Intersections Inc. (INTX, Financial) filed Quarterly Report for the period ended 2009-09-30.
INTERSECTIONS INC. is a leading global provider of consumer and corporate identity risk management services. Its premier identity theft, privacy, and consumer solutions are designed to provide high value, revenue generating opportunities to its marketing partners, including leading financial institutions, Fortune 100 corporations and other businesses. Intersections also markets full identity theft protection solutions under its brand, Identity Guard. Intersections' consumer identity theft protection services actively safeguard more than eight million consumers against identity theft. Intersections Inc. has a market cap of $87.74 million; its shares were traded at around $5.02 with a P/E ratio of 5.91 and P/S ratio of 0.24.
However, the comparison of the values calculated using an equally weighted average between the income and market based approach to our market capitalization resulted in a value significantly in excess of our market capitalization. We therefore proportionally allocated the market capitalization, including a reasonable control premium, to the reporting units to determine the implied fair value of the reporting units. Based on the analysis as of June 30, 2009, the implied fair value of the Consumer Products and Services reporting unit exceeded the carrying value by approximately 67.6%. The carrying value of our Other reporting unit exceeded its implied fair value by 44.3%, however, there is no remaining goodwill allocated to this reporting unit as of June 30, 2009. The carrying value of our Background Screening reporting unit exceeded its implied fair value by approximately 21.7% based on this analysis as of at June 30, 2009, which resulted in an impairment of goodwill in our Background Screening reporting unit.
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INTERSECTIONS INC. is a leading global provider of consumer and corporate identity risk management services. Its premier identity theft, privacy, and consumer solutions are designed to provide high value, revenue generating opportunities to its marketing partners, including leading financial institutions, Fortune 100 corporations and other businesses. Intersections also markets full identity theft protection solutions under its brand, Identity Guard. Intersections' consumer identity theft protection services actively safeguard more than eight million consumers against identity theft. Intersections Inc. has a market cap of $87.74 million; its shares were traded at around $5.02 with a P/E ratio of 5.91 and P/S ratio of 0.24.
Highlight of Business Operations:
Discount rates reflect market-based estimates of the risks associated with the projected cash flows directly resulting from the use of those assets in operations. For the step one impairment test as of June 30, 2009, the discount rates used to develop the estimated fair value of the reporting units ranged from 15.0% to 30.0%. The discount rate for our Consumer Products and Services reporting unit increased to 15.0% from 12.0% for the three months ended June 30, 2009 compared to our annual goodwill impairment evaluation at October 31, 2008. This slight increase represents some anticipated degradation in the core business due to the challenging economic environment and its impact on our financial institution clients. The discount rate for our Background Screening and Other reporting units were 17.0% and 30.0%, respectively. The discount rates for these reporting units are higher because there is inherent risk or volatility in the expected cash flows of these reporting units. This volatility is due to the reduced rate of growth in a less stable start-up market and the reduced rate of growth in a weakened economic environment, coupled with the historical net losses within each reporting unit. The long-term growth rate we used to determine the terminal value of each reporting unit for the year ended December 31, 2008 and for the six months ended June 30, 2009 was 3.0%. This was based on managements assessment of the minimum expected terminal growth rate of each reporting unit, as well as broader economic considerations such as GDP, inflation and the maturity of the markets we serve.However, the comparison of the values calculated using an equally weighted average between the income and market based approach to our market capitalization resulted in a value significantly in excess of our market capitalization. We therefore proportionally allocated the market capitalization, including a reasonable control premium, to the reporting units to determine the implied fair value of the reporting units. Based on the analysis as of June 30, 2009, the implied fair value of the Consumer Products and Services reporting unit exceeded the carrying value by approximately 67.6%. The carrying value of our Other reporting unit exceeded its implied fair value by 44.3%, however, there is no remaining goodwill allocated to this reporting unit as of June 30, 2009. The carrying value of our Background Screening reporting unit exceeded its implied fair value by approximately 21.7% based on this analysis as of at June 30, 2009, which resulted in an impairment of goodwill in our Background Screening reporting unit.
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