Goodwill and Intangible Assets

12 Months Ended

Dec. 29, 2013

NOTE 6—GOODWILL AND INTANGIBLE ASSETS

In order to evaluate goodwill for impairment, the company identifies its reporting units and determines the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. In accordance with the provisions of the Intangibles—Goodwill and Other Topic of the ASC, the company designates reporting units for purposes of assessing goodwill impairment. A reporting unit is defined as the lowest level of an entity that is a business and that can be distinguished, physically and operationally and for internal reporting purposes, from the other activities, operations, and assets of the entity. Goodwill is assigned to reporting units of the company that are expected to benefit from the synergies of the acquisition. The company has determined that it has three reporting units for purposes of goodwill impairment testing: Mobile, Computing, Consumer and Communications (MCCC), Power Conversion, Industrial and Automotive (PCIA) and Standard Discrete and Standard Linear (SDT). The company’s policy is to evaluate goodwill for impairment for all reporting units in the fourth quarter of each fiscal year. The company evaluated goodwill for impairment as of December 29, 2013 and December 30, 2012 for the past two fiscal years.

During 2011, the company adopted Accounting Standards Update (ASU) 2011-08, Intangibles—Goodwill and Other—Testing Goodwill for Impairment. ASU 2011-08 intends to simplify goodwill impairment testing by permitting assessment of qualitative factors to determine whether events and circumstances lead to the conclusion that it is necessary to perform the two-step goodwill impairment test currently required under ASU 350, Intangibles Goodwill and Other. This analysis was completed for 2012, and based on the results of the analysis; the company concluded that the reporting units would not be subject to the two-step goodwill impairment test. For 2013, the company conducted step I of the quantitative goodwill impairment test, and concluded that there was no goodwill impairment and that the performance of the step II testing was not necessary. Moreover, the company performed various sensitivity analysis based on several key input variables, which further supported the conclusion that there was no goodwill impairment.

When the company performs the two-step impairment test the impairment review is based on a combination of the income approach, which estimates the fair value of the company’s reporting units based on a discounted cash flow approach, and the market approach which estimates the fair value of the company’s reporting units based on comparable market multiples. The average fair value is then reconciled to the company’s market capitalization with an appropriate control premium. The discount rates utilized in the discounted cash flows ranged from approximately 9.9% to 12.7%, reflecting market based estimates of capital costs and discount rates adjusted for a market participants view with respect to execution, concentration, and other risks associated with the projected cash flows of the individual segments. The peer companies used in the market approach are primarily the major competitors of each segment. The company’s valuation methodology requires management to make judgments and assumptions based on historical experience and projections of future operating performance. If these assumptions differ materially from future results, the company may record impairment charges in the future.

As of December 29, 2013 and December 30, 2012, the company concluded that goodwill was not impaired. There were no events to trigger an impairment review of other long lived assets for the years ended December 29, 2013 and December 30, 2012.

During the first quarter of 2012, the company moved two small product groups from the MCCC organization to the PCIA and SDT organizations. Since this changed the company’s reporting units, goodwill was assigned to the reporting units affected using a relative fair value allocation. There was no impairment noted as a result of this realignment.

The following table presents the carrying amount of goodwill by reporting unit.


	MCCC		PCIA			SDT			Total
	(In millions)
Balance as of December 30, 2012 and December 29, 2013
Goodwill	$	162.0	$	156.1		$	54.5		$	372.6
Accumulated Impairment Losses		—		(148.8	)		(54.5	)		(203.3	)

	$	162.0	$	7.3		$	—		$	169.3

The following table presents a summary of acquired intangible assets.


			As of December 29, 2013					As of December 30, 2012
	Period of Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
			(In millions)
Identifiable intangible assets:
Developed technology		2-15 years	$	250.8	$	(240.0	)	$	250.8	$	(228.4	)
Customer base		8-10 years		81.6		(73.6	)		81.6		(71.1	)
Core technology		10 years		15.7		(5.1	)		15.7		(3.9	)
In Process R&D		10 years		2.8		(0.5	)		2.8		(0.2	)
Patents		4 years		5.9		(5.9	)		5.9		(5.9	)

Subtotal				356.8		(325.1	)		356.8		(309.5	)

Goodwill				169.3		—			169.3		—

Total			$	526.1	$	(325.1	)	$	526.1	$	(309.5	)

Amortization expense for intangible assets was $15.5 million, $18.2 million and $19.7 million for 2013, 2012 and 2011, respectively.

The estimated amortization expense for intangible assets for each of the five succeeding fiscal years is as follows:


Estimated Amortization Expense:	(In millions)
Fiscal 2014		7.5
Fiscal 2015		5.2
Fiscal 2016		5.2
Fiscal 2017		2.5
Fiscal 2018		2.2

- 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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