Goodwill and Intangibles

12 Months Ended

Dec. 30, 2018

(5) Goodwill and Intangibles

Goodwill

Changes in the carrying amount of goodwill, by operating segment, for the years ended December 30, 2018 and December 31, 2017 are as follows:

					Entertainment
	U.S. and Canada		International		and Licensing		Total
2018
Balance at December 31, 2017	$	296,978		170,699		105,386		573,063
Impairment during the period		—		—		(86,253)		(86,253)
Foreign exchange translation		—		(338)		(591)		(929)
Balance at December 30, 2018	$	296,978		170,361		18,542		485,881

2017
Balance at December 25, 2016	$	296,978		169,833		103,744		570,555
Foreign exchange translation		—		866		1,642		2,508
Balance at December 31, 2017	$	296,978		170,699		105,386		573,063

A portion of the Company's goodwill and other intangible assets reside in the Corporate segment of the business. For purposes of the goodwill impairment testing, these assets are allocated to the reporting units within the Company's operating segments.

The Company performs an annual impairment assessment on goodwill. This annual impairment assessment is performed in the fourth quarter of the Company's fiscal year. In addition, if an event occurs or circumstances change that indicate that the carrying value may not be recoverable, the Company will perform an interim impairment test at that time.

During the fourth quarter of 2018 the Company adopted (ASU 2017-04), Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit (“the Step 2 test”) from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit.

During the fourth quarter of 2018, the Company took a number of actions to react to a rapidly changing mobile gaming industry that resulted in a modification to the Company’s long-term plan for its Backflip business. These modifications included organizational actions and related personnel changes, the extension of launch dates for game currently in or planned for development and the addition of partners for the development of future games releases. The modifications resulted in changes to the long-term projections for the Backflip business. The goodwill impairment analysis involved comparing the Backflip carrying value to its estimated fair value, which was calculated based on the Income Approach. Discounted cash flows serve as the primary basis for the Income Approach. The Company utilized forecasted cash flows for the Backflip reporting unit that included assumptions including but not limited to: expected revenues to be realized based on planned future mobile game releases, expected EBITDA margins derived in part based on expected future royalty costs, advertising and marketing costs, development costs, overhead costs, and expected future tax rates. The cash flows beyond the forecast period were estimated using a terminal value growth rate of 3%. To calculate the fair value of the future cash flows under the Income Approach, a discount rate of 19% was utilized, representing the reporting unit’s estimated weighted-average cost of capital. Based on the results of the impairment test, the Company determined that the carrying value of the Backflip reporting unit exceeded its estimated fair value. Based on this assessment, the Company recorded an impairment charge of $86,253 in the fourth quarter of 2018, in the Company’s Entertainment and Licensing segment, which was the full amount of remaining goodwill associated with the Backflip reporting unit.

During the fourth quarter of 2016 in conjunction with the Company’s annual review for impairment, the Company recorded an impairment charge of $32,858 after completing its evaluation of the Backflip reporting unit. The Company’s 2016 evaluation was dependent in large part on the performance of related product launches that took place during the fourth quarter of 2016 in addition to revised expectations regarding the timing of future product launches at that time.

Based on its qualitative assessment of goodwill for all reporting units with the exception of Backflip, the company concluded there was no other impairment of goodwill during 2018 or 2016. The Company completed its annual impairment tests of goodwill in the fourth quarter of 2017 and concluded that there was no impairment of its goodwill.

Other Intangibles, Net

A summary of the Company's other intangibles, net at December 30, 2018 and December 31, 2017:

	2018		2017
Acquired product rights	$	1,309,344		789,940
Licensed rights of entertainment properties		30,501		256,555
Accumulated amortization		(721,741)		(904,851)
Amortizable intangible assets		618,104		141,644
Product rights with indefinite lives		75,738		75,738
Total other intangibles, net	$	693,842		217,382

Certain intangible assets relating to rights obtained in the Company's acquisition of Milton Bradley in 1984 and Tonka in 1991 are not amortized. These rights were determined to have indefinite lives and are included as product rights with indefinite lives in the table above. The Company tests these assets for impairment on an annual basis in the fourth quarter of each year or when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. The Company completed its annual impairment tests of indefinite-lived intangible assets in the fourth quarter of 2018, 2017, and 2016 concluding that there was no impairment of these assets. The Company's other intangible assets are amortized over their remaining useful lives, and accumulated amortization of these other intangibles is reflected in other intangibles, net in the accompanying consolidated balance sheets.

Intangible assets are reviewed for indications of impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.

In the fourth quarter of 2018, the Company reviewed intangible assets recorded in connection with licensed property rights and owned technology. Due to a decline in revenue and revised projections for future revenue, it was determined that the intangible asset carrying values exceeded expected future cash flows, indicating that the intangible assets were impaired. The Company calculated the fair value of the intangible assets based on a discounted cash flow, which resulted in a charge of $31,303 million recorded within administrative expense and in the Company’s Corporate and Eliminations segment.

Other than the intangible assets discussed above, no other indications of impairment existed. The Company will continue to incur amortization expense related to the use of acquired and licensed rights to produce various products. A portion of the amortization of these product rights will fluctuate depending on brand activation, related revenues during an annual period and future expectations, as well as rights reaching the end of their useful lives. The Company currently estimates amortization expense related to the above intangible assets for the next five years to be approximately:

2019	$	47,000
2020		49,000
2021		36,000
2022		36,000
2023		27,000