Goodwill and Intangible Assets, Net

9 Months Ended

Oct. 03, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

The Company tests goodwill and non-amortizing intangible assets at least annually for possible impairment. Accordingly, the Company completes the annual testing of impairment for goodwill and non-amortizing intangible assets on the later of January 1 or the first day of each fiscal year. In addition to its annual test, the Company regularly evaluates whether events or circumstances have occurred that may indicate a potential impairment of goodwill or non-amortizing intangible assets.

The process of testing goodwill for impairment involves the determination of the fair value of the applicable reporting units. The test consists of the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss in an amount equal to that excess is recognized up to the amount of goodwill. The Company performed its annual impairment testing for its reporting units as of January 4, 2021, its annual impairment testing date for fiscal year 2021. The Company concluded that there was no goodwill impairment, and the fair value exceeded the carrying value by more than 20% for each reporting unit, except for the Company's Tulip reporting unit which had a fair value that was between 10% and 20% more than its carrying value. The range of the long-term terminal growth rates for the Company’s reporting units was 3% to 5% for the fiscal year 2021 impairment analysis. The range for the discount rates for the reporting units was 8.0% to 12.5%. Keeping all other variables constant, a 10% change in any one of these input assumptions for the various reporting units, except for the Tulip reporting unit, would still allow the Company to conclude that there was no impairment of goodwill. As of January 4, 2021, the Company's Tulip reporting unit, which had a goodwill balance of $77.8 million, was at increased risk of an impairment charge given its ongoing weakness due to the impact of COVID-19; however, it is currently performing according to plan.

The Company has consistently employed the income approach to estimate the current fair value when testing for impairment of goodwill. A number of significant assumptions and estimates are involved in the application of the income approach to forecast operating cash flows, including markets and market share, sales volumes and prices, costs to produce, tax rates, capital spending, discount rates and working capital changes. Cash flow forecasts are based on approved business unit operating plans for the early years’ cash flows and historical relationships in later years. The income approach is sensitive to changes in long-term terminal growth rates and the discount rates. The long-term terminal growth rates are consistent with the Company’s historical long-term terminal growth rates, as the current economic trends are not expected to affect the long-term terminal growth rates of the Company. The Company corroborates the income approach with a market approach.

Non-amortizing intangibles are also subject to an annual impairment test. The Company has consistently employed the relief from royalty model to estimate the current fair value when testing for impairment of non-amortizing intangible assets. The impairment test consists of a comparison of the fair value of the non-amortizing intangible asset with its carrying amount. If the carrying amount of a non-amortizing intangible asset exceeds its fair value, an impairment loss in an amount equal to that excess is recognized up to the amount of the amortizing intangible asset. In addition, the Company evaluates the remaining useful life of its non-amortizing intangible asset at least annually to determine whether events or circumstances continue to support an indefinite useful life. If events or circumstances indicate that the useful life of the Company's non-amortizing intangible asset is no longer indefinite, the asset will be tested for impairment. This intangible asset will then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangible assets that are subject to amortization. The Company performed its annual impairment testing as of January 4, 2021 and concluded that there was no impairment of its non-amortizing intangible asset. An assessment of the recoverability of amortizing intangible assets takes place when events have occurred that may give rise to an impairment. No such events occurred during the first nine months of fiscal year 2021.

The changes in the carrying amount of goodwill for the nine months ended October 3, 2021 were as follows:


	Discovery & Analytical Solutions		Diagnostics		Consolidated
	(In thousands)
Balance at January 3, 2021	$	1,755,887	$	1,691,227	$	3,447,114
Foreign currency translation	(35,336)		(34,507)		(69,843)

Acquisitions, earn-outs and other	3,720,017		322,983		4,043,000
Balance at October 3, 2021	$	5,440,568	$	1,979,703	$	7,420,271

Identifiable intangible asset balances by category were as follows:


	October 3, 2021		January 3, 2021
	(In thousands)
Patents	$	31,037	$	30,855
Less: Accumulated amortization	(28,641)		(28,440)
Net patents	2,396		2,415
Trade names and trademarks	171,976		98,661
Less: Accumulated amortization	(55,853)		(48,806)
Net trade names and trademarks	116,123		49,855
Licenses	68,297		58,700
Less: Accumulated amortization	(54,069)		(52,452)
Net licenses	14,228		6,248
Core technology	1,842,229		789,799
Less: Accumulated amortization	(458,426)		(398,992)
Net core technology	1,383,803		390,807
Customer relationships	3,184,009		1,357,660
Less: Accumulated amortization	(616,332)		(522,820)
Net customer relationships	2,567,677		834,840
In-process research and development	5,925		10,944
Net amortizable intangible assets	4,090,152		1,295,109
Non-amortizing intangible asset:
Trade name	70,584		70,584
Total	$	4,160,736	$	1,365,693

Total amortization expense related to definite-lived intangible assets was $71.0 million and $184.7 million for the three and nine months ended October 3, 2021, respectively, and $48.9 million and $142.9 million for the three and nine months ended October 4, 2020, respectively. Estimated amortization expense related to amortizable intangible assets for each of the next five years is $101.1 million for the remainder of fiscal year 2021, $414.3 million for fiscal year 2022, $403.1 million for fiscal year 2023, $390.9 million for fiscal year 2024, and $363.3 million for fiscal year 2025