Goodwill and Intangible Assets

3 Months Ended

Mar. 29, 2015

Note 6 – Goodwill and Intangible Assets

We assess the impairment of goodwill on an ongoing basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is subject to an annual impairment test in the fourth quarter of the fiscal year, or more frequently, if indicators of potential impairment arise. In the first quarter of 2015, we reorganized our operating segments. This reorganization required us to assess the impairment of our goodwill and other long-lived assets. The goodwill impairment guidance requires that entities designate reporting units at 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. In previous periods, our reporting units were equivalent to our reportable segments and are consistent with the operating segments described in Note 12 Segments and Geographic Information.

The impairment assessment 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 2015 ranged from approximately 11.5% to 14.0%, 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 reporting unit. 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 analyses 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. In the first quarter of 2015, we conducted step one of the quantitative goodwill impairment test as of the first day of fiscal year 2015. After completing step one of the impairment test, we determined that the estimated fair value of one of our goodwill reporting units was less than the carrying value of that reporting unit. In the first quarter of 2015, we wrote off the entire goodwill balance for the reporting unit with an estimated fair value less than the carrying value, which resulted in an impairment loss of $0.6 million. This goodwill reporting unit is included in the Analog Power and Systems Solutions (APSS) reportable segment described in Note 12 Segments and Geographic Information. The remainder of our reporting units with goodwill had fair values substantially in excess of book values. We generally allocated goodwill to the reporting units based on the relative fair value of the respective unit. In 2014, there were no goodwill impairments and the fair values of the reporting units with goodwill were substantially in excess of book values.

The following table presents the carrying amount of goodwill by operating segment:


	SPS		APSS			SPG		Total
	(In millions)
Balance at December 28, 2014	$	105.1	$	103.0		$	1.1	$	209.2

Impairment loss		—		(0.6	)		—		(0.6	)
Foreign exchange impact		—		(4.0	)		—		(4.0	)

Balance at March 29, 2015	$	105.1	$	98.4		$	1.1	$	204.6

The following table presents a summary of acquired intangible assets.


			As of March 29, 2015					As of December 28, 2014
	Period of Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
			(In millions)
Identifiable intangible assets:
Developed technology		8 - 10 years	$	260.3	$	(245.9	)	$	261.4	$	(245.3	)
Customer base		6 - 10 years		85.7		(78.2	)		86.1		(77.4	)
Core technology		10 - 15 years		15.7		(6.6	)		15.7		(6.3	)
In-process R&D		3 - 10 years		3.2		(0.8	)		3.3		(0.7	)
Trademarks and trade names		5 years		0.5		(0.1	)		0.5		(0.1	)

Subtotal				365.4		(331.6	)		367.0		(329.8	)

Goodwill				204.6		—			209.2		—

Total identifiable intangible assets			$	570.0	$	(331.6	)	$	576.2	$	(329.8	)

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


Estimated Amortization Expense:	(In millions)
Remaining Fiscal 2015		7.0
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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