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Goodwill and Other Intangible Assets, Net
 9 Months Ended
Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets, Net Goodwill and Other Intangible Assets, Net

The Company has historically performed its annual goodwill and other indefinite-lived intangible asset impairment test as of the first day of the third fiscal quarter of each year (July 1). During the second quarter of fiscal 2019, the Company decided to change the date of its annual impairment test from July 1 to December 1. The change was made to more closely align the impairment test date with the Company’s annual planning and budgeting process as well as its long-term planning and forecasting process. The Company has determined this change in accounting principle is preferable and will not affect the consolidated financial statements. Pursuant to the authoritative accounting literature, in 2019 the Company performed an impairment test as of the first day of its third fiscal quarter of 2019 (July 1) and will also perform an impairment test on December 1 to ensure that the change in impairment test date would not delay or avoid an impairment charge. There were no goodwill impairment charges as a result of the Company’s 2019 annual goodwill impairment testing that was performed in the third quarter as of July 1, 2019.
Goodwill activity for the nine months ended September 30, 2019 is as follows (in millions):
 
 
September 30, 2019
Segments
Net Book Value at December 31,
2018
 
Purchase
Accounting
Adjustments
 
Impairment Charges
 
Foreign
Exchange and Other
 
Gross
Carrying
Amount
 
Accumulated
Impairment
Charges
 
Net Book
Value
Appliances and Cookware
$
211.2

 
$
1.8

 
$
(1.8
)
 
$
(0.1
)
 
$
751.8

 
$
(540.7
)
 
$
211.1

Food and
Commercial
722.7

 
2.3

 
(2.3
)
 
23.8

 
2,096.1

 
(1,349.6
)
 
746.5

Home and Outdoor Living
163.8

 
5.7

 
(5.7
)
 
(0.3
)
 
2,154.2

 
(1,990.7
)
 
163.5

Learning and Development
2,595.2

 
0.6

 
(0.6
)
 
(29.3
)
 
3,412.5

 
(846.6
)
 
2,565.9

Other
—

 
0.2

 
—

 
(0.2
)
 
—

 
—

 
—

 
$
3,692.9

 
$
10.6

 
$
(10.4
)
 
$
(6.1
)
 
$
8,414.6

 
$
(4,727.6
)
 
$
3,687.0



During the third quarter of 2019, in connection with the Company’s state income tax payable/receivable reconciliation process, the Company identified that its state income tax receivable was overstated by $19.9 million. Upon further analysis, the Company determined the $19.9 million state income tax receivable was recorded during March 2017 with a corresponding reduction to goodwill. As such, the Company recorded an entry to increase goodwill with a corresponding reduction to its state income tax receivable for $19.9 million. The Company then allocated the goodwill to the Company’s businesses and reporting units to determine whether or not the goodwill should have been included in the carrying value of a disposal group or reporting unit that was previously sold or impaired. Based on its analysis, the Company concluded that the entire $19.9 million goodwill balance would have been impaired or recognized as a loss on disposal in previously issued financial statements. The Company concluded the effects of such adjustments are not material to the current period or previously issued financial statements. As such, the Company recorded out-of-period impairment charges and a loss on sale of a divested businesses of $11.7 million and $8.2 million, respectively, of which $10.6 million and $9.3 million were reflected in loss from continuing operations and loss from discontinued operations, net of tax, respectively, in the Company’s Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2019.

Other intangible assets, net are comprised of the following as of the dates indicated (in millions):
 
September 30, 2019
 
December 31, 2018
 
 
 
Gross
Carrying
Amount
 
Accumulated Amortization 
 
Net Book
Value 
 
Gross
Carrying
Amount 
 
Accumulated
Amortization 
 
Net Book
Value 
 
Amortization
Periods
(in years)
Trade names — indefinite life
$
3,239.5

 
$
—

 
$
3,239.5

 
$
4,093.1

 
$
—

 
$
4,093.1

 
N/A
Trade names — other
167.0

 
(45.6
)
 
121.4

 
170.6

 
(36.5
)
 
134.1

 
2-15
Capitalized software
570.9

 
(417.6
)
 
153.3

 
552.1

 
(373.1
)
 
179.0

 
3-12
Patents and intellectual property
135.1

 
(95.5
)
 
39.6

 
137.6

 
(79.8
)
 
57.8

 
3-14
Customer relationships and distributor channels
1,295.2

 
(260.6
)
 
1,034.6

 
1,303.3

 
(214.6
)
 
1,088.7

 
3-30
Other
109.0

 
(95.1
)
 
