Note 7 - Goodwill and Other Intangible Assets, Net (Notes)

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill and Other Intangible Assets, Net

Our goodwill and intangible asset balances at December 31, 2015 and 2014 relates entirely to our Services segment, as a result of our acquisition of Clayton and its subsequent acquisitions of Red Bell and ValuAmerica, as discussed further below and in Note 2.

The following table shows the changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014:



(In thousands)	Goodwill		Accumulated Impairment Losses			Net
Balance at December 31, 2013	$	2,095	$	—		$	2,095
Goodwill acquired	191,932		—			191,932
Impairment losses	—		(2,095		)	(2,095		)
Balance at December 31, 2014	194,027		(2,095		)	191,932
Goodwill acquired	3,238		—			3,238
Impairment losses	—		—			—
Balance at December 31, 2015	$	197,265	$	(2,095	)	$	195,170

During the first quarter of 2015, Clayton expanded its service offerings by acquiring Red Bell, a real estate brokerage company that provides products and services that include automated valuation models; broker price opinions used by investors, lenders and loan servicers; and advanced technology solutions for: (1) monitoring loan portfolio performance; (2) tracking non-performing loans; (3) managing REO assets; and (4) valuing and selling residential real estate through a secure platform. The transaction was treated as a purchase for accounting purposes, with the excess of the acquisition price over the estimated fair value of the net assets acquired resulting in goodwill of $2.4 million. In addition, in October 2015, Clayton acquired ValuAmerica, a national title agency and appraisal management company with a technology platform that helps mortgage lenders and their vendors streamline and manage their supply chains and operational workflow. The transaction was treated as a purchase for accounting purposes, with the excess of the acquisition price over the estimated fair value of the net assets acquired resulting in goodwill of $0.8 million. Neither of these acquisitions met the criteria to be considered a material business combination. The goodwill in these acquisitions is an asset representing the estimated future economic benefits arising from the assets we have acquired that were not individually identified and separately recognized, and includes the value of the discounted expected future cash flows, the workforce, expected synergies with our other affiliates and other unidentifiable intangible assets. These acquisitions expand Clayton’s scope of services and are consistent with our strategy to be positioned to offer products and services throughout the entire mortgage value chain.

Goodwill is deemed to have an indefinite useful life and is subject to review for impairment annually, or more frequently, whenever circumstances indicate potential impairment. We conducted our annual goodwill impairment analysis in the fourth quarters of 2014 and 2015. In 2014, we recorded a goodwill impairment of $2.1 million related to a small subsidiary within our Services segment that we had acquired in 2013. As part of the annual goodwill impairment assessment, we estimated the fair value of this subsidiary using an income approach. The key assumption in our fair value analysis was forecasted future cash flows, which were less than originally expected. There was no goodwill remaining for this subsidiary at December 31, 2014. The goodwill impairment test is a two-step process as required by the accounting standard related to intangible assets. Step one compares a reporting unit’s estimated fair value to its carrying value. If the carrying amount exceeds the estimated fair value, the second step must be completed to measure the amount of the reporting unit’s goodwill impairment loss, if any. For purposes of performing our 2015 annual goodwill impairment test, we concluded that the Services segment constitutes one reporting unit to which all of the goodwill recorded is related. In 2015, the estimated fair value of the reporting unit exceeded its carrying amount; therefore, there was no impairment as of December 31, 2015.

The following is a summary of the gross and net carrying amounts and accumulated amortization of our other intangible assets as of and for the year to date periods indicated:



	December 31, 2015
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	83,471	$	(11,038	)	$	72,433
Technology	15,100		(2,949		)	12,151
Trade name and trademarks	8,340		(1,243		)	7,097
Client backlog	6,680		(4,184		)	2,496
Non-competition agreements	185		(115		)	70
Total	$	113,776	$	(19,529	)	$	94,247

	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	79,203	$	(2,917	)	$	76,286
Technology	8,970		(797		)	8,173
Trade name and trademarks	7,860		(393		)	7,467
Client backlog	6,680		(2,406		)	4,274
Non-competition agreements	145		(37		)	108
Total	$	102,858	$	(6,550	)	$	96,308

For tax purposes, substantially all of the goodwill and other intangible assets are expected to be deductible and amortized over a period of 15 years. For financial reporting purposes, other intangible assets with finite lives will be amortized over their applicable estimated useful lives in a manner that approximates the pattern of expected economic benefit from each intangible asset, as follows:



	Estimated Useful Life
Client relationships	3 years	-	15 years
Technology	3 years	-	8 years
Trademark			10 years
Client backlog	3 years	-	5 years
Non-competition agreements	2 years	-	3 years

For the years ended December 31, 2015 and 2014, amortization expense was $13.0 million and $8.6 million, respectively. The amortization expense for 2014 includes an impairment loss of $2.1 million, as disclosed above. There was no amortization expense in 2013. The estimated aggregate amortization expense for 2016 and thereafter is as follows (in thousands):



2016	$	13,138
2017	12,492
2018	11,845
2019	10,609
2020	9,058
Thereafter	37,105
Total	$	94,247

- 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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