Shutterfly 2009 Annual Report Download - page 88

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SHUTTERFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible asset amortization expense for the years ended December 31, 2008, 2007 and 2006 was $1,827,000, $412,000 and $222,000,
respectively. Amortization of existing intangible assets is estimated to be as follows (in thousands):
Goodwill
As defined by SFAS No. 142, the Company has one reporting unit therefore all goodwill is allocated to that single unit. To determine the
fair value of its reporting unit the Company used a discounted cash flows model, using ten years of projected unleveraged free cash flows and
terminal EBITDA earnings multiples. The discount rates used for the analysis reflected a weighted average cost of capital based on industry and
capital structure adjusted for equity risk premiums and size risk premiums based on market capitalization. The discount rates used were also
subjected to broad sensitivity analysis to ensure that fair value estimates were within a reasonable range. The discounted cash flow valuation
uses projections of future cash flows and includes assumptions concerning future operating performance and economic conditions and may differ
from actual future cash flows. As a result of this work, under the fair value measurement methodology, the Company concluded the fair value of
its reporting unit exceeded its carrying value. During the fourth quarter of fiscal years 2008 and 2007, the Company completed its annual
impairment test, and there was no impairment indicated.
Changes in the carrying amount of goodwill are as follows (in thousands):
See Note 6 - Acquisitions.
Year Ending:
2009
$
1,826
2010
1,686
2011
1,415
2012
1,271
2013
129
Thereafter
496
$
6,823
Balance, December 31, 2006
$
—
Acquisition of business
379
Goodwill adjustments
—
Balance, December 31, 2007
379
Acquisition of business
6,945
Goodwill adjustments
400
Balance, December 31, 2008
$
7,724
86