|
|
 | | | |
- close
- close
- close
- close
This excerpt taken from the AN 10-K filed Feb 17, 2010. Intangible Assets Our principal identifiable intangible assets are individual store rights under franchise agreements with vehicle manufacturers, which have indefinite lives and are tested at least annually on April 30 for impairment. The impairment test for intangibles with indefinite lives requires the comparison of estimated fair value to its carrying value by store. Fair values of rights under franchise agreements are estimated by discounting expected future cash flows of the store. We completed our annual impairment tests as of April 30, 2009, and we recorded $1.5 million ($0.9 million after-tax) of non-cash impairment charges related to rights under an Import store’s franchise agreement. This non-cash impairment charge was recorded to reduce the carrying value of the store’s franchise agreement to its estimated fair value. The decline in the fair value of rights under this store’s franchise agreement reflects the underperformance relative to expectations of this store since our acquisition of it, as well as our expectations for the store’s future prospects. These factors resulted in a reduction in forecasted cash flows and growth rates used to estimate fair value. This non-cash impairment charge is classified as Franchise Rights Impairment in the accompanying Consolidated Statements of Operations. As of December 31, 2009, we had $173.4 million of franchise rights recorded on our Consolidated Balance Sheet, of which $5.3 million was related to Domestic stores, $32.6 million was related to Import stores, and $135.5 million was related to Premium Luxury stores. We completed our annual impairment test for intangibles with indefinite lives as of April 30, 2008, and during the six months ended June 30, 2008, we recorded $5.1 million ($3.0 million after-tax) of non-cash impairment charges related to rights under certain Import stores’ franchise agreements to reduce the carrying value of those stores’ franchise agreements to estimated fair value.
68
Table of ContentsAUTONATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the third quarter of 2008, as a result of the challenging automotive retail environment at that time, we also performed an interim impairment test of our rights under franchise agreements prior to testing goodwill for impairment, as noted above. During the third quarter of 2008, we recorded non-cash impairment charges of $20.3 million related to rights under certain Domestic stores’ franchise agreements, $16.2 million related to rights under certain Import stores’ franchise agreements, and $104.9 million related to rights under certain Premium Luxury stores’ franchise agreements, for a total of $141.4 million ($87.7 million after-tax). For the full year ended December 31, 2008, we recorded a total of $146.5 million ($90.8 million after-tax) of impairment charges associated with franchise rights. During 2009, we reclassified impairment charges of $19.1 million ($11.7 million after-tax) that were recorded during 2008 to Loss from Discontinued Operations in our Consolidated Statements of Operations for the year ended December 31, 2008, as the stores associated with these impairment charges were reclassified to discontinued operations in 2009. During 2007, we recorded $2.2 million ($1.4 million after-tax) of non-cash impairment charges related to rights under an Import store’s franchise agreement to reduce the carrying value of that store’s franchise agreement to estimated fair value. During 2009, we reclassified these impairment charges of $2.2 million ($1.4 million after-tax) that were recorded during 2007 to Loss from Discontinued Operations in our Consolidated Statements of Operations for the year ended December 31, 2007, as the store associated with these impairment charges was reclassified to discontinued operations in 2009. This excerpt taken from the AN 10-K filed Feb 17, 2009. Intangible
Assets
Our principal identifiable intangible assets are individual
store rights under franchise agreements with vehicle
manufacturers, which have indefinite lives and are tested at
least annually for impairment. We completed our annual
impairment test for these intangibles with indefinite lives as
of April 30, 2008, as well as interim impairment tests for
certain rights under franchise agreements where events or
changes in circumstances indicated their carrying amounts may
exceed fair value. The impairment test for intangibles with
indefinite lives requires the comparison of estimated fair value
to its carrying value by store. Fair values of rights under
franchise agreements are estimated by discounting expected
future cash flows of the store.
As a result of the continuing challenging automotive retail
environment, we also tested our rights under franchise
agreements for impairment during the third quarter of 2008,
prior to testing goodwill for impairment, as noted above. We
recorded non-cash impairment charges of $20.3 million
related to rights under certain Domestic stores’ franchise
agreements, $16.2 million related to rights under certain
Import stores’ franchise agreements, and
$104.9 million related to rights under certain Premium
Luxury stores’ franchise agreements, for a total of
$141.4 million ($87.7 million after-tax). These
impairment charges were recorded to reduce the carrying value of
those stores’ franchise agreements to estimated fair value.
Subsequent to these non-cash franchise rights impairment
charges, we had $173.9 million of franchise rights recorded
on our balance sheet as of December 31, 2008, of which
$5.3 million was related to Domestic stores,
$34.1 million was related to Import stores, and
$134.5 million was related to Premium Luxury stores.
During the six months ended June 30, 2008, we recorded
$5.1 million ($3.0 million after-tax) of non-cash
impairment charges related to rights under certain Import
stores’ franchise agreements to reduce the carrying
AUTONATION,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
value of those stores’ franchise agreements to estimated
fair value. During 2007, we recorded $2.2 million
($1.4 million after-tax) of non-cash impairment charges
related to rights under an Import store’s franchise
agreement to reduce the carrying value of that store’s
franchise agreement to estimated fair value.
The decline in the fair value of rights under these stores’
franchise agreements reflects the underperformance relative to
expectations of these stores since our acquisition of them, as
well as our expectations for the stores’ future prospects.
These factors resulted in a reduction in forecasted cash flows
and growth rates used to estimate fair value. These non-cash
impairment charges are classified as Franchise Rights Impairment
in the accompanying Consolidated Income Statements.
At December 31, 2008 and 2007, current insurance accruals
were included in Other Current Liabilities in the Consolidated
Balance Sheets and long-term insurance accruals were included in
Other Liabilities in the Consolidated Balance Sheets as follows:
Notes payable and long-term debt at December 31 are as follows:
This excerpt taken from the AN 10-K filed Feb 24, 2005. Intangible Assets
The Company accounts for acquisitions using the purchase method. Additionally, acquired intangible assets are separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of the Company’s intent to do so. Other intangibles with definite lives are amortized primarily over three to sixteen years using a straight-line method. The Company’s principal identifiable intangible assets are rights under franchise agreements with vehicle manufacturers. The Company generally expects its franchise agreements to survive for the foreseeable future and, when the agreements do not have indefinite terms, anticipates routine renewals of the agreements without substantial cost. The contractual terms of the Company’s franchise agreements provide for various durations, ranging from one year to no expiration date, and in certain cases manufacturers have undertaken to renew such franchises upon expiration so long as the dealership is in compliance with the terms of the agreement. However, in general, the states in which the Company operates have automotive dealership franchise laws that provide that, notwithstanding the terms of any franchise agreement, it is unlawful for a manufacturer to terminate or not renew a franchise unless “good cause” exists. It is generally difficult for a manufacturer to terminate, or not renew, a franchise under these franchise laws, which were designed to protect dealers. In addition, in the Company’s experience and historically in the automotive retail industry, dealership franchise agreements are rarely involuntarily terminated or not renewed by the manufacturer. Accordingly, the Company believes that its franchise agreements will contribute to cash flows for the foreseeable future and have indefinite lives. The Company has completed impairment tests as of June 30, 2004 and 2003 for goodwill and intangibles with indefinite lives. The goodwill test includes determining the fair value of the Company’s single reporting unit and comparing it to the carrying value of the net assets allocated to the reporting unit. No impairment charges resulted from the required impairment tests. Goodwill and intangibles with indefinite lives will be tested for impairment annually at June 30 or more frequently when events or circumstances indicate that an impairment may have occurred. 49
Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| EXCERPTS ON THIS PAGE:
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||
