CarParts.com, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangibles

Goodwill and Intangibles

6 Months Ended

Jul. 02, 2011

Note 6—Goodwill and Intangibles

The following table summarizes the change in our goodwill during the twenty-six weeks ended July 2, 2011 as follows (in thousands):


Balance at January 1, 2011	$	17,137
Change in goodwill		207

Balance at July 2, 2011	$	17,344

During the thirteen weeks ended July 2, 2011, the Company recorded goodwill adjustments of $207 (in thousands) related to the settlement amount that the Company received from the shareholders of WAG for the negative working capital amount of WAG on the date of the Acquisition. During the twenty-six weeks ended July 2, 2011, no additional goodwill was recorded.

The Company evaluates goodwill for impairment on an annual basis or more frequently if events or circumstances occur that would indicate a reduction in fair value. As of October 31, 2010, the Company performed its annual impairment test and the excess of fair value estimates over carrying value for our reporting unit was approximately $187 million. Based on its analysis, there would have to be a 65% decrease in the fair value of the reporting unit to fail step 1. During the twenty-six weeks ended July, 2, 2011, there was no change to the Company's reporting unit and no events or circumstances occurred that would indicate a reduction in fair value. The accumulated impairment loss on goodwill was $4.4 million as of July 2, 2011 and January 1, 2011.

Intangibles subject to amortization are expensed on a straight-line basis. Amortization expense relating to intangibles totaled $1,363 and $2,990 (in thousands) for the thirteen and twenty-six weeks ended July 2, 2011, respectively. Amortization expense relating to intangibles totaled $124 and $245 (in thousands) for the thirteen and twenty-six weeks ended July 3, 2010, respectively. During the thirteen and twenty-six weeks ended July 2, 2011, the Company purchased certain domain and trade names for a purchase price of $22 (in thousands) and $48 (in thousands), respectively. All of these assets were allocated to intangible assets not subject to amortization.

Intangibles, excluding goodwill, consisted of the following at July 2, 2011 and January 1, 2011 (in thousands):


	Useful Life		July 2, 2011							January 1, 2011
	Useful Life		Gross Carrying Amount		Accum. Amort.			Net Carrying Amount		Gross Carrying Amount		Accum. Amort.			Net Carrying Amount
Intangible assets subject to amortization:
Websites		5 years	$	2,035	$	(798	)	$	1,237	$	2,035	$	(594	)	$	1,441
Internet platform intellectual property ⁽¹⁾		10 months		4,300		(4,300	)		—		4,300		(1,984	)		2,316
Product design intellectual property ⁽¹⁾		9 years		2,750		(265	)		2,485		2,750		(116	)		2,634
Customer relationships ⁽¹⁾		4 years		2,050		(455	)		1,595		2,050		(197	)		1,853
Assembled workforce		7 years		483		(228	)		255		478		(182	)		296
Favorable lease ⁽¹⁾		2.5 years		78		(31	)		47		78		(14	)		64

Sub-Total				11,696		(6,077	)		5,619		11,691		(3,087	)		8,604
Intangible assets not subject to amortization:
Domain and trade names ⁽²⁾		Indefinite life		10,162		—			10,162		10,114		—			10,114

Total			$	21,858	$	(6,077	)	$	15,781	$	21,805	$	(3,087	)	$	18,718

(1)	Includes the intangible assets acquired in connection with the Acquisition.

(2)	Includes domain names assigned a value of $8.2 million purchased in connection with the Acquisition.

The following table summarizes the future estimated amortization expense for these assets over the next five years (in thousands):


2011	$	675
2012		1,344
2013		1,281
2014		881
2015		303
Thereafter		1,135

Total	$	5,619

- 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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