GOODWILL AND INTANGIBLE ASSETS

We account for acquired businesses using the purchase method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the acquisition date at their respective estimated fair values. Goodwill represents the excess acquisition cost over the fair value of net assets acquired in a business combination. Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination that generated the goodwill. The Company has seven goodwill reporting units, three of which represent separate operating segments and are aggregated within the Wholesale reportable segment, three of which are separate operating segments that do not qualify as separate reportable segments, and a single retail reporting unit, which is included within discontinued operations. Goodwill reporting units are evaluated for events or changes in circumstances indicating a goodwill reporting unit has changed. Relative fair value allocations are performed when components of an aggregated goodwill reporting unit become separate reporting units.

During fiscal 2019, a relative fair value allocation was performed when the Canada Wholesale reporting unit became a separate operating segment and reporting unit.

In conjunction with the acquisition of Supervalu, goodwill resulting from the acquisition was assigned to the Supervalu Wholesale reporting unit and the legacy Company Wholesale reporting unit, as both of these reporting units are expected to benefit from the synergies of the business combination. The assignment was based on the relative synergistic value estimated as of the acquisition date. This systematic approach utilized the relative cash flow contributions and value created from the acquisition to each reporting unit on a stand-alone basis. As of the acquisition date, approximately $112 million was attributed to the legacy Company Wholesale reporting unit, which is preliminary and subject to the final determinations of the fair value of net assets acquired and a proportionate assignment adjustment between the Supervalu Wholesale reporting unit and the legacy Company reporting unit.

The Company reviews goodwill for impairment at least annually and more frequently if events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is below its carrying amount. The annual review for goodwill impairment is performed as of the first day of the fourth quarter of each fiscal year. The Company tests for goodwill impairment at the reporting unit level, which is at or one level below the operating segment level.

Goodwill Impairment Review

During the first quarter of fiscal 2019, the Company experienced a decline in its stock price and market capitalization. During the second quarter of fiscal 2019, the stock price continued to decline, and the decline in the stock price and market capitalization became significant and sustained. Due to this sustained decline in stock price, the Company determined that it was more likely than not that the carrying value of the Supervalu Wholesale reporting unit exceeded its fair value and performed an interim quantitative impairment test of goodwill.

The Company estimated the fair values of all reporting units using both the market approach, applying a multiple of earnings based on guidelines for publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit. The calculation of the impairment charge includes substantial fact-based determinations and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities. The rates used to discount projected future cash flows under the income approach reflect a weighted average cost of capital of 10%, which considered guidelines for publicly traded companies, capital structure and risk premiums, including those reflected in the current market capitalization. The Company corroborated the reasonableness of the estimated reporting unit fair values by reconciling to its enterprise value and market capitalization. Based on this analysis, the Company determined that the carrying value of its Supervalu Wholesale reporting unit exceeded its fair value by an amount that exceeded the assigned goodwill as of the acquisition date. As a result, the Company recorded a goodwill impairment charge of $332.6 million for fiscal 2019 year-to-date, which reflects the preliminary goodwill impairment charge of $370.9 million and an adjustment to the charge of $38.3 million recorded in the second and third quarters of fiscal 2019, respectively. The goodwill impairment charge adjustment recorded in the third quarter of fiscal 2019 was attributable to changes in the preliminary fair value of net assets, which affected the initial goodwill resulting from the Supervalu acquisition. The goodwill impairment charge is reflected in Goodwill and asset impairment charges in the Condensed Consolidated Statements of Income. The goodwill impairment charge reflects all of Supervalu Wholesale’s reporting unit goodwill, based on the preliminary acquisition date assigned fair values.

The goodwill impairment charge recorded in fiscal 2019 year-to-date is subject to change based upon the final purchase price allocation during the measurement period for estimated fair values of assets acquired and liabilities assumed from the Supervalu acquisition. There can be no assurance that such final assessments will not result in material increases or decreases to the recorded goodwill impairment charge based upon the preliminary purchase price allocations, due to changes in the provisional opening balance sheet estimates of goodwill. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date). Refer to Note 4. “Acquisitions” for further information about the preliminary purchase price allocation and provisional goodwill estimated as of the acquisition date.

2018 Earth Origins Market Impairment

During the second quarter of fiscal 2018, the Company made the decision to close three non-core, under-performing stores of its total twelve stores. Based on this decision, coupled with the decline in results in the first half of fiscal 2018 and the future outlook as a result of competitive pressure, the Company determined that both a test for recoverability of long-lived assets and a goodwill impairment analysis should be performed. The determination of the need for a goodwill analysis was based on the assertion that it was more likely than not that the fair value of the reporting unit was below its carrying amount. As a result of both these analyses, the Company recorded a total impairment charge of $3.4 million on long-lived assets and $7.9 million to goodwill, respectively, during the second quarter of fiscal 2018. During the fourth quarter of fiscal 2018 the Company disposed of its Earth Origins retail business.

Goodwill and Intangible Assets Changes

Changes in the carrying value of Goodwill by reportable segment that have goodwill consisted of the following:



(in thousands)	Wholesale				Other			Total
Goodwill as of July 28, 2018	$	352,342		⁽¹⁾	$	10,153	⁽²⁾	$	362,495
Preliminary goodwill from current fiscal year business combinations	444,572				—			444,572
Impairment charge	(332,602		)		—			(332,602		)
Other adjustments	(1,952		)		—			(1,952		)
Change in foreign exchange rates	(670		)		—			(670		)
Goodwill as of April 27, 2019	$	461,690		⁽¹⁾	$	10,153	⁽²⁾	$	471,843


(1)	Amounts are net of accumulated goodwill impairment charges of $0.0 million and $332.6 million as of July 28, 2018 and April 27, 2019, respectively.


(2)	Amounts are net of accumulated goodwill impairment charges of $9.3 million as of both July 28, 2018 and April 27, 2019.

Identifiable intangible assets consisted of the following:



	April 27, 2019						July 28, 2018
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortizing intangible assets:
Customer relationships	$	1,011,880	$	93,104	$	918,776	$	197,246	$	61,543	$	135,703
Non-compete agreements	11,900		3,229		8,671		2,900		1,914		986
Operating lease intangibles	33,099		905		32,194		—		—		—
Trademarks and tradenames	67,700		11,255		56,445		1,700		981		719
Total amortizing intangible assets	1,124,579		108,493		1,016,086		201,846		64,438		137,408
Indefinite lived intangible assets:
Trademarks and tradenames	55,812		—		55,812		55,801		—		55,801
Intangible assets, net	$	1,180,391	$	108,493	$	1,071,898	$	257,647	$	64,438	$	193,209

Amortization expense was $19.5 million and $3.7 million for the 13-week periods ended April 27, 2019 and April 28, 2018, respectively, and $44.1 million and $11.2 million for the 39-week periods ended April 27, 2019 and April 28, 2018, respectively. The estimated future amortization expense for each of the next five fiscal years and thereafter on definite lived intangible assets existing as of April 27, 2019 is shown below:



Fiscal Year:	(In thousands)
Remaining fiscal 2019	$	24,170
2020	84,313
2021	70,739
2022	66,880
2023	67,092
2024 and thereafter	702,892
	$	1,016,086