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FORM 10-K
57
NOTE 4 – 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.