Goodwill and Other Intangible Assets

12 Months Ended

Jan. 03, 2015

Acquisitions, Goodwill and Other Intangible Assets [Abstract]

Acquisitions, Goodwill and Other Intangible Assets [Text Block]

NOTE 2

GOODWILL AND OTHER INTANGIBLE ASSETS

Pringles® acquisition

On May 31, 2012, the Company completed its acquisition of the Pringles® business (Pringles) from The Procter & Gamble Company (P&G) for $2.695 billion, or $2.683 billion net of cash and cash equivalents, subject to certain purchase price adjustments, which resulted in a reduction of the purchase price by approximately $15 million to $2.668 billion net of cash and cash equivalents. The acquisition was accounted for under the purchase method and was financed through a combination of cash on hand, and short-term and long-term debt. The assets and liabilities of Pringles are included in the Consolidated Balance Sheet as of January 3, 2015 and December 28, 2013 and the results of the Pringles operations subsequent to the acquisition date are included in the Consolidated Statement of Income.

The final acquired assets and assumed liabilities include the following:

(millions)			May 31, 2012
Accounts receivable, net		$	128
Inventories			103
Other prepaid assets			18
Property			317
Goodwill			1,319
Other intangibles:
	Definite-lived intangible assets		79
	Brand		776
Other assets:
	Deferred income taxes		23
	Other		16
Notes payable			(3)
Accounts payable			(9)
Other current liabilities			(24)
Other liabilities			(75)
		$	2,668

Goodwill of $645 million is expected to be deductible for statutory tax purposes.

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets recognized. The goodwill recorded as part of the acquisition primarily reflects the value of providing an established platform to leverage the Company's existing brands in the international snacks category, synergies expected to arise from the combined brand portfolios, as well as any intangible assets that do not qualify for separate recognition.

For the years ended January 3, 2015 and December 28, 2013, the Company incurred integration-related costs as part of the Pringles acquisition as follows: $20 million ($46 million in 2013) recorded in SGA, $22 million ($15 million in 2013) recorded in COGS and $1 million ($5 million in 2013) in net sales. Transaction fees and other integration-related costs incurred through December 29, 2012 were as follows: $73 million recorded in SGA, $3 million recorded in COGS and $5 million in fees for a bridge financing facility which are recorded in OIE.

Changes in the carrying amount of goodwill are presented in the following table.

Changes in the carrying amount of goodwill

		U.S.						North
		Morning		U.S.		U.S.		America				Latin		Asia		Consoli-
(millions)		Foods		Snacks		Specialty		Other		Europe		America		Pacific		dated
December 29, 2012	$	133	$	3,767	$	82	$	280	$	438	$	92	$	246	$	5,038
Pringles goodwill		-		-		-		-		10		-		3		13
Other goodwill		-		12		-		-		-		-		-		12
Currency translation adjustment		-		-		-		(2)		4		(3)		(11)		(12)
December 28, 2013	$	133	$	3,779	$	82	$	278	$	452	$	89	$	238	$	5,051
Currency translation adjustment		-		-		-		(5)		(63)		(6)		(6)		(80)
January 3, 2015	$	133	$	3,779	$	82	$	273	$	389	$	83	$	232	$	4,971


Intangible assets subject to amortization
(millions)

		U.S.						North
		Morning		U.S.		U.S.		America				Latin		Asia		Consoli-
Gross carrying amount		Foods*		Snacks*		Specialty		Other		Europe*		America*		Pacific		dated
December 29, 2012	$	8	$	65	$	-	$	5	$	41	$	6	$	10	$	135
Currency translation adjustment		-		-		-		-		1		-		-		1
December 28, 2013	$	8	$	65	$	-	$	5	$	42	$	6	$	10	$	136
Currency translation adjustment		-		-		-		-		(4)		-		-		(4)
January 03, 2015	$	8	$	65	$	-	$	5	$	38	$	6	$	10	$	132

Accumulated Amortization
December 29, 2012	$	8	$	7	$	-	$	3	$	1	$	6	$	-	$	25
Amortization		-		4		-		1		3		-		1		9
December 28, 2013	$	8	$	11	$	-	$	4	$	4	$	6	$	1	$	34
Amortization		-		5		-		-		3		-		1		9
January 03, 2015	$	8	$	16	$	-	$	4	$	7	$	6	$	2	$	43

Intangible assets subject to amortization, net
December 29, 2012	$	-	$	58	$	-	$	2	$	40	$	-	$	10	$	110
Amortization		-		(4)		-		(1)		(3)		-		(1)		(9)
Currency translation adjustment		-		-		-		-		1		-		-		1
December 28, 2013	$	-	$	54	$	-	$	1	$	38	$	-	$	9	$	102
Amortization (a)		-		(5)		-		-		(3)		-		(1)		(9)
Currency translation adjustment		-		-		-		-		(4)		-		-		(4)
January 03, 2015	$	-	$	49	$	-	$	1	$	31	$	-	$	8	$	89
* Certain fully amortized intangible assets which were no longer utilized by the Company have been written off and revised in prior period presentation. The impact to the reporting segments are as follows (millions): U.S. Morning Foods - $20; U.S. Snacks - $5; Europe - $2; Latin America - $1.
(a) The currently estimated aggregate amortization expense for each of the next five succeeding fiscal periods is approximately $9 million per year.


Intangible assets not subject to amortization
(millions)

		U.S.						North
		Morning		U.S.		U.S.	America					Latin		Asia		Consoli-
(millions)		Foods	Snacks			Specialty		Other		Europe	America			Pacific		dated
December 29, 2012	$	63	$	1,625	$	-	$	95	$	466	$	-	$	-	$	2,249
Currency translation adjustment		-		-		-		-		16		-		-		16
December 28, 2013	$	63	$	1,625	$	-	$	95	$	482	$	-	$	-	$	2,265
Currency translation adjustment		-		-		-		-		(59)		-		-		(59)
January 3, 2015	$	63	$	1,625	$	-	$	95	$	423	$	-	$	-	$	2,206

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities.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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