Goodwill and Other Intangible Assets

12 Months Ended

Dec. 28, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and other intangible assets included in the Consolidated Balance Sheets consisted of the following (in thousands):



	December 28, 2019		December 29, 2018
Goodwill	$	270,820	$	270,788
Definite-lived intangible assets	146,040		163,714
Indefinite-lived intangible assets	28,849		28,788
Total goodwill and other intangible assets	$	445,709	$	463,290

Goodwill

The changes in the carrying amount of goodwill, by reporting segment, are as follows (in thousands):



	Office Furniture			Hearth Products			Total
Balance as of December 30, 2017
Goodwill	$	128,657		$	183,199		$	311,856
Accumulated impairment losses	(32,208		)	(143		)	(32,351		)
Net goodwill balance as of December 30, 2017	$	96,449		$	183,056		$	279,505

Goodwill acquired during the year	—			3,463			3,463
Impairment losses	(12,168		)	—			(12,168		)
Foreign currency translation adjustment	(12		)	—			(12		)

Balance as of December 29, 2018
Goodwill	128,645			186,662			315,307
Accumulated impairment losses	(44,376		)	(143		)	(44,519		)
Net goodwill balance as of December 29, 2018	$	84,269		$	186,519		$	270,788

Foreign currency translation adjustment	32			—			32

Balance as of December 28, 2019
Goodwill	128,677			186,662			315,339
Accumulated impairment losses	(44,376		)	(143		)	(44,519		)
Net goodwill balance as of December 28, 2019	$	84,301		$	186,519		$	270,820

The changes in goodwill in fiscal 2018 primarily relate to completed acquisitions in the hearth products segment, and impairment charges in the office furniture segment.

Definite-lived intangible assets

The table below summarizes amortizable definite-lived intangible assets, which are reflected in "Goodwill and Other Intangible Assets" in the Corporation’s Consolidated Balance Sheets (in thousands):



	December 28, 2019						December 29, 2018
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Patents	$	40	$	40	$	—	$	40	$	34	$	6
Software	176,836		67,541		109,295		170,274		49,561		120,713
Trademarks and trade names	7,564		3,381		4,183		7,564		2,721		4,843
Customer lists and other	104,004		71,442		32,562		103,840		65,688		38,152
Net definite-lived intangible assets	$	288,444	$	142,404	$	146,040	$	281,718	$	118,004	$	163,714

Amortization expense is reflected in "Selling and administrative expenses" in the Consolidated Statements of Comprehensive Income and was as follows (in thousands):



	2019		2018		2017
Capitalized software	$	18,130	$	17,109	$	9,389
Other definite-lived intangibles	$	6,275	$	6,615	$	6,989

The occurrence of events such as acquisitions, dispositions, or impairments may impact future amortization expense. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the following five fiscal years is as follows (in millions):



	2020		2021		2022		2023		2024
Amortization expense	$	23.8	$	22.7	$	19.7	$	17.5	$	16.5

Indefinite-lived intangible assets

The Corporation also owns certain intangible assets, which are deemed to have indefinite useful lives because they are expected to generate cash flows indefinitely. These indefinite-lived intangible assets are reflected in "Goodwill and Other Intangible Assets" in the Consolidated Balance Sheets (in thousands):



	December 28, 2019		December 29, 2018
Trademarks and trade names	$	28,849	$	28,788

The immaterial change in the indefinite-lived intangible assets balances shown above is related to foreign currency translation impacts. As a result of the required annual impairment assessment performed in the fourth quarter of 2019, the Corporation did not record any impairment charges related to indefinite-lived intangible assets, as the estimated fair values were significantly in excess of the respective carrying values.

Sale and License of an Intangible Asset

In the third quarter of 2017, the Corporation recorded a $6.0 million nonrecurring gain from the sale and license of an intangible asset, which had a zero carrying value. This nonrecurring gain is reflected in "Gain on sale, disposal, and license of assets, net" in the Consolidated Statements of Comprehensive Income.

Impairment Analysis

As a result of the required annual goodwill impairment assessment performed in the fourth quarter of 2019, the Corporation determined the fair value of its reporting units exceeded the respective carrying value and, therefore, no impairment of goodwill was recorded. The projections used in the impairment model reflected management's assumptions regarding revenue growth rates, economic and market trends, cost structure, investments required for product enhancements, and other expectations about the anticipated short-

term and long-term operating results of the reporting units. For three reporting units in the office furniture segment, the concluded fair values included in the respective annual quantitative impairment test contain a higher degree of sensitivity to changes in estimates, and therefore an increased risk of future impairment charges, relative to the Corporation's other reporting units for which the estimated fair value is significantly in excess of the carrying value. These three reporting units have goodwill of $6.9 million, $7.5 million and $14.1 million, respectively, and an estimated fair value that exceeded carrying value by approximately 68 percent, 15 percent, and 11 percent, respectively.

The reporting unit that exceeded its carrying value by approximately 15 percent in the current year assessment recorded a goodwill impairment charge of $12.2 million pretax in 2018. In connection with the current year impairment assessment, the Corporation assumed a discount rate of 14 percent, near term growth rates ranging from 2 percent to 5.5 percent, and a terminal growth rate of 3 percent. Holding other assumptions constant, a 100 basis point increase in the discount rate would result in a $2.8 million decrease in the estimated fair value of the reporting unit. Holding other assumptions constant, a 100 basis point decrease in the long-term growth rate would result in a $1.1 million decrease in the estimated fair value of the reporting unit. Both of these scenarios individually would result in the estimated fair value exceeding carrying value.

For the reporting unit that exceeded its carrying value by approximately 11 percent, the Corporation assumed a discount rate of 15 percent, near term growth rates ranging from 10 percent to 51 percent, and a terminal growth rate of 3 percent. Holding other assumptions constant, a 100 basis point increase in the discount rate would result in a $7.9 million decrease in the estimated fair value of the reporting unit. This scenario would result in the estimated fair value being below carrying value. Holding other assumptions constant, a 100 basis point decrease in the long-term growth rate would result in a $1.8 million decrease in the estimated fair value of the reporting unit. This scenario would result in the estimated fair value exceeding carrying value.