Goodwill and Other Intangible Assets

12 Months Ended

Jun. 29, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets:

Goodwill reflects the cost of acquisitions in excess of the fair values assigned to identifiable net assets acquired. Goodwill is assigned to reporting units based upon the expected benefit of the synergies of the acquisition. The reporting units are Engines and Products.

The changes in the carrying amount of goodwill for the fiscal years ended June 29, 2014 and June 30, 2013 are as follows (in thousands):



	Engines			Products			Total
Goodwill Balance at July 1, 2012	$	137,359		$	67,405		$	204,764
Impairment Loss	—			(71,310		)	(71,310		)
Acquisition	4,589			10,707			15,296
Effect of Translation	(1,011		)	(387		)	(1,398		)
Goodwill Balance at June 30, 2013	$	140,937		$	6,415		$	147,352
Impairment Loss	—			(2,960		)	(2,960		)
Acquisition	—			—			—
Effect of Translation	125			5			130
Goodwill Balance at June 29, 2014	$	141,062		$	3,460		$	144,522

At June 29, 2014, June 30, 2013 and July 1, 2012, accumulated goodwill impairment losses, as recorded in the Products segment, were $123.7 million, $120.8 million and $49.5 million respectively.

The Company evaluates goodwill for impairment at least annually as of the fiscal year-end or more frequently if events or circumstances indicate that the assets may be impaired. Goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is to compare the carrying values of each of the Company's reporting units to their estimated fair values as of the test dates. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the book value of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed, which compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount is in excess of the implied fair value, goodwill is considered to be impaired. The estimates of fair value of the reporting units are computed using an income approach. The income approach utilizes a multi-year forecast of estimated cash flows and a terminal value at the end of the cash flow period. The forecast period assumptions consist of internal projections that are based on the Company's budget and long-range strategic plan. The discount rate used at the test date is the weighted-average cost of capital which reflects the overall level of inherent risk of the reporting unit and the rate of return an outside investor would expect to earn. The fair value of goodwill is considered a non-recurring level 3 fair value measurement in accordance with ASC 820 Fair Value Measurement.

In fiscal 2013, the Company recorded a non-cash goodwill impairment charge of $71.3 million, which was determined by comparing the carrying value of the Products reporting unit goodwill with the implied fair value of goodwill for the reporting unit. Based on a combination of factors, predominantly driven by a slower than anticipated recovery of the North American lawn and garden market at that time and the operating results of the Products segment during the previous years leading up to the impairments which lacked the benefit of certain weather related events that would have been favorable to the business, the Company’s forecasted cash flow estimates used in the goodwill assessment as of June 30, 2013 were adversely impacted. As a result, the Company concluded that the carrying value amounts of the Products reporting unit exceeded its fair value as of June 30, 2013. The impairment charge was a non-cash expense that was recorded as a separate component of operating expenses. The impairment charge did not adversely affect the Company’s debt position, cash flow, liquidity or compliance with financial covenants under its revolving credit facility.

The Company’s other intangible assets as of June 29, 2014 and June 30, 2013 are as follows (in thousands):



	2014									2013
	Gross Carrying Amount			Accumulated Amortization			Net			Gross Carrying Amount			Accumulated Amortization			Net
Amortized Intangible Assets:
Patents	$	13,601		$	(11,167	)	$	2,434		$	13,601		$	(10,680	)	$	2,921
Customer Relationships	32,539			(8,610		)	23,929			32,539			(6,971		)	25,568
Effect of Translation	(991		)	(49		)	(1,040		)	(991		)	39			(952		)
Total Amortized Intangible Assets	45,149			(19,826		)	25,323			45,149			(17,612		)	27,537
Unamortized Intangible Assets:
Tradenames	55,016			—			55,016			60,516			—			60,516
Effect of Translation	(22		)	—			(22		)	(73		)	—			(73		)
Total Unamortized Intangible Assets	54,994			—			54,994			60,443			—			60,443
Total Intangible Assets	$	100,143		$	(19,826	)	$	80,317		$	105,592		$	(17,612	)	$	87,980

The Company also performs an impairment test of its indefinite-lived intangible assets as of the fiscal year-end or more frequently if events or circumstances indicate that the assets may be impaired. For purposes of the indefinite-lived intangible asset impairment analysis, the Company performs its assessment of fair value based on an income approach using the relief-from-royalty method. The Company determines the fair value of each tradename by applying a royalty rate to a projection of net sales discounted using a risk adjusted cost of capital. Sales growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches and many other variables. Each royalty rate is based on profitability of the business to which it relates and observed market royalty rates. The fair value of indefinite-lived intangibles is considered a non-recurring level 3 fair value measurement in accordance with ASC 820 Fair Value Measurement.

In fiscal 2014 and fiscal 2013, the non-cash intangible asset impairment charge recorded was $5.5 million and $18.8 million, respectively. Based on a combination of factors, predominantly driven by a slower than anticipated recovery of the North American lawn and garden market at that time, the Company’s forecasted cash flow estimates used in the other intangible assets assessment as of June 29, 2014 and June 30, 2013 were adversely impacted. As a result, the Company concluded that the carrying value of a tradename within the Products reporting unit exceeded its fair value as of June 29, 2014 and June 30, 2013. The impairment charges did not adversely affect the Company’s debt position, cash flow, liquidity or compliance with financial covenants under its revolving credit facility. In fiscal 2012, the Company determined that no intangible asset impairment existed.

Amortization expense of other intangible assets amounted to approximately $2.2 million in 2014, $2.5 million in 2013, and $1.9 million in 2012.

The estimated amortization expense of other intangible assets for the next five years is (in thousands):




2015	$	2,178
2016	2,178
2017	2,178
2018	2,178
2019	2,178

	$	10,890

- 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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