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Note F - Goodwill and Intangible Assets

12 Months Ended

Sep. 28, 2019

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE F – GOODWILL AND INTANGIBLE ASSETS

Our three reporting units, which are also reportable segments, are Food Service, Retail Supermarket and Frozen Beverages.

The carrying amount of acquired intangible assets for the reportable segments are as follows:

	September 28, 2019				September 29, 2018
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
			(in thousands)

FOOD SERVICE

Indefinite lived intangible assets
Trade Names	$	16,628	$	-	$	16,628	$	-

Amortized intangible assets
Non compete agreements		858		665		980		538
Customer relationships		19,900		9,954		20,510		8,600
License and rights		1,690		1,227		1,690		1,143
TOTAL FOOD SERVICE	$	39,076	$	11,846	$	39,808	$	10,281

RETAIL SUPERMARKETS

Indefinite lived intangible assets
Trade Names	$	6,530	$	-	$	6,557	$	-

Amortized Intangible Assets
Trade names		676		389		649		260
Customer relationships		7,979		4,421		7,979		3,623
TOTAL RETAIL SUPERMARKETS	$	15,185	$	4,810	$	15,185	$	3,883


FROZEN BEVERAGES

Indefinite lived intangible assets
Trade Names	$	9,315	$	-	$	9,315	$	-
Distribution rights		6,900		-		6,900		-

Amortized intangible assets
Customer relationships		737		102		257		76
Licenses and rights		1,400		933		1,400		863
TOTAL FROZEN BEVERAGES	$	18,352	$	1,035	$	17,872	$	939

CONSOLIDATED	$	72,613	$	17,691	$	72,865	$	15,103

The gross carrying amount of intangible assets is determined by applying a discounted cash flow model to the future sales and earnings associated with each intangible asset or is set by contract cost. The amortization period used for definite lived intangible assets is set by contract period or by the period over which the bulk of the discounted cash flow is expected to be generated. We currently believe that we will receive the benefit from the use of the trade names and distribution rights classified as indefinite lived intangible assets indefinitely and they are therefore not amortized.

Licenses and rights, customer relationships and non-compete agreements are being amortized by the straight-line method over periods ranging from 2 to 20 years and amortization expense is reflected throughout operating expenses.

Amortizing intangibles are reviewed for impairment as events or changes in circumstances occur indicating that the carrying amount of the asset may not be recoverable. Indefinite lived intangibles are reviewed annually at year end for impairment. Cash flow and sales analyses are used to assess impairment. The estimates of future cash flows and sales involve considerable management judgment and are based upon assumptions about expected future operating performance which include Level 3 inputs such as annual growth rates and discount rates. Assumptions used in these forecasts are consistent with internal planning. The actual cash flows and sales could differ from management’s estimates due to changes in business conditions, operating performance, economic conditions, competition and consumer preferences. There were no impairments of intangible assets in 2019, 2018 or 2017.

In fiscal year 2017, intangible assets of $6,957,000 were acquired in our ICEE distributor acquisition in our frozen beverage segment and intangible assets of $15,760,000 were acquired in the Hill & Valley acquisition in our food service segment and intangible assets of $576,000 were acquired in the Labriola Baking acquisition, also in our food service segment. There were no intangible assets acquired in fiscal year 2018 and intangible assets of $480,000 were acquired in the Frozen Beverage segment in fiscal year 2019.

Aggregate amortization expense of intangible assets for the fiscal years 2019, 2018 and 2017 was $3,320,000, $3,510,000 and $3,840,000, respectively.

Estimated amortization expense for the next five fiscal years is approximately $3,100,000 in 2020, $2,500,000 in 2021, $2,300,000 in 2022 and 2023 and $2,000,000 in 2024. The weighted average amortization period of the intangible assets is 10.6 years.

Goodwill

The carrying amounts of goodwill for the reportable segments are as follows:

Food

Retail

Frozen

Service

Supermarkets

Beverages

Total

(in thousands)

Balance at

September 28, 2019
$ 61,665 $ 3,670 $ 37,176 $ 102,511

September 29, 2018
$ 61,665 $ 3,670 $ 37,176 $ 102,511

The carrying value of goodwill is determined based on the excess of the purchase price of acquisitions over the estimated fair value of tangible and intangible net assets. Goodwill is not amortized but is evaluated annually at year end by management for impairment. Our impairment analysis for 2018, 2017 and 2016 was based on a combination of the income approach, which estimates the fair value of reporting units based on discounted cash flows, and the market approach, which estimates the fair value of reporting units based on comparable market prices and multiples. Under the income approach the Company used a discounted cash flow which requires Level 3 inputs such as: annual growth rates, discount rates based upon the weighted average cost of capital and terminal values based upon current stock market multiples. There were no impairment charges in 2019, 2018 and 2017.

In 2017, goodwill of $1,236,000 was acquired in the ICEE distributor acquisition in our frozen beverage segment, goodwill of $14,175,000 was acquired in the Hill & Valley acquisition in our food service segment and goodwill of $658,000 was acquired in the Labriola Baking acquisition, also in our food service segment.

No goodwill was acquired in fiscal years 2018 and 2019.