GOODWILL AND OTHER INTANGIBLE ASSETS
 9 Months Ended
Oct. 01, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill by reportable segment for the nine months ended October 1, 2016 were as follows:
 
December 31, 2015
 
Goodwill Resulting from Business Combinations
 
Impairments
 
Foreign Currency Translation and Other(1)
 
October 1, 2016
Food and Beverage
$
269.9

 
$
—

 
$
—

 
$
0.5

 
$
270.4

Power and Energy(2)
538.9

 
—

 
(252.8
)
 
(20.0
)
 
266.1

Industrial(3)
214.6

 
—

 
—

 
8.8

 
223.4

Total
$
1,023.4

 
$
—

 
$
(252.8
)
 
$
(10.7
)
 
$
759.9


(1)
In connection with our recasting of historical reportable segment results in January 2016, as discussed further in Note 3, we performed a re-allocation of reportable segment goodwill during the first quarter of 2016. This re-allocation resulted in the following changes in goodwill compared to amounts previously reported at December 31, 2015 by reportable segment: Food and Beverage goodwill reduction of $5.6, Power and Energy goodwill reduction of $4.0, and Industrial goodwill increase of $9.6.
(2)
The carrying amount of goodwill included $250.4 and $0.0 of accumulated impairments as of October 1, 2016 and December 31, 2015, respectively.
(3)
The carrying amount of goodwill included $67.7 of accumulated impairments as of October 1, 2016 and December 31, 2015.
As of the first day of our fiscal fourth quarter of 2015, we performed our annual goodwill impairment test, which indicated the estimated fair value of our Power and Energy reporting unit exceeded its carrying value by approximately 10%. The estimated fair value of each of our other reporting units significantly exceeded its respective book value.
Over the course of the fourth quarter of 2015, global oil prices continued to decline, resulting in delayed customer order patterns.  Based on these slower order rates at the end of the fourth quarter, we lowered the 2016 forecasted revenue and profitability of our Power and Energy segment. The combination of adverse market conditions, lower order trends, and resultant impact to our 2016 forecast subsequent to our annual goodwill impairment test led management to conclude an interim impairment test of our Power and Energy reporting unit was necessary as of December 31, 2015. 
The results of our interim goodwill impairment test conducted as of December 31, 2015 indicated the estimated fair value of the Power and Energy reporting unit exceeded its carrying value by approximately 3%, while the carrying value of the Power and Energy segment goodwill was $538.9 as of December 31, 2015. Our assumptions in the December 31, 2015 interim impairment test included, among others, that (i) first half 2016 order trends would remain comparable to those obtained in the fourth quarter of 2015, (ii) targeted cost savings could be executed as planned and cost savings would, in part, be realized by the end of 2016, and (iii) current and forward EBITDA multiples would remain consistent with oil and gas industry transactions observed in the preceding twelve months.
During the second quarter of 2016, our Power and Energy reporting unit experienced sustained quarterly order rates below order intake levels in the fourth quarter of 2015 and operating results which were below our internal estimates. As a result of the lower order patterns and lower year-to-date earnings of the reporting unit, we revised our 2016 projections below the bottom end of the range utilized in our fourth quarter 2015 interim impairment test, leading us to conclude that an interim impairment test as of July 2, 2016 was necessary.
Using revised cash flow projections as of July 2, 2016, market participant discount rates, and EBITDA multiples observed of peer companies and in recent transactions in the oil and gas industry, we determined the “step one” fair value of our Power and Energy reporting unit was below the carrying value of its net assets. In “step two” of the goodwill impairment test, we estimated the implied fair value of Power and Energy’s goodwill as of July 2, 2016, which resulted in an impairment charge related to such goodwill of $252.8. The non-recurring fair value measurement is a "Level 3" measurement under the fair value hierarchy as further defined in Note 14.
Management assessed the operating performance of each of our other reporting units and concluded that an interim impairment test as of July 2, 2016 for the other reporting units was not necessary.
As of October 1, 2016, there were no indicators necessitating an interim impairment test of any of our reporting units, based on management's review of operating performance.
We will perform our annual impairment testing of goodwill (and indefinite-lived intangible assets that are not amortized), during the fourth quarter in conjunction with our annual financial planning process. In performing that annual impairment testing, we will assess, among other items, order trends and the operating cash flow performance of our reporting units, including Power and Energy. Adverse changes to or a failure to achieve the updated order rates or cash flow projections included in the interim impairment test as of July 2, 2016 of our Power and Energy reporting unit, as discussed above, or further deterioration of macroeconomic conditions and/or significant declines in industry multiples, could result in future impairments, which could be material.
Other Intangibles, Net
Identifiable intangible assets were as follows:
 
