rmax_CurrentFolio_10Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2015.

OR

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                 to                 .

Commission file number 001-36101

 

RE/MAX Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Delaware

 

80-0937145

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

 

 

5075 South Syracuse Street
Denver, Colorado

 

80237

(Address of principal executive offices)

 

(Zip Code)

 

(303) 770-5531

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

(Do not check if a smaller reporting company)

  

Smaller reporting company

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of outstanding shares of the registrant’s Class A common stock, par value $0.0001 per share, and Class B common stock, par value $0.0001, as of October 30, 2015 was 12,339,639 and 1, respectively.

 

 

 

 


 

Table of Contents

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

Page No.

 

 

PART I. – FINANCIAL INFORMATION

 

 

 

 

 

Item 1. 

 

Financial Statements

 

 

 

RE/MAX Holdings, Inc. Unaudited Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014

 

 

 

RE/MAX Holdings, Inc. Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2015 and September 30, 2014

 

 

 

RE/MAX Holdings, Inc. Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and September 30, 2014

 

 

 

RE/MAX Holdings, Inc. Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2015

 

 

 

RE/MAX Holdings, Inc. Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and September 30, 2014

 

 

 

RE/MAX Holdings, Inc. Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

 

Item 2. 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29 

 

 

 

 

Item 3. 

 

Quantitative and Qualitative Disclosures About Market Risks

51 

 

 

 

 

Item 4. 

 

Controls and Procedures

52 

 

 

 

 

 

 

PART II. – OTHER INFORMATION

 

 

 

 

 

Item 1. 

 

Legal Proceedings

53 

 

 

 

 

Item 1A. 

 

Risk Factors

53 

 

 

 

 

Item 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

58 

 

 

 

 

Item 3. 

 

Defaults Upon Senior Securities

58 

 

 

 

 

Item 4. 

 

Mine Safety Disclosures

58 

 

 

 

 

Item 5. 

 

Other Information

58 

 

 

 

 

Item 6. 

 

Exhibits

59 

 

 

 

 

 

 

SIGNATURES

60 

 

 

2


 

Table of Contents

PART I. – FINANCIAL INFORMATION

 

Item 1. Financial Statements

RE/MAX HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

    

2015

    

2014

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

95,370

 

$

107,199

 

Escrow cash - restricted

 

 

78

 

 

693

 

Accounts and notes receivable, current portion, less allowances of $4,836 and $4,495, respectively

 

 

17,948

 

 

16,641

 

Accounts receivable from affiliates

 

 

26

 

 

231

 

Income taxes receivable

 

 

321

 

 

765

 

Other current assets

 

 

4,424

 

 

5,237

 

Total current assets

 

 

118,167

 

 

130,766

 

Property and equipment, net of accumulated depreciation of $17,483 and $19,993, respectively

 

 

2,561

 

 

2,661

 

Franchise agreements, net of accumulated amortization of $97,430 and $87,330, respectively

 

 

65,331

 

 

75,505

 

Other intangible assets, net of accumulated amortization of $8,867 and $8,550, respectively

 

 

4,233

 

 

2,725

 

Goodwill

 

 

71,976

 

 

72,463

 

Deferred tax assets, net

 

 

64,729

 

 

66,903

 

Investments in equity method investees

 

 

3,852

 

 

3,693

 

Debt issuance costs, net

 

 

1,604

 

 

1,896

 

Other assets

 

 

1,932

 

 

1,715

 

Total assets

 

$

334,385

 

$

358,327

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

421

 

$

561

 

Accounts payable to affiliates

 

 

1,172

 

 

1,114

 

Escrow liabilities

 

 

78

 

 

693

 

Accrued liabilities

 

 

10,765

 

 

9,380

 

Income taxes payable

 

 

150

 

 

189

 

Deferred revenue and deposits

 

 

18,294

 

 

17,142

 

Current portion of debt

 

 

13,362

 

 

9,460

 

Current portion of payable pursuant to tax receivable agreements

 

 

3,914

 

 

3,914

 

Other current liabilities

 

 

338

 

 

211

 

Total current liabilities

 

 

48,494

 

 

42,664

 

Debt, net of current portion

 

 

189,003

 

 

202,213

 

Payable pursuant to tax receivable agreements, net of current portion

 

 

63,504

 

 

63,504

 

Deferred tax liabilities, net

 

 

173

 

 

190

 

Other liabilities, net of current portion

 

 

10,431

 

 

10,473

 

Total liabilities

 

 

311,605

 

 

319,044

 

Commitments and contingencies (note 12)

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Class A common stock, par value $0.0001 per share, 180,000,000 shares authorized; 12,339,639 shares issued and outstanding as of September 30, 2015; 11,768,041 shares issued and outstanding as of December 31, 2014

 

 

1

 

 

1

 

Class B common stock, par value $0.0001 per share, 1,000 shares authorized; 1 share issued and outstanding as of September 30, 2015 and December 31, 2014

 

 

 —

 

 

 —

 

Additional paid-in capital

 

 

247,303

 

 

241,882

 

Retained earnings

 

 

2,061

 

 

12,041

 

Accumulated other comprehensive (loss) income

 

 

(45)

 

 

886

 

Total stockholders' equity attributable to RE/MAX Holdings, Inc.

