Goodwill and Other Intangible Assets

3 Months Ended

Apr. 01, 2017

Acquisitions, Goodwill and Other Intangible Assets [Abstract]

Goodwill and other intangible assets

Parati acquisition

In December 2016, the Company acquired Ritmo Investimentos, controlling shareholder of Parati S/A, Afical Ltda and Padua Ltda ("Parati Group"), a leading Brazilian food group for approximately BRL 1.38 billion ($381 million) or $379 million, net of cash and cash equivalents. The purchase price is subject to certain working capital and net debt adjustments based on the actual working capital and net debt existing on the acquisition date compared to targeted amounts. The acquisition was accounted for under the purchase price method and was financed with cash on hand and short-term borrowings. The assets and liabilities of the Parati Group are included in the Consolidated Balance Sheet as of April 1, 2017 within the Latin America segment. The acquired assets and assumed liabilities include the following:



(millions)		December 1, 2016
Current assets		$	44
Property	72
Goodwill	145
Intangible assets	179
Current liabilities	(48			)
Non-current deferred tax liability and other	(13			)
		$	379

The above amounts represent the allocation of purchase price as of April 1, 2017 and are subject to revision when the working capital and net debt adjustments to the purchase price are agreed between the parties and appraisals are finalized for property and intangible assets. These items will be finalized during 2017.

As of April 1, 2017, the Company had finalized plans to merge the acquired and pre-existing Brazilian legal entities, which will result in tax basis of the acquired intangible assets. Accordingly, deferred tax liabilities and goodwill were both reduced by $41 million in the quarter ended April 1, 2017. In addition, during the first quarter, the value of intangible assets subject to amortization increased $57 million and intangible assets not subject to amortization increased $4 million with an offsetting $61 million adjustment to goodwill in conjunction with the updated allocation of the purchase price.

A portion of the acquisition price aggregating $67 million was placed in escrow in favor of the seller for general representations and warranties, as well as pending resolution of certain contingencies arising from the business prior to the acquisition. The Company is still evaluating these amounts, which could result in the recognition of certain contingent liabilities along with corresponding receivables from the escrow account.

Changes in the carrying amount of goodwill, intangible assets subject to amortization, consisting primarily of customer lists, and indefinite-lived intangible assets, consisting of brands, are presented in the following tables:

Carrying amount of goodwill



(millions)	U.S. Morning Foods		U.S. Snacks		U.S. Specialty		North America Other		Europe		Latin America			Asia Pacific		Consoli- dated
December 31, 2016	$	131	$	3,568	$	82	$	457	$	376	$	328		$	224	$	5,166
Purchase price allocation adjustment	—		—		—		—		—		(102		)	—		(102		)
Currency translation adjustment	—		—		—		1		7		9			3		20
April 1, 2017	$	131	$	3,568	$	82	$	458	$	383	$	235		$	227	$	5,084

Intangible assets subject to amortization



Gross carrying amount
(millions)	U.S. Morning Foods		U.S. Snacks			U.S. Specialty		North America Other		Europe			Latin America		Asia Pacific		Consoli- dated
December 31, 2016	$	8	$	42		$	—	$	5	$	40		$	36	$	10	$	141
Purchase price allocation adjustment	—		—			—		—		—			57		—		57
Currency translation adjustment	—		—			—		—		1			4		—		5
April 1, 2017	$	8	$	42		$	—	$	5	$	41		$	97	$	10	$	203

Accumulated Amortization
December 31, 2016	$	8	$	19		$	—	$	4	$	14		$	6	$	3	$	54
Amortization	—		1			—		—		1			—		—		2
April 1, 2017	$	8	$	20		$	—	$	4	$	15		$	6	$	3	$	56

Intangible assets subject to amortization, net
December 31, 2016	$	—	$	23		$	—	$	1	$	26		$	30	$	7	$	87
Purchase price allocation adjustment	—		—			—		—		—			57		—		57
Currency translation adjustment	—		—			—		—		1			4		—		5
Amortization	—		(1		)	—		—		(1		)	—		—		(2		)
April 1, 2017	$	—	$	22		$	—	$	1	$	26		$	91	$	7	$	147

For intangible assets in the preceding table, amortization was $2 million and $2 million for the quarters ended April 1, 2017 and April 2, 2016, respectively. The currently estimated aggregate annual amortization expense for full-year 2017 is approximately $8 million.

Intangible assets not subject to amortization



(millions)	U.S. Morning Foods		U.S. Snacks		U.S. Specialty		North America Other		Europe		Latin America		Asia Pacific		Consoli- dated
December 31, 2016	$	—	$	1,625	$	—	$	176	$	383	$	98	$	—	$	2,282
Purchase price allocation adjustment	—		—		—		—		—		4		—		4
Currency translation adjustment	—		—		—		—		5		4		—		9
April 1, 2017	$	—	$	1,625	$	—	$	176	$	388	$	106	$	—	$	2,295

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities.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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