3. GOODWILL AND INTANGIBLE ASSETS
The following table summarizes the changes in the Company’s net goodwill balance through February 1, 2014.
|
|
|
2013 |
|
2012 |
| ||
|
Balance beginning of year |
|
|
|
|
| ||
|
Goodwill |
|
$ |
3,766 |
|
$ |
3,670 |
|
|
Accumulated impairment losses |
|
(2,532 |
) |
(2,532 |
) | ||
|
|
|
1,234 |
|
1,138 |
| ||
|
|
|
|
|
|
| ||
|
Activity during the year |
|
|
|
|
| ||
|
Acquisitions |
|
901 |
|
96 |
| ||
|
|
|
|
|
|
| ||
|
Balance end of year |
|
|
|
|
| ||
|
Goodwill |
|
4,667 |
|
3,766 |
| ||
|
Accumulated impairment losses |
|
(2,532 |
) |
(2,532 |
) | ||
|
|
|
$ |
2,135 |
|
$ |
1,234 |
|
In 2013, the Company acquired all the outstanding shares of Harris Teeter, a supermarket retailer in southeastern and mid-Atlantic markets and Washington, D.C., resulting in additional goodwill of $901. See Note 2 for additional information regarding the merger.
In 2012, the Company acquired an interest in one of its suppliers and all the outstanding shares of Axium Pharmacy, a leading specialty pharmacy that provides specialized drug therapies and support services for patients with complex medical conditions, resulting in combined additional goodwill of $96.
Testing for impairment must be performed annually, or on an interim basis upon the occurrence of a triggering event or a change in circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The annual evaluation of goodwill performed during the fourth quarter of 2013, 2012 and 2011 did not result in impairment.
Based on current and future expected cash flows, the Company believes goodwill impairments are not reasonably likely. A 10% reduction in fair value of the Company’s reporting units would not indicate a potential for impairment of the Company’s remaining goodwill balance.
The Company acquired definite and indefinite lived intangible assets totaling approximately $558 as a result of the merger with Harris Teeter. See Note 2 for additional information regarding the merger.
The following table summarizes the Company’s intangible assets balance through February 1, 2014.
|
|
|
2013 |
|
2012 |
| ||||||||
|
|
|
Gross carrying |
|
Accumulated |
|
Gross carrying |
|
Accumulated |
| ||||
|
Definite-lived favorable leasehold interests |
|
$ |
144 |
|
$ |
(61 |
) |
$ |
69 |
|
$ |
(58 |
) |
|
Definite-lived pharmacy prescription files |
|
95 |
|
(28 |
) |
45 |
|
(26 |
) | ||||
|
Definite-lived other |
|
78 |
|
(10 |
) |
54 |
|
(2 |
) | ||||
|
Indefinite-lived trade name |
|
430 |
|
— |
|
— |
|
— |
| ||||
|
Indefinite-lived liquor licenses |
|
54 |
|
— |
|
48 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total |
|
$ |
801 |
|
$ |
(99 |
) |
$ |
216 |
|
$ |
(86 |
) |
(1) Favorable leasehold interests are amortized to rent expense, pharmacy prescription files are amortized to merchandise costs and other intangibles are amortized to operating, general and administrative expense.
Amortization expense associated with intangible assets totaled approximately $18, $13 and $12, during fiscal years 2013, 2012 and 2011, respectively. Future amortization expense associated with the net carrying amount of definite-lived intangible assets for the years subsequent to 2013 is estimated to be approximately:
|
2014 |
|
$ |
28 |
|
|
2015 |
|
25 |
| |
|
2016 |
|
22 |
| |
|
2017 |
|
21 |
| |
|
2018 |
|
20 |
| |
|
Thereafter |
|
102 |
| |
|
|
|
|
| |
|
Total future estimated amortization associated with definite-lived intangible assets |
|
$ |
218 |
|