GOODWILL AND INTANGIBLE ASSETS, NET

12 Months Ended

Jul. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 6—GOODWILL AND INTANGIBLE ASSETS, NET

The Company has five goodwill reporting units: two of which represent separate operating segments and are aggregated within the Wholesale reportable segment (U.S. Wholesale and Canada Wholesale); one separate Retail operating and reportable segment and two of which are separate operating segments (Woodstock Farms and Blue Marble Brands) that do not meet the criteria for being disclosed as separate reportable segments and are included in the Other segment. The Canada Wholesale operating segment, which is aggregated with U.S. Wholesale, would not meet the quantitative thresholds for separate reporting if it did not meet the aggregation criteria.

In the fourth quarter of fiscal 2021, the Company performed its annual goodwill qualitative impairment review and determined that a quantitative impairment test was not required for any of its reporting units.

Fiscal 2020 Goodwill Impairment Reviews

During the first quarter of fiscal 2020, the Company changed its management structure and internal financial reporting, which resulted in the requirement to combine the Supervalu Wholesale reporting unit and the legacy Company Wholesale reporting unit into one U.S. Wholesale reporting unit, and experienced a further sustained decline in market capitalization and enterprise value. As a result of the change in reporting units and the sustained decline in market capitalization and enterprise value, the Company performed an interim quantitative impairment review of goodwill for the Wholesale reporting units, which included a determination of the fair value of all reporting units.

The Company estimated the fair values of all reporting units using both the market approach, applying a multiple of earnings based on observable multiples for guideline publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit. The calculation of the impairment charge included substantial fact-based determinations and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities. The rates used to discount projected future cash flows under the income approach reflect a weighted average cost of capital of 8.5%, which considered observable data about guideline publicly traded companies, an estimated market participant’s expectations about capital structure and risk premiums, including those reflected in the Company’s market capitalization. The Company confirmed the reasonableness of the estimated reporting unit fair values by reconciling to its enterprise value and market capitalization. Based on this analysis, the Company determined that the carrying value of its U.S. Wholesale reporting unit exceeded its fair value by an amount that exceeded its assigned goodwill. As a result, the Company recorded a goodwill impairment charge of $422 million in the first quarter of fiscal 2020. The goodwill impairment charge is reflected in Goodwill impairment charges in the Consolidated Statements of Operations. The goodwill impairment charge reflected the impairment of all of the U.S. Wholesale reporting unit’s goodwill.

In the fourth quarter of fiscal 2020, the Company performed its annual goodwill qualitative impairment review and determined that a quantitative impairment test was not required for any of its reporting units.

Fiscal 2019 Goodwill Impairment Reviews

During the first quarter of fiscal 2019, the Company experienced a decline in its stock price and market capitalization. During the second quarter of fiscal 2019, the stock price continued to decline, and the decline in the stock price and market capitalization became significant and sustained. Due to this sustained decline in stock price, the Company determined that it was more likely than not that the carrying value of the Supervalu Wholesale reporting unit exceeded its fair value and performed an interim quantitative impairment test of goodwill.

The Company estimated the fair values of all reporting units using both the market approach, applying a multiple of earnings based on guidelines for publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit. The calculation of the impairment charge includes substantial fact-based determinations and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities. The rates used to discount projected future cash flows under the income approach reflect a weighted average cost of capital of 10%, which considered guidelines for publicly traded companies, capital structure and risk premiums, including those reflected in the Company’s then-current market capitalization. The Company confirmed the reasonableness of the estimated reporting unit fair values by reconciling those fair values to its enterprise value and market capitalization. Based on this analysis, the Company determined that the carrying value

of its Supervalu Wholesale reporting unit exceeded its fair value by an amount that exceeded the assigned goodwill as of the acquisition date. As a result, the Company recorded a goodwill impairment charge of $293 million in fiscal 2019, which reflects the preliminary goodwill impairment charge recorded in the second quarter of fiscal 2019 and adjustments to the charge recorded in the third and fourth quarters of fiscal 2019. The goodwill impairment charge adjustments recorded in the third and fourth quarters of fiscal 2019 were attributable to changes in the preliminary fair value of net assets, most notably changes in tax assets and liabilities, intangible assets and property and equipment, which affected the initial goodwill resulting from the Supervalu acquisition. The goodwill impairment charge is reflected in Goodwill impairment charges in the Consolidated Statements of Operations. The goodwill impairment charge reflects all of Supervalu Wholesale’s reporting unit goodwill, based on preliminary acquisition date assigned fair values. The quantitative goodwill impairment review indicated that the estimated fair value of the legacy Company Wholesale and Canada Wholesale reporting units were in excess of their carrying values by over 20%. Other continuing operations reporting units were substantially in excess of their carrying value.

The goodwill impairment charge recorded in fiscal 2019 was subject to change based upon the final purchase price allocation during the measurement period for estimated fair values of assets acquired and liabilities assumed from the Supervalu acquisition. There were no material increases or decreases to the recorded goodwill impairment charge based upon the final purchase price allocations.

In fiscal 2019, the Company performed quarterly reviews of the composition of its reporting units.

In the fourth quarter of fiscal 2019, the Company performed its annual goodwill qualitative impairment test and determined that a quantitative impairment test was not required for any of its reporting units.

Goodwill and Intangible Assets Changes

Changes in the carrying value of Goodwill by reportable segment that have goodwill consisted of the following:


(in millions)	Wholesale		Other		Total
Goodwill as of August 3, 2019(1)(2)	$	432	$	10	$	442
Goodwill from current fiscal year business combinations	1		—		1
Impairment charge	(424)		—		(424)
Change in foreign exchange rates	1		—		1
Goodwill as of August 1, 2020(1)(2)	10		10		20
Change in foreign exchange rates	—		—		—
Goodwill as of July 31, 2021(1)(2)	$	10	$	10	$	20

(1) Wholesale amounts are net of accumulated goodwill impairment charges of $293 million, $717 million and $717 million for fiscal 2019, 2020 and 2021, respectively.

(2) Other amounts are net of accumulated goodwill impairment charges of $9 million, $10 million and $10 million for fiscal 2019, 2020 and 2021, respectively.

Identifiable intangible assets, net consisted of the following:


	2021						2020
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortizing intangible assets:
Customer relationships	$	1,007	$	234	$	773	$	1,007	$	173	$	834
Pharmacy prescription files	33		13		20		33		8		25
Non-compete agreements	—		—		—		13		12		1
Operating lease intangibles	7		4		3		8		4		4
Trademarks and tradenames	84		45		39		84		34		50
Total amortizing intangible assets	1,131		296		835		1,145		231		914
Indefinite lived intangible assets:
Trademarks and tradenames	56		—		56		56		—		56
Intangibles assets, net	$	1,187	$	296	$	891	$	1,201	$	231	$	970

Amortization expense was $78 million, $91 million and $70 million for fiscal 2021, 2020 and 2019, respectively. The estimated future amortization expense for each of the next five fiscal years and thereafter on definite lived intangible assets existing as of July 31, 2021 is shown below:


Fiscal Year:	(In millions)
2022	$	72
2023	72
2024	72
2025	70
2026	66
Thereafter	483
	$	835