 

 

249,320

 

 

254,810

 

Non-controlling interest

 

 

(226,540)

 

 

(215,527)

 

Total stockholders' equity

 

 

22,780

 

 

39,283

 

Total liabilities and stockholders' equity

 

$

334,385

 

$

358,327

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

Table of Contents

RE/MAX HOLDINGS, INC.

Condensed Consolidated Statements of Income

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

    

2015

    

2014

    

2015

    

2014

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing franchise fees

 

$

18,905

 

$

18,523

 

$

54,833

 

$

54,251

 

Annual dues

 

 

8,010

 

 

7,697

 

 

23,687

 

 

22,846

 

Broker fees

 

 

9,321

 

 

8,279

 

 

24,988

 

 

21,853

 

Franchise sales and other franchise revenue

 

 

5,624

 

 

5,472

 

 

19,535

 

 

17,935

 

Brokerage revenue

 

 

3,250

 

 

4,269

 

 

10,551

 

 

11,534

 

Total revenue

 

 

45,110

 

 

44,240

 

 

133,594

 

 

128,419

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, operating and administrative expenses

 

 

20,724

 

 

20,559

 

 

65,525

 

 

65,321

 

Depreciation and amortization

 

 

3,765

 

 

3,767

 

 

11,384

 

 

11,517

 

Loss (gain) on sale or disposition of assets, net

 

 

9

 

 

 —

 

 

(606)

 

 

(1)

 

Total operating expenses

 

 

24,498

 

 

24,326

 

 

76,303

 

 

76,837

 

Operating income

 

 

20,612

 

 

19,914

 

 

57,291

 

 

51,582

 

Other expenses, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,338)

 

 

(2,255)

 

 

(7,448)

 

 

(7,007)

 

Interest income

 

 

36

 

 

58

 

 

136

 

 

205

 

Foreign currency transaction losses

 

 

(201)

 

 

(811)

 

 

(1,585)

 

 

(504)

 

Loss on early extinguishment of debt

 

 

 —

 

 

 —

 

 

(94)

 

 

(178)

 

Equity in earnings of investees

 

 

361

 

 

265

 

 

963

 

 

394

 

Total other expenses, net

 

 

(2,142)

 

 

(2,743)

 

 

(8,028)

 

 

(7,090)

 

Income before provision for income taxes

 

 

18,470

 

 

17,171

 

 

49,263

 

 

44,492

 

Provision for income taxes

 

 

(3,277)

 

 

(3,116)

 

 

(8,882)

 

 

(8,130)

 

Net income

 

$

15,193

 

$

14,055

 

$

40,381

 

$

36,362

 

Less: net income attributable to non-controlling interest

 

 

10,396

 

 

9,780

 

 

27,907

 

 

25,299

 

Net income attributable to RE/MAX Holdings, Inc.

 

$

4,797

 

$

4,275

 

$

12,474

 

$

11,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.39

 

$

0.37

 

$

1.03

 

$

0.95

 

Diluted

 

$

0.39

 

$

0.35

 

$

1.01

 

$

0.90

 

Weighted average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

12,333,690

 

 

11,579,669

 

 

12,127,548

 

 

11,593,738

 

Diluted

 

 

12,420,748

 

 

12,229,010

 

 

12,315,663

 

 

12,235,160

 

Cash dividends declared per share of Class A common stock

 

$

0.1250

 

$

0.0625

 

$

1.8750

 

$

0.1875

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

Table of Contents

RE/MAX HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

    

2015

    

2014

    

2015

    

2014

 

Net income

 

$

15,193

 

$

14,055

 

$

40,381

 

$

36,362

 

Change in cumulative translation adjustment

 

 

(580)

 

 

(245)

 

 

(1,038)

 

 

(236)

 

Other comprehensive loss, net of tax

 

 

(580)

 

 

(245)

 

 

(1,038)

 

 

(236)

 

Comprehensive income

 

 

14,613

 

 

13,810

 

 

39,343

 

 

36,126

 

Less: comprehensive income attributable to non-controlling interest

 

 

9,988

 

 

9,632

 

 

27,800

 

 

25,156

 

Comprehensive income attributable to RE/MAX Holdings, Inc., net of tax

 

$

4,625

 

$

4,178

 

$

11,543

 

$

10,970

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

5


 

Table of Contents

RE/MAX HOLDINGS, INC.

