Goodwill And Intangible Assets

12 Months Ended

Jan. 03, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill

As described in Note 4 of Notes to the Consolidated Financial Statements, the Company acquired two businesses in 2014 and two businesses in 2013. The excess of purchase price over estimated fair value was assigned to goodwill.

As described in Note 3 of Notes to the Consolidated Financial Statements, the Company evaluates the carrying amount of goodwill annually or more frequently if events or circumstances indicate that an asset might be impaired. As a result of the annual review, there were certain reporting units where the carrying value, exceeded fair value.

The Commercial and Industrial Systems segment and the Power Transmission Solutions segment include reporting units that have significant exposure to the volatility in the oil and gas industry. These markets saw a sharp decline in the latter part of 2014, leading to declines in sales and profitability and thereby reducing expected cash flows. Expected cash flows were also negatively impacted by lower gas and oil prices as lower prices decreased the capital spending of customers these reporting units serve. Weak economic conditions in regions such as Australia and New Zealand as well as currency devaluations in Venezuela have contributed to the reduced expected cash flows for the Company's reporting units in these regions. In the Climate Solutions segment, unfavorable customer dynamics impacted one reporting unit's expected cash flows. Additionally, the Company's reporting unit related to technology that had been deemed substantially impaired during the fourth quarter of 2013 was deemed fully impaired during 2014 as a result of the closing of the facility.

Reporting units within the Commercial and Industrial Systems and Climate Solutions segments experienced declines in sales and profitability that were more pronounced in the latter part of fiscal 2013, combined with reduced future expected cash flows driven by weak sales and margins resulting from economic conditions in Australia, India and Europe. Another reporting unit had reduced future expected cash flows from a slower than expected adoption of switched reluctance motor technology. In the Power Transmission Solutions segment, one reporting unit had reduced expected cash flows resulting from weak sales in the hydraulic fracturing market within the oil and gas industry.

See Note 3 of Notes to the Consolidated Financial Statements, "Goodwill" and "Long-Lived Assets" for additional details of the impairments.

The following table presents changes to goodwill during the periods indicated (in millions):




	Total			Commercial and Industrial Systems			Climate Solutions			Power Transmission Solutions
Balance as of December 29, 2012	$	1,151.0		$	759.4		$	354.4		$	37.2
Acquisitions and valuation adjustments	15.3			15.3			—			—
Less: Impairment charges	76.3			64.2			—			12.1
Translation adjustments	(8.1		)	(7.3		)	(0.8		)	—
Balance as of December 28, 2013	$	1,081.9		$	703.2		$	353.6		$	25.1

Acquisitions and valuation adjustments	54.5			54.5			—			—
Less: Impairment charges	119.5			100.7			7.7			11.1
Translation adjustments	(12.9		)	(11.6		)	(1.3		)	—
Balance as of January 3, 2015	$	1,004.0		$	645.4		$	344.6		$	14.0

Cumulative goodwill impairment charges	$	195.8		$	164.9		$	7.7		$	23.2

Intangible Assets

As described in Note 3 of Notes to the Consolidated Financial Statements, the Company evaluates intangible assets in accordance with prescribed guidance. As a result of this review, during 2014, due primarily to the sharp decline in the price of oil, the carrying amounts of intangible assets for two reporting units within the Climate Solutions and Power Transmission Solutions segments were deemed impaired. The impairment charges related to these two reporting units were $7.8 million and $11.1 million, respectively. During fiscal 2013, a total of $17.0 million of intangible assets in the Commercial and Industrial Systems segment were deemed impaired. A switched reluctance technology reporting unit recognized a $16.2 million impairment in technology and a motor distribution reporting unit in Europe recognized a $0.8 million impairment in customer relationships.

Gross intangible assets consist of the following (in millions):



	Weighted Average Amortization Period (Years)	December 28, 2013		Acquisitions		Impairment Charges		Translation Adjustments			January 3, 2015
Customer Relationships	11	$	253.8	$	20.5	$	10.7	$	(6.8	)	$	256.8
Technology	9	133.0		5.2		7.8		(1.0		)	129.4
Trademarks	12	32.6		2.0		0.4		(1.1		)	33.1
Patent and Engineering Drawings	5	16.6		—		—		—			16.6
Non-compete Agreements	5	8.3		0.4		—		(0.1		)	8.6
Total Gross Intangibles		$	444.3	$	28.1	$	18.9	$	(9.0	)	$	444.5

Accumulated amortization on intangible assets consists of the following:



	December 28, 2013		Amortization		Translation Adjustments			January 3, 2015
Customer Relationships	$	101.4	$	24.2	$	(3.0	)	$	122.6
Technology	57.9		17.6		(0.6		)	74.9
Trademarks	18.0		2.9		(0.8		)	20.1
Patent and Engineering Drawings	15.0		1.7		(0.1		)	16.6
Non-compete Agreements	7.8		0.3		(0.1		)	8.0
Total Accumulated Amortization	$	200.1	$	46.7	$	(4.6	)	$	242.2
Intangible Assets, Net of Amortization	$	244.2						$	202.3

The Company's contractual customer relationships are generally short-term in nature. Useful lives are established at acquisition based on historical attrition rates.

Amortization expense was $46.7 million in fiscal 2014, $44.1 million in fiscal 2013 and $44.0 million in fiscal 2012.

The following table presents estimated future amortization expense (in millions):



	Estimated Amortization
Year	Estimated Amortization
2015	$	35.4
2016	30.8
2017	24.2
2018	22.2
2019	22.1

- 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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