Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

The changes in the carrying amount of goodwill, for the year ended December 31, 2019, were as follows:


	December 31, 2018		Goodwill Resulting from Business Combinations (1)		Impairments		Foreign Currency Translation		December 31, 2019
HVAC reportable segment
Gross goodwill	$	261.8	$	15.7	$	—	$	(0.4)	$	277.1
Accumulated impairments	(144.4)		—		—		(0.2)		(144.6)
Goodwill	117.4		15.7		—		(0.6)		132.5
Detection and Measurement reportable segment
Gross goodwill	265.0		40.4		—		(1.3)		304.1
Accumulated impairments	(134.3)		—		—		0.7		(133.6)
Goodwill	130.7		40.4		—		(0.6)		170.5
Engineered Solutions reportable segment
Gross goodwill	335.3		—		—		(1.1)		334.2
Accumulated impairments	(189.0)		—		—		1.1		(187.9)
Goodwill	146.3		—		—		—		146.3
All Other
Gross goodwill	20.8		—		—		—		20.8
Accumulated impairments	(20.8)		—		—		—		(20.8)
Goodwill	—		—		—		—		—
Total
Gross goodwill	882.9		56.1		—		(2.8)		936.2
Accumulated impairments	(488.5)		—		—		1.6		(486.9)
Goodwill	$	394.4	$	56.1	$	—	$	(1.2)	$	449.3

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⁽¹⁾ Reflects goodwill acquired in connection with the Sabik, SGS and Patterson-Kelley acquisitions of $41.2, $1.9 and $13.8, respectively, partially offset by a reduction in Cues' goodwill during the first quarter of 2019 of $0.8 resulting from revisions to the valuation of certain income tax accounts. As indicated in Note 4, the acquired assets, including goodwill, and liabilities assumed in the Sabik, SGS, and Patterson-Kelley acquisitions have been recorded at estimates of fair value and are subject to change upon completion of acquisition accounting.

The changes in the carrying amount of goodwill, for the year ended December 31, 2018, were as follows:


	December 31, 2017		Goodwill Resulting from Business Combinations (1)		Impairments		Foreign Currency Translation		December 31, 2018
HVAC reportable segment
Gross goodwill	$	263.7	$	—	$	—	$	(1.9)	$	261.8
Accumulated impairments	(144.7)		—		—		0.3		(144.4)
Goodwill	119.0		—		—		(1.6)		117.4
Detection and Measurement reportable segment
Gross goodwill	216.6		50.4		—		(2.0)		265.0
Accumulated impairments	(136.0)		—		—		1.7		(134.3)
Goodwill	80.6		50.4		—		(0.3)		130.7
Engineered solutions reportable segment
Gross goodwill	337.5		—		—		(2.2)		335.3
Accumulated impairments	(191.2)		—		—		2.2		(189.0)
Goodwill	146.3		—		—		—		146.3
All Other
Gross goodwill	20.8		—		—		—		20.8
Accumulated impairments	(20.8)		—		—		—		(20.8)
Goodwill	—		—		—		—		—
Total
Gross goodwill	838.6		50.4		—		(6.1)		882.9
Accumulated impairments	(492.7)		—		—		4.2		(488.5)
Goodwill	$	345.9	$	50.4	$	—	$	(1.9)	$	394.4

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⁽¹⁾ Reflects amounts acquired in connection with the Schonstedt and Cues acquisitions of $1.8 and $48.6, respectively.

Identifiable intangible assets were as follows:


	December 31, 2019										December 31, 2018
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible assets with determinable lives:⁽¹⁾
Customer relationships	$	77.4	$	(8.7)	$	68.7	$	44.8	$	(3.5)	$	41.3
Technology	29.5		(3.3)		26.2		17.1		(1.1)		16.0
Patents	4.5		(4.5)		—		4.5		(4.5)		—
Other	12.6		(9.2)		3.4		11.3		(7.9)		3.4
	124.0		(25.7)		98.3		77.7		(17.0)		60.7
Trademarks with indefinite lives ⁽²⁾	153.4		—		153.4		137.7		—		137.7
Total	$	277.4	$	(25.7)	$	251.7	$	215.4	$	(17.0)	$	198.4

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⁽¹⁾The identifiable intangible assets associated with the Sabik, SGS and Patterson-Kelley acquisitions consist of customer backlog of $0.4, $0.4 and $0.3, respectively, and customer relationships of $11.6, $3.7 and $17.5, respectively. In addition, the Sabik and Patterson-Kelley acquisitions included technology of $9.1 and $3.5, respectively. Further, the Sabik acquisition included definite-lived trademarks of $0.2.

⁽²⁾Changes during 2019 related primarily to the acquisition of Sabik, SGS and Patterson-Kelley trademarks of $9.0, $1.0 and $6.0, respectively.

Amortization expense was $8.9, $4.2 and $0.6 for the years ended December 31, 2019, 2018 and 2017, respectively. Estimated amortization expense over each of the next five years is $9.6 related to these intangible assets.

At December 31, 2019, the net carrying value of intangible assets with determinable lives consisted of $27.4 in the HVAC reportable segment and $70.9 in the Detection and Measurement reportable segment. Trademarks with indefinite lives consisted of $96.2 in the HVAC reportable segment, $48.1 in the Detection and Measurement reportable segment, and $9.1 in the Engineered Solutions reportable segment.

Consistent with the requirements of the Intangible — Goodwill and Other Topic of the Codification, the fair values of our reporting units generally are estimated using discounted cash flow projections that we believe to be reasonable under current and forecasted circumstances, the results of which form the basis for making judgments about carrying values of the reported net assets of our reporting units. Other considerations are also incorporated, including comparable industry price multiples. Many of our reporting units closely follow changes in the industries and end markets that they serve. Accordingly, we consider estimates and judgments that affect the future cash flow projections, including principal methods of competition such as volume, price, service, product performance and technical innovations and estimates associated with cost improvement initiatives, capacity utilization and assumptions for inflation and foreign currency changes. Any significant change in market conditions and estimates or judgments used to determine expected future cash flows that indicate a reduction in carrying value may give rise to impairment in the period that the change becomes known.

We perform our annual goodwill impairment testing during the fourth quarter in conjunction with our annual financial planning process, with such testing based primarily on events and circumstances existing as of the end of the third quarter. In addition, we test goodwill for impairment on a more frequent basis if there are indications of potential impairment. Based on our annual goodwill impairment testing in the fourth quarter of 2019, we concluded that the estimated fair value of each of our reporting units, exclusive of Cues, exceeded the carrying value of their respective net assets by over 100%. The estimated fair value of Cues exceeded the carrying value of its net assets by approximately 10%, while the total goodwill for Cues was $47.8 at December 31, 2019. A change in any of the assumptions used in testing Cues’ goodwill for impairment (e.g., projected revenue and profit growth rates, discount rates, industry price multiples, etc.) could result in Cues’ estimated fair value being less than the carrying value of its net assets. If Cues is unable to achieve the financial forecasts included in its 2019 annual goodwill impairment analysis, we may be required to record an impairment charge in a future period related to Cues’ goodwill.

We perform our annual trademarks impairment testing during the fourth quarter, or on a more frequent basis if there are indications of potential impairment. The fair values of our trademarks are determined by applying estimated royalty rates to projected revenues, with the resulting cash flows discounted at a rate of return that reflects current market conditions. The basis for these projected revenues is the annual operating plan for each of the related businesses, which is prepared in the fourth quarter of each year.