Harris Teeter 2010 Annual Report Download - page 19

purchase an additional 14% ownership interest in Vardhman under the terms of the original joint venture agreement,
which increased A&E’s total ownership interest in Vardhman to 49%. A&E continues to transform its business to
be more Asian centric, which is in line with the global shifting of A&E’s customer base.
A&E also expanded its global presence through new joint venture agreements and increased ownership of
existing joint venture arrangements. During fiscal 2005, A&E entered into a joint venture in Brazil resulting in a
30% ownership interest in Linhas Bonfio S.A (“Linhas”). During fiscal 2009, A&E acquired an additional 13%
ownership interest in Linhas, which increased A&E’s total ownership interest in Linhas to 43%. During fiscal 2010,
A&E increased its ownership interest in Hilos A&E Dominicana, Ltd. from 51% to 63% and obtained the remaining
20% ownership interest in its two joint ventures in South Africa.
A&E’s fiscal 2004 acquisition of certain assets and the U.S. business of Synthetic Thread Company, Inc.
provided A&E with an entry into the technical textiles market. A&E expanded its customer base and product line
offerings in the technical textiles arena by acquiring certain assets and the U.S. business of Ludlow Textiles
Company, Inc. in fiscal 2005. Further diversification was achieved in fiscal 2005 by A&E’s acquisition of certain
assets and the business of Robison-Anton Textile Co., a U.S. producer of high-quality embroidery threads. The sale
of non-apparel threads and yarns resulting from these acquisitions has partially offset sales declines in the U.S.
resulting from the shifting of apparel manufacturing. In fiscal 2006, A&E expanded its production and distribution
of non-apparel products through the acquisition of TSP Tovarna Sukancev in Trakov d.d. (“TSP”) located in
Maribor, Slovenia.A&E continues to expand the manufacturing and distribution of non-apparel products throughout
its global operations.
A&E continues to face increased operating costs and highly competitive pricing in its markets. Management
at A&E intends to continue to reduce expenses at its U.S. operations and certain foreign operations, and focus on
its strategic plans to become more Asian centric.
Results of Operations
Goodwill and Long-Lived Asset Impairments
The deterioration of the economic environment during fiscal 2009, particularly with respect to A&E’s
customers in the retail apparel and non-apparel markets, caused management to lower the expected future cash flows
of A&E’s U.S. operating segment during the Company’s annual strategic planning process. Based on the revised
expectations, A&E was required to perform an interim test for goodwill impairment and, as a result, recorded non-
cash impairment charges related to its U.S. operating segment during the third quarter of fiscal 2009. Impairment
charges included the write-off of all of the goodwill associated with its U.S. acquisitions previously made in 1995
and 1996 and the write-down of certain long-lived assets of its U.S. operating segment. During fiscal 2009, A&E
wrote off $7,654,000 of goodwill and wrote down certain long-lived assets of its U.S. operating segment by
$2,237,000. A&E also recorded tax benefits of $3,792,000 related to the impairment charges. An annual impairment
review was conducted in the first quarter of fiscal 2010, resulting in no goodwill impairment charge being required
as the fair value exceeded the carrying value.
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