637,877




Acquired franchise stores		2,038		—		—		2,038


Balance at December 31, 2012—Net	$	319,771	$	117,303	$	202,841	$	639,915




Acquired franchise stores		1,431		—		—		1,431
Acquisition of DiscountSupplements.com		24,582		—		—		24,582
Translation effect of exchange rates		418		—		—		418


Balance at December 31, 2013—Net	$	346,202	$	117,303	$	202,841	$	666,346

Intangible assets other than goodwill consisted of the following:

	Retail Brand		Franchise Brand		Operating Agreements			Other Intangibles			Total

	(in thousands)
Balance at December 31, 2011	$	500,000	$	220,000	$	138,970		$	10,619		$	869,589




Acquired franchise stores		—		—		—			701			701
Amortization expense		—		—		(6,653	)		(1,920	)		(8,573	)


Balance at December 31, 2012	$	500,000	$	220,000	$	132,317		$	9,400		$	861,717




Acquired franchise stores		—		—		—			329			329
Acquisitions		—		—		—			9,565			9,565
Amortization expense		—		—		(6,652	)		(2,347	)		(8,999	)
Translation effect of exchange rates		—		—		—			162			162


Balance at December 31, 2013	$	500,000	$	220,000	$	125,665		$	17,109		$	862,774

The following table reflects the gross carrying amount and accumulated amortization for each major intangible asset:

			December 31, 2013							December 31, 2012

	Weighted- Average Life		Cost		Accumulated Amortization			Carrying Amount		Cost		Accumulated Amortization			Carrying Amount
			(in thousands)
Brands—retail		—	$	500,000	$	—		$	500,000	$	500,000	$	—		$	500,000
Brands—franchise		—		220,000		—			220,000		220,000		—			220,000
Retail agreements		30.3		31,000		(7,301	)		23,699		31,000		(6,249	)		24,751
Franchise agreements		25.0		70,000		(19,017	)		50,983		70,000		(16,217	)		53,783
Manufacturing agreements		25.0		70,000		(19,017	)		50,983		70,000		(16,217	)		53,783
Other intangibles		8.2		20,327		(3,995	)		16,332		10,600		(2,151	)		8,449
Franchise rights		3.7		5,463		(4,686	)		777		5,134		(4,183	)		951


Total		23.5	$	916,790	$	(54,016	)	$	862,774	$	906,734	$	(45,017	)	$	861,717

The following table represents future estimated amortization expense of intangible assets with finite lives:

Years ending December 31,	Estimated amortization expense

	(in thousands)
2014	$	12,952
2015		12,820
2016		11,987
2017		9,996
2018		9,952
Thereafter		85,067


Total	$	142,774

Such estimates do not reflect the impact of future foreign exchange rates changes.

- 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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