Condensed Consolidated Statement of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

 

    

 

    

Accumulated

    

 

    

 

 

 

 

Class A

 

Class B

 

Additional

 

 

 

other

 

Non-

 

Total

 

 

 

common stock

 

common stock

 

paid-in

 

Retained

 

comprehensive

 

controlling

 

stockholders'

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

capital

 

earnings

 

(loss) income

 

interest

 

equity

 

Balances, January 1, 2015

 

11,768,041

 

$

1

 

1

 

$

 —

 

$

241,882

 

$

12,041

 

$

886

 

$

(215,527)

 

$

39,283

 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

12,474

 

 

 —

 

 

27,907

 

 

40,381

 

Distributions paid to non-controlling unitholders

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(38,813)

 

 

(38,813)

 

Equity-based compensation expense

 

 —

 

 

 —

 

 —

 

 

 —

 

 

1,098

 

 

 —

 

 

 —

 

 

 —

 

 

1,098

 

Dividends paid to Class A common stockholders

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(22,454)

 

 

 —

 

 

 —

 

 

(22,454)

 

Change in accumulated other comprehensive (loss) income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(931)

 

 

(107)

 

 

(1,038)

 

Issuance of Class A common stock, equity-based compensation plans

 

571,598

 

 

 —

 

 —

 

 

 —

 

 

1,912

 

 

 —

 

 

 —

 

 

 —

 

 

1,912

 

Excess tax benefit realized on exercise of stock options and delivery of vested restricted stock units

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,411

 

 

 —

 

 

 —

 

 

 —

 

 

2,411

 

Balances, September 30, 2015

 

12,339,639

 

$

1

 

1

 

$

 —

 

$

247,303

 

$

2,061

 

$

(45)

 

$

(226,540)

 

$

22,780

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

6


 

Table of Contents

RE/MAX HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 

 

 

    

2015

    

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

40,381

 

$

36,362

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

11,384

 

 

11,517

 

Bad debt expense

 

 

555

 

 

289

 

Gain on sale or disposition of assets, net

 

 

(606)

 

 

(1)

 

Loss on early extinguishment of debt

 

 

94

 

 

178

 

Equity-based compensation expense

 

 

1,098

 

 

532

 

Non-cash interest expense

 

 

324

 

 

273

 

Deferred income tax expense and other

 

 

1,831

 

 

1,322

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts and notes receivable, current portion

 

 

(2,113)

 

 

(1,991)

 

Advances from/to affiliates

 

 

302

 

 

34

 

Other current and noncurrent assets

 

 

1,565

 

 

1,394

 

Other current and noncurrent liabilities

 

 

1,411

 

 

(2,136)

 

Deferred revenue and deposits, current portion

 

 

1,315

 

 

1,225

 

Net cash provided by operating activities

 

 

57,541

 

 

48,998

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, equipment and software

 

 

(2,066)

 

 

(1,017)

 

Proceeds from sale of property and equipment

 

 

17

 

 

2

 

Capitalization of trademark costs

 

 

(61)

 

 

(91)

 

Disposition

 

 

20

 

 

 —

 

Cost to sell assets

 

 

(71)

 

 

 —

 

Net cash used in investing activities

 

 

(2,161)

 

 

(1,106)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Payments on debt

 

 

(8,880)

 

 

(16,278)

 

Capitalized debt amendment costs

 

 

(555)

 

 

 —

 

Distributions paid to non-controlling unitholders

 

 

(38,813)

 

 

(18,881)

 

Dividends paid to Class A common stockholders

 

 

(22,454)

 

 

(2,173)

 

Payments on capital lease obligations

 

 

(237)

 

 

(156)

 

Proceeds from exercise of stock options

 

 

2,032

 

 

54

 

Excess tax benefit realized on exercise of stock options and delivery of vested restricted stock units

 

 

2,411

 

 

179

 

Cancellation of vested restricted stock units for required tax withholding

 

 

(120)

 

 

(818)

 

Net cash used in financing activities

 

 

(66,616)

 

 

(38,073)

 

Effect of exchange rate changes on cash

 

 

(593)

 

 

(66)

 

Net (decrease) increase in cash and cash equivalents

 

 

(11,829)

 

 

9,753

 

Cash and cash equivalents, beginning of year

 

 

107,199

 

 

88,375

 

Cash and cash equivalents, end of period

 

$

95,370

 

$

98,128

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest and debt amendment costs

 

$

7,126

 

$

6,692

 

Cash paid for income taxes

 

 

4,052

 

 

6,824

 

Schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

Note receivable received as consideration for sale of brokerage operations assets

 

$

430

 

$

 —

 

Capital leases for property and equipment

 

 

412

 

 

18

 

Increase in accounts payable for capitalization of trademark costs and purchases of property, equipment and software

 

 

381

 

 

155

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

7


 

Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Business and Organization

RE/MAX Holdings, Inc. (“RE/MAX Holdings”) was formed as a Delaware corporation on June 25, 2013 and was capitalized on July 8, 2013. On October 7, 2013, RE/MAX Holdings completed an initial public offering (the “IPO”) of 11,500,000 shares of Class A common stock at a public offering price of $22.00 per share. A portion of the proceeds received by RE/MAX Holdings from the IPO was used to acquire the net business assets of HBN, Inc. (“HBN”) and Tails, Inc. (“Tails”) in the Southwest and Central Atlantic regions of the United States (“U.S.”), respectively, which were subsequently contributed to RMCO, LLC and its consolidated subsidiaries (“RMCO”), and the remaining proceeds were used to purchase common membership units in RMCO. After completion of the IPO, RE/MAX Holdings owned 39.56% of the common membership units in RMCO. As of September 30, 2015, RE/MAX Holdings owns 41.03% of the common membership units in RMCO. RE/MAX Holdings’ only business is to act as the sole manager of RMCO and, in that capacity, RE/MAX Holdings operates and controls all of the business and affairs of RMCO.  As a result, RE/MAX Holdings consolidates the financial position and results of operations of RMCO. RE/MAX Holdings and its consolidated subsidiaries, including RMCO, are referred to hereinafter as the “Company.”

The Company is one of the leading franchisors of residential and commercial real estate brokerage services throughout the U.S. and globally. The Company also operates a small number of real estate brokerage offices in the U.S. The Company’s revenue is derived from continuing franchise fees (which consist of fixed contractual fees paid monthly by regional franchise owners and franchisees based on the number of agents in the respective franchise region or franchisee’s office), annual dues from agents, broker fees (which consist of fees paid by regional franchise owners and franchisees for real estate commissions paid by customers when an agent sells a home), franchise sales and other franchise revenue (which consist of fees from initial sales and renewals of franchises, regional franchise fees, preferred marketing arrangements, approved supplier programs and event-based revenue from training and other programs) and brokerage revenue (which consists of fees assessed by the Company’s owned brokerages for services provided to their affiliated real estate agents). The Company, as a franchisor, grants each broker-owner a license to use the RE/MAX brand, trademark, promotional and operating materials and concepts.

 

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and comprise the condensed consolidated financial statements of the Company and have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and with Article 10 of Regulation S-X. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements are presented on a consolidated basis and include the accounts of RE/MAX Holdings and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary to present fairly the Company’s financial position as of September 30, 2015 and December 31, 2014, the results of its operations and comprehensive income for the three and nine months ended September 30, 2015 and 2014, changes in its stockholders’ equity for the nine months ended September 30, 2015 and results of its cash flows for the nine months ended September 30, 2015 and 2014. Interim results may not be indicative of full year performance. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant areas in which management uses assumptions include, among other things, the establishment of the allowance for doubtful trade accounts and notes receivable, the determination of the estimated lives of intangible assets, the estimates for amounts accrued for litigation matters, equity-based compensation, the estimates of the fair value of reporting units used in the annual assessment of goodwill, the fair value of assets acquired and the amounts payable pursuant to the terms of the Tax Receivable Agreements (“TRAs”) discussed in more detail in Note 3, Non-controlling Interest. Actual results could differ from those estimates.

Principles of Consolidation

RE/MAX Holdings holds an approximate 40% economic interest in RMCO, but as its managing member, RE/MAX Holdings controls RMCO’s operations, management and activities. As a result, RE/MAX Holdings consolidates RMCO and records a non-controlling interest in the accompanying Condensed Consolidated Balance Sheets and records net income attributable to the non-controlling interest and comprehensive income attributable to the non-controlling interest in the accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income, respectively.  

Recent Accounting Pronouncements

Under the Jumpstart Our Business Startups Act (“JOBS Act”), the Company meets the definition of an emerging growth company. The Company has irrevocably elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-16, Business Combinations (Topic 805): Simplifying the Accounting Measurement-Period Adjustments, which eliminates the requirement for an entity to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is completed. ASU 2015-16 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2015. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements and related disclosures.

In June 2015, the FASB issued ASU 2015-10, Technical Corrections and Improvements, which both clarifies and simplifies content in the FASB Accounting Standards Codification and corrects unintended application of U.S. GAAP. ASU 2015-10 is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2015. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements and related disclosures.  

In April 2015, the FASB issued ASU 2015-05, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance on fees paid in a cloud computing arrangement and clarifies the accounting for a software license element of a cloud computing arrangement. ASU 2015-05 is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2015. The standard permits the use of either the retrospective or prospective transition method. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures.

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Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires an entity to present debt issuance costs related to a debt liability as a direct deduction from the debt liability rather than as an asset. ASU 2015-03 is effective retrospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2015. The adoption of this standard is expected to impact the presentation of certain financial statement line items within the Company’s consolidated balance sheets and related disclosures, but will not affect the Company’s consolidated results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of the guidance in ASU 2014-09 by one year. ASU 2014-09 is now effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2017. Early application is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements and related disclosures.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. ASU 2014-08 also provides guidance on the financial statement presentation and disclosures of discontinued operations. ASU 2014-08 became effective prospectively for the Company on January 1, 2015 and a sale that occurred during the second quarter of 2015 did not qualify as a discontinued operation.  See Note 5, Dispositions, for additional information.

