GOODWILL AND OTHER INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS

12 Months Ended

Dec. 30, 2017

GOODWILL AND OTHER INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS

GOODWILL AND OTHER INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS

NOTE 3. GOODWILL AND OTHER INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS

Goodwill

Results from our annual goodwill impairment test in the fourth quarter of 2017 indicated that no impairment occurred during 2017. The fair value of these assets was primarily based on Level 3 inputs.

Changes in the net carrying amount of goodwill for 2017 and 2016 by reportable segment were as follows:

(In millions)	Label and Graphic Materials			Retail Branding and Information Solutions			Industrial and Healthcare Materials			Total

Goodwill as of January 2, 2016	$	277.9		$	408.3		$	–		$	686.2
Acquisitions (1)		107.8			–			14.3			122.1
Transfer (2)		–			(53.1	)		53.1			–
Translation adjustments		(12.4	)		(1.3	)		(1.0	)		(14.7	)

Goodwill as of December 31, 2016		373.3			353.9			66.4			793.6
2017 Acquisitions (1)		17.5			–			125.5			143.0
Acquisition adjustments (3)		4.8			–			.7			5.5
Translation adjustments		33.9			1.5			7.6			43.0

Goodwill as of December 30, 2017	$	429.5		$	355.4		$	200.2		$	985.1

(1)	Goodwill acquired in 2016 primarily related to the Mactac acquisition. Goodwill acquired in 2017 related to the acquisitions of Hanita, which is included in our Label and Graphic Materials ("LGM") reportable segment, and Finesse Medical and Yongle Tape, which are included in our Industrial and Healthcare Materials ("IHM") reportable segment.
(2)	In connection with our 2016 change in operating structure, we allocated goodwill associated with our fastener solutions reporting unit from our Retail Branding and Information Solutions ("RBIS") reportable segment to IHM based on the relative fair values of our fastener solutions and RBIS reporting units. Prior to 2016, no reporting units within IHM had allocated goodwill. Refer to Note 1, "Summary of Significant Accounting Policies," for more information.
(3)	Goodwill purchase price allocation adjustments related to the acquisition of Mactac in August 2016.

The carrying amounts of goodwill at December 30, 2017 and December 31, 2016 were net of accumulated impairment losses of $820 million recognized in fiscal year 2009 by our RBIS reportable segment.

In connection with the 2017 Acquisitions, we recognized goodwill based on our expectation of synergies and other benefits from acquiring these businesses. We expect the majority of the recognized goodwill related to the Hanita acquisition to be deductible for income tax purposes.

Indefinite-Lived Intangible Assets

Results from our annual indefinite-lived intangible assets impairment test in the fourth quarter indicated that no impairment occurred in 2017.

The carrying value of indefinite-lived intangible assets resulting from business acquisitions, consisting of trade names and trademarks, was $21.2 million and $20.3 million at December 30, 2017 and December 31, 2016, respectively. In connection with the Mactac acquisition in 2016, we acquired approximately $13 million of indefinite-lived intangible assets, which consist of trade names. These intangible assets were not subject to amortization as they were classified as indefinite-lived assets.

Finite-Lived Intangible Assets

In connection with the 2017 Acquisitions, we acquired approximately $110 million of identifiable intangible assets, which consisted of customer relationships, trade names and trademarks, and patents and other acquired technology. We utilized the income approach to estimate the fair values of the identifiable intangibles associated with the 2017 Acquisitions, using primarily Level 3 inputs. The discount rates we used to value these assets were between 11% and 16.5%.

The table below summarizes the preliminary amounts and weighted useful lives of these intangible assets:

	Amount (in millions)		Weighted-average amortization period (in years)

Customer relationships	$	71.5		16
Patents and other acquired technology		34.0		8
Trade names and trademarks		4.2		6

In connection with the Mactac acquisition in 2016, we acquired approximately $29 million of identifiable intangible assets, which consisted of customer relationships and patents and other acquired technology. We utilized an income approach to estimate the fair values of the identifiable intangibles acquired from Mactac, using primarily Level 3 inputs. The discount rates we used to value these assets were between 10.5% and 12.5%.

The table below summarizes the amounts and weighted useful lives of these intangible assets:

	Amount (in millions)		Weighted-average amortization period (in years)

Customer relationships	$	26.1		15
Patents and other acquired technology		2.5		4

Refer to Note 2, "Acquisitions," for more information.

The following table sets forth our finite-lived intangible assets resulting from business acquisitions at December 30, 2017 and December 31, 2016, which continue to be amortized:

		2017						2016
(In millions)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

Customer relationships (1)		$	329.2	$	226.4	$	102.8	$	247.1	$	209.4	$	37.7
Patents and other acquired technology (1)			86.9		51.3		35.6		52.0		46.7		5.3
Trade names and trademarks (2)			27.7		21.0		6.7		21.4		18.2		3.2
Other intangibles			12.0		12.0		–		11.7		11.5		.2

Total		$	455.8	$	310.7	$	145.1	$	332.2	$	285.8	$	46.4


(1)	Includes respective finite-lived intangible assets acquired from the 2017 Acquisitions and the Mactac acquisition.
(2)	Includes respective finite-lived intangible assets acquired from the 2017 Acquisitions.

Amortization expense for finite-lived intangible assets resulting from business acquisitions was $18.6 million for 2017, $19.9 million for 2016, and $20.5 million for 2015.

The estimated amortization expense for finite-lived intangible assets resulting from business acquisitions for each of the next five fiscal years is expected to be as follows:

(In millions)	Estimated Amortization Expense

2018	$	14.7
2019		13.9
2020		12.0
2021		11.8
2022		10.8

- 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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