Sprouts Farmers Market 2014 Annual Report Download - page 90

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The Company’s allocation of purchase price in the Sunflower Transaction is as follows:
Net assets acquired:
Inventory ..................................... $ 33,321
Deferred tax asset ............................. 2,308
Other current assets ........................... 3,859
Property and equipment ........................ 67,347
Intangible assets .............................. 7,416
Other assets .................................. 1,246
Liabilities assumed:
Current liabilities .............................. (36,534)
Financing lease obligations ...................... (22,616)
Deferred tax liability ............................ (412)
Other long-term liabilities ....................... (6,103)
Goodwill ......................................... 169,648
Total purchase price ........................... $219,480
Goodwill was attributed to the assembled workforce of Sunflower and synergies expected to be
achieved from the combined operations of the Company and Sunflower, primarily related to buying and
distribution costs, economies of scale for certain direct store expenses and savings on marketing-related
selling costs and corporate overhead. Goodwill recorded in the Sunflower Transaction is not expected to be
deductible for tax purposes.
Identifiable intangible assets consist of the following:
Trade name (10 year useful life) ....................... $1,800
Liquor licenses (indefinite-lived) ........................ 1,070
Favorable leasehold interests (12.3 years weighted average
useful life) ........................................ 4,546
Total intangible assets ............................... $7,416
Sales and net income of Sunflower totaling $297.8 million and $8.6 million respectively are included in
the consolidated results of operations for the year ended December 30, 2012.
Valuations
The Company engaged an independent valuation firm to assist management with the valuations of
acquired inventory, personal property, real estate, favorable and unfavorable leasehold interests and
intangible assets for the Sunflower Transaction. Acquired inventory was recorded at net realizable value,
with significant estimates relating to the time expected to dispose of inventory, disposal costs and
commensurate profit. Personal property, consisting primarily of leasehold improvements and furniture,
fixtures and equipment, were valued using the cost method, which requires significant estimates related to
replacement costs of acquired personal property, as well as estimates of physical deterioration. Real estate
was valued through a combination of income and market approaches and significant estimates underlying
these valuations include market comparable pricing and capitalization rates, which the independent
valuation firm assisted management in determining.
The Sunflower trade name was accounted for as a “defensive intangible asset” with an estimated
useful life of 10 years from the date of the Sunflower Transaction. Acquired liquor licenses were valued
using a cost approach.
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