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

Jun. 30, 2012

Note 5 – Goodwill and Intangibles

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, 2011, the Company performed its annual impairment test and the excess of fair value estimates over carrying value for our reporting unit was approximately $50 million. Based on its analysis, there would have to be a 38% decrease in the estimated fair value of the reporting unit to fail step 1. As of June 30, 2012, there was no change to the Company’s reporting unit and no events or circumstances occurred that would indicate an impairment of goodwill based on the excess of estimated fair value over carrying value for our reporting unit.

The carrying value of goodwill remained unchanged during the twenty-six weeks ended June 30, 2012 (in thousands):


(unaudited)
Balance at December 31, 2011	$	18,854
Change in goodwill		—


Balance at June 30, 2012	$	18,854

As of June 30, 2012, the accumulated impairment loss on goodwill was $4.4 million (recorded in 2008).

During the twenty-six weeks ended June 30, 2012, the Company incurred legal protection costs for certain domain and trade names of $16,000 which was allocated to intangible assets not subject to amortization. During the twenty-six weeks ended July 2, 2011, the Company purchased certain domain and trade names in the amount of $48,000, which was allocated to intangible assets not subject to amortization.

The Company did not note events or changes in circumstances indicating that the carrying value of our intangible assets may not be recoverable during the twenty-six weeks ended June 30, 2012 and July 2, 2011, therefore, no impairment loss was recognized on intangible assets as of the periods then ended.

Intangible assets subject to amortization are expensed on a straight-line basis. Amortization expense relating to intangible assets for the thirteen weeks ended June 30, 2012 and July 2, 2011 was $0.3 million and $1.4 million, respectively. Amortization expense relating to intangible assets for the twenty-six weeks ended June 30, 2012 and July 2, 2011 was $0.7 million and $3.0 million, respectively.

Intangibles, excluding goodwill, consisted of the following at June 30, 2012 and December 31, 2011 (in thousands):


			June 30, 2012							December 31, 2011
			(unaudited)
	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	$	(1,204	)	$	831	$	2,035	$	(1,001	)	$	1,034
Internet platform intellectual property		10 months		—		—			—		4,300		(4,300	)		—
Product design intellectual property		9 years		2,750		(569	)		2,181		2,750		(416	)		2,334
Customer relationships		4 years		2,050		(972	)		1,078		2,050		(712	)		1,338
Assembled workforce		7 years		497		(332	)		165		481		(275	)		206
Favorable lease		2.5 years		78		(74	)		4		78		(56	)		22


Sub-Total				7,410		(3,151	)		4,259		11,694		(6,760	)		4,934
Intangible assets not subject to amortization:
Domain and trade names		Indefinite life		5,066		—			5,066		5,050		—			5,050


Total			$	12,476	$	(3,151	)	$	9,325	$	16,744	$	(6,760	)	$	9,984

The following table summarizes the future estimated annual amortization expense for these assets over the next five years, as of June 30, 2012 (in thousands):


(unaudited)
2013	$	1,316
2014		1,089
2015		600
2016		307
2017		306
Thereafter		641


Total	$	4,259

- 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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