Critical Accounting Judgments and Estimates

There have been no changes in the Company’s critical accounting judgments and estimates from those that were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The Company believes that the disclosures herein are adequate so that the information presented is not misleading. 

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Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

3. Non-controlling Interest

RE/MAX Holdings is the sole managing member of RMCO and subsequent to the IPO, began to operate and control all of the business affairs of RMCO. As a result, RE/MAX Holdings began to consolidate RMCO on October 7, 2013. RE/MAX Holdings owns a 41.03% and 39.89% minority economic interest in RMCO as of September 30, 2015 and December 31, 2014, respectively, and records a non-controlling interest for the remaining 58.97% and 60.11% economic interest in RMCO held by RIHI, Inc. (“RIHI”) as of September 30, 2015 and December 31, 2014, respectively. RE/MAX Holdings’ minority economic interest in RMCO increased due to the increase in common units which were issued concurrently with the issuance of shares of Class A common stock during the nine months ended September 30, 2015 upon the exercise of 564,443 stock options, the vesting of 5,154 restricted stock units and the grant of 2,001 shares, net of shares withheld and cancelled to cover the Company’s minimum statutory tax withholding obligation. See Note 10, Equity-Based Compensation, for further details. RE/MAX Holdings’ only sources of cash flow from operations are distributions from RMCO and management fees received pursuant to the management services agreement between RE/MAX Holdings and RMCO. “Net income attributable to non-controlling interest” in the accompanying Condensed Consolidated Statements of Income represents the portion of earnings attributable to the economic interest in RMCO held by the non-controlling unitholders. As of October 7, 2013, “Non-controlling interest” in the accompanying Condensed Consolidated Balance Sheets represented the carryover basis of RIHI’s capital account in RMCO. Prospectively, the non-controlling interest has been adjusted to reflect tax and other cash distributions made to, and the income allocated to, the non-controlling unitholders. The ownership of the common units in RMCO is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

 

2015

 

2014

 

 

    

Shares

    

Ownership %

    

Shares

    

Ownership %

 

Non-controlling unitholders ownership of common units in RMCO

 

17,734,600

 

58.97

%

17,734,600

 

60.11

%

RE/MAX Holdings, Inc. outstanding Class A common stock (equal to RE/MAX Holdings, Inc. common units in RMCO)

 

12,339,639

 

41.03

%

11,768,041

 

39.89

%

Total common units in RMCO

 

30,074,239

 

100.00

%

29,502,641

 

100.00

%

 

The aforementioned ownership percentages are used to calculate the net income attributable to RE/MAX Holdings. A reconciliation from “Income before provision for income taxes” to “Net income attributable to RE/MAX Holdings, Inc.” in the accompanying Condensed Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands, except percentages):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

 

2015

    

2014

 

2015

 

2014

 

Income before provision for income taxes

 

$

18,470

 

$

17,171

 

$

49,263

 

$

44,492

 

Weighted average ownership percentage of controlling interest

 

 

41.02

%

 

39.50

%

 

40.61

%

 

39.53

%

Income before provision for income taxes attributable to RE/MAX Holdings, Inc.

 

 

7,576

 

 

6,783

 

 

20,006

 

 

17,588

 

Provision for income taxes attributable to RE/MAX Holdings, Inc.

 

 

(2,779)

 

 

(2,508)

 

 

(7,532)

 

 

(6,525)

 

Net income attributable to RE/MAX Holdings, Inc.

 

$

4,797

 

$

4,275

 

$

12,474

 

$

11,063

 

 

 

11


 

Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

A reconciliation of the “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income for the periods indicated is detailed as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

    

2015

    

2014

    

2015

 

2014

Provision for income taxes attributable to RE/MAX Holdings, Inc. (a)

 

$

(2,779)

 

$

(2,508)

 

$

(7,532)

 

$

(6,525)

Provision for income taxes attributable to entities other than RE/MAX Holdings, Inc. (b)

 

 

(498)

 

 

(608)

 

 

(1,350)

 

 

(1,605)

Provision for income taxes

 

$

(3,277)

 

$

(3,116)

 

$

(8,882)

 

$

(8,130)

(a)

The provision for income taxes attributable to RE/MAX Holdings includes all U.S. federal and state income taxes as well as RE/MAX Holdings’ approximate 40% share of the taxes imposed directly on RE/MAX, LLC, a wholly-owned subsidiary of RMCO, related to tax liabilities in certain foreign jurisdictions of $346,000 and $395,000 for the three months ended September 30, 2015 and 2014, respectively, and $924,000 and $1,049,000 for the nine months ended September 30, 2015 and 2014, respectively.

(b)

The provision for income taxes attributable to entities other than RE/MAX Holdings represents taxes imposed directly on RE/MAX, LLC related to tax liabilities in certain foreign jurisdictions that are allocated to the non-controlling interest.

