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GOODWILL AND INTANGIBLE ASSETS
 12 Months Ended
May 28, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS
7. GOODWILL AND INTANGIBLE ASSETS

 

Goodwill 

Changes in the carrying value of goodwill are as follows (in thousands): 

 

   Goodwill
Balance at May 30, 2015  $— 
Premium paid for IMES acquisition   6,332 
Balance at May 28, 2016  $6,332 

 

Goodwill is initially recorded based on the premium paid for acquisitions and is subsequently tested for impairment, using the first day of our fourth quarter as the measurement date. We test goodwill for impairment annually and whenever events or circumstances indicates an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit. The goodwill balance in its entirety relates to our IMES reporting unit which is included in the Healthcare segment.

 

In accordance with ASC 350 “Intangibles - Goodwill and Other”, if indicators of impairment are deemed to be present, we would perform an interim impairment test and any resulting impairment loss would be charged to expense in the period identified.

 

For annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, Accounting Standards Update (ASU) 2011-08, Testing for Goodwill for Impairment (“ASU 2011-08”) permits an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not likely that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.

 

We had $6.3 million of goodwill on our balance sheet as of May 28, 2016. In accordance with ASU 2011-08, the results of our goodwill impairment test as of February 28, 2016, indicated that the value of goodwill attributed to our IMES reporting unit, which is included in the Healthcare segment, was not impaired.

 

Projected future operating results and cash flows used for valuation purposes may, in testing for impairment, reflect considerable improvements relative to historical periods with respect to, among other things, revenue growth and operating margins. Although we believe our projected future operating results and cash flows and related estimates regarding fair values are based on reasonable assumptions, historically, projected operating results and cash flows have not always been achieved.

 

Intangible Assets

 

Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized over their useful lives and are tested for impairment when events or changes in circumstances occur that indicate possible impairment.

 

Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements, and technology acquired in connection with our acquisitions. Intangible assets subject to amortization as well as amortization expense are as follows (in thousands):

 

   Intangible Assets Subject to
Amortization as of
   May 28,
2016		  May 30,
2015
Gross Amounts:      
Trade Name  $659   $29 
Customer Relationships   3,434    948 
Non-compete Agreements   177    47 
Technology   230    — 
Total Gross Amounts  $4,500   $1,024 
Accumulated Amortization:          
Trade Name  $231   $29 
Customer Relationships   374    221 
Non-compete Agreements   55    31 
Technology   22    — 
Total Accumulated Amortization  $682   $281 
           
Net Intangibles  $3,818   $743 

 

We determined that intangible assets were not impaired as of May 28, 2016 on the basis that no adverse events or changes in circumstances were identified that could indicate that the carrying amounts of such assets may not be recoverable.

 

The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):

 

  Amortization
Expense
Fiscal Year  
2017 $        362  
2018    434
2019    246
2020    258
2021    246
Thereafter    2,272  
Total amortization expense $ 3,818  

 

The amortization expense associated with the intangible assets totaled approximately $0.4 million during fiscal 2016 and $0.1 million during both fiscal 2015 and fiscal 2014. The weighted average number of years of amortization expense remaining is 15.8 years.