Note 6 - Goodwill and Intangible Assets
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Goodwill and Intangible Assets Disclosure [Text Block] |
NOTE
F – GOODWILL AND INTANGIBLE ASSETS
Our
three reporting units, which are also reportable segments,
are Food Service, Retail Supermarket and Frozen
Beverages.
The
carrying amount of acquired intangible assets for the
reportable segments are as follows:
The
gross carrying amount of intangible assets is determined by
applying a discounted cash flow model to the future sales
and earnings associated with each intangible asset or is
set by contract cost. The amortization period
used for definite lived intangible assets is set by
contract period or by the period over which the bulk of the
discounted cash flow is expected to be
generated. We currently believe that we will
receive the benefit from the use of the trade names
classified as indefinite lived intangible assets
indefinitely and they are therefore not amortized.
Licenses
and rights, customer relationships and non compete
agreements are being amortized by the straight-line method
over periods ranging from 3 to 20 years and amortization
expense is reflected throughout operating expenses.
Amortizing
intangibles are reviewed for impairment as events or
changes in circumstances occur indicating that the carrying
amount of the
asset may not be recoverable. Indefinite lived
intangibles are reviewed annually for impairment. Cash flow
and sales analyses are used to assess impairment. The
estimates of future cash flows and sales involve
considerable management judgment and are based upon
assumptions about expected future operating
performance. Assumptions used in these forecasts are
consistent with internal planning. The actual cash flows
and sales could differ from management’s estimates
due to changes in business conditions, operating
performance, economic conditions, competition and consumer
preferences.
Intangible
assets of $10,796,000 were acquired in the food service
segment in the California Churros acquisition in fiscal
year 2010.
Intangible
assets of $676,000 and $856,000 were acquired in the food
service and retail supermarket segments, respectively, in
the handhelds acquisition in fiscal year 2011.
Aggregate
amortization expense of intangible assets for the fiscal
years 2011, 2010 and 2009 was $4,811,000, $4,687,000 and
$4,508,000, respectively.
Estimated
amortization expense for the next five fiscal years is
approximately $4,500,000 in 2012, $4,400,000 in 2013 and
2014, $4,300,000 in 2015 and $4,100,000 in
2016. The weighted average amortization period
of the intangible assets is 10.1 years.
Goodwill
The
carrying amounts of goodwill for the reportable segments
are as follows:
The carrying
value of goodwill is determined based on the excess of the
purchase price of acquisitions over the estimated fair
value of tangible and intangible net assets. Goodwill
is not amortized but is evaluated annually by management
for impairment. Our impairment analysis for 2011 is a
qualitative assessment in which we have considered
historical net cash provided by operating activities and
purchases of property , plant and equipment, their
relationship to the carrying value of goodwill, recent fair
value calculations of our reporting units and our
assessment of the likelihood, based on an assessment of
what we know about our Company’s products and
markets, costs and general economic conditions, that the
relationship of cash flow to the carrying value of goodwill
will change significantly in the foreseeable future. Our
impairment analysis for 2010 and 2009 was based on a
combination of the income approach, which estimates the
fair value discounted cash flows, and the market approach,
which estimates the fair value based on comparable market
prices. Under the income approach the Company used a
discounted cash flow which requires Level 3 inputs such
as: annual growth rates, discount rates based upon
the weighted average cost of capital and terminal values
based upon our stock market multiples. There were no
impairment charges in 2011, 2010 or 2009.
Goodwill
of $9,756,000 was acquired in the food service segment in
the California Churros acquisition in fiscal year
2010.
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