12


 

Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

Distributions and Other Payments to Non-controlling Unitholders

Distributions for Taxes

As a limited liability company (treated as a partnership for income tax purposes), RMCO does not incur significant federal, state or local income taxes, as these taxes are primarily the obligations of its members. As authorized by the Fourth Amended and Restated RMCO Limited Liability Company Agreement (the “RMCO, LLC Agreement”), RMCO is generally required to distribute cash on a pro rata basis to its members to the extent necessary to cover each member’s estimated tax liabilities, if any, with respect to their allocable share of RMCO earnings, but only to the extent that any other discretionary distributions from RMCO for the relevant period were otherwise insufficient to enable each member to cover its estimated tax liabilities. RMCO makes such tax distributions to its members based on an estimated tax rate stipulated in the RMCO, LLC Agreement. During the nine months ended September 30, 2015, the amount of other discretionary distributions RMCO made to non-controlling unitholders was sufficient to cover such member’s estimated tax liabilities. Distributions for taxes paid to or on behalf of non-controlling unitholders under the RMCO, LLC Agreement were $15,557,000 during the nine months ended September 30, 2014, and are recorded in “Non-controlling interest” in the accompanying Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Stockholders’ Equity and reported in “Distributions paid to non-controlling unitholders” in the accompanying Condensed Consolidated Statements of Cash Flows. Upon completion of its tax returns with respect to the prior year, RMCO may make other discretionary true-up distributions to its members, if cash is available for such purposes, with respect to actual taxable income for the prior year.

Other Discretionary Distributions 

Discretionary cash distributions may also be made to non-controlling unitholders based on their ownership percentage in RMCO as determined in accordance with the RMCO, LLC Agreement.  The Company expects that future cash distributions will be made to non-controlling unitholders pro rata on a quarterly basis equal to the anticipated dividend payments to the stockholders of the Company’s Class A common stock, or otherwise on a discretionary basis as determined to be necessary or appropriate by the Company. The Company made other distributions to non-controlling unitholders of $38,813,000 during the nine months ended September 30, 2015, which is recorded in “Non-controlling interest” in the accompanying Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Stockholders’ Equity and reported in “Distributions paid to non-controlling unitholders” in the accompanying Condensed Consolidated Statements of Cash Flows. Of this amount, $33,253,000 related to dividend distributions as discussed in Note 4, Earnings Per Share and Dividends, and $5,560,000 was a discretionary distribution paid in connection with the terms of the RMCO, LLC Agreement. During the nine months ended September 30, 2014, the Company made other distributions to non-controlling unitholders of $3,325,000.

On November 4, 2015, the Company declared a distribution to non-controlling unitholders of $2,217,000, which is payable on November 27, 2015. No other distributions were paid to non-controlling unitholders during the nine months ended September 30, 2015 and 2014.   

Payments Pursuant to the Tax Receivable Agreements

At the time of the IPO, RE/MAX Holdings entered into separate TRAs with RMCO’s historical owners, RIHI and Weston Presidio V., L.P. (“Weston Presidio”). During the second quarter of 2015, Weston Presidio assigned, transferred and conveyed to Oberndorf Investments LLC (“Oberndorf”) all of its rights, title and interest in and to, and all of its liabilities and obligations under, the TRA dated as of October 7, 2013 by and between RE/MAX Holdings and Weston Presidio. In connection therewith, the Company entered into a joinder to the TRA on May 29, 2015 with Western Presidio and Oberndorf (the “Joinder Agreement”). Neither the assignment and transfer nor the Joinder Agreement impacted the financial position, results of operations or cash flows of the Company. 

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Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

As of September 30, 2015, the Company reflected a liability of $67,418,000, representing the payments due to RIHI and Oberndorf, under the terms of the TRAs (see current and non-current portion of “Payable pursuant to tax receivable agreements” in the accompanying Condensed Consolidated Balance Sheets). 

As of September 30, 2015, the Company estimates that amounts payable pursuant to the TRAs within the next 12 month period will be approximately $3,914,000. To determine the current amount of the payments due to RIHI and Oberndorf, the Company estimated the amount of taxable income that RE/MAX Holdings generated during 2014 and the amount of the specified deductions subject to the TRAs which were realized by RE/MAX Holdings in its 2014 federal and state tax returns. This amount was then used as a basis for determining the Company’s increase in estimated tax cash savings as a result of such deductions on which a current TRA obligation became due (i.e. payable within 12 months of the Company’s year-end). These calculations are performed pursuant to the terms of the TRAs. No amounts were paid pursuant to the terms of the TRAs during the nine months ended September 30, 2015 or 2014.

The timing and amount of the payments to be made under the TRAs are subject to certain contingencies, including RE/MAX Holdings having sufficient taxable income to utilize all of the tax benefits defined in the TRAs. If the Company elects to terminate the TRAs early, the Company would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the TRAs, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits.

