Einstein Bros 2003 Annual Report Download - page 46

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http://www.sec.gov/Archives/edgar/data/949373/000104746904009609/a2132006z10-k.htm[9/11/2014 10:13:55 AM]
F-12
December 30, 2003 and December 31, 2002 indicated that the fair value of Manhattan reporting unit exceeded its carrying value. Thus, the
associated goodwill was not impaired, and the second step of the impairment tests was not required. Our transitional and annual impairment
analyses for our indefinite lived intangibles (trademarks) as of January 1, 2002 and December 31, 2002 indicated that such assets' fair values
exceeded their respective carrying values; however, our December 30, 2003 annual impairment analyses for our indefinite-lived intangibles
(trademarks) for Manhattan and Chesapeake indicated that, in each instance, their respective carrying values exceeded their fair values, thus we
recorded an impairment of $3,207,000 and $1,671,000, respectively. In addition to the trademark impairment, we also wrote-off the value of
previously reacquired Manhattan franchise territory rights of $414,000. The impairments for both Manhattan and Chesapeake were related to
declining cash flows for those brands and our expectation that the trend of lower sales will continue in future years. For fiscal year 2004, we are
developing new strategies with respect to both the Manhattan and Chesapeake brands. These strategies are aimed at revitalizing the brands and
growing our cash flow from these brands. We are also reviewing our long-term plans for each of these brands and their relation to our business as a
whole. Accordingly, we are continuing to classify the trademarks as indefinite-lived at this time, and will review this determination in future
periods if our intentions for these brands were to change. The fair value of Einstein Bros. and Noah's indefinite-lived intangible assets (trademarks)
exceeded their carrying value thus no impairment was present at December 30, 2003.
In 2003 and 2002, goodwill and indefinite-lived trademarks were not amortized in accordance with SFAS 142 and other intangibles were
being amortized on a straight-line basis consistent with the associated estimated future cash flows, as follows:
Trade secrets 5 years
Patents—manufacturing process 5 years
In 2001 trademarks and other intangibles were amortized on a straight-line basis as follows:
Goodwill 25 years
Trademarks 30 years
Trade secrets 5 years
Patents—manufacturing process 5 years
December 30,
2003
December 31,
2002
(amounts in thousands)
Non-amortizing intangibles:
Trademarks $ 65,868 $ 70,746
Amortizing intangibles:
Trade secrets 5,385 5,385
Patents—manufacturing process 33,741 33,741
39,126 39,126
Less accumulated amortization (19,563) (11,738)
Total amortizing intangibles 19,563 27,388
Total intangibles $ 85,431 $ 98,134
Intangible amortization expense totaled approximately $7,825,000, $7,818,000 and $5,260,000 for the years ended December 30, 2003,
December 31, 2002 and January 1, 2002 respectively. Amortization
F-13
expense for the fiscal years of 2004 and 2005 is anticipated to be $7,825,000 annually. Amortization expense for fiscal 2006 is anticipated to be
the remaining $3,913,000.