Goodwill and Other Intangible Assets, net

6 Months Ended

Jun. 30, 2021

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, 2021, were as follows (in millions):


	Segment
	Electrical Solutions		Utility Solutions		Total
BALANCE DECEMBER 31, 2020	$	663.9	$	1,259.4	$	1,923.3
Prior year acquisitions	—		1.8		1.8
Current year dispositions	—		(1.9)		(1.9)
Foreign currency translation	0.6		(0.9)		(0.3)
BALANCE JUNE 30, 2021	$	664.5	$	1,258.4	$	1,922.9

In June of 2021, the Company completed the sale of the Consumer Analytics Solutions business for $9.8 million. The Consumer Analytics Solutions business was part of Aclara and was previously included in the Utility Solutions segment. Upon disposition, the Consumer Analytics Solutions business had assets of $15.9 million, including definite-lived intangibles of $8.7 million (primarily customer relationships and developed technology), goodwill of $1.9 million and total liabilities of $1.5 million (primarily comprised of deferred revenue). As a result of the sale of the Consumer Analytics Solutions business, we recognized a pre-tax loss of $6.8 million that is included in Total other expense in the Condensed Consolidated Statements of Income.

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


	June 30, 2021				December 31, 2020
	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Definite-lived:
Patents, tradenames and trademarks	$	213.3	$	(78.6)	$	213.4	$	(73.8)
Customer relationships, developed technology and other	942.9		(373.1)		958.0		(340.6)
TOTAL DEFINITE-LIVED INTANGIBLES	$	1,156.2	$	(451.7)	$	1,171.4	$	(414.4)
Indefinite-lived:
Tradenames and other	53.8		—		53.6		—
TOTAL OTHER INTANGIBLE ASSETS	$	1,210.0	$	(451.7)	$	1,225.0	$	(414.4)

Amortization expense associated with definite-lived intangible assets was $19.9 million and $18.6 million during the three months ended June 30, 2021 and 2020, respectively, and $40.7 million and $37.7 million during the six months ended June 30, 2021 and 2020, respectively. Future amortization expense associated with these intangible assets is estimated to be $39.1 million for the remainder of 2021, $73.1 million in 2022, $68.4 million in 2023, $63.5 million in 2024, $58.9 million in 2025, and $55.2 million in 2026. 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 76% of the gross value of definite-lived intangible assets follow an accelerated amortization method.

The Company completed its annual goodwill impairment test as of April 1, 2021. The Company applied the "Step-zero" test to one of its five reporting units, 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 this reporting unit substantially exceeded its carrying value and, therefore, further quantitative analysis was not required. For the other four reporting units, the Company elected to utilize the quantitative goodwill impairment testing process, as permitted in the accounting guidance, by comparing the estimated fair value of the reporting units to their carrying values. If the estimated fair value of a 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 models to estimate fair value. These cash flow estimates are derived from historical experience, third party end market data, and future long-term business plans and include assumptions of future sales growth, gross margin, operating margin, terminal growth rate, and the application of an appropriate discount rate.

Significant changes in these estimates and assumptions could affect the determination of fair value and/or goodwill impairment for each reporting unit.

As of April 1, 2021, the impairment testing resulted in implied fair values for each reporting unit that exceeded such 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 each 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 2021 test, the Company 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 their 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, 2021, the impairment testing resulted in fair values for each indefinite-lived intangible asset that significantly exceeded the carrying values and there were no indefinite-lived intangible assets at risk of failing the quantitative impairment test.