Obligations pursuant to the TRAs are obligations of RE/MAX Holdings. They do not impact the non-controlling interest. These obligations are not income tax obligations and have no impact on the “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income. In general, items of income, gain, loss and deduction are allocated on the basis of the members’ ownership interests pursuant to the RMCO, LLC Agreement after taking into consideration all relevant sections of the Internal Revenue Code.

 

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Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

4. Earnings Per Share and Dividends

Earnings Per Share

Basic earnings per share (“EPS”) measures the performance of an entity over the reporting period. Diluted EPS measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The treasury stock method is used to determine the dilutive potential of stock options and restricted stock units.

The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except share and per share information):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

    

2015

    

2014

    

2015

    

2014

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to RE/MAX Holdings, Inc.

 

$

4,797

 

$

4,275

 

$

12,474

 

$

11,063

 

Denominator for basic net income per share of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

12,333,690

 

 

11,579,669

 

 

12,127,548

 

 

11,593,738

 

Denominator for diluted net income per share of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding

 

 

12,333,690

 

 

11,579,669

 

 

12,127,548

 

 

11,593,738

 

Add dilutive effect of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

51,171

 

 

590,285

 

 

163,777

 

 

590,736

 

Restricted stock units

 

 

35,887

 

 

59,056

 

 

24,338

 

 

50,686

 

Weighted average shares of Class A common stock outstanding, diluted

 

 

12,420,748

 

 

12,229,010

 

 

12,315,663

 

 

12,235,160

 

Earnings per share of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, basic

 

$

0.39

 

$

0.37

 

$

1.03

 

$

0.95

 

Net income attributable to RE/MAX Holdings, Inc. per share of Class A common stock, diluted

 

$

0.39

 

$

0.35

 

$

1.01

 

$

0.90

 

 

The one share of Class B common stock outstanding does not share in the earnings of RE/MAX Holdings and is therefore not a participating security. Accordingly, basic and diluted net income per share of Class B common stock has not been presented.

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Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

Dividends

The Company’s Board of Directors declared quarterly dividends of $0.125 per share on all outstanding shares of Class A common stock in the first, second and third quarters of 2015, or $4,571,000 in total dividends. Of this amount, $1,500,000 was paid on April 8, 2015, $1,529,000 was paid on June 4, 2015 and $1,542,000 was paid on September 3, 2015. The Company made corresponding distributions to non-controlling unitholders of $2,217,000 on each of April 8, 2015, June 4, 2015 and September 3, 2015. Additionally, during the nine months ended September 30, 2015, the Company’s Board of Directors declared a special dividend of $1.50 per share on all outstanding shares of Class A common stock, or $17,883,000 in total dividends, which along with a corresponding distribution to non-controlling unitholders of $26,602,000, was paid on April 8, 2015. The Company’s Board of Directors declared quarterly dividends of $0.0625 per share on all outstanding shares of Class A common stock in the first, second and third quarters of 2014, or $2,173,000 in total dividends. Of this amount, $725,000 was paid on April 18, 2014 and $724,000 was paid on each of June 5, 2014 and September 3, 2014. The Company made corresponding distributions to non-controlling unitholders of $1,108,000 on each of April 18, 2014, June 5, 2014 and September 3, 2014.

On November 4, 2015, the Company’s Board of Directors declared a quarterly dividend of $0.125 per share on all outstanding shares of Class A common stock, which is payable on November 27, 2015 to shareholders of record at the close of business on November 13, 2015.

 

5. Dispositions

Disposition of RE/MAX Caribbean Islands, Inc.

On December 31, 2014, the Company sold substantially all of the assets of its owned and operated regional franchising operations located in the Caribbean and Central America for a net sales price of approximately $100,000. In connection with the sale of the assets, the Company entered into separate regional franchise agreements effective January 1, 2015 with a term of 20 years with the purchasers, under which the Company will receive ongoing monthly continuing franchise fees, broker fees and franchise sales revenue. 

Disposition of RB2B, LLC d/b/a RE/MAX 100

On April 10, 2015, the Company sold certain operating assets and liabilities related to six owned brokerage offices located in the U.S., of RB2B, LLC d/b/a RE/MAX 100 (“RE/MAX 100”), a wholly owned subsidiary of the Company, for a sales price of $450,000. The Company recognized a gain on the sale of the assets and the liabilities transferred of $615,000 during the second quarter of 2015, which is reflected in “Gain on sale or disposition of assets, net” in the accompanying Condensed Consolidated Statements of Income. In connection with this sale, the Company transferred separate office franchise agreements to the purchaser, under which the Company will receive ongoing monthly continuing franchise fees, broker fees and franchise sales revenue. The financial position and results of operations of RE/MAX 100 were entirely attributable to the Company’s Brokerages reportable segment. 

