Goodwill And Other Intangible Assets

6 Months Ended

Jul. 03, 2011

Goodwill And Other Intangible Assets

Goodwill And Other Intangible Assets

6. Goodwill and Other Intangible Assets

Goodwill is not being amortized, but is tested annually for impairment, or more frequently if events and circumstances indicate that the asset might be impaired. The annual impairment test is performed as of the first day of the fourth quarter of the fiscal year. At January 2, 2011 and July 3, 2011, we had $240.2 million and $244.4 million, respectively, of goodwill recorded in conjunction with past business combinations. The 2010 impairment analysis indicated no impairment in goodwill. As of July 3, 2011, we evaluated potential impairment indicators pursuant to the requirements of ASC 350-20-35-30. We believe no indicators of impairment occurred during the second quarter of 2011, and believe the assumptions used in the analysis performed in 2010 are still relevant and indicative of our current operating environment. As a result, no impairment was recorded to goodwill during the first half of 2011. During the second quarter of 2011, the Company determined there was a computational error related to deferred income tax balances established in the initial Town & Country purchase price allocation. As a result, additions of $4.2 million were made related to deferred taxes. The Company evaluated the impact of this error on the initial purchase price allocation and concluded the error was not of a magnitude to require restatement of the initial purchase price allocation. The computational error had less than 2% impact on goodwill, total assets and noncurrent liabilities as of December 30, 2007. As a result the adjustment was reflected in 2011.

In accordance with ASC 350 "Intangibles – Goodwill and Other", the Company has finite-lived intangible assets recorded that are amortized and indefinite-lived assets that are not amortized. The finite-lived assets consist of supply agreements, favorable/unfavorable leasehold arrangements, loan origination costs, trade names and certain franchise rights, all of which are amortized over the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company's future cash flows. Supply agreements are being amortized over a weighted average period of approximately nine years. Favorable/unfavorable leasehold arrangements are being amortized over a weighted average period of approximately eleven years. The Laredo Taco Company trade name is being amortized over fifteen years. The Town & Country Food Stores trade name is being amortized over fifty months. Loan origination costs are amortized over the life of the underlying debt as an increase to interest expense.

The following table presents the gross carrying amount and accumulated amortization for each major class of intangible assets, excluding goodwill, at January 2, 2011 and July 3, 2011:

	January 2, 2011						July 3, 2011
	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
	(in thousands)
Unamortized
Trade name	$	45	$	—	$	45	$	45	$	—	$	45
Franchise rights		389		—		389		489		—		489
Liquor licenses		12,038		—		12,038		12,038		—		12,038
Amortized
Supply agreements		18,534		4,305		14,229		19,501		5,132		14,369
Favorable leasehold arrangements, net		2,497		2,341		156		3,584		3,341		243
Loan origination costs		14,024		2,888		11,136		14,393		4,201		10,192
Trade names		5,756		2,384		3,372		5,756		2,774		2,982
Intangible assets, net	$	53,283	$	11,918	$	41,365	$	55,806	$	15,448	$	40,358