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Goodwill and Other Intangibles

6 Months Ended

Jun. 30, 2011

Goodwill and Other Intangibles [Abstract]

8. Goodwill and Other Intangibles

Goodwill has been allocated to reporting units that closely reflect the regions served by our four trade names: New York Sports Clubs (“NYSC”), Boston Sports Clubs (“BSC”), Washington Sports Clubs (“WSC”) and Philadelphia Sports Clubs (“PSC”), with certain more remote clubs that do not benefit from a regional cluster being considered single reporting units (“Outlier Clubs”) and our three clubs located in Switzerland being considered a single reporting unit (“SSC”). The Company has one Outlier Club with goodwill. As of June 30, 2011, the BSC, WSC and PSC regions do not have goodwill balances.

As of February 28, 2011 and 2010, the Company performed its annual impairment test. The February 28, 2011 and 2010 impairment tests supported the recorded goodwill balances and as such no impairment of goodwill was required. The valuation of reporting units requires assumptions and estimates of many critical factors, including revenue and market growth, operating cash flows and discount rates.

The Company's next annual impairment test will be performed as of February 29, 2012 or earlier, if any such change constitutes a triggering event outside the quarter when the annual goodwill impairment test is performed. It is not possible at this time to determine if any such future impairment charge would result. There were no triggering events in the three months ended June 30, 2011. As of February 28, 2011, the estimated fair value of NYSC was 49% greater than book value and the estimated fair value of SSC was 79% greater than book value.

The changes in the carrying amount of goodwill from January 1, 2010 through June 30, 2011 are detailed in the charts below.

	NYSC		BSC		SSC		Outlier Clubs		Total
Balance as of January 1, 2010
Goodwill	$	31,403	$	15,766	$	1,096	$	3,982	$	52,247
Accumulated impairment of goodwill		-		(15,766)		-		(3,845)		(19,611)
		31,403		-		1,096		137		32,636
Changes due to foreign currency exchange rate fluctuations		-		-		158		-		158

Balance as of December 31, 2010
Goodwill		31,403		15,766		1,254		3,982		52,405
Accumulated impairment of goodwill		-		(15,766)		-		(3,845)		(19,611)
		31,403		-		1,254		137		32,794
Changes due to foreign currency exchange rate fluctuations		-		-		146		-		146
Balance as of June 30, 2011
Goodwill		31,403		15,766		1,400		3,982		52,551
Accumulated impairment of goodwill		-		(15,766)		-		(3,845)		(19,611)
	$	31,403	$	-	$	1,400	$	137	$	32,940

Intangible assets as of June 30, 2011 and December 31, 2010 are as follows:

	June 30,		December 31,
	2011		2010
Covenants-not-to-compete	$	1,508	$	1,508
Accumulated amortization		(1,497)		(1,464)
	$	11	$	44

- 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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