Note F - Goodwill and Intangible Assets

12 Months Ended

Sep. 29, 2018

Notes to Financial Statements

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:

	September 29, 2018				September 30, 2017
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
	(in thousands)
FOOD SERVICE
Indefinite lived intangible assets
Trade Names	$	16,628	$	-	$	16,628	$	-
Amortized intangible assets
Non compete agreements		980		538		980		263
Customer relationships		20,510		8,600		20,510		6,476
License and rights		1,690		1,143		1,690		1,058
TOTAL FOOD SERVICE	$	39,808	$	10,281	$	39,808	$	7,797
RETAIL SUPERMARKETS
Indefinite lived intangible assets
Trade Names	$	6,557	$	-	$	6,557	$	-
Amortized Intangible Assets
Trade names		649		260		649		130
Customer relationships		7,979		3,623		7,979		2,822
TOTAL RETAIL SUPERMARKETS	$	15,185	$	3,883	$	15,185	$	2,952
FROZEN BEVERAGES
Indefinite lived intangible assets
Trade Names	$	9,315	$	-	$	9,315	$	-
Distribution rights		6,900		-		6,900		-
Amortized intangible assets
Customer relationships		257		76		257		50
Licenses and rights		1,400		863		1,400		794
TOTAL FROZEN BEVERAGES	$	17,872	$	939	$	17,872	$	844
CONSOLIDATED	$	72,865	$	15,103	$	72,865	$	11,593

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 and distribution rights 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

2

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 ofthe asset

may

not

be recoverable.  Indefinite lived intangibles are reviewed annually at year end 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 which include Level

3

inputs such as annual growth rates and discount rates.  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. There were

no

impairments of intangible assets in

2018,

2017

or

2016.

Intangible assets of

$1,078,000

were acquired in fiscal year

2016

in the food service segment due to the purchase of the HEARTBAR brand. In fiscal year

2017,

intangible assets of

$6,957,000

were acquired in our ICEE distributor acquisition in our frozen beverage segment and intangible assets of

$15,760,000

were acquired in the Hill & Valley acquisition in our food service segment and intangible assets of

$576,000

were acquired in the Labriola Baking acquisition, also in our food service segment. There were

no

intangible assets acquired in fiscal year

2018.

Aggregate amortization expense of intangible assets for the fiscal years

2018,

2017

and

2016

was

$3,510,000,

$3,840,000

and

$5,078,000,

respectively.

Estimated amortization expense for the next

five

fiscal years is approximately

$3,300,000

in

2019,

$3,000,000

in

2020,

$2,400,000

in

2021

and

$2,300,000

in

2022

and

2023.

The weighted average amortization period of the intangible assets is

10.8

years.

Goodwill

The carrying amounts of goodwill for the reportable segments are as follows:

	Food		Retail		Frozen
	Service		Supermarkets		Beverages		Total
	(in thousands)
Balance at
September 29, 2018	$	61,665	$	3,670	$	37,176	$	102,511
September 30, 2017	$	61,665	$	3,670	$	37,176	$	102,511

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 at year end by management for impairment.  Our impairment analysis for

2018,

2017

and

2016

was based on a combination of the income approach, which estimates the fair value of reporting units based on discounted cash flows, and the market approach, which estimates the fair value of reporting units based on comparable market prices and multiples.  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 current stock market multiples.  There were

no

impairment charges in

2018,

2017

and

2016.

In

2017,

goodwill of

$1,236,000

was acquired in the ICEE distributor acquisition in our frozen beverage segment, goodwill of

$14,175,000

was acquired in the Hill & Valley acquisition in our food service segment and goodwill of

$658,000

was acquired in the Labriola Baking acquisition, also in our food service segment.          

No

goodwill was acquired in fiscal years

2016

and

2018.