13.9

 
109.0

 
(74.3
)
 
34.7

 
3-5
 
$
5,516.7

 
$
(914.4
)
 
$
4,602.3

 
$
6,365.7

 
$
(778.3
)
 
$
5,587.4

 
 


Amortization expense for intangible assets for continuing operations was $51.6 million and $41.6 million for the three months ended September 30, 2019 and 2018, respectively, and $145 million and $141 million for the nine months ended September 30, 2019 and 2018, respectively. Amortization expense for intangible assets for discontinued operations was nil and $2.9 million for the three months ended September 30, 2019 and 2018, respectively, and nil and $43.4 million for the nine months ended September 30, 2019 and 2018, respectively. Amortization expense was nil for 2019 as the Company ceased amortizing other finite-lived intangible assets relating to businesses which satisfied the criteria to be classified as held for sale during the second quarter of 2018.

In 2018, as part of the Accelerated Transformation Plan, the Company approved a plan to market for sale the Commercial Business. This business had been classified as held for sale in the Company's historical Consolidated Balance Sheets. During the third quarter of 2019, due to a change in strategy by management, the Company decided not to sell the business. As a result, the business no longer satisfied the requirements to be classified as held for sale in the Company's Consolidated Balance Sheet as of September 30, 2019. Accordingly, the Consolidated Balance Sheet as of December 31, 2018 was recast to reclassify the business from held for sale to held and used. The Company measured the business at the lower of its (i) carrying amount before it was classified as held for sale, adjusted for depreciation and amortization expense that would have been recognized had the business been continuously classified as held and used, or (ii) fair value at the date the decision not to sell was made. The Company recorded a charge of $4.0 million in the third quarter of 2019 relating to the amount of amortization expense that would have been recorded in prior periods had the asset been continuously classified as held and used.

During the three months ended September 30, 2019 and 2018, as a result of the Company’s annual other indefinite-lived intangible impairment testing, the Company recorded impairment charges to reflect impairment of intangible assets related to certain of the Company’s indefinite-lived trade names. The impairment charges were allocated to the Company’s reporting segments as follows (in millions):
 
Three Months Ended September 30,
Impairment of indefinite-lived intangibles assets (1)
2019 (1)
2018 (2)
Appliances and Cookware
$
606.9

$
1,185.0

Food and Commercial
—

454.7

Home and Outdoor Living
217.1

2,385.1

Learning and Development
—

246.0

 
$
824.0

$
4,270.8


(1)
In the Appliances and Cookware segment, the impairment charge was recorded within the Appliances and Cookware reporting unit. In the Home and Outdoor Living segment, impairment charges of $151 million and $65.8 million were recorded within the Home Fragrance and Outdoor and Recreation reporting units, respectively. The carrying value of certain Appliances and Cookware trade names exceeded their fair value primarily due to the recently announced tariffs on Chinese imports as well as a decline in sales volume due to a loss in market share for certain appliance categories driven by the success of newly launched competitive products. Both of these factors resulted in downward revisions to forecasted results. The carrying value of certain Home and Outdoor Living trade names exceeded their fair value primarily within the Home Fragrance reporting unit. The reporting unit has begun to experience a shift in product mix that is expected to continue into the future, which resulted in a downward revision to forecasted results for one of its trade names.
Given the current trade negotiations with China and the uncertainties regarding the potential impact on the Company's business, there can be no assurance that the Company's estimates and assumptions regarding the impact of tariffs made for purposes of the goodwill and indefinite-lived intangible asset impairment test during the third quarter of 2019 will prove to be accurate predictions of the future. If the Company's assumptions regarding forecasted cash flow and revenue and operating income growth rates of certain reporting units are not achieved, it is possible that a material impairment charge may be required in the future.

(2)
In the Appliances and Cookware segment, impairment charges of $1.2 billion were recorded within the Appliances and Cookware reporting unit. In the Food and Commercial segment, impairment charges of $455 million were recorded within the Food and Commercial reporting unit. In the Home and Outdoor Living segment, impairment charges of $1.7 billion, $630 million and $75.0 million were recorded within the Home Fragrance, Outdoor and Recreation and Connected Home and Security reporting units, respectively. In the Learning and Development segment, the impairment charge recorded was attributable to the Baby reporting unit. These impairment charges were recorded as a result of the Company’s impairment testing, and resulted primarily from a decrease in the Company’s market capitalization during the three months ended September 30, 2018 and a deterioration of expected future revenues and margins related to certain tradenames within these segments.