Goodwill and Intangible Assets
The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of October 25, 2013 and October 26, 2012 are as follows:
|
| | | | | | | | | | | | | | | | | |
| | | October 25, 2013 | | October 26, 2012 |
In thousands | Weighted Average Amortization Period | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
Finite lived other intangible assets: | | | | | | | | | |
Backlog | 1 year | | $ | 13,198 |
| | $ | (13,198 | ) | | $ | 17,018 |
| | $ | (17,018 | ) |
Customer relationships | 17 years | | 259,000 |
| | (57,764 | ) | | 340,200 |
| | (46,630 | ) |
Engineering drawings | 6 years | | 2,900 |
| | (2,900 | ) | | 2,900 |
| | (2,900 | ) |
Non-compete agreements | 5 years | | 5,800 |
| | (5,800 | ) | | 5,800 |
| | (5,750 | ) |
Patents | 19 years | | 91,076 |
| | (19,109 | ) | | 91,184 |
| | (14,704 | ) |
Trademarks | 5 years | | 12,200 |
| | — |
| | — |
| | — |
|
Unpatented technology | 20 years | | 32,851 |
| | (4,142 | ) | | 32,836 |
| | (2,512 | ) |
Subtotal | 16 years | | 417,025 |
| | (102,913 | ) | | 489,938 |
| | (89,514 | ) |
Indefinite-lived other intangible assets: | | | | | | | | | |
Trademarks | | | 17,700 |
| | — |
| | 188,800 |
| | — |
|
Total other intangible assets | | | $ | 434,725 |
| | $ | (102,913 | ) | | $ | 678,738 |
| | $ | (89,514 | ) |
In the first quarter of fiscal 2013, we finalized the determination of the fair value of net assets acquired of IMM. This resulted in an $81.2 million decrease in customer relationship intangibles, a $3.8 million decrease in backlog and a $3.7 million decrease in trademarks from fiscal 2012.
In the fourth quarter of fiscal 2013, we reviewed our brand portfolio and developed a strategy to increase the visibility of our core brands in furtherance of our One Joy Global initiative. During this review we determined that the indefinite life assumption was no longer appropriate for most of our previously acquired trademarks.
In connection with the review of our brand portfolio, we worked with a third party appraisal firm to develop new estimates of fair value of our trademark portfolio using discounted cash flow models. In connection with obtaining an independent third party valuation, management provided certain information and assumptions that were utilized in the fair value calculation. Assumptions critical to the process included forecasted financial information, discount rates, royalty rates and growth rates. Estimates of the fair value of each trademark were based on the best information currently available. However, further adjustments may be necessary in the future if conditions differ substantially from the assumptions utilized.
The remaining value of the trademarks that are being replaced will be amortized over the new estimated useful life. For those trademarks that are not being replaced, our strategy is to co-brand these products, and we have revalued these trademarks based on that assumption. The co-branded trademarks will continue to have an indefinite life. As a result, a non-cash impairment charge of $155.2 million was recorded in the fourth quarter of fiscal 2013, of which $130.2 million was recorded by our Underground Mining Machinery segment and $25.0 million was recorded by our Surface Mining Equipment segment. This charge is recorded in the Consolidated Statement of Income under the heading Intangible asset impairment charges. Going forward, the amortization on the remaining carrying value associated with the trademarks that are being replaced will be recorded in the Consolidated Statements of Income under the heading Product development, selling and administrative expenses.
Changes in the carrying amount of goodwill in fiscal 2013 and 2012 are as follows:
|
| | | | | | | | | | | |
In thousands | Underground Mining Machinery | | Surface Mining Equipment | | Consolidated |
Balance as of October 28, 2011 | $ | 115,704 |
| | $ | 312,774 |
| | $ | 428,478 |
|
Goodwill acquired/adjusted during the year | 908,567 |
| | 45,760 |
| | 954,327 |
|
Translation adjustments | (57 | ) | | (390 | ) | | (447 | ) |
Balance as of October 26, 2012 | 1,024,214 |
| | 358,144 |
| | 1,382,358 |
|
Goodwill adjusted during the year | 99,144 |
| | — |
| | 99,144 |
|
Translation adjustments | (175 | ) | | (808 | ) | | (983 | ) |
Balance as of October 25, 2013 | $ | 1,123,183 |
| | $ | 357,336 |
| | $ | 1,480,519 |
|
Amortization expense for finite-lived intangible assets was $13.6 million, $37.4 million and $12.6 million, for fiscal 2013, 2012 and 2011, respectively.
Estimated future annual amortization expense is as follows:
|
| | | |
In thousands | |
For the fiscal year ending: | |
2014 | $ | 24,976 |
|
2015 | 24,926 |
|
2016 | 24,830 |
|
2017 | 23,744 |
|
2018 | 23,493 |
|
