GOODWILL AND INTANGIBLE ASSETS, NET

9 Months Ended

Sep. 30, 2013

NOTE 4. GOODWILL AND INTANGIBLE ASSETS, NET

For the nine months ended September 30, 2013 and 2012, the Company acquired 13 and 23 franchise stores, respectively. These acquisitions were accounted for using the acquisition method of accounting and the Company recorded the acquired inventory, fixed assets, franchise rights and goodwill, with an applicable reduction to receivables and cash. For the nine months ended September 30, 2013 and 2012, the total purchase price associated with these acquisitions was $2.1 million and $3.6 million, respectively, of which $1.3 million and $1.8 million, respectively, was paid in cash.

The following table summarizes the Company’s goodwill activity:

					Manufacturing/
	Retail		Franchising		Wholesale		Total
	(in thousands)

Balance at December 31, 2012	$	319,771	$	117,303	$	202,841	$	639,915
Acquired franchise stores	1,111		-		-		1,111
Balance at September 30, 2013 (unaudited)	$	320,882	$	117,303	$	202,841	$	641,026

Intangible assets other than goodwill consisted of the following:

	Retail		Franchise		Operating			Other
	Brand		Brand		Agreements			Intangibles			Total
	(in thousands)

Balance at December 31, 2012	$	500,000	$	220,000	$	132,317		$	9,400		$	861,717
Acquired franchise stores	-		-		-			249			249
Amortization expense	-		-		(4,989		)	(1,270		)	(6,259		)
Balance at September 30, 2013 (unaudited)	$	500,000	$	220,000	$	127,328		$	8,379		$	855,707

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

	Weighted -	September 30, 2013							December 31, 2012
	Average			Accumulated			Carrying				Accumulated			Carrying
	Life	Cost		Amortization			Amount		Cost		Amortization			Amount
				(unaudited)
		(in thousands)

Brands - retail	-	$	500,000	$	-		$	500,000	$	500,000	$	-		$	500,000
Brands - franchise	-	220,000		-			220,000		220,000		-			220,000
Retail agreements	30.2	31,000		(7,038		)	23,962		31,000		(6,249		)	24,751
Franchise agreements	25.0	70,000		(18,317		)	51,683		70,000		(16,217		)	53,783
Manufacturing agreements	25.0	70,000		(18,317		)	51,683		70,000		(16,217		)	53,783
Other intangibles	11.4	10,600		(3,061		)	7,539		10,600		(2,151		)	8,449
Franchise rights	3.7	5,383		(4,543		)	840		5,134		(4,183		)	951
Total	24.5	$	906,983	$	(51,276	)	$	855,707	$	906,734	$	(45,017	)	$	861,717

The following table represents future estimated amortization expense of intangible assets with finite lives at September 30, 2013:

	Estimated
	amortization
Years ending December 31,	expense
	(unaudited)
	(in thousands)
2013	$	2,078
2014	8,018
2015	7,880
2016	7,770
2017	7,718
Thereafter	102,243
Total	$	135,707

- 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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