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Intangible Assets and Goodwill (RMCO)
9 Months Ended
Sep. 30, 2013
RMCO
 
Intangible Assets and Goodwill

 

(3)              Intangible Assets and Goodwill

The following table provides the components of the Company’s intangible assets (in thousands):

 

 

September 30, 2013

 

  

December 31, 2012

 

 

Initial Cost

 

  

Accumulated
Amortization

 

 

Net
Balance

 

  

Initial Cost

 

  

Accumulated
Amortization

 

 

Net
Balance

 

Franchise agreements             

$

  141,834

 

  

$

(72,395

)

 

$

  69,439

  

  

$

  139,827

 

  

$

(61,489

)

 

$

  78,338

  

Other intangibles:

 

 

 

  

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

 

 

 

 

Software             

$

  7,222

 

  

$

(6,350

)

 

$

  872

  

  

$

  7,158

 

  

$

(5,942

)

 

$

  1,216

  

Trademarks             

 

  2,875

 

  

 

(1,236

)

 

 

  1,639

  

  

 

  2,716

 

  

 

(1,111

)

 

 

  1,605

  

Total other intangible assets             

$

  10,097

 

  

$

(7,586

)

 

$

  2,511

  

  

$

  9,874

 

  

$

(7,053

)

 

$

  2,821

  

Amortization expense for the three month periods ended September 30, 2013 and 2012 was $3,141,000 and $2,192,000, respectively. Amortization expense for the nine month periods ended September 30, 2013 and 2012 was $9,431,000 and $7,369,000, respectively.

Based on the Company’s amortizable intangible assets as of September 30, 2013, the Company expects related amortization expense for the remainder of 2013, the four succeeding years and thereafter to approximate $3,142,000, $12,473,000, $12,262,000, $12,024,000, $8,162,000 and $23,823,000, respectively.

The Company performs its annual impairment analysis of goodwill as of August 31 each year or more often if there are indicators of impairment present. The Company tests each reporting unit for goodwill impairment. Reporting units are driven by the level at which management reviews operating results and are one level below the operating segment.  The Company’s impairment assessment begins with a qualitative assessment to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount.  The initial qualitative assessment includes comparing the overall financial performance of the reporting units against the planned results as well as other factors which might indicate that the reporting unit’s value has declined since the last assessment date.  If it is determined in the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the standard two-step quantitative impairment test is performed.  The first step of the quantitative impairment test consists of comparing the estimated fair value of each reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, then it is not considered impaired and no further analysis is required. If step one indicates that the estimated fair value of a reporting unit is less than its carrying value, then impairment potentially exists and the second step is performed to measure the amount of goodwill impairment. Goodwill impairment exists when the estimated implied fair value of a reporting unit’s goodwill is less than its carrying value.

The Company determined the fair value of its reporting units utilizing the Company’s best estimate of future revenue, operating expenses, cash flows, market and general economic conditions as well as assumptions that it believes marketplace participants would utilize, including discount rates, cost of capital, and long term growth rates as we all other factors in its analyses. As a result of the first step of the Company’s goodwill impairment test as of August 31, 2013, the fair value of the Company’s reporting units significantly exceeded their carrying value. Thus, no indicators of impairment existed.

Amounts recorded as goodwill in the Company’s accompanying Condensed Consolidated Balance Sheets are attributable to the Real Estate Franchise Services reportable segment. The following table presents changes to goodwill for the nine months ended September 30, 2013 (in thousands):

 

 

Real Estate
Franchise
Services

 

Balance, January 1, 2013             

$

  71,039

 

Effect of changes in foreign currency exchange  rates             

 

(137

)

Balance, September 30, 2013             

$

  70,902