Goodwill and Intangible Assets

Goodwill

The following table shows the changes in the carrying amount of goodwill by business segment:



	Americas Simple Meals and Beverages			Global Biscuits and Snacks			Campbell Fresh⁽¹⁾			Total
Net balance at July 31, 2016	$	775		$	757		$	731		$	2,263
Impairment charges	—			—			(191		)	(191		)
Foreign currency translation adjustment	5			38			—			43
Net balance at July 30, 2017	$	780		$	795		$	540		$	2,115
Acquisitions	202			2,866			—			3,068
Impairment charges	—			—			(540		)	(540		)
Foreign currency translation adjustment	(4		)	(59		)	—			(63		)
Net balance at July 29, 2018	$	978		$	3,602		$	—		$	4,580

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⁽¹⁾	The balance of goodwill is reflected net of accumulated impairment charges of $837 as of July 29, 2018, $297 as of July 30, 2017 and $106 as of July 31, 2016, respectively, related to the Bolthouse Farms carrot and carrot ingredients reporting unit, the deli reporting unit, and the Bolthouse Farms refrigerated beverages and salad dressings reporting unit.

In March 2018, we acquired Snyder's-Lance for $6,112. Goodwill related to the acquisition was $2,866. In addition, we acquired Pacific Foods in December 2017 for $688 and goodwill related to the acquisition was $202. See Note 3 for additional information.

2016 Assessments

In the fourth quarter of 2016, as part of our annual review of intangible assets, an impairment charge of $106 was recorded on goodwill for the Bolthouse Farms carrot and carrot ingredients reporting unit within the Campbell Fresh segment. In 2016, carrot performance primarily reflected the adverse impact of weather conditions on crop yields, and execution issues in response to those conditions, which led to customer dissatisfaction, a loss of business, and higher carrot costs in the second half of the year. The impairment was attributable to a decline in profitability in the second half of 2016 and a revised outlook for the business, with reduced expectations for sales, operating margins, and discounted cash flows.

2017 Assessments

During the second quarter of 2017, sales and operating profit performance for the Bolthouse Farms carrot and carrot ingredients reporting unit were well below our expectations due to difficulty with regaining market share lost during 2016 and higher carrot costs from the adverse impact of heavy rains on crop yields. During the quarter, we also lowered our forecast for sales and earnings for the reporting unit for the second half of 2017 based on revised market share recovery expectations and the continuing effect of unusual weather conditions on carrot costs. In addition, as part of a strategic review initiated by a new leadership team of Campbell Fresh during the second quarter, we decided to reduce emphasis on growing sales of carrot ingredients, which are a by-product of the manufacturing process, and to manage carrots sold at retail for modest sales growth consistent with the category while improving profitability. Accordingly, we reduced our expectations for recovery of retail carrot market share. As a consequence of the business performance and the strategic review, we lowered our sales outlook for future fiscal years. We also lowered our average margin expectations due in part to cost volatility, which has been higher than expected. Based upon the business performance in the second quarter of 2017, our reduced near-term outlook, and reduced expectations for sales, operating margins and discounted cash flows, we performed an interim goodwill impairment assessment in the second quarter, which resulted in a $127 impairment charge to reduce the carrying amount to $75.

We acquired Garden Fresh Gourmet on June 29, 2015. During 2017, sales and operating profit performance for Garden Fresh Gourmet, a reporting unit within the Campbell Fresh segment, were well below expectations, and we lowered our outlook for the second half of 2017 due to customer losses and failure to meet product distribution goals. We expected to expand distribution of salsa beyond our concentration in the Midwest region, however this proved to be challenging as differentiated recipes are required to meet taste profiles in other parts of the country. In addition, as part of a strategic review initiated by a new leadership team of Campbell Fresh during the second quarter, we lowered our distribution and category growth expectations and, therefore, future sales outlook. Based upon the business performance in 2017, our reduced near-term outlook, and reduced expectations for sales, operating margins and discounted cash flows, we performed an interim goodwill impairment assessment on this reporting unit in the second quarter, which resulted in a $64 impairment charge to reduce the carrying amount to $52.

2018 Assessments

During the second quarter of 2018, we performed an interim impairment assessment on the intangible assets of the Bolthouse Farms carrot and carrot ingredients reporting unit as operating performance was below expectations. The business was impacted by adverse weather conditions and the implementation of enhanced quality protocols, which impacted crop yields and resulted in higher costs. This cost volatility continued to be higher than expected and caused us to reassess our short- and long-term margin expectations for this business. Based on this performance, we reduced our outlook for future operating margins and discounted cash flows, which resulted in a $75 impairment charge, representing a write-down of the remaining goodwill in the reporting unit.

