GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Dec. 01, 2012

NOTE 2 — GOODWILL AND INTANGIBLE ASSETS

Changes in the Company’s Goodwill and Intangible assets consisted of the following:


	February 25, 2012		Additions		Impairments		Other net adjustments		December 1, 2012
Goodwill:
Independent Business goodwill	$	710	$	—	$	—	$	—	$	710
Save-A-Lot goodwill		137		—		—		—		137

Total goodwill	$	847	$	—	$	—	$	—	$	847


	February 25, 2012			Additions/ Amortization			Impairments			Other net adjustments			December 1, 2012
Intangible assets:
Trademarks and tradenames – indefinite useful lives	$	469		$	—		$	(74	)	$	—		$	395
Favorable operating leases, customer lists, customer relationships and other (accumulated amortization of $361 and $331 as of December 1, 2012 and February 25, 2012, respectively)		664			3			(14	)		11			664
Non-compete agreements (accumulated amortization of $4 and $4 as of December 1, 2012 and February 25, 2012, respectively)		11			—			—			(1	)		10

Total intangible assets		1,144			3			(88	)		10			1,069
Accumulated amortization		(335	)		(37	)					6			(366	)

Total intangible assets, net	$	809											$	703

The Company applies a fair value based impairment test to the net book value of goodwill and intangible assets with indefinite useful lives on an annual basis and on an interim basis if events or circumstances indicate that an impairment loss may have occurred.

During the second quarter of fiscal 2013 the Company experienced declines in revenues and announced the closure of certain stores that are operated under tradenames with assigned carrying values. As a result, the Company performed an interim impairment test of certain intangible assets with indefinite useful lives, which indicated the carrying values of certain intangible assets with indefinite useful lives exceeded their estimated fair values. The Company recorded a pre-tax non-cash impairment charge of $74 in the Retail Food segment for Trademarks and tradenames with indefinite useful lives during the second quarter of fiscal 2013. There were no impairment charges recorded in the third quarter of fiscal 2013 with respect to Trademarks and tradenames.

Fair values of the Company’s tradenames were determined primarily by discounting an assumed royalty value applied to projected future revenues associated with the tradename based on management’s expectations of the current and future operating environment. The royalty cash flows are discounted using rates based on the weighted average cost of capital and the specific risk profile of the tradenames relative to the Company’s other assets. These estimates are impacted by variable factors including inflation, the general health of the economy and market competition. The calculation of the impairment charge contains significant judgments and estimates including weighted average cost of capital and the specified risk profile of the tradename and future revenue and profitability.

During the second quarter of fiscal 2013, the Company recorded a $14 impairment charge for favorable operating lease intangible assets in the Retail Food segment, of which $12 related to the announced closure of approximately 60 non-strategic stores and $2 related to underperforming stores. The impairment charges were measured using Level 3 fair value inputs and are a component of Selling and administrative expenses in the Condensed Consolidated Statements of Earnings.

During the third quarter of fiscal 2012, the Company recorded preliminary non-cash impairment charges of $907, comprised of $661 of goodwill and $246 of intangible assets with indefinite useful lives. The impairment was due to the significant and sustained decline in the Company’s market capitalization and updated discounted future cash flows. The calculation of the preliminary impairment charges contain significant judgments and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.

Amortization expense of intangible assets with definite useful lives was $37 and $43 for the year-to-date ended December 1, 2012 and December 3, 2011, respectively. Future amortization expense will average approximately $28 per fiscal year for each of the next five fiscal years.

- 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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