Goodwill And Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill - We record goodwill as the excess of the purchase price over the fair value of the net assets acquired in acquisitions accounted for under the purchase method of accounting. We test goodwill for impairment annually as of October 31 of each year, or more frequently if circumstances indicate possible impairment. We identify a potential impairment by comparing the fair value of the applicable reporting unit (which is consistent with our business segments) to its net book value, including goodwill. If the net book value exceeds the fair value of the reporting unit, we measure the impairment by comparing the carrying value of the reporting unit to its fair value.

We test our goodwill for impairment by comparing the fair value of each of our reporting units to their net carrying value. Our impairment analysis is quantitative; however, it includes subjective estimates based on assumptions regarding future growth rates, interest rates and operating expenses.

A lower fair value estimate in the future for any of our reporting units could result in goodwill impairments. Factors that could trigger a lower fair value estimate include sustained price declines of the reporting unit’s products and services, cost increases, regulatory or political environment changes, changes in customer demand, and other changes in market conditions, which may affect certain market participant assumptions used in the discounted future cash flow model based on internal forecasts of revenues and expenses over a specified period plus a terminal value (the income approach).

The income approach estimates fair value by discounting each reporting unit’s estimated future cash flows using a weighted-average cost of capital that reflects current market conditions and the risk profile of the reporting unit. To arrive at our future cash flows, we use estimates of economic and market assumptions, including growth rates in revenues, costs, estimates of future expected changes in operating margins, tax rates and cash expenditures. Future revenues are also adjusted to match changes in our business strategy. We believe this approach is an appropriate valuation method. Under the market multiple approach, we determine the estimated fair value of each of our reporting units by applying transaction multiples to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using either a one, two or three year average. Our reporting unit valuations were determined primarily by utilizing the income approach and the market multiple approach.

During the first quarter of 2020, triggering events were identified which led to performing interim goodwill impairment testing in our reporting units as of March 31, 2020. These events included the COVID-19 pandemic breakout, commodity price declines, and a significant decrease in our market capitalization as well as those of our peers and customers. The fair value for our reporting units for the interim testing was valued using a market approach. An appropriate control premium was considered for each of the reporting units and applied to the output of the market approach. An interim impairment test during the first quarter of 2020 resulted in $2,747.5 million and $335.9 million of goodwill impairment charges recorded in our Subsea and Surface Technologies segments, respectively.

During our annual impairment tests the following significant estimates were used by management in determining the fair values of reporting units in order to test the goodwill at October 31:


	2020	2019	2018
Year of cash flows before terminal value	4	4	5
Discount rates	15.0%	12.5% to 15.0%	12.0% to 13.0%
EBITDA multiples	N/A	6.0 - 8.5x	7.0 - 8.5x

During the year ended December 31, 2020, the significant estimates used by management in determining the fair value described above relate to Technip Energies reporting unit only. The fair value over carrying amount for our Technip Energies segment was in excess of 300% of its carrying amount at October 31, 2020.

Based on the impairment tests performed during the year ended December 31, 2020 we recorded $2,747.5 million and $335.9 million of goodwill impairment charges recorded in our Subsea and Surface Technologies reporting units, respectively. No goodwill impairment charges were recorded in our Technip Energies reporting unit.

During the year ended December 31, 2019, we recorded $1,321.9 million and $666.8 million of goodwill impairment charges in our Subsea and Surface Technologies reporting units, respectively. See Note 19 for further details.

The carrying amount of goodwill by reporting segment was as follows:


(In millions)	Subsea		Technip Energies		Surface Technologies		Total





December 31, 2018	4,142.4		2,447.7		1,017.5		7,607.6
Impairments	(1,321.9)		—		(666.8)		(1,988.7)
Purchase accounting adjustment	—		—		9.9		9.9
Other	—		(17.7)		—		(17.7)
Translation	(6.4)		(6.4)		—		(12.8)
December 31, 2019	2,814.1		2,423.6		360.6		5,598.3
Impairments	(2,747.5)		—		(335.9)		(3,083.4)
Transfers (a)	(21.2)		46.1		(24.9)		—

Translation	(45.4)		42.8		0.2		(2.4)
December 31, 2020	$	—	$	2,512.5	$	—	$	2,512.5

(a) Beginning in the first quarter of 2020, Technip Energies includes our Loading Systems business that was previously reported in the Surface Technologies segment and our process automation business, Cybernetix, that was previously reported in the Subsea segment. See Note 7 for further details.

As of December 31, 2020 and 2019, accumulated goodwill impairment was $6,455.1 million and $3,371.7 million, respectively.

Intangible assets - The components of intangible assets were as follows:


	December 31,
	2020				2019
(In millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Acquired technology	$	247.1	$	98.1	$	246.7	$	73.6
Backlog	—		—		175.0		175.0
Customer relationships	285.4		114.4		285.4		85.9
Licenses, patents and trademarks	816.8		264.0		811.1		227.6
Software	232.1		178.9		215.9		151.1
Other	120.2		65.1		115.9		50.2
Total intangible assets	$	1,701.6	$	720.5	$	1,850.0	$	763.4

We recorded $123.7 million, $126.1 million and $182.6 million in amortization expense related to intangible assets during the years ended December 31, 2020, 2019 and 2018, respectively. During the years 2021 through 2025, annual amortization expense is expected to be as follows: $117 million in 2021, $114 million in 2022, $110 million in 2023, $96 million in 2024, $93 million in 2025 and $451 million thereafter.