GOODWILL AND INTANGIBLE ASSETS
Goodwill
Changes in the carrying value of goodwill, by reportable segment, were as follows (in millions).
|
| | | | | | | | | | | | | | | | |
| | U.S. Networks | | International Networks | | Education | | Total |
December 31, 2011 | | $ | 4,979 |
| | $ | 1,293 |
| | $ | 19 |
| | $ | 6,291 |
|
Acquisitions (See Note 3.) | | 19 |
| | 87 |
| | — |
| | 106 |
|
Foreign currency translation | | — |
| | 2 |
| | — |
| | 2 |
|
December 31, 2012 | | 4,998 |
| | 1,382 |
| | 19 |
| | 6,399 |
|
Acquisitions (See Note 3.) | | — |
| | 924 |
| | 25 |
| | 949 |
|
Dispositions | | (9 | ) | | — |
| | — |
| | (9 | ) |
Foreign currency translation | | — |
| | 1 |
| | 1 |
| | 2 |
|
December 31, 2013 | | $ | 4,989 |
| | $ | 2,307 |
| | $ | 45 |
| | $ | 7,341 |
|
The carrying amount of goodwill at the U.S. Networks segment included accumulated impairments of $20 million at December 31, 2013 and 2012.
Intangible Assets
Finite-lived intangible assets consisted of the following (in millions, except years).
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted Average Amortization Period (Years) | | December 31, 2013 | | December 31, 2012 |
Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net |
Intangible assets subject to amortization: | | | | | | | | | | | | | |
Trademarks | 9 | | $ | 432 |
| | $ | (58 | ) | | $ | 374 |
| | $ | 40 |
| | $ | (24 | ) | | $ | 16 |
|
Customer relationships | 16 | | 1,189 |
| | (262 | ) | | 927 |
| | 516 |
| | (138 | ) | | 378 |
|
Other | 13 | | 112 |
| | (12 | ) | | 100 |
| | 56 |
| | (3 | ) | | 53 |
|
Total | | | $ | 1,733 |
| | $ | (332 | ) | | $ | 1,401 |
| | $ | 612 |
| | $ | (165 | ) | | $ | 447 |
|
Indefinite-lived intangible assets not subject to amortization (in millions):
|
| | | | | | | | |
| | December 31, |
| | 2013 | | 2012 |
Intangible assets not subject to amortization: | | | | |
Trademarks | | $ | 164 |
| | $ | 164 |
|
During 2013, intangible assets, net increased $954 million primarily due to the recognition of $1.1 billion of finite-lived intangible assets in connection with business acquisitions (see Note 3), partially offset by amortization expense. Amortization expense for finite-lived intangible assets reflects the pattern in which the assets' economic benefits are consumed over their estimated useful lives, often using the straight-line method. Amortization expense, excluding impairments, related to finite-lived intangible assets was $165 million, $29 million and $31 million for 2013, 2012 and 2011, respectively.
Amortization expense relating to intangible assets subject to amortization for each of the next five years and thereafter is estimated to be as follows (in millions).
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | Thereafter |
Amortization expense | | $ | 166 |
| | $ | 150 |
| | $ | 150 |
| | $ | 141 |
| | $ | 131 |
| | $ | 663 |
|
The amount and timing of the estimated expenses in the above table may vary due to future acquisitions, dispositions, impairments or changes in estimated useful lives.
Impairment Analysis
During the fourth quarter of 2013, the Company completed its annual impairment review of goodwill. Due to the period of time elapsed since the last quantitative impairment test in 2010, the Company elected to proceed to the first step of the quantitative goodwill impairment test for all reporting units. The estimated fair value of each reporting unit exceeded its carrying value and, therefore, no impairment was recorded. The fair values of the reporting units were determined using DCF and market-based valuation models. The market-based valuation models utilized multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”). Both the DCF and market-based models resulted in substantially similar fair values. Cash flows were determined based on Company estimates of future operating results and discounted using an internal rate of return based on an assessment of the risk inherent in future cash flows of the respective reporting unit.
During 2012 the Company performed a qualitative goodwill impairment assessment for all goodwill reporting units, and determined that it was more likely than not that the fair value of those reporting units exceeded their carrying values. Therefore no goodwill impairment was recorded during 2012.
During 2011 the Company performed a qualitative goodwill impairment assessment and determined that it was more likely than not that the fair value of its reporting units exceeded their carrying values, except for the commerce reporting unit, now a component of the U.S. Networks reporting unit. Due to changes in the long-term projections for the commerce reporting unit, the Company performed a quantitative goodwill impairment test and upon completion concluded that all $20 million in goodwill of the commerce reporting unit was impaired. Impairment charges are recorded in restructuring and impairment charges on the consolidated statements of operations.