October 1, 2016
 
December 31, 2015
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Value
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Value
Intangible assets with determinable lives:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
219.8

 
$
(103.8
)
 
$
116.0

 
$
344.0

 
$
(94.1
)
 
$
249.9

Technology
95.6

 
(42.3
)
 
53.3

 
122.1

 
(38.0
)
 
84.1

Patents
6.7

 
(5.0
)
 
1.7

 
6.7

 
(4.6
)
 
2.1

Other
12.8

 
(10.3
)
 
2.5

 
13.0

 
(10.3
)
 
2.7

 
334.9

 
(161.4
)
 
173.5

 
485.8

 
(147.0
)
 
338.8

Trademarks with indefinite lives
205.8

 
—

 
205.8

 
240.6

 
—

 
240.6

Total
$
540.7

 
$
(161.4
)
 
$
379.3

 
$
726.4

 
$
(147.0
)
 
$
579.4


At October 1, 2016, the net carrying value of intangible assets with determinable lives consisted of the following by reportable segment: $79.0 in Power and Energy, $66.0 in Food and Beverage, and $28.5 in Industrial. During the three months ended October 1, 2016, $5.2 of technology assets were reclassified from the Industrial segment to the Food and Beverage segment in connection with the relocation of a manufacturing facility in Denmark to an existing facility in Poland, as also discussed in Note 4. Trademarks with indefinite lives consisted of the following by reportable segment: $99.5 in Food and Beverage, $60.6 in Industrial and $45.7 in Power and Energy.
During the second quarter of 2016, as described in the “Goodwill” section above, we observed sustained quarterly order rates for Power and Energy below order intake levels in the fourth quarter of 2015 and operating results below our previous expectations, and thus determined an interim test of recoverability was required for the definite and indefinite-lived intangibles of that reporting segment. Based on market conditions as of July 2, 2016 and backlog positions falling below prior periods, we reduced our estimates of the expected future revenues from recorded intangible assets in the Power and Energy reporting unit.
In accordance with relevant guidance, we estimated the undiscounted cash flows of our customer relationships by projecting revenues and margin driven by customer relationships, reduced by an estimated retention rate. We estimated the undiscounted cash flows of our technology assets by applying estimated royalty rates to revenues projected to result from each of such underlying assets. The undiscounted cash flows of customer relationships and technology assets were less than their respective carrying values. In “step two” of the impairment test, we discounted expected cash flows from the customer relationships and technology assets at a rate of return that reflects current market conditions. As a result, we recorded impairment charges of $115.9 related to customer relationships and $30.9 related to technology assets during the second quarter of 2016.
Also during the second quarter of 2016, and as a result of the “step one” impairment test of our Power and Energy indefinite-lived trademarks, we recorded an impairment charge of $26.8, representing the difference between fair value and carrying value. The fair value of the reporting unit’s trademarks was estimated using assumed royalty rates applied to expected future cash flows of the respective product lines of the reporting unit, discounted at a rate of return reflecting current market conditions.
Other changes in the gross carrying values of trademarks and other identifiable intangible assets during the nine months ended October 1, 2016 related primarily to foreign currency translation.