Goodwill and Other Intangible Assets

Goodwill

Goodwill balances and activity for the years ended December 31, 2017 and 2016 consisted of the following:



	Segment
	Wholesale			Retail			Consolidated
	(in millions)
Balance at December 31, 2015	$	687		$	1,007		$	1,694
Goodwill adjustment related to Alta East acquisition	2			—			2
Goodwill related to Kolkhorst acquisition	3			—			3
Goodwill related to Emerge acquisition	78			—			78
Goodwill impairment charge	—			(227		)	(227		)
Balance at December 31, 2016	770			780			1,550
Goodwill adjustment related to Emerge acquisition	(25		)	—			(25		)
Goodwill adjustment related to Denny acquisition	7			—			7
Goodwill impairment charge	—			(102		)	(102		)
Balance at December 31, 2017	$	752		$	678		$	1,430

Goodwill represents the excess of the purchase price of an acquired entity over the amounts allocated to the assets acquired and liabilities assumed in a business combination. During the year ended December 31, 2017, we completed our evaluation of the Denny, Emerge, Kolkhorst and Valentine acquisitions' purchase accounting analysis with the assistance of a third party valuation firm.

Goodwill is recorded at the acquisition date based on a preliminary purchase price allocation and generally may be adjusted when the purchase price allocation is finalized. In accordance with ASC 350-20-35 “Goodwill - Subsequent Measurements”. During 2017, management performed goodwill impairment testing on its reporting units included in assets held for sale resulting in impairment charges of $387 million. Of this amount, $102 million was allocated to the sites reclassified to continuing operations in the fourth quarter within the retail and Stripes reporting units. Once allocated, management performed goodwill impairment tests on both reporting units to which the goodwill balances were allocated. No goodwill impairment was identified for the retail or Stripes reporting units as a result of these tests.

In connection with the reclassification of the retail assets as held-for-sale, Sunoco LP performed interim goodwill impairment testing on the remaining goodwill balance in the retail reporting unit. See Note 4 for more information on the balances reclassified as held-for-sale and the related impairment testing.

The Partnership determined the fair value of our reporting units using a weighted combination of the discounted cash flow method and the guideline company method. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating margins, weighted average costs of capital and future market conditions, among others. The Partnership believes the estimates and assumptions used in our impairment assessments are reasonable and based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Under the discounted cash flow method, the Partnership determined fair value based on estimated future cash flows of each reporting unit including estimates for capital expenditures, discounted to present value using the risk-adjusted industry rate, which reflect the overall level of inherent risk of the reporting unit. Cash flow projections are derived from one year budgeted amounts plus an estimate of later period cash flows, all of which are determined by management. Subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur. Under the guideline company method, the Partnership determined the estimated fair value of each of our reporting units by applying valuation multiples of comparable publicly-traded companies to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using a three year average. In addition, the Partnership estimated a reasonable control premium representing the incremental value that accrues to the majority owner from the opportunity to dictate the strategic and operational actions of the business.

Other Intangibles

Gross carrying amounts and accumulated amortization for each major class of intangible assets, excluding goodwill, consisted of the following:



	December 31, 2017						December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
Indefinite-lived
Tradenames	$	295	$	—	$	295	$	288	$	—	$	288
Contractual rights	30		—		30		43		—		43
Liquor licenses	12		—		12		16		—		16
Finite-lived
Customer relations including supply agreements	674		256		418		611		198		413
Favorable leasehold arrangements, net	12		5		7		10		3		7
Loan origination costs (1)	10		6		4		10		4		6
Other intangibles	5		3		2		3		1		2
Intangible assets, net	$	1,038	$	270	$	768	$	981	$	206	$	775

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(1)	Loan origination costs are associated with the 2014 Revolver, see Note 10 for further information of the debt.

We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If such a review should indicate that the carrying amount of amortizable intangible assets is not recoverable, we reduce the carrying amount of such assets to fair value. We review non-amortizable intangible assets for impairment annually, or more frequently if circumstances dictate.

During the fourth quarter of 2017, the Partnership performed the annual impairment tests on our indefinite-lived intangible assets and recognized $13 million and $4 million of impairment charge on our contractual rights and liquor licenses, respectively, primarily due to decreases in projected future revenues and cash flows from the date the intangible asset was originally recorded.

Total amortization expense on finite-lived intangibles included in depreciation, amortization and accretion was $61 million, $61 million and $37 million for the years ended December 31, 2017, December 31, 2016, and December 31, 2015, respectively.

Customer relations and supply agreements have a remaining weighted-average life of approximately 11 years. Favorable leasehold arrangements have a remaining weighted-average life of approximately 14 years. Non-competition agreements and other intangible assets have a remaining weighted-average life of approximately 13 years. Loan origination costs have a remaining weighted-average life of approximately 2 years.

As of December 31, 2017, the Partnership’s estimate of amortization includable in amortization expense and interest expense for each of the five succeeding fiscal years and thereafter for finite-lived intangibles is as follows (in millions):



	Amortization		Interest
2018	$	58	$	2
2019	57		2
2020	55		—
2021	48		—
2022	28		—
Thereafter	181		—
Total	$	427	$	4