Goodwill and Other Intangible Assets

12 Months Ended

Jan. 02, 2016

Acquisitions, Goodwill and Other Intangibles [Abstract]

Acquisitions, Goodwill and Other Intangibles [Text Block]

GOODWILL AND OTHER INTANGIBLE ASSETS

Bisco Misr and Mass Foods acquisitions

In January 2015, the Company completed its acquisition of a majority interest in Bisco Misr, the number one packaged biscuits company in Egypt, for $125 million, or $117 million net of cash and cash equivalents acquired. In October 2015, the Company acquired additional ownership in Bisco Misr through payment of $13 million to non-controlling interests, which is reported as financing activity on the Consolidated Statement of Cash Flows. As of January 2, 2016, the Company owns greater than 95% of Bisco Misr outstanding shares.

In September 2015, the Company completed the acquisition of Mass Foods, Egypt's leading cereal company, for $46 million, or $44 million, net of cash and cash equivalents acquired, subject to certain purchase price adjustments.

The acquisitions were accounted for under the purchase method and were financed through cash on hand. The assets and liabilities of Bisco Misr and Mass Foods are included in the Consolidated Balance Sheet as of January 2, 2016 and the results of their operations subsequent to the acquisition date, which are immaterial, are included in the Consolidated Statement of Income within the Europe operating segment. In addition, the pro-forma effect of these acquisitions, if the acquisitions had been completed at the beginning of 2014, would have been immaterial.

The acquired assets and assumed liabilities include the following:



(millions)	January 18, 2015
Current assets	$	21
Property	90
Goodwill	81
Intangible assets and other	46
Current liabilities	(24		)
Other non current liabilities, primarily deferred taxes	(33		)
Non-controlling interests	(20		)
	$	161

Goodwill, which is not expected to be deductible for statutory tax purposes, is calculated as the excess of the purchase price over the fair value of the net assets recognized. The goodwill recorded primarily reflects the value of providing an established platform to leverage the Company’s existing brands in the markets served by Bisco Misr and Mass Foods as well as any intangible assets that do not qualify for separate recognition. The allocation of purchase price for Bisco Misr was finalized in the 4th quarter of 2015. The allocation of the purchase price of Mass Foods is subject to revision when appraisals are finalized, which is expected to occur no later than the third quarter of 2016.

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



Changes in the carrying amount of goodwill
(millions)	U.S. Morning Foods		U.S. Snacks			U.S. Specialty		North America Other			Europe			Latin America			Asia Pacific			Consoli- dated
December 28, 2013*	$	131	$	3,589		$	82	$	470		$	452		$	89		$	238		$	5,051
Currency translation adjustment	—		—			—		(5		)	(63		)	(6		)	(6		)	(80		)
January 3, 2015*	$	131	$	3,589		$	82	$	465		$	389		$	83		$	232		$	4,971
Additions	—		—			—		—			81			—			—			81
VIE deconsolidation	—		(21		)	—		—			—			—			—			(21		)
Currency translation adjustment	—		—			—		(9		)	(39		)	(7		)	(8		)	(63		)
January 2, 2016	$	131	$	3,568		$	82	$	456		$	431		$	76		$	224		$	4,968

* In conjunction with the establishment of the Kashi operating segment, included within the North America Other reportable segment, certain intangible assets were reallocated. All prior period balances were updated to conform with current presentation.



Intangible assets subject to amortization
(millions) Gross carrying amount	U.S. Morning Foods		U.S. Snacks			U.S. Specialty		North America Other		Europe			Latin America		Asia Pacific			Consoli- dated
December 28, 2013	$	8	$	65		$	—	$	5	$	42		$	6	$	10		$	136
Currency translation adjustment	—		—			—		—		(4		)	—		—			(4		)
January 3, 2015	$	8	$	65		$	—	$	5	$	38		$	6	$	10		$	132
Additions	—		—			—		—		9			—		—			9
VIE deconsolidation	—		(23		)	—		—		—			—		—			(23		)
Currency translation adjustment	—		—			—		—		(2		)	—		—			(2		)
January 2, 2016	$	8	$	42		$	—	$	5	$	45		$	6	$	10		$	116

Accumulated Amortization
December 28, 2013	$	8	$	11		$	—	$	4	$	4		$	6	$	1		$	34
Amortization	—		5			—		—		3			—		1			9
January 3, 2015	$	8	$	16		$	—	$	4	$	7		$	6	$	2		$	43
VIE deconsolidation	—		(4		)	—		—		—			—		—			(4		)
Amortization (a)	—		4			—		—		4			—		—			8
January 2, 2016	$	8	$	16		$	—	$	4	$	11		$	6	$	2		$	47

Intangible assets subject to amortization, net
December 28, 2013	$	—	$	54		$	—	$	1	$	38		$	—	$	9		$	102
Amortization	—		(5		)	—		—		(3		)	—		(1		)	(9		)
Currency translation adjustment	—		—			—		—		(4		)	—		—			(4		)
January 3, 2015	$	—	$	49		$	—	$	1	$	31		$	—	$	8		$	89
Additions	—		—			—		—		9			—		—			9
VIE deconsolidation	—		(19		)	—		—		—			—		—			(19		)
Amortization (a)	—		(4		)	—		—		(4		)	—		—			(8		)
Currency translation adjustment	—		—			—		—		(2		)	—		—			(2		)
January 2, 2016	$	—	$	26		$	—	$	1	$	34		$	—	$	8		$	69

(a) The currently estimated aggregate amortization expense for each of the next five succeeding fiscal periods is approximately $7 million per year.



Intangible assets not subject to amortization
(millions)	U.S. Morning Foods		U.S. Snacks		U.S. Specialty		North America Other		Europe			Latin America		Asia Pacific		Consoli- dated
December 28, 2013*	$	—	$	1,625	$	—	$	158	$	482		$	—	$	—	$	2,265
Currency translation adjustment	—		—		—		—		(59		)	—		—		(59		)
January 3, 2015*	$	—	$	1,625	$	—	$	158	$	423		$	—	$	—	$	2,206
Additions	—		—		—		—		36			—		—		36
Currency translation adjustment	—		—		—		—		(43		)	—		—		(43		)
January 2, 2016	$	—	$	1,625	$	—	$	158	$	416		$	—	$	—	$	2,199

- 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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