Goodwill and Intangible Assets

12 Months Ended

Sep. 28, 2013

7. Goodwill and Intangible Assets

The following represented the change in the carrying amount of goodwill by segment for fiscal 2013 and 2012 (in thousands):

	Domestic			Canada			Total

Balance as of September 24, 2011	$	386,416		$	402,889		$	789,305
Reassignment of Timothy's goodwill		(17,063	)		17,063			—
Foreign currency effect		—			18,771			18,771

Balance as of September 29, 2012	$	369,353		$	438,723		$	808,076
Foreign currency effect		—			(19,892	)		(19,892	)

Balance as of September 28, 2013	$	369,353		$	418,831		$	788,184

Indefinite-lived intangible assets included in the Canada operating segment consisted of the following (in thousands) as of:

		September 28, 2013			September 29, 2012

Trade names		$	97,740		$	102,381

Effective May 8, 2013, the Company combined the results of its U.S. operations, formerly reported in the SCBU and KBU segments, into one Domestic segment.

Effective September 25, 2011, Timothy's is included in the Canada segment. Prior to September 25, 2011, Timothy's was included in the Domestic segment. This resulted in a re-assignment of goodwill of $17.1 million from the Domestic segment to the Canada segment using a relative fair value approach. The amount of goodwill reassigned was determined based on the relative fair values of Timothy's and the Domestic segment.

The Company conducted its annual impairment test of goodwill and indefinite-lived intangible assets as of September 28, 2013, and elected to bypass the optional qualitative assessment and performed a quantitative impairment test. Goodwill was evaluated for impairment at the following reporting unit levels:

•

Domestic

•

Canada—Roasting and Retail

•

Canada—Coffee Services Canada

For the goodwill impairment test, the fair value of the reporting units was estimated using the Discounted Cash Flow ("DCF") method. A number of significant assumptions and estimates are involved in the application of the DCF method including discount rate, sales volume and prices, costs to produce and working capital changes. For the indefinite-lived intangible assets impairment test, the fair value of the trade name was estimated using the Relief-from-Royalty Method. This method estimates the savings in royalties the Company would otherwise have had to pay if it did not own the trade name and had to license the trade name from a third-party with rights of use substantially equivalent to ownership. The fair value of the trade name is the present value of the future estimated after-tax royalty payments avoided by ownership, discounted at an appropriate, risk-adjusted rate of return. For goodwill and indefinite-lived intangible impairment tests, the Company used a royalty rate of 3.0%, an income tax rate of 38.0% for the United States and 27.5% for Canada, and discount rates ranging from 13% to 14%. There was no impairment of goodwill or indefinite-lived intangible assets in fiscal years 2013, 2012, or 2011.

Intangible Assets Subject to Amortization

Definite-lived intangible assets consisted of the following (in thousands) as of:

		September 28, 2013					September 29, 2012

	Useful Life in Years	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Acquired technology	4 - 10	$	21,609	$	(17,123	)	$	21,622	$	(15,433	)
Customer and roaster agreements	8 - 11		26,977		(19,750	)		27,323		(16,796	)
Customer relationships	2 - 16		414,967		(113,061	)		430,178		(79,168	)
Trade names	9 - 11		37,200		(13,353	)		38,000		(9,785	)
Non-compete agreements	2 - 5		374		(364	)		374		(344	)

Total		$	501,127	$	(163,651	)	$	517,497	$	(121,526	)

Definite-lived intangible assets are amortized on a straight-line basis over the period of expected economic benefit. Total amortization expense was $45.4 million, $46.0 million, and $41.3 million for fiscal years 2013, 2012, and 2011, respectively. The weighted average remaining life for definite-lived intangibles at September 28, 2013 is 8.3 years.

The estimated aggregate amortization expense over each of the next five years and thereafter, is as follows (in thousands):


2014	$	44,361
2015		42,807
2016		42,081
2017		40,686
2018		40,686
Thereafter		126,855

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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