GOODWILL AND OTHER INTANGIBLES
Goodwill:
Goodwill is reviewed for impairment annually during the fourth quarter, or more frequently if events or changes in business conditions indicate that impairment may exist. Goodwill is not amortizable for financial statement purposes. During the year ended December 31, 2013, the Company recorded a decrease in goodwill of $2.2 million, resulting from adjustments to purchase price allocations related to small acquisitions. During the year ended December 31, 2012, the Company recorded an increase in goodwill of $14.5 million, resulting primarily from purchase price allocations related to small acquisitions, partially offset by the excess tax benefit related to exercises of stock options acquired in the acquisition of CSK. The Company did not record any goodwill impairment during the years ended December 31, 2013 or 2012.
The following table identifies the changes in goodwill for the years ended December 31, 2013 and 2012 (in thousands):
|
| | | |
Balance at December 31, 2011 | $ | 743,907 |
|
Activity | 14,503 |
|
Balance at December 31, 2012 | 758,410 |
|
Activity | (2,185 | ) |
Balance at December 31, 2013 | $ | 756,225 |
|
As of December 31, 2013 and 2012, other than goodwill, the Company did not have any other indefinite lived intangible assets.
Intangibles other than goodwill:
The following table identifies the components of the Company’s amortizable intangibles as of December 31, 2013 and 2012 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Cost of Amortizable
Intangibles | | Accumulated Amortization (Expense) Benefit | | Net Amortizable Intangibles |
| December 31,
2013 | | December 31,
2012 | | December 31,
2013 | | December 31,
2012 | | December 31,
2013 | | December 31,
2012 |
Amortizable intangible assets: | | | | | | | | | | | |
Favorable leases | $ | 50,910 |
| | $ | 50,910 |
| | $ | (32,463 | ) | | $ | (28,566 | ) | | $ | 18,447 |
| | $ | 22,344 |
|
Non-compete agreements | 647 |
| | 717 |
| | (428 | ) | | (447 | ) | | 219 |
| | 270 |
|
Total amortizable intangible assets | $ | 51,557 |
| | $ | 51,627 |
| | $ | (32,891 | ) | | $ | (29,013 | ) | | $ | 18,666 |
| | $ | 22,614 |
|
| | | | | | | | | | | |
Unfavorable leases | $ | 49,380 |
| | $ | 49,380 |
| | $ | 36,758 |
| | $ | 32,210 |
| | $ | 12,622 |
| | $ | 17,170 |
|
The Company recorded favorable lease assets in conjunction with the acquisition of CSK; these favorable lease assets represent the values of operating leases acquired with favorable terms. These favorable leases had an estimated weighted-average remaining useful life of approximately 10.0 years as of December 31, 2013. For the years ended December 31, 2013, 2012 and 2011, the Company recorded amortization expense of $4.0 million, $4.7 million and $6.1 million, respectively, related to its amortizable intangible assets, which are included in “Other assets, net” on the accompanying Consolidated Balance Sheets.
The Company recorded unfavorable lease liabilities in conjunction with the acquisition of CSK; these unfavorable lease liabilities represent the values of operating leases acquired with unfavorable terms. These unfavorable leases had an estimated weighted-average remaining useful life of approximately 4.9 years as of December 31, 2013. For the years ended December 31, 2013, 2012 and 2011, the Company recognized an amortized benefit of $4.5 million, $5.7 million and $6.7 million, respectively, related to these unfavorable operating leases, which are included in “Other liabilities” on the accompanying Consolidated Balance Sheets. These unfavorable lease liabilities are not included as a component of the Company’s closed store reserves, which are discussed in Note 6.
The following table identifies the estimated amortization expense and benefit of the Company’s intangibles for each of the next five years as of December 31, 2013 (in thousands):
|
| | | | | | | | | | | |
| Amortization Expense | | Amortization Benefit | | Total Amortization (Expense) Benefit |
2014 | $ | (3,109 | ) | | $ | 3,642 |
| | $ | 533 |
|
2015 | (2,679 | ) | | 2,794 |
| | 115 |
|
2016 | (2,323 | ) | | 2,076 |
| | (247 | ) |
2017 | (1,907 | ) | | 1,493 |
| | (414 | ) |
2018 | (1,444 | ) | | 923 |
| | (521 | ) |
Total | $ | (11,462 | ) | | $ | 10,928 |
| | $ | (534 | ) |
