Note 7 - Goodwill and Other Intangible Assets, Net (Notes)

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure

Goodwill and Other Intangible Assets, Net

Goodwill

Goodwill primarily represents the amount paid for Clayton in excess of the fair value of identifiable net assets acquired as further described in Note 1. Goodwill represents the estimated future economic benefits arising from the assets we acquired that did not qualify to be identified and recognized individually, and includes the value of discounted expected future cash flows of Clayton, Clayton’s workforce, expected synergies with our other affiliates and other unidentifiable intangible assets. Goodwill is deemed to have an indefinite useful life and is subject to review for impairment annually, or more frequently, whenever circumstances indicate potential impairment. Currently, we expect approximately $191.0 million of our goodwill, of which $189.0 million relates to the Clayton transaction, to be deductible for tax purposes over a period of 15 years.

The net carrying amount of our goodwill was $194.0 million and $2.1 million as of September 30, 2014 and December 31, 2013, respectively. There were no accumulated impairment losses as of those dates.

Other Intangible Assets

Intangible assets, other than goodwill, primarily consist of Clayton’s client relationships, technology, trade name and trademarks, client backlog and non-competition agreements. Client relationships represent the value of the specifically acquired customer relationships and are valued using the excess earnings approach using estimated client revenues, attrition rates, implied royalty rates and discount rates. The excess earnings approach estimates the present value of expected earnings in excess of a traditional return on business assets. Technology represents proprietary software used for loan review and due diligence, managing the REO disposition process and performing surveillance of mortgage loan servicers. Trade name and trademarks reflect the value inherent in the recognition of the “Clayton” name and its reputation. Client backlog is the estimated present value of fees to be earned for services performed on loans currently under surveillance or REO assets under management. The value of a non-competition agreement is an appraisal of potential lost revenues that would arise from an individual leaving to work for a competitor or initiating a competing enterprise.

The following is a summary of the gross and net carrying amounts and accumulated amortization of our other intangible assets as of and for the year to date periods indicated:



	As of September 30, 2014
(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Client relationships	$	79,245	$	(1,460	)	$	77,785
Technology	8,970		(415		)	8,555
Trademark	7,860		(197		)	7,663
Client backlog	6,680		(1,203		)	5,477
Non-competition agreements	145		(19		)	126
Total	$	102,900	$	(3,294	)	$	99,606

	As of December 31, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	200	$	—		$	200
Non-competition agreements	5		—			5
Total	$	205	$	—		$	205

For tax purposes, substantially all of the other intangible assets are expected to be deductible and will be amortized over a period of 15 years. For financial reporting purposes, other intangible assets with finite lives will be amortized over their applicable estimated useful lives in a manner that approximates the pattern of expected economic benefit from each intangible asset, as follows:



	Estimated Useful Life
Client relationships	3 years	-	15 years
Technology	3 years	-	6 years
Trademark			10 years
Client backlog	3 years	-	5 years
Non-competition agreements	2 years	-	3 years

The estimated aggregate amortization expense for the remainder of 2014 and thereafter is as follows (in thousands):



2014	$	3,259
2015	12,014
2016	10,890
2017	10,584
2018	10,394
2019	9,376
Thereafter	43,089

- 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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