Johnson Controls 2014 Annual Report Download - page 74

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74
The Company's impairment testing in the fourth quarter of fiscal 2014 indicated that the estimated fair value of the Building
Efficiency Other - Middle East reporting unit exceeded its corresponding carrying amount including goodwill by approximately
9%. Accordingly, the Company has not recognized any impairment of goodwill associated with this reporting unit, which as of
September 30, 2014 had a goodwill balance of $85 million. The Company continuously monitors for events and circumstances
that could negatively impact the key assumptions in determining fair value, including long-term revenue growth projections,
profitability, discount rates, recent market valuations from transactions by comparable companies, volatility in the Company's
market capitalization, and general industry, market and macro-economic conditions. It is possible that future changes in such
circumstances, or in the variables associated with the judgments, assumptions and estimates used in assessing the fair value of the
reporting unit, would require the Company to record a non-cash impairment charge. Except as described above, no other reporting
units were determined to be at risk of failing step one of the goodwill impairment test as the impairment testing performed indicated
that the estimated fair value of each reporting unit substantially exceeded its corresponding carrying amount including recorded
goodwill at September 30, 2014, 2013 and 2012.
During fiscal 2013, based on a combination of factors, including the recent operating results of the Automotive Experience Interiors
business, restrictions on future capital and restructuring funding, and the Company's announced intention to explore strategic
options related to this business, the Company's forecasted cash flow estimates used in the goodwill assessment were negatively
impacted as of September 30, 2013. As a result, the Company concluded that the carrying value of the Interiors reporting unit
exceeded its fair value as of September 30, 2013. The Company recorded a goodwill impairment charge of $430 million in the
fourth quarter of fiscal 2013, which was determined by comparing the carrying value of the reporting unit's goodwill with the
implied fair value of goodwill for the reporting unit.
The assumptions included in the impairment tests require judgment, and changes to these inputs could impact the results of the
calculations. Other than management's internal projections of future cash flows, the primary assumptions used in the impairment
tests were the weighted-average cost of capital and long-term growth rates. Although the Company's cash flow forecasts are based
on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using
to operate the underlying businesses, there are significant judgments in determining the expected future cash flows attributable to
a reporting unit. The impairment charges are non-cash expenses recorded within restructuring and impairment costs on the
consolidated statements of income and did not adversely affect the Company's debt position, cash flow, liquidity or compliance
with financial covenants.
The Company’s other intangible assets, primarily from business acquisitions valued based on independent appraisals, consisted
of (in millions):
September 30, 2014 September 30, 2013
Gross
Carrying
Amount Accumulated
Amortization Net
Gross
Carrying
Amount Accumulated
Amortization Net
Amortized intangible assets
Patented technology $ 86 $ (56) $ 30 $ 92 $ (53) $ 39
Customer relationships 1,017 (161) 856 537 (138) 399
Miscellaneous 312 (106) 206 336 (91) 245
Total amortized intangible assets 1,415 (323) 1,092 965 (282) 683
Unamortized intangible assets
Trademarks/trade names 547 — 547 316 — 316
Total intangible assets $ 1,962 $ (323) $ 1,639 $ 1,281 $ (282) $ 999
Amortization of other intangible assets for the fiscal years ended September 30, 2014, 2013 and 2012 was $86 million, $75 million
and $56 million, respectively. Excluding the impact of any future acquisitions, the Company anticipates amortization for fiscal
2015, 2016, 2017, 2018 and 2019 will be approximately $95 million, $90 million, $86 million, $83 million and $77 million,
respectively.
7. PRODUCT WARRANTIES
The Company offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement.
A typical warranty program requires that the Company replace defective products within a specified time period from the date of
sale. The Company records an estimate for future warranty-related costs based on actual historical return rates and other known