 

 

 

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Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

6. Intangible Assets and Goodwill

The following table provides the components of the Company’s intangible assets, other than goodwill (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Initial

    

 

    

 

    

 

    

 

    

 

    

 

 

 

 

Weighted

 

September 30, 2015

 

December 31, 2014

 

 

 

Average

 

Initial

 

Accumulated

 

Net

 

Initial

 

Accumulated

 

Net

 

 

 

Amortization

 

Cost

 

Amortization

 

Balance

 

Cost

 

Amortization

 

Balance

 

Franchise agreements

 

12.0

 

$

162,761

 

$

(97,430)

 

$

65,331

 

$

162,835

 

$

(87,330)

 

$

75,505

 

Other intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software (a)

 

4.5

 

$

10,125

 

$

(7,309)

 

$

2,816

 

$

8,356

 

$

(7,126)

 

$

1,230

 

Trademarks

 

14.6

 

 

2,975

 

 

(1,558)

 

 

1,417

 

 

2,919

 

 

(1,424)

 

 

1,495

 

Total other intangible assets

 

6.7

 

$

13,100

 

$

(8,867)

 

$

4,233

 

$

11,275

 

$

(8,550)

 

$

2,725

 


(a)

As of September 30, 2015 and December 31, 2014, capitalized software development costs of $2,392,000 and $857,000, respectively, were recorded in “Other intangible assets” in the accompanying Condensed Consolidated Balance Sheets. As of these dates, the associated information technology infrastructure projects were not complete and ready for their intended use and thus were not subject to amortization.

 

Amortization expense for the three months ended September 30, 2015 and 2014 was $3,510,000 and $3,518,000, respectively. Amortization expense for the nine months ended September 30, 2015 and 2014 was $10,608,000 and $10,656,000, respectively.

The estimated future amortization of intangible assets, other than goodwill, is as follows (in thousands):

 

 

 

 

 

 

 

Year ending December 31:

    

 

 

 

Remainder of 2015

 

$

3,473

 

2016

    

 

14,276

 

2017

 

 

10,438

 

2018

 

 

6,821

 

2019

 

 

6,811

 

Thereafter

 

 

27,745

 

 

 

$

69,564

 

 

The Company performs its annual impairment analysis of goodwill as of August 31 each year or more often if there are indicators of impairment present. The Company tests each reporting unit for goodwill impairment. Reporting units are driven by the level at which management reviews operating results and are one level below the operating segment.  The Company’s impairment assessment begins with a qualitative assessment to determine if it is more likely than not that a reporting unit’s fair value is less than the carrying amount.  The initial qualitative assessment includes comparing the overall financial performance of the reporting units against the planned results as well as other factors which might indicate that the reporting unit’s value has declined since the last assessment date.  If it is determined in the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the standard two-step quantitative impairment test is performed.  The first step of the quantitative impairment test consists of comparing the estimated fair value of each reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, then it is not considered impaired and no further analysis is required. If the first step of the quantitative impairment test indicates that the estimated fair value of a reporting unit is less than its carrying value, then impairment potentially exists and the second step of the quantitative impairment test is performed to measure the amount of goodwill impairment. Goodwill impairment exists when the estimated implied fair value of a reporting unit’s goodwill is less than its carrying value.

17


 

Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

The Company performed the qualitative impairment assessment for all of its reporting units by evaluating, among other things, market and general economic conditions, entity-specific events, events affecting a reporting unit and the Company’s results of operations and key performance measures. The Company concluded subsequent to the completion of the qualitative impairment assessment that the fair value of each of the Company’s reporting units significantly exceed their respective carrying values. As a result, the Company did not perform the quantitative test, and no indicators of impairment existed.

Amounts recorded as goodwill in the accompanying Condensed Consolidated Balance Sheets are attributable to the Company’s Real Estate Franchise Services reportable segment. The following table presents changes to goodwill for the nine months ended September 30, 2015 (in thousands):

 

 

 

 

 

 

 

Balance, January 1, 2015

    

$

72,463

 

Effect of changes in foreign currency exchange rates

 

 

(487)

 

Balance, September 30, 2015

 

$

71,976

 

 

 

 

7. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

    

September 30, 

 

December 31, 

 

 

 

2015

 

2014

 

Accrued payroll and related employee costs

 

$

7,018

 

$

4,519

 

Accrued property taxes

 

 

1,205

 

 

1,622

 

Accrued professional fees

 

 

654

 

 

947

 

Lease-related accruals

 

 

493

 

 

773

 

Other

 

 

1,395

 

 

1,519

 

 

 

$

10,765

 

$

9,380

 

 

 

8. Debt

Debt consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

    

September 30, 

 

December 31, 

 

 

 

2015

 

2014

 

2013 Senior Secured Credit Facility, principal of $520 payable quarterly, matures in July 2020, net of unamortized discount of $789 and $360 as of September 30, 2015 and December 31, 2014, respectively

    

$

202,365

 

$

211,673

 

Less current portion

 

 

(13,362)

 

 

(9,460)

 

 

 

$

189,003

 

$

202,213

 

 

18


 

Table of Contents

RE/MAX HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

Maturities of debt are as follows (in thousands):

 

 

 

 

 

 

 

Year ending December 31:

    

 

 

 

Remainder of 2015

 

$

520

 

2016