Goodwill and Intangible Assets

The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of October 30, 2015 and October 31, 2014 are as follows:



		October 30, 2015					October 31, 2014
In thousands	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite lived intangible assets:
Customer relationships	16 years	$	215,703	$	(69,245	)	$	269,391	$	(74,611	)
Engineering drawings	3 years	5,843		(4,165		)	5,843		(3,308		)
Patents	19 years	93,520		(27,985		)	90,969		(23,624		)
Trademarks	5 years	15,039		(5,049		)	12,200		(2,440		)
Unpatented technology	20 years	32,852		(7,372		)	32,762		(5,668		)
Subtotal	17 years	362,957		(113,816		)	411,165		(109,651		)
Indefinite-lived intangible assets:
Trademarks		6,569		—			17,755		—
Total other intangible assets		$	369,526	$	(113,816	)	$	428,920	$	(109,651	)

Finite-lived intangible assets

Finite-lived intangible assets are amortized to reflect the pattern of economic benefits consumed, which is principally the straight-line method. Intangible assets that are subject to amortization are evaluated for potential impairment whenever events or circumstances indicate that the carrying amount may not be recoverable.

As of July 31, 2015, we assessed our tangible and intangible finite-lived assets for impairment due to the prolonged suppressed global commodity markets and their related effect on the global mining investment environment. No impairment was identified related to our finite-lived intangible assets as of July 31, 2015. However, during the fourth quarter of fiscal 2015, we determined that there was an additional risk that certain tangible and intangible finite-lived assets may not be recoverable due to continued deterioration of our markets. Each asset group was considered and it was determined that the cash flows of an asset group in China and a steel mill would be insufficient to support their carrying value.

In connection with the evaluation of these asset groups, we developed an estimate of fair value using a discounted cash flow model. Assumptions critical to the process included forecasted financial information, discount rates and applicable customer retention rates. This fair value determination was categorized as Level 3 in the fair value hierarchy. See Note 19, Fair Value Measurements, for the definition of Level 3 inputs.

As a result of this analysis, customer relationship non-cash impairment charges of $57.9 million and $2.1 million were recorded in the fourth quarter of fiscal 2015 by our Underground and Surface segments, respectively. These charges are recorded in the Consolidated Statement of Operations under the heading Impairment charges.

No other impairments were identified related to our finite-lived intangible assets as of October 30, 2015.

Amortization expense for finite-lived intangible assets was $26.5 million, $26.2 million and $13.6 million, for fiscal 2015, 2014 and 2013, respectively.

Estimated future annual amortization expense is as follows:



In thousands
For the fiscal year ending:
2016	$	23,048
2017	22,570
2018	21,951
2019	19,466
2020	19,394

Indefinite-lived intangible assets

Indefinite-lived intangible assets are not amortized but are evaluated for impairment annually or more frequently if events or changes occur that suggest an impairment in carrying value, such as a significant adverse change in the business climate.

We assessed our indefinite-lived trademarks as of July 31, 2015 due to the prolonged suppressed global commodity markets and their related effect on the global mining investment environment. No impairment was identified related to our indefinite-lived trademarks as of July 31, 2015. However, during the fourth quarter of fiscal 2015 we re-assessed our indefinite-lived trademarks due to the continued deterioration of our markets, developing an estimate of fair value using a discounted cash flow model. Assumptions critical to the process included forecasted financial information, discount rates and royalty rates. The estimates of the fair values of the indefinite-lived trademarks are based on the best information currently available. However, further adjustments may be necessary in the future if conditions differ substantially from the assumptions utilized. This fair value determination was categorized as Level 3 in the fair value hierarchy. See Note 19, Fair Value Measurements, for the definition of Level 3 inputs.

As a result of this analysis, a non-cash impairment charge of $10.8 million was recorded in the fourth quarter of fiscal 2015 by our Underground segment. This charge is recorded in the Consolidated Statement of Operations under the heading Impairment charges.