During the third quarter of 2018, we performed an interim impairment assessment on the intangible assets of the deli reporting unit, which includes Garden Fresh Gourmet and the U.S. refrigerated soup business, within Campbell Fresh. During the third quarter of 2018, certain of our private label refrigerated soup customers, which represent a majority of the business, informed us of their intention to in-source production beginning in 2019, and the sales and operating profit outlook of the Garden Fresh Gourmet business was reduced. Due to the anticipated loss of refrigerated soup business with these customers, as well as the recent performance of the Garden Fresh Gourmet business, we revised the long-term outlook for future sales, operating margins and discounted cash flows for this reporting unit, which resulted in an $81 impairment charge, representing a write-down of the remaining goodwill in the reporting unit.

In addition, we performed an interim impairment assessment on the intangible assets of the Bolthouse Farms refrigerated beverages and salad dressings reporting unit within Campbell Fresh as the operating performance in the third quarter was below expectations. We assessed sales performance of refrigerated beverages and key drivers impacting gross profit for the unit. We revised our long-term outlook for future earnings and discounted cash flows to reflect reduced sales expectations to modest growth and decreased our gross profit outlook to reflect the inflation and manufacturing efficiency pressures that remain with the unit. This revised outlook resulted in a $384 impairment charge, representing a write-down of the remaining goodwill in the reporting unit.

The impairment charges were recorded in Other expenses / (income) in the Consolidated Statements of Earnings.

Intangible Assets

The following table sets forth balance sheet information for intangible assets, excluding goodwill, subject to amortization and intangible assets not subject to amortization:



Intangible Assets	2018			2017
Amortizable intangible assets
Customer relationships	$	1,116		$	223
Technology	40			40
Other	43			35
Total gross amortizable intangible assets	$	1,199		$	298
Accumulated amortization	(126		)	(92		)
Total net amortizable intangible assets	$	1,073		$	206
Non-amortizable intangible assets
Trademarks	3,123			912
Total net intangible assets	$	4,196		$	1,118

Non-amortizable intangible assets consist of trademarks, which include Snyder's of Hanover, Lance, Kettle Brand, Pace, Pacific Foods, Snack Factory, Cape Cod, Bolthouse Farms, Plum, Kjeldsens, and Garden Fresh Gourmet. Other amortizable intangible assets consist of recipes, non-compete agreements, trademarks, patents and distributor relationships.

Amortization of intangible assets was $34 for 2018, $19 for 2017 and $20 for 2016. Amortization expense for the next 5 years is estimated to be $65 in 2019, $60 in 2020, and $59 in 2021 through 2023. Asset useful lives range from 2 to 22 years.

Due to the factors previously described, we recognized impairment charges on the Bolthouse Farms carrot and carrot ingredients reporting unit trademark as follows: $35 in 2016 and $20 in 2017. The carrying value of the trademark was $48 as of July 29, 2018.

In the second quarter of 2017, due to the factors previously described, we performed an interim impairment assessment on the trademark in the Garden Fresh Gourmet reporting unit, which resulted in a $1 impairment charge.

In the third quarter of 2018, due to the factors described above, we performed an interim impairment assessment on the trademarks in the deli reporting unit and the Bolthouse Farms refrigerated beverages and salad dressings reporting unit. We recorded impairment charges of $13 related to the Garden Fresh Gourmet trademark within the deli reporting unit and $130 related to the Bolthouse Farms refrigerated beverages and salad dressings trademark. This reduced the carrying value of the trademarks to $23 in the deli reporting unit and to $150 in the Bolthouse Farms refrigerated beverages and salad dressings reporting unit.

In the fourth quarter of 2018, as part of our annual review of intangible assets, we recognized an impairment charge of $54 on the Plum trademark, which reduced the carrying value to $61. In 2018, sales and operating performance were well below expectations due in part to competitive pressure and reduced margins. In the fourth quarter, as part of a strategic review initiated by a new leadership team and based on recent performance, we lowered our long-term outlook for future sales.

The impairment charges were recorded in Other expenses / (income) in the Consolidated Statements of Earnings.

The estimates of future cash flows used in determining the fair value of goodwill and intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ materially from management’s estimates due to changes in business conditions, operating performance and economic conditions.