GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Oct. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 5—GOODWILL AND INTANGIBLE ASSETS

The Company has 5 goodwill reporting units: two of which represent separate operating segments and are aggregated within the Wholesale reportable segment (U.S. Wholesale and Canada Wholesale); one separate Retail operating and reportable segment and two of which are separate operating segments (Woodstock Farms and Blue Marble Brands) that do not meet the criteria for being disclosed as separate reportable segments. The Canada Wholesale operating segment, which is aggregated with U.S. Wholesale, would not meet the quantitative thresholds for separate reporting if it did not meet the aggregation criteria.

Fiscal 2020 Goodwill Impairment Review

During the first quarter of fiscal 2020, the Company changed its management structure and internal financial reporting, which resulted in the requirement to combine the Supervalu Wholesale reporting unit and the legacy Company Wholesale reporting unit into one U.S. Wholesale reporting unit, and experienced a further sustained decline in market capitalization and enterprise value. As a result of the change in reporting units and the sustained decline in market capitalization and enterprise value, the Company performed an interim quantitative impairment review of goodwill for the Wholesale reporting unit, which included a determination of the fair value of all reporting units.

The Company estimated the fair values of all reporting units using both the market approach, applying a multiple of earnings based on observable multiples for guideline 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 8.5%, which considered observable data about guideline publicly traded companies, an estimated market participant’s expectations about capital structure and risk premiums, including those reflected in the Company’s 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 U.S. Wholesale reporting unit exceeded its fair value by an amount that exceeded its assigned goodwill. As a result, the Company recorded a goodwill impairment charge of $421.5 million in the first quarter of fiscal 2020. The goodwill impairment charge is reflected in Goodwill and asset impairment charges in the Condensed Consolidated Statements of Operations. The goodwill impairment charge reflects the impairment of all of the U.S. Wholesale reporting unit’s goodwill.

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 August 1, 2020	$	9,747	(1)	$	9,860	(2)	$	19,607



Change in foreign exchange rates	64			—			64
Goodwill as of October 31, 2020	$	9,811	(1)	$	9,860	(2)	$	19,671

(1)Amounts are net of accumulated goodwill impairment charges of $716.5 million as of August 1, 2020 and October 31, 2020.

(2)Amounts are net of accumulated goodwill impairment charges of $9.6 million as of August 1, 2020 and October 31, 2020.

Identifiable intangible assets consisted of the following:


	October 31, 2020						August 1, 2020
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortizing intangible assets:
Customer relationships	$	1,007,195	$	188,006	$	819,189	$	1,007,118	$	172,832	$	834,286
Pharmacy prescription files	32,900		9,422		23,478		32,900		7,964		24,936
Non-compete agreements	12,900		12,786		114		12,900		11,500		1,400
Operating lease intangibles	8,193		4,420		3,773		8,193		4,020		4,173
Trademarks and tradenames	83,700		39,486		44,214		83,700		34,708		48,992
Total amortizing intangible assets	1,144,888		254,120		890,768		1,144,811		231,024		913,787
Indefinite lived intangible assets:
Trademarks and tradenames	55,813		—		55,813		55,813		—		55,813
Intangible assets, net	$	1,200,701	$	254,120	$	946,581	$	1,200,624	$	231,024	$	969,600

Amortization expense was $23.0 million and $22.1 million for the first quarters of fiscal 2021 and 2020, respectively. The estimated future amortization expense for each of the next five fiscal years and thereafter on definite lived intangible assets existing as of October 31, 2020 is shown below:


Fiscal Year:	(In thousands)
Remaining fiscal 2021	$	55,173
2022	72,170
2023	71,950
2024	72,412
2025	70,305
2026 and thereafter	548,758
	$	890,768