In addition, in the fourth quarter of fiscal 2013, we reviewed our brand portfolio and developed a strategy to increase the visibility of our core brands in furtherance of our One Joy Global initiative. During this review we determined that the indefinite life assumption was no longer appropriate for most of our previously acquired trademarks. The remaining value of the trademarks that were replaced are being amortized over the new estimated useful life. For those trademarks that were not replaced, our strategy is to co-brand these products, and we revalued these trademarks based on that assumption. The co-branded trademarks continue to have an indefinite life. As a result, a non-cash impairment charge of $155.2 million was recorded in the fourth quarter of fiscal 2013, of which $130.2 million was recorded by our Underground segment and $25.0 million was recorded by our Surface segment. This charge is recorded in the Consolidated Statement of Operations under the heading Intangible asset impairment charges. Going forward, the amortization on the remaining carrying value associated with the trademarks that are being replaced is being recorded in the Consolidated Statements of Operations under the heading Product development, selling and administrative expenses.

Goodwill

Changes in the carrying amount of goodwill in fiscal 2015 and 2014 are as follows:



In thousands	Underground			Surface			Consolidated
Balance as of October 25, 2013	$	1,123,183		$	357,336		$	1,480,519
Goodwill acquired during the year	271			—			271
Translation adjustments	36,737			(834		)	35,903
Balance as of October 31, 2014	1,160,191			356,502			1,516,693
Goodwill acquired during the year	55,717			—			55,717
Impairment charges	(1,199,256		)	—			(1,199,256		)
Translation adjustments	(16,652		)	(1,881		)	(18,533		)
Balance as of October 30, 2015	$	—		$	354,621		$	354,621

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill is assigned to specific reporting units, and is tested for impairment at least annually, during the fourth quarter of our fiscal year, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value.

As of July 31, 2015, we concluded that an indicator was present that suggested impairment may exist for our goodwill, as our total shareholders’ equity exceeded our market capitalization due to the prolonged suppressed global commodity markets, their related effect on the global mining investment environment and the resulting impact on our market capitalization. Based on this indicator of impairment, we performed an interim test for impairment of goodwill as of the last day of our fiscal third quarter. We concluded our step one evaluation on our reporting units and determined that the estimated fair value of our Underground reporting unit was lower than the carrying value of the reporting unit. The result of our interim test for the Surface reporting unit was that the fair value of the reporting unit exceeded carrying value. However, given the timing of the decline in our market capitalization, we were unable to complete step two of the Underground goodwill impairment test until we were engaged in the preparation of our annual financial statements. Step two of the analysis requires us to perform a theoretical purchase price allocation for the Underground reporting unit to determine the implied fair value of goodwill and to compare the implied fair value of goodwill to the recorded amount of goodwill. Upon completion of step two of our goodwill impairment test, we recorded a non-cash goodwill impairment charge of $1.2 billion. This impairment charge represents a complete impairment of goodwill in the Underground reporting unit, and it is recorded in the Consolidated Statement of Operations under the heading Impairment charges.

As of October 30, 2015, we determined there was an indicator of potential goodwill impairment due to the continued deterioration of our markets and the resulting effects on our market capitalization. As a result we performed another interim impairment test of our goodwill and indefinite-lived intangible assets. The result of our step one evaluation was that the estimated fair value of the Surface reporting unit again exceeded its carrying value. Although we have concluded there is no impairment on the goodwill of $354.6 million associated with our Surface segment as of year end, we will continue to closely monitor in the future considering the uncertainty in the markets and the continued decline in our stock price after year end. Should there be still further market declines and/or stock price declines in future periods, there is increasing risk that Surface segment goodwill may be impaired. We will continue to update our evaluation as market conditions and the follow on impacts to our share price warrant.

In connection with our goodwill impairment test, we worked with a third party appraisal firm to fair value Underground goodwill using a discounted cash flow model. In connection with obtaining an independent third party valuation, management provided certain information and assumptions that were utilized in the fair value calculation. Assumptions critical to the process included forecasted financial information and discount rates. This fair value determination was categorized as Level 3 in the fair value hierarchy. See Note 19, Fair Value Measurements, for the definition of Level 3 inputs.