Goodwill and Other Intangible Assets

9 Months Ended

Sep. 27, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

The Company reviews goodwill for impairment on an annual basis at the beginning of the fourth quarter, or an interim basis if there are indicators of potential impairment. The impairment test is conducted using an income approach. As there is currently no market for the Company’s equity, management performs the impairment analysis utilizing a discounted cash flow approach that incorporates current estimates regarding performance and macroeconomic factors, discounted at a weighted average cost of capital. During the first half of 2014, the Company experienced a decline in operating results primarily due to unfavorable weather conditions, weaker growth in the repair and remodeling market and incremental costs associated with the launch of its new window platform. Management initially believed that the impact of some of these conditions could be quickly remedied. However, since lower-than-expected operating results continued throughout the third quarter, the Company determined that an indicator of potential impairment existed and it is more likely than not that its indefinite-lived intangible assets are impaired. It therefore, performed interim impairment testing as of August 31, 2014.

The Company completed step one of its goodwill impairment testing with the assistance of an independent valuation firm and determined that the fair value of its single reporting unit was lower than its carrying value. This required the Company to proceed to step two of its impairment analysis. Based on preliminary calculations, the Company recorded an estimated goodwill impairment loss of $148.5 million during the quarter ended September 27, 2014. The Company expects to finalize the step two impairment analysis and record any adjustments to the preliminary amount during the fourth quarter of 2014. The goodwill impairment charge is a non-cash item and does not affect the calculation of the borrowing base or financial covenants in the Company’s credit agreement. There is no tax benefit associated with this non-cash charge.

The changes in the carrying amount of goodwill are as follows (in thousands):



	Goodwill
Balance at December 28, 2013	$	471,791
Foreign currency translation	(4,892		)
Impairment	(148,504		)
Balance at September 27, 2014	$	318,395

At September 27, 2014 and December 28, 2013, accumulated goodwill impairment losses were $232.8 million and $84.3 million, respectively, exclusive of foreign currency translation.

The Company’s other intangible assets consist of the following (in thousands):



	September 27, 2014						December 28, 2013
	Cost		Accumulated Amortization		Net Carrying Value		Cost		Accumulated Amortization		Net Carrying Value
Amortized customer bases	$	324,879	$	101,408	$	223,471	$	327,280	$	82,874	$	244,406
Amortized non-compete agreements	20		15		5		20		11		9
Total amortized intangible assets	324,899		101,423		223,476		327,300		82,885		244,415
Non-amortized trade names (1)	225,818		—		225,818		318,809		—		318,809
Total intangible assets	$	550,717	$	101,423	$	449,294	$	646,109	$	82,885	$	563,224

(1) Balances at September 27, 2014 and December 28, 2013 include impairment charges of $89.7 million recorded in the third quarter of 2014 and $79.9 million recorded in 2011, respectively.

The Company’s non-amortized intangible assets consist of the Alside^®, Revere^®, Gentek^®, Preservation^® and Alpine^® trade names and are subject to testing for impairment on an annual basis at the beginning of the fourth quarter, or an interim basis if indicators of potential impairment are present. As noted above, management determined that an indicator of potential impairment existed for the non-amortized trade names as of August 31, 2014 and completed an interim test of the fair value with the assistance of an independent valuation firm. Using the income approach, the Company determined that the fair value of certain non-amortized trade names was lower than the carrying value, and consequently, the Company recorded an impairment charge of $89.7 million during the quarter ended September 27, 2014.

Finite-lived intangible assets, which consist of customer bases and non-compete agreements, are amortized on a straight-line basis over their estimated useful lives. The estimated average amortization period for customer bases and non-compete agreements is 13 years and 3 years, respectively. Amortization expense related to other intangible assets was $6.4 million and $19.3 million for the quarter and nine months ended September 27, 2014, respectively, and $6.5 million and $19.6 million for the quarter and nine months ended September 28, 2013, respectively.

- 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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