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Goodwill and Other Intangible Assets
12 Months Ended
Dec. 28, 2019
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

Note 5 – Goodwill and Other Intangible Assets

All goodwill relates to the Food Distribution segment.   Changes in the carrying amount of goodwill were as follows:

(In thousands)

 

 

 

 

 

 

Total

 

Balance at December 30, 2017 and December 29, 2018:

 

 

 

 

 

 

$

 

178,648

 

Acquisitions (Note 15)

 

 

 

 

 

 

 

 

2,387

 

Balance at December 28, 2019:

 

 

 

 

 

 

$

 

181,035

 

 

The Company reviews goodwill and other intangible assets for impairment annually, during the fourth quarter of each year, and more frequently if circumstances indicate the possibility of impairment. Testing goodwill and other intangible assets for impairment requires management to make significant estimates about the Company’s future performance, cash flows, and other assumptions that can be affected by potential changes in economic, industry or market conditions, business operations, competition, or the Company’s stock price and market capitalization.

During the Company’s 2019 annual impairment review, projected cash flows were discounted based on a weighted average cost of capital (“WACC”) of 9.9%. This WACC was developed from current interest rates, equity risk premiums, and other market-based expectations regarding expected investment returns. The development of the WACC requires estimates of an equity rate of return and a debt rate of return, which are specific to the industry in which the Food Distribution reporting unit operates. In 2019, the Company also performed an interim impairment review during the second quarter due to a decline in the Company’s market capitalization. The Company concluded that the fair value of the Food Distribution reporting unit was substantially in excess of its carrying value in both the second and fourth quarter reviews.

In 2017, the Company experienced significantly lower than expected Retail operating results and it was determined that the carrying value of the Retail segment exceeded its fair value. Consequently, the Company recorded a goodwill impairment charge of $189.0 million in the third quarter of 2017 to fully impair Retail segment goodwill.

The following table reflects the components of amortized intangible assets, included in “Intangible assets, net” on the consolidated balance sheets:

 

 

 

December 28, 2019

 

 

December 29, 2018

 

 

 

 

Gross

 

 

 

 

 

 

 

Gross

 

 

 

 

 

 

 

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Accumulated

 

(In thousands)

 

 

Amount

 

 

Amortization

 

 

Amount

 

 

Amortization

 

Non-compete agreements

 

 

 

$

 

4,438

 

 

$

 

1,493

 

 

$

 

3,358

 

 

$

 

886

 

Favorable leases (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

7,738

 

 

 

 

4,282

 

Pharmacy customer prescription lists

 

 

 

 

 

8,200

 

 

 

 

4,481

 

 

 

 

6,354

 

 

 

 

4,377

 

Customer relationships

 

 

 

 

 

57,937

 

 

 

 

11,497

 

 

 

 

57,937

 

 

 

 

7,835

 

Trade names

 

 

 

 

 

1,068

 

 

 

 

687

 

 

 

 

1,068

 

 

 

 

536

 

Franchise fees and other

 

 

 

 

 

1,114

 

 

 

 

422

 

 

 

 

1,064

 

 

 

 

422

 

Total

 

 

 

$

 

72,757

 

 

$

 

18,580

 

 

$

 

77,519

 

 

$

 

18,338

 

  (a) Upon the adoption of ASU 2016-02 at the beginning of 2019, favorable leases were reclassified as a component of Operating lease assets within the consolidated balance sheets.

The weighted average amortization periods for amortizable intangible assets as of December 28, 2019 are as follows:

Non-compete agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

6.1 years

Pharmacy customer prescription lists

 

 

 

 

 

 

 

 

 

 

 

 

 

7.7 years

Customer relationships

 

 

 

 

 

 

 

 

 

 

 

 

 

16.0 years

Trade names

 

 

 

 

 

 

 

 

 

 

 

 

 

7.1 years

Franchise fees and other

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1 years

Amortization expense for intangible assets was $5.8 million, $5.8 million and $5.5 million for 2019, 2018 and 2017, respectively.

Estimated amortization expense for each of the five succeeding fiscal years is as follows:

(In thousands)

2020

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

Amortization expense

$

 

5,662

 

 

$

 

5,211

 

 

$

 

4,985

 

 

$

 

4,879

 

 

$

 

4,627

 

Indefinite-lived intangible assets that are not amortized, consisting primarily of trade names and licenses for the sale of alcoholic beverages, totaled $76.3 million and $69.7 million as of December 28, 2019 and December 29, 2018, respectively.