Albertsons 2016 Annual Report Download - page 77

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NOTE 3—GOODWILL AND INTANGIBLE ASSETS
Changes in the Company’s Goodwill and Intangible assets, net consisted of the following:
February 22,
2014 Additions Impairments Other net adjustments February 28, 2015 Additions Impairments Other net adjustments February 27, 2016
Goodwill:
Wholesale $ 710 $ — $ — $ — $ 710 $ — $ — $ — $ 710
Save-A-Lot 137 4 — — 141 1 — — 142
Retail — 14 — — 14 1 — — 15
Total goodwill $ 847 $ 18 $ — $ — $ 865 $ 2 $ — $ — $ 867
Intangible assets:
Favorable operating
leases, prescription
files, customer lists
and other
(accumulated
amortization of $97
and $86 as of
February 27, 2016
and February 28,
2015, respectively) $ 111 $ 13 $ — $ — $ 124 $ 25 $ (6) $ (1) $ 142
Tradenames and
trademarks—
indefinite useful
lives 9 — — — 9 — — — 9
Non-compete
agreements
(accumulated
amortization of $2
and $2 as of
February 27, 2016
and February 28,
2015, respectively) 3 — — — 3 — — — 3
Total intangible assets 123 13 — — 136 25 (6) (1) 154
Accumulated
amortization (80) (8) — — (88) (11) — — (99)
Total intangible assets,
net $ 43 $ 48 $ 55
The Company applies a fair value based impairment test to the net book value of goodwill and intangible assets with indefinite
useful lives on an annual basis and on an interim basis if events or circumstances indicate that an impairment loss may have
occurred.
The Company conducted an annual impairment test of the net book value of goodwill and intangible assets with indefinite
useful lives during the fourth quarter of fiscal 2016, which indicated the fair value of the Retail, Wholesale and the Save-A-Lot
Corporate Stores reporting units exceeded their carrying values by approximately 100 percent, 95 percent and 35 percent,
respectively. The fair value of the Save-A-Lot Licensee Distribution reporting unit was in excess of 100 percent of its carrying
value and the fair values of intangible assets with indefinite useful lives was in excess of their carrying values.
In the first quarter ended June 20, 2015, the Company recorded intangible assets using valuations based on Level 3 inputs
consisting primarily of certain distribution center operation rights, purchase options and other intangibles received by the
Company under the letter agreement the Company entered into with Albertson's dated May 28, 2015, as described in Note 14—
Commitments, Contingencies and Off-Balance Sheet Arrangements.
In the third quarter ended December 5, 2015, the Company received a notice pursuant to which the Company could exercise
certain purchase options. As a result, the Company performed a review of the associated intangible assets for impairment,
which indicated the carrying value of the intangible exceeded its estimated value. The Company recorded a non-cash intangible
impairment charge of $6 within its Wholesale segment.
Annual impairment testing and the related calculation of the impairment charges contains significant judgments and estimates
including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.
Amortization expense of intangible assets with definite useful lives of $11, $8 and $8 was recorded in fiscal 2016, 2015 and
2014, respectively. Future amortization expense is expected to average approximately $7 per year for the next five years.