CHEMED CORP Goodwill & Intangibles Disclosure
The table below shows a rollforward of Goodwill (in thousands):
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| Roto- |
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| |
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| Vitas |
| Rooter |
| Total | |||
Balance at December 31, 2021 |
| $ | 333,331 |
| $ | 245,260 |
| $ | 578,591 |
Business combinations |
|
| 732 |
|
| 2,061 |
|
| 2,793 |
Foreign currency adjustments |
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|
|
|
| (89) |
|
| (89) |
Balance at December 31, 2022 |
| $ | 334,063 |
| $ | 247,232 |
| $ | 581,295 |
Business combinations |
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|
| 3,682 |
|
| 3,682 |
Foreign currency adjustments |
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|
| 40 |
|
| 40 |
Balance at December 31, 2023 |
| $ | 334,063 |
| $ | 250,954 |
| $ | 585,017 |
Identifiable, definite-lived intangible assets arise from purchase business combinations and are amortized using either an accelerated method or the straight-line method over the estimated useful lives of the assets. The selection of an amortization method is based on which method best reflects the economic pattern of usage of the asset. Reacquired franchise rights are amortized over the remaining term of the franchise agreement at the time of acquisition. The weighted average lives of our identifiable, definite-lived intangible assets at December 31, 2023, were:
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Covenants not to compete | 6.4 | yrs. |
Reacquired franchise rights | 7.4 |
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Referral networks | 14.0 |
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Customer lists | 16.8 |
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The date of our annual goodwill and indefinite-lived intangible asset impairment analysis is October 1. The VITAS trade name is considered to have an indefinite life. We also capitalize the direct costs of obtaining licenses to operate either hospice programs or plumbing operations subject to a minimum capitalization threshold. These costs are amortized over the life of the license using the straight-line method. Certificates of Need (“CON”), which are required in certain states for hospice operations, are generally granted without expiration and thus, we believe them to be indefinite-lived assets subject to impairment testing.
We consider that Roto-Rooter Corp. (“RRC”), Roto-Rooter Services Co. (“RRSC”) and VITAS are appropriate reporting units for testing goodwill impairment. We consider RRC and RRSC separate reporting units but one operating segment. This is appropriate as they each have their own set of general ledger accounts that can be analyzed at “one level below an operating segment” per the definition of a reporting unit in FASB guidance.
We completed our qualitative analysis for impairment of goodwill and our indefinite-lived intangible assets as of October 1, 2023. Based on our assessment, we do not believe that it is more likely than not that our reporting units or indefinite-lived assets fair values are less than their carrying values.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Feb 29, 2024 | Showing above |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 26, 2016 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.