Note 6: Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by segment for 2013 and 2012 are as follows:
| (Amounts in millions) | Commercial & Industrial Group |
Snap-on Tools Group |
Repair Systems & Information Group |
Total | ||||||||||||
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Balance as of 2011 year end |
$ | 297.0 | $ | 12.5 | $ | 486.3 | $ | 795.8 | ||||||||
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Currency translation |
9.9 | – | 1.7 | 11.6 | ||||||||||||
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Balance as of 2012 year end |
306.9 | 12.5 | 488.0 | 807.4 | ||||||||||||
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Currency translation |
5.6 | – | 1.0 | 6.6 | ||||||||||||
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Acquisition |
– | – | 24.8 | 24.8 | ||||||||||||
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Balance as of 2013 year end |
$ | 312.5 | $ | 12.5 | $ | 513.8 | $ | 838.8 | ||||||||
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Goodwill of $838.8 million as of 2013 year end includes $24.8 million of non-tax-deductible goodwill resulting from the purchase accounting related to the May 2013 Challenger acquisition. See Note 2 for additional information on the company’s acquisition of Challenger.
Additional disclosures related to other intangible assets as of 2013 and 2012 year end are as follows:
| 2013 | 2012 | |||||||||||||||
| (Amounts in millions) | Gross Carrying Value |
Accumulated Amortization |
Gross Carrying Value |
Accumulated Amortization |
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Amortized other intangible assets: |
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Customer relationships |
$ | 140.8 | $ | (62.8) | $ | 135.3 | $ | (54.1) | ||||||||
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Developed technology |
19.5 | (19.2) | 19.4 | (18.8) | ||||||||||||
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Internally developed software |
125.3 | (80.2) | 107.2 | (66.1) | ||||||||||||
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Patents |
28.8 | (20.4) | 28.1 | (19.4) | ||||||||||||
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Trademarks |
2.8 | (1.6) | 2.6 | (1.4) | ||||||||||||
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Other |
7.3 | (1.4) | 7.1 | (1.2) | ||||||||||||
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Total |
324.5 | (185.6) | 299.7 | (161.0) | ||||||||||||
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Non-amortized trademarks |
51.6 | – | 48.5 | – | ||||||||||||
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Total other intangible assets |
$ | 376.1 | $ | (185.6) | $ | 348.2 | $ | (161.0) | ||||||||
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The gross carrying values of customer relationships and non-amortized trademarks as of 2013 year end include $5.2 million and $3.2 million, respectively, related to the Challenger acquisition. See Note 2 for additional information on the company’s acquisition of Challenger.
Significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to significant and long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, significant changes in key personnel or litigation, a significant and sustained decrease in share price and/or other events, including effects from the sale or disposal of a reporting unit, could require a provision for impairment of goodwill and/or other intangible assets in a future period. As of 2013 year end, the company has no accumulated impairment losses.
The weighted-average amortization periods related to other intangible assets are as follows:
| In Years | ||
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Customer relationships |
16 | |
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Developed technology |
5 | |
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Internally developed software |
3 | |
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Patents |
10 | |
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Trademarks |
6 | |
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Other |
39 |
Snap-on is amortizing its customer relationships on both an accelerated and straight-line basis over a 16 year weighted-average life; the remaining intangibles are amortized on a straight-line basis. The weighted-average amortization period for all amortizable intangibles on a combined basis is 12 years.
The company’s customer relationships generally have contractual terms of three to five years and are typically renewed without significant cost to the company. The weighted-average 16 year life for customer relationships is based on the company’s historical renewal experience. Intangible asset renewal costs are expensed as incurred.
The aggregate amortization expense for 2013, 2012 and 2011 was $25.5 million, $26.5 million and $25.3 million, respectively. Based on current levels of amortizable intangible assets and estimated weighted-average useful lives, estimated annual amortization expense is expected to be $22.8 million in 2014, $17.3 million in 2015, $13.0 million in 2016, $10.4 million in 2017, and $9.0 million in 2018.