Goodwill and Identifiable Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Identifiable Intangible Assets

6. Goodwill and Identifiable Intangible Assets

We had goodwill of $1,833.8 million and $1,755.3 million as of December 31, 2016 and 2015, respectively. The increase of $78.5 million was primarily due to the acquisitions of Riobel and ROHL, partially offset by the Norcraft acquisition-related adjustment (See Note 4, “Acquisitions”). The change in the net carrying amount of goodwill by segment was as follows:



(In millions)	Cabinets			Plumbing			Doors		Security			Total Goodwill
Balance at December 31, 2014^(a)	$	630.1		$	595.6		$	143.0	$	99.1		$	1,467.8
2015 translation adjustments		(4.9	)		—			—		(2.7	)		(7.6	)
Acquisition-related adjustments		312.5			(17.0	)		—		(0.4	)		295.1
Balance at December 31, 2015^(a)	$	937.7		$	578.6		$	143.0	$	96.0		$	1,755.3
2016 translation adjustments		0.8			(2.3	)		—		0.3			(1.2	)
Acquisition-related adjustments		(14.2	)		93.9			—		—			79.7
Balance at December 31, 2016^(a)	$	924.3		$	670.2		$	143.0	$	96.3		$	1,833.8

^(a)	Net of accumulated impairment losses of $399.5 million in the Doors segment.

We also had identifiable intangible assets, principally tradenames, of $1,107.0 million and $996.7 million as of December 31, 2016 and 2015, respectively. The $137.8 million increase in gross identifiable intangible assets was primarily due to the acquisitions in our Plumbing segment during 2016.

The gross carrying value and accumulated amortization by class of intangible assets as of December 31, 2016 and 2015 were as follows:


	As of December 31, 2016							As of December 31, 2015
(In millions)	Gross Carrying Amounts		Accumulated Amortization			Net Book Value		Gross Carrying Amounts		Accumulated Amortization			Net Book Value
Indefinite-lived intangible assets—tradenames	$	671.8	$	—		$	671.8	$	638.6		—		$	638.6
Amortizable intangible assets
Tradenames		15.8		(7.3	)		8.5		19.1		(8.6	)		10.5
Customer and contractual relationships		611.9		(203.1	)		408.8		511.2		(177.4	)		333.8
Patents/proprietary technology		61.9		(44.0	)		17.9		54.7		(40.9	)		13.8
Total		689.6		(254.4	)		435.2		585.0		(226.9	)		358.1
Total identifiable intangibles	$	1,361.4	$	(254.4	)	$	1,107.0	$	1,223.6	$	(226.9	)	$	996.7

Amortizable intangible assets, principally tradenames and customer relationships, are subject to amortization on a straight-line basis over their estimated useful life, ranging from 3 to 30 years, based on the assessment of a number of factors that may impact useful life. These factors include historical tradename performance with respect to consumer name recognition, geographic market presence, market share, plans for ongoing tradename support and promotion, customer attrition rates, and other relevant factors. We expect to record intangible amortization of approximately $32 million in 2017, $30 million in 2018, $28 million in 2019, $28 million in 2020, and $28 million in 2021.

We review indefinite-lived tradename intangible assets for impairment annually in the fourth quarter, as well as whenever market or business events indicate there may be a potential impact on a specific intangible asset. Impairment losses are recorded to the extent that the carrying value of the indefinite-lived intangible asset exceeds its fair value. We measure fair value using the standard relief-from-royalty approach which estimates the present value of royalty income that could be hypothetically earned by licensing the tradename to a third party over the remaining useful life.

In 2016, 2015 and 2014, we did not record any asset impairment charges associated with goodwill or indefinite-lived intangible assets. As of December 31, 2016, the fair value of one of the tradenames in the Cabinets segment and one of our tradenames in the Doors segment exceeded their carrying value by less than 10%. Accordingly, a reduction in the estimated fair value of these tradenames could trigger an impairment. As of December 31, 2016, the carrying value of these tradenames was $168 million. Factors influencing our fair value estimates of these tradenames are described in the following paragraph.

The events and/or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include: actual new construction and repair and remodel growth rates that lag our assumptions, actions of key customers, volatility of discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in royalty rates and decline in the trading price of our common stock. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived intangible assets.

- 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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