Goodwill and Other Intangible Assets, net

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, net

Changes in the carrying values of goodwill for the six months ended June 30, 2020, were as follows (in millions):


	Segment
	Electrical		Utility Solutions		Total
BALANCE DECEMBER 31, 2019	$	727.7	$	1,084.1	$	1,811.8

Prior year acquisitions	0.3		3.4		3.7
Foreign currency translation	(3.0)		(3.8)		(6.8)
BALANCE JUNE 30, 2020	$	725.0	$	1,083.7	$	1,808.7

During the six months ended June 30, 2020, we recognized a net increase to the consideration paid primarily related to our acquisition of all of the issued and outstanding shares of Cantega Technologies Inc., including its wholly owned subsidiary Greenjacket Inc., and all of the issued and outstanding shares of Reliaguard Inc. (collectively "Cantega") as a result of the customary net working capital provisions in the acquisition agreement. The increase in net consideration paid of $2.0 million resulted in a corresponding increase to goodwill. The goodwill is not deductible for tax purposes.

The Company performs its goodwill impairment testing as of April 1st of each year, unless circumstances dictate the need for more frequent assessments. For the 2020 test, the Company applied the "Step-zero" test to three of its six reporting units with goodwill, which allows the Company to first assess qualitative factors to determine whether it is more likely than not that a reporting unit's fair value is greater than its carrying amount. Based on the qualitative assessment, the Company concluded that it was more likely than not that the fair value of these reporting units substantially exceeded their carrying values and therefore, further quantitative analysis was not required. For the other three reporting units, the Company has elected to utilize the quantitative goodwill impairment testing process as permitted in the accounting guidance, by comparing the fair value of the Company's reporting units to their carrying values. If the fair value of the reporting unit exceeds its carrying value, no impairment exists.

Goodwill impairment testing requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units and determining the fair value of each reporting unit. Significant judgment is required to estimate the fair value of reporting units including estimating future cash flows, determining appropriate discount rates and other assumptions, including assumptions about secular economic and market conditions, such as the potential continuing effects of the COVID-19 pandemic. The Company uses internal discounted cash flow estimates to determine fair value. These cash flow estimates are derived from historical experience, third party end market data, and future long-term business plans that include assumptions about future sales growth, gross margin, operating margin, and terminal growth rate and the application of discount rates determined by management to be appropriate. Significant changes in these estimates and assumptions could affect the determination of fair value and/or goodwill impairment for each reporting unit. The Company believes that its estimated aggregate fair value of its reporting units is reasonable when compared to the Company's market capitalization on the valuation date.

As of April 1, 2020, the impairment testing resulted in implied fair values for each reporting unit that exceeded the reporting unit's carrying value, including goodwill. The Company did not have any reporting units at risk of failing the quantitative impairment test as the excess of the implied fair value significantly exceeded the carrying value of the reporting units. Additionally, the Company did not have any reporting units with zero or negative carrying amounts.

The Company performs its impairment assessment of indefinite-lived intangible assets as of April 1st of each year, unless circumstances dictate the need for more frequent assessments. For the 2020 test, the Company has elected to utilize the quantitative impairment testing process as permitted in the accounting guidance, by comparing the fair value of the indefinite-lived intangible assets to their carrying values. If the fair value of the indefinite-lived intangible assets exceeds its carrying value, no impairment exists. The fair value was determined utilizing an income approach (relief from royalty method). Significant judgment is required to estimate the fair value of the indefinite-lived intangible assets including assumptions for future revenues, discount rates, royalty rates, and other assumptions, including assumptions about secular economic and market conditions, such as the potential continuing effects of the COVID-19 pandemic. Significant changes in these estimates and assumptions could affect the determination of fair value and/or impairment for each indefinite-lived intangible asset. As of April 1, 2020, the impairment testing resulted in fair values for each indefinite-lived intangible asset that exceeded the carrying value. The Company did not have any indefinite-lived intangible assets at risk of failing the quantitative impairment test as the excess of the fair value significantly exceeded the carrying value of the assets.

The carrying value of other intangible assets included in Intangible assets, net in the Condensed Consolidated Balance Sheets is as follows (in millions):


	June 30, 2020						December 31, 2019
	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Definite-lived:
Patents, tradenames and trademarks	$	201.1	$	(68.8)	$	202.7	$	(65.0)
Customer relationships, developed technology and other	858.1		(302.7)		861.0		(270.8)
Total	$	1,059.2	$	(371.5)	$	1,063.7	$	(335.8)
Indefinite-lived:
Tradenames and other	53.0		—		53.6		—
TOTAL	$	1,112.2	$	(371.5)	$	1,117.3	$	(335.8)

Amortization expense associated with definite-lived intangible assets was $18.6 million and $18.1 million during the three months ended June 30, 2020 and 2019, respectively, and $37.7 million and $36.3 million during the six months ended June 30, 2020 and 2019, respectively. Future amortization expense associated with these intangible assets is estimated to be $36.2 million for the remainder of 2020, $72.1 million in 2021, $67.0 million in 2022, $62.2 million in 2023, $56.8 million in 2024, and $52.3 million in 2025. The Company amortizes intangible assets with definite lives using either an accelerated method that reflects the pattern in which economic benefits of the intangible assets are consumed and results in higher amortization in the earlier years of the assets useful life, or using a straight line method. Approximately 75% of the gross value of definite-lived intangible assets follow an accelerated amortization method.