(Goodwill and Other Intangible Assets )

9 Months Ended

Oct. 03, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The Company reviews goodwill for impairment on an annual basis at the beginning of the fourth quarter, or on an interim basis if there are indicators of potential impairment. The impairment test is conducted with the assistance of an independent valuation firm 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. Based on its most recent annual step one impairment test of goodwill, performed during the fourth quarter of 2014, as of September 28, 2014, the Company’s fair value exceeded carrying value by approximately 14%. The assumptions utilized to estimate the fair value of the enterprise included 5-year projections of revenue, contribution margin, adjusted EBITDA and cash flows. Additional considerations included industry trends, internal management of operating expenses and anticipated improvements to the manufacturing inefficiencies that hindered its operating results during 2014.

The operating results for the period ended October 3, 2015 are meeting or do not significantly deviate from the projections utilized previously during the prior year’s annual step one impairment test. Therefore, the Company did not recognize any impairment losses of its goodwill during the quarter or nine months ended October 3, 2015 and unless market conditions change from current expectations, the Company does not expect that it will have to record additional, material goodwill or non-amortizable intangible impairment charges in the near future.

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 was 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, which was reduced by $4.3 million during the fourth quarter when the Company finalized step two. 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 January 3, 2015	$	317,257
Foreign currency translation	(10,052		)
Balance at October 3, 2015	$	307,205

At each of the periods ended October 3, 2015 and January 3, 2015, accumulated goodwill impairment losses were $228.5 million, exclusive of foreign currency translation.

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



	October 3, 2015						January 3, 2015
	Cost		Accumulated Amortization		Net Carrying Value		Cost		Accumulated Amortization		Net Carrying Value
Amortized customer bases	$	316,221	$	123,151	$	193,070	$	321,836	$	106,655	$	215,181
Amortized non-compete agreements	20		19		1		20		16		4
Total amortized intangible assets	316,241		123,170		193,071		321,856		106,671		215,185
Non-amortized trade names (1)	215,282		—		215,282		222,115		—		222,115
Total intangible assets	$	531,523	$	123,170	$	408,353	$	543,971	$	106,671	$	437,300

(1) Balances at October 3, 2015 and January 3, 2015 include impairment charges of $169.6 million, of which $89.7 million were recorded in the second half of 2014 and $79.9 million recorded were recorded in 2011.

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 on an interim basis if indicators of potential impairment are present. The Company did not recognize any impairment losses of its other intangible assets during the quarter and nine months ended October 3, 2015.

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 $6.3 million and $18.8 million for the quarter and nine months ended October 3, 2015, respectively, and $6.4 million and $19.3 million for the quarter and nine months ended September 27, 2014, 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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