Goodwill and Other Intangible Assets

12 Months Ended

Dec. 28, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets [Text Block]

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Intangible Assets

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

Carrying amount of goodwill

(millions)	North America			Europe			Latin America			AMEA			Consoli- dated
December 30, 2017	$	4,617		$	368		$	244		$	275		$	5,504
Additions	—			—			—			616			616
Purchase price allocation adjustment	(2		)	—			—			—			(2		)
Purchase price adjustment	—			—			—			—			—
Currency translation adjustment	(4		)	(22		)	(26		)	(16		)	(68		)
December 29, 2018	$	4,611		$	346		$	218		$	875		$	6,050
Divestiture	(191		)	—			—			—			(191		)
Currency translation adjustment	2			1			(5		)	4			2
December 28, 2019	$	4,422		$	347		$	213		$	879		$	5,861

Intangible assets subject to amortization

Gross carrying amount
(millions)	North America			Europe			Latin America			AMEA			Consoli- dated
December 30, 2017	$	72		$	45		$	74		$	10		$	201
Additions	—			—			—			425			425
Purchase price allocation adjustment	2			—			—			—			2
Currency translation adjustment	—			(2		)	(11		)	(7		)	(20		)
December 29, 2018	$	74		$	43		$	63		$	428		$	608
Additions	2			—			—			—			2
Divestiture	(12		)	—			—			—			(12		)
Currency translation adjustment	—			(2		)	(3		)	1			(4		)
December 28, 2019	$	64		$	41		$	60		$	429		$	594
Accumulated Amortization
December 30, 2017	$	35		$	18		$	10		$	4		$	67
Amortization	4			3			4			12			23
Currency translation adjustment	—			(1		)	(2		)	—			(3		)
December 29, 2018	$	39		$	20		$	12		$	16		$	87
Amortization (a)	4			2			3			18			27
Divestiture	(12		)	—			—			—			(12		)
Currency translation adjustment	—			(1		)	—			—			(1		)
December 28, 2019	$	31		$	21		$	15		$	34		$	101
Intangible assets subject to amortization, net
December 30, 2017	$	37		$	27		$	64		$	6		$	134
Additions	—			—			—			425			425
Amortization	(4		)	(3		)	(4		)	(12		)	(23		)
Purchase price allocation adjustment	2			—			—			—			2
Currency translation adjustment	—			(1		)	(9		)	(7		)	(17		)
December 29, 2018	$	35		$	23		$	51		$	412		$	521
Additions	2			—			—			—			2
Amortization	(4		)	(2		)	(3		)	(18		)	(27		)
Divestiture	—			—			—			—			—
Currency translation adjustment	—			(1		)	(3		)	1			(3		)
December 28, 2019	$	33		$	20		$	45		$	395		$	493

(a) The currently estimated aggregate amortization expense for each of the next five succeeding fiscal periods is approximately $28 million per year through 2024.

Intangible assets not subject to amortization

(millions)	North America			Europe			Latin America			AMEA			Consoli- dated
December 30, 2017	$	1,985		$	420		$	86		$	14		$	2,505
Additions	—			—			—			373			373
Purchase price allocation adjustment	—			—			—			—			—
Currency translation adjustment	—			(19		)	(13		)	(6		)	(38		)
December 29, 2018	$	1,985		$	401		$	73		$	381		$	2,840
Additions	18			—			—			—			18
Divestiture	(765		)	—			—			—			(765		)
Currency translation adjustment	—			(9		)	(3		)	2			(10		)
December 28, 2019	$	1,238		$	392		$	70		$	383		$	2,083

Annual Impairment Testing

On December 30, 2018 the Company reorganized our North American business. The reorganization eliminated the legacy business unit structure and internal reporting. In addition, the Company changed the internal reporting provided to the chief operating decision maker (CODM) and segment manager. As a result, the Company reevaluated its operating segments and reporting units.

In addition, we transferred the management of our Middle East, North Africa, and Turkey businesses from Europe to AMEA, effective December 30, 2018.

Refer to Note 17 Reportable Segments for further details on these changes. As a result of these changes in operating segments and related reporting units, the Company re-allocated goodwill between reporting units where necessary and compared the carrying value to the fair value of each impacted reporting unit on a before and after basis. This evaluation was only required to be performed on reporting units impacted by the changes noted above.

Effective December 30, 2018 in North America, the previous U.S. Snacks, U.S. Morning Foods, U.S. Specialty Channels, U.S. Frozen Foods, Kashi, Canada and RX operating segments are now a single operating segment (Kellogg North America). At the beginning of 2019, the Company evaluated the related impacted reporting units for impairment on a before and after basis and concluded that the fair values of each reporting unit exceeded their carrying values.

Approximately $46 million of goodwill was re-allocated between the impacted reporting units within Europe and AMEA related to the transfer of businesses between these operating segments. The Company performed a goodwill evaluation of the impacted reporting units on a before and after basis and concluded that the fair value of the impacted reporting units exceeded their carrying values.

Additionally, during the first quarter of 2019, the Company determined that it was more likely than not that the Company would be selling selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses within the North America reporting unit. As a result, the Company performed a goodwill impairment evaluation on the North America reporting unit in the first quarter of 2019 and concluded that the fair value exceeded the carrying value of the reporting unit. During the second quarter of 2019, the Company entered into a definitive agreement to sell the businesses to Ferrero. The sale was completed during the third quarter of 2019 and resulted in the divestiture of the net assets and liabilities of these businesses, included in the North America reporting unit, including $191 million of Goodwill and $765 million of Net Intangibles. In addition to the cash consideration received, the Company entered into a perpetual royalty-free licensing agreement with Ferrero, allowing Kellogg the use of certain brand names for cracker products. The license agreement was fair valued at $18 million and recorded as an indefinite-lived intangible asset.

At December 28, 2019, goodwill and other intangible assets amounted to $8.4 billion, consisting primarily of goodwill and brands originally associated with the 2001 acquisition of Keebler Foods Company and the 2012 acquisition of Pringles. Within this total, approximately $2.1 billion of non-goodwill intangible assets were classified as indefinite-lived, including $1.7 billion related to trademarks, comprised principally of Pringles and cracker-related trademarks. The majority of these intangible assets are recorded in our North America reporting unit. The Company currently believes the fair value of goodwill and other intangible assets exceeds their carrying value and that those intangibles so classified will contribute indefinitely to cash flows. Through impairment testing performed during the fourth quarter of 2019, no heightened risk of impairment of individual intangible assets or reporting units was identified.

Additionally, the Company has goodwill of $606 million and $373 million at December 28, 2019 related to the Multipro and RX reporting units, respectively. The Company performed goodwill impairment testing for Multipro using both an EBITDA market multiple and discounted cash flow (DCF) method. The Company performed goodwill impairment testing for RX using both a sales market multiple and discounted cash flow method. Significant assumptions utilized within the Multipro DCF model include forecasted net sales growth and gross margin. The significant assumption utilized within the RX DCF model is forecasted net sales growth. The Company determined the fair value of Multipro and RX exceed the carrying value and no heightened risk of impairment exists for the reporting units.