Goodwill and Intangible Assets

12 Months Ended

Dec. 28, 2014

Note 7—Goodwill and Intangible Assets

In order to evaluate goodwill for impairment, we identify our reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. 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. We have determined that we have 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). Our policy is to evaluate goodwill for impairment for reporting units that carry goodwill in the fourth quarter of each fiscal year. We evaluated goodwill for impairment as of December 28, 2014 and December 29, 2013.

For 2014, we elected to assess qualitative factors to determine whether it is necessary to perform the two-step impairment test. We believe as a result of the qualitative assessment, that it is not more-likely-than-not that the fair value of each reporting unit is less than its carrying amount, therefore, no further testing was required and there was no goodwill impairment.

For 2013, we 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.

When we perform the two-step impairment test, the impairment review is based on a combination of the income approach, which estimates the fair value of our reporting units based on a discounted cash flow approach, and the market approach which estimates the fair value of our reporting units based on comparable market multiples. The average fair value is then reconciled to our market capitalization with an appropriate control premium. The discount rates utilized in the discounted cash flows in 2013 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. Our valuation methodology requires management to make judgments and assumptions based on historical experience and projections of future operating performance. In addition, we performed various sensitivity analysis based on several key input variables, which further supported our assessment. If these assumptions differ materially from future results, we may record impairment charges in the future. As of December 28, 2014 and December 29, 2013, we concluded that goodwill was not impaired.

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


	MCCC			PCIA			SDT			Total
	(In millions)
Balance as of December 28, 2014
Goodwill	$	201.9		$	156.1		$	54.5		$	412.5
Accumulated impairment losses		—			(148.8	)		(54.5	)		(203.3	)

	$	201.9		$	7.3		$	—		$	209.2


Xsens acquisition	$	44.4		$	—		$	—		$	44.4
Foreign exchange impact	$	(4.5	)	$	—		$	—		$	(4.5	)

Balance as of 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


Balance as of December 30, 2012
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 28, 2014					As of December 29, 2013
	Period of Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
			(In millions)
Identifiable intangible assets:
Developed technology		8-10 years	$	261.4	$	(245.3	)	$	250.8	$	(240.0	)
Customer base		6-10 years		86.1		(77.4	)		81.6		(73.6	)
Core technology		10-15 years		15.7		(6.3	)		15.7		(5.1	)
In-process R&D		3-10 years		3.3		(0.7	)		2.8		(0.5	)
Trademarks and trade names		5 years		0.5		(0.1	)		—		—

Subtotal				367.0		(329.8	)		350.9		(319.2	)

Goodwill				209.2		—			169.3		—

Total identifiable intangible assets			$	576.2	$	(329.8	)	$	520.2	$	(319.2	)

Amortization expense for intangible assets was $10.6 million, $15.5 million and $18.2 million for 2014, 2013 and 2012, 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 2015	$	9.1
Fiscal 2016		8.1
Fiscal 2017		5.4
Fiscal 2018		4.1
Fiscal 2019		4.0

- 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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