GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

Canada Business

Given the continued slowdowns in global oil markets and the economic repercussions from the COVID-19 pandemic in Canada, qualitative tests performed in the second quarter of 2020 indicated the existence of impairment indicators for the Canada business. As such, quantitative tests were performed to evaluate whether any impairment of goodwill was necessary.

Based on the result of the quantitative tests, the Company concluded that there was no impairment of goodwill. The enterprise value of the Canada business at June 30, 2020 exceeded its carrying value by more than 25%, which is a 10 percentage point decrease since the date of the last quantitative test, December 31, 2019. Based on the most recent impairment test of the Canada business and respective sensitivity analysis, it was noted that an increase of approximately 3% in the pre-tax discount rate or approximately 1.5% decrease in revenue long-term growth rate projections, would cause the Canada business enterprise value to fall to the level of its carrying value and thus trigger an impairment.

The Company will continue to monitor business plans for the Canada business throughout 2020 to determine the need for interim impairment evaluations. Changes in assumptions regarding future business performance and macroeconomic conditions, particularly the COVID-19 pandemic and global oil prices, may negatively impact demand generation over a long period, future cash flows and enterprise valuations, which could result in future impairments of goodwill and intangible assets for the Canada business.

Fabory Business

During the first quarter of 2020, the Company recorded impairment charges totaling $58 million attributable to all of Fabory's goodwill and tradenames. Concurrently, consistent with the circumstances leading to the goodwill and tradenames' impairment, the Company performed a recoverability and fair value test of Fabory’s long-lived assets, including property, buildings and equipment and customer lists and relationships and concluded to impair those assets. The impairments of these assets were driven primarily by revenue slowdown in key Fabory markets, gross profit pressures and a flat-to-declining operating margin against a backdrop of industrial sector declines across Europe, which was further amplified by the long-term implications of the COVID-19 pandemic, among other factors. The Company divested Fabory during the second quarter of 2020 (see Note 1).

The balances and changes in the carrying amount of Goodwill (net of cumulative goodwill impairments) by segment are as follows (in millions of dollars):


	United States		Canada		Other businesses		Total
Balance at January 1, 2019	$	192	$	120	$	112	$	424


Translation	—		6		(1)		5
Balance at December 31, 2019	192		126		111		429

Impairment	—		—		(58)		(58)
Translation	—		(5)		(1)		(6)
Balance at June 30, 2020	$	192	$	121	$	52	$	365

The cumulative goodwill impairments as of June 30, 2020, were $137 million and consisted of $32 million in the Canada business and $105 million in Other businesses. There were no impairments to goodwill for the three and six months ended June 30, 2020 related to current businesses in Grainger's portfolio.

The balances in Intangible assets, net are as follows (in millions of dollars):


		June 30, 2020										December 31, 2019
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	11.8 years	$	221	$	166	$	55	$	401	$	301	$	100
Trademarks, trade names and other	14.2 years	34		20		14		36		20		16
Non-amortized trade names and other	Indefinite	27		—		27		100		38		62
Capitalized software	4.2 years	652		525		127		626		500		126
Total intangible assets	6.7 years	$	934	$	711	$	223	$	1,163	$	859	$	304