GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL — The changes in the carrying amount of goodwill by segment are as follows:



(Millions of Dollars)	Tools & Storage			Security			Industrial		Total
Balance January 2, 2016	$	3,343.4		$	2,317.2		$	1,423.7	$	7,084.3
Reclassification to Assets held for sale	(5.7		)	(297.1		)	—		(302.8		)
Acquisitions	3.0			21.6			—		24.6
Foreign currency translation and other	(92.9		)	(34.7		)	15.5		(112.1		)
Balance December 31, 2016	$	3,247.8		$	2,007.0		$	1,439.2	$	6,694.0

As previously discussed, the assets and liabilities expected to be included in the sales of the mechanical security businesses within the Security segment and the small business within the Tools & Storage segment have been classified as held for sale on the Company's Consolidated Balance Sheets as of December 31, 2016. As a result, in accordance with ASC 350, "Intangibles - Goodwill and Other," a portion of the goodwill associated with the Security and Tools & Storage segments was allocated to these businesses. The amounts allocated were based on the relative fair values of the businesses to be sold and the portions of the reporting units that were retained. Accordingly, goodwill for the Security and Tools & Storage segments was reduced by $297.1 million and $5.7 million, respectively, and classified within Assets held for sale on the Consolidated Balance Sheets as of December 31, 2016.

As required by the Company's policy, goodwill and indefinite-lived trade names were tested for impairment in the third quarter of 2016. The Company assessed the fair value of its Infrastructure reporting unit utilizing a discounted cash flow valuation model as had been done in previous years and determined that the fair value exceeded the respective carrying amount. The key assumptions used were the discount rate and perpetual growth rate applied to cash flow projections. Also inherent in the discounted cash flow valuation were near-term revenue growth rates over the next five years. These assumptions contemplated business, market and overall economic conditions.

For the remaining four reporting units, the Company determined qualitatively that it was not more likely than not that goodwill was impaired, and thus, the quantitative goodwill impairment test was not required. In making this determination, the Company considered the significant excess of fair value over carrying amount as calculated in the most recent quantitative analysis performed in conjunction with the 2015 annual impairment test, each reporting unit's 2016 performance compared to prior year and their respective industries, analyst multiples and other positive qualitative information, all of which indicated that it is more likely than not that the fair values of the four reporting units were greater than the respective carrying amounts. Based on this evaluation of internal and external qualitative factors, the Company concluded that the quantitative goodwill impairment test was not required for these four reporting units.

The fair values of the Company's indefinite-lived trade names were assessed using both qualitative assessments, which considered relevant key external and internal factors, and quantitative analyses, which utilized discounted cash flow valuation models taking into consideration appropriate discount rates, royalty rates and perpetual growth rates applied to projected sales. Based on the results of this testing, the Company determined that the fair values of each of its indefinite-lived trade names exceeded their respective carrying amounts.

During the fourth quarter of 2016, in connection with its quarterly forecasting cycle, the Company updated the forecasted operating results for each of its businesses based on the most recent financial results and best estimates of future operations. The updated forecasts reflected an expected decline in near-term revenue growth and profitability for the Infrastructure reporting unit within the Industrial segment, primarily due to ongoing difficult market conditions in the oil & gas industry, mainly related to project delays as a result of continued geopolitical challenges and a cyclical slowdown in offshore pipeline activity, as well as a slower than expected recovery in the scrap steel market. Accordingly, in connection with the preparation of the Consolidated Financial Statements for the year ended December 31, 2016, the Company performed an updated impairment analysis with respect to the Infrastructure reporting unit, which included approximately $269 million of goodwill at year-end. Based on this analysis, which included revised assumptions of near-term revenue growth and profitability levels, it was determined that the fair value of the Infrastructure reporting unit exceeded its carrying value by 14%. Therefore, management concluded it was not more likely than not that an impairment had occurred. Management is confident in the long-term viability and success of the Infrastructure reporting unit based on the strong long-term growth prospects of the markets and geographies served, the Company's continued commitment to, and investments in, organic growth initiatives (including solid progress being made with respect to Breakthrough Innovation projects under the SFS 2.0 program), and Infrastructure's leading market position in its respective industries.

In the event that future operating results of any of the Company's reporting units do not meet current expectations, management, based upon conditions at the time, would consider taking restructuring or other actions as necessary to maximize revenue growth and profitability. A thorough analysis of all the facts and circumstances existing at that time would need to be performed to determine if recording an impairment loss would be appropriate.

INTANGIBLE ASSETS — Intangible assets at December 31, 2016 and January 2, 2016 were as follows:



	2016					2015
(Millions of Dollars)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized Intangible Assets — Definite lives
Patents and copyrights	$	40.7	$	(36.5	)	$	50.6	$	(44.2	)
Trade names	152.0		(100.4		)	164.8		(100.8		)
Customer relationships	1,614.6		(978.9		)	1,774.2		(995.5		)
Other intangible assets	258.2		(158.7		)	263.3		(148.7		)
Total	$	2,065.5	$	(1,274.5	)	$	2,252.9	$	(1,289.2	)

Total indefinite-lived trade names are $1,508.5 million at December 31, 2016 and $1,577.8 million at January 2, 2016. The year-over-year decrease is due to a reclassification of $65.2 million to Assets held for sale relating to the previously discussed pending sale of the majority of the Company's mechanical security businesses within the Security segment and currency fluctuations. In addition, net definite-lived intangible assets totaling $31.8 million were reclassified to Assets held for sale as of December 31, 2016.

Aggregate intangible assets amortization expense by segment was as follows:



(Millions of Dollars)	2016		2015		2014
Tools & Storage	$	36.8	$	39.0	$	40.7
Security	57.8		61.3		78.8
Industrial	49.8		56.8		66.9
Consolidated	$	144.4	$	157.1	$	186.4

The 2014 amounts above are inclusive of amortization expense for discontinued operations amounting to $2.9 million.

Future amortization expense in each of the next five years amounts to $125.7 million for 2017, $116.3 million for 2018, $107.9 million for 2019, $90.1 million for 2020, $81.8 million for 2021 and $269.2 million thereafter.

- 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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