Goodwill and Other Intangible Assets

6 Months Ended

Jun. 27, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The Company accounts for acquired goodwill in accordance with ASC 805 and ASC 350, “Intangibles - Goodwill and Other” (“ASC 350”), which involves judgment with respect to the determination of the valuation of the assets acquired and liabilities assumed in order to determine the final amount of goodwill recorded in a purchase. Under ASC 350, goodwill is not amortized. Instead, it is evaluated for impairment on an annual basis, or more frequently when an event occurs or circumstances change between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying value, including, for example, a significant adverse change in the business climate. The Company has set the annual evaluation date as of the first day of its fiscal fourth quarter. The reporting units evaluated for goodwill impairment have been determined to be the same as the Company's operating segments. With the exception of the Custom and Commercial Air Solutions ("CAS") reporting unit and the AVC entities, all of the Company's reporting units have goodwill and, therefore, are required to be evaluated for goodwill impairment.

Impairment of Long-lived Assets and Goodwill

During the second quarter of 2014, the Company determined that the significant under performance of its AVC companies through the first half of the year, along with a declining earnings forecast for the remainder of 2014 and beyond, represented an indicator of impairment related to the long lived assets of these businesses. As a result, the Company performed the first step in the long-lived assets impairment test pursuant to ASC 360, “Property, Plant and Equipment” and compared the forecasted undiscounted cash flows for these businesses to their net assets. These cash flows were insufficient to recover the carrying value of these businesses. Based on the estimated fair values of the asset groups and the long lived assets, the Company recorded an aggregate impairment charge of approximately $80.4 million to write down the long-lived assets to their fair values. This charge was comprised of approximately $74.7 million for intangible assets, primarily trademarks, customer relationships and developed technology, approximately $4.4 million for goodwill and approximately $1.3 million for property and equipment.

As a result of certain restructuring initiatives that the Company commenced in the second quarter of 2015, the Company identified an indicator of impairment related to the long-lived assets of certain of the AVC companies due to declining operating results related to these companies. Based on review of the forecasted undiscounted cash flows over the remaining estimated useful life of the primary asset of the asset group, the Company determined that there were no significant forecasted net positive cash flows to recover the net book value of property and equipment and such property and equipment had no material salvage value. As a result, the Company recorded an impairment charge of approximately $1.2 million to reduce the carrying value of the property and equipment to zero.

Goodwill Activity

The following table presents a summary of the activity in goodwill by reporting segment for the first half of 2015:



	December 31, 2014 ⁽¹⁾			Acquisitions ⁽²⁾		June 27, 2015 ⁽¹⁾
	(Dollar amounts in millions)
Air Quality and Home Solutions ("AQH"):
Gross goodwill	$	156.8		$	—	$	156.8
Impairment losses	—			—		—
Net AQH goodwill	156.8			—		156.8
Security and Control Solutions ("SCS"):
Gross goodwill	80.9			—		80.9
Impairment losses	—			—		—
Net SCS goodwill	80.9			—		80.9
Ergonomic and Productivity Solutions ("ERG"):
Gross goodwill	131.4			25.1		156.5
Impairment losses	—			—		—
Net ERG goodwill	131.4			25.1		156.5
Residential and Commercial HVAC:
Gross goodwill	105.2			0.1		105.3
Impairment losses	—			—		—
Net RCH goodwill	105.2			0.1		105.3
Audio, Video and Control Solutions:
Gross goodwill	4.4			—		4.4
Impairment losses	(4.4		)	—		(4.4		)
Net AVC goodwill	—			—		—
Consolidated goodwill:
Gross goodwill	478.7			25.2		503.9
Impairment losses	(4.4		)	—		(4.4		)
Net consolidated goodwill	$	474.3		$	25.2	$	499.5


(1)	The CAS and combined AVC reporting units did not have goodwill for any periods presented.


(2)	Acquisition adjustments recorded during the first half of 2015 for the ERG and RCH segments relate to the acquisition of Anthro and Reznor, respectively. See Note B, “Acquisitions and Dispositions”.

- 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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