Goodwill and Other Intangible Assets

12 Months Ended

Jan. 03, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

In accordance with FASB ASC 350, the Company is required to evaluate the carrying value of its goodwill for potential 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 were 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. During the fourth quarter, the Company finalized step two of the impairment analysis and reduced the impairment charge by $4.3 million, for a final impairment charge of $144.2 million. 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.

In addition to the interim impairment testing of goodwill, the Company conducted its annual impairment testing as of beginning of the fourth quarter of 2014. No impairment charges were recorded as the fair value of its reporting unit was higher than its carrying value. During each of 2013 and 2012, the Company completed the annual impairment test of goodwill and based on the results of the testing, no impairment charges were recorded.

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



	Goodwill
Balance at December 29, 2012	$	482,613
Foreign currency translation	(10,822		)
Balance at December 28, 2013	471,791
Impairment	(144,159		)
Foreign currency translation	(10,375		)
Balance at January 3, 2015	$	317,257

At January 3, 2015 and December 28, 2013 accumulated goodwill impairment losses were $228.5 million and $84.3 million, respectively, exclusive of foreign currency translation.

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



	January 3, 2015						December 28, 2013
	Cost		Accumulated Amortization		Net Carrying Value		Cost		Accumulated Amortization		Net Carrying Value
Amortized customer bases	$	321,836	$	106,655	$	215,181	$	327,280	$	82,874	$	244,406
Amortized non-compete agreements	20		16		4		20		11		9
Total amortized intangible assets	321,856		106,671		215,185		327,300		82,885		244,415
Non-amortized trade names (1)	222,115		—		222,115		318,809		—		318,809
Total intangible assets	$	543,971	$	106,671	$	437,300	$	646,109	$	82,885	$	563,224


(1)	Balances at January 3, 2015 and December 28, 2013 include impairment charges of $89.7 million recorded in 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 tested for impairment on an annual basis at the beginning of the fourth quarter, or an interim basis if there are indicators of potential impairment. During 2014, 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. During each of 2014, 2013 and 2012, the Company completed the annual impairment test of intangible assets with indefinite lives and based on the results of the testing, no impairment charges were recorded.

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 $25.7 million, $26.0 million and $26.2 million for the years ended January 3, 2015, December 28, 2013 and December 29, 2012, respectively. Amortization expense is estimated to be approximately $25 million per year for fiscal years 2015, 2016, 2017, 2018 and 2019.

- 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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