Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

In the second quarter of 2020, as a result of market and economic conditions resulting from the COVID-19 pandemic, as well as financial performance and restructuring actions, the Company determined that the conditions indicated that indefinite lived intangible assets within the Aftermarket and Boats reporting units are more-likely-than-not impaired and performed an impairment test to compare the fair value of these indefinite lived intangible assets, consisting of certain brand/trade names, with their carrying value. These factors were also indicators during the second quarter of 2020 that it was more-likely-than-not that the fair value of the Aftermarket and Boats reporting units would be less than their respective carrying values. As a result, the Company performed quantitative goodwill impairment tests of the Aftermarket and Boats reporting units.

The fair value of each brand/trade name was determined using the relief-from-royalty method. Under the quantitative goodwill impairment test, the fair value of each reporting unit was determined using a discounted cash flow analysis and a market approach.

Determining the fair value of brand/trade names and the reporting units required the use of significant judgment, including royalty rates, discount rates, assumptions in the Company’s long-term business plan about future revenues and expenses, capital expenditures, and changes in working capital, which are dependent on internal forecasts, estimation of long-term growth for each reporting unit, and determination of the weighted average cost of capital. These plans take into consideration numerous factors including historical experience, anticipated future economic conditions, including the impacts from the COVID-19 pandemic, changes in raw material prices and growth expectations for the industries and end markets in which the Company participates. Inputs used to estimate these fair values included significant unobservable inputs that reflect the Company’s assumptions about the inputs that market participants would use and, therefore, the fair value assessments are classified within Level 3 of the fair value hierarchy.

As a result of this analysis, during the second quarter of 2020 the Company recorded impairment charges of $108.9 million related to certain brand/trade names associated with Transamerican Auto Parts which are included in the Aftermarket reporting unit. Further, during the second quarter of 2020, the Company recorded impairment charges of $270.3 million related to goodwill of the Aftermarket reporting unit. Subsequent to the impairment charges recorded in the second quarter, there is no remaining goodwill for the Aftermarket reporting unit. The charges are included in Goodwill and other intangible asset impairments on the consolidated statements income (loss). The impairments resulted in a $90.3 million income tax benefit (deferred tax asset) associated with the remaining tax-deductible basis in goodwill and intangibles.

As of September 30, 2020, there were no goodwill or other intangible asset impairment charges recorded related to the Boats, ORV, Snow, Global Adjacent Markets, or Motorcycles reporting units during 2020.

Goodwill and other intangible assets, net of accumulated amortization, at September 30, 2020 and December 31, 2019 are as follows (in millions):


	September 30, 2020		December 31, 2019
Goodwill	$	392.9	$	659.9
Other intangible assets, net	694.4		830.3
Total goodwill and other intangible assets, net	$	1,087.3	$	1,490.2

The changes in the carrying amount of goodwill for the nine months ended September 30, 2020 were as follows (in millions):


	Nine months ended September 30, 2020
Goodwill, beginning of period	$	659.9

Goodwill impairment	(270.3)
Currency translation effect on foreign goodwill balances	3.3
Goodwill, end of period	$	392.9

The components of other intangible assets were as follows ($ in millions):


	Total estimated life (years)	September 30, 2020		December 31, 2019
Non-amortizable—indefinite lived:
Brand/trade names		$	333.7	$	442.0
Amortizable:
Non-compete agreements	4	2.6		2.6
Dealer/customer related	5-20	460.1		499.5
Developed technology	5-7	9.8		12.7
Total amortizable		472.5		514.8
Less: Accumulated amortization		(111.8)		(126.5)
Net amortized other intangible assets		360.7		388.3
Total other intangible assets, net		$	694.4	$	830.3

Amortization expense for intangible assets was $8.7 million and $10.4 million for the three months ended September 30, 2020 and 2019, respectively, and $27.5 million and $30.9 million for the nine months ended September 30, 2020 and 2019, respectively. Estimated amortization expense for the remainder of 2020 through 2025 is as follows: 2020 (remainder), $8.7 million; 2021, $33.3 million; 2022, $28.3 million; 2023, $25.7 million; 2024, $25.0 million; 2025, $25.0 million; and after 2025, $214.7 million. The preceding expected amortization expense is an estimate and actual amounts could differ due to additional intangible asset acquisitions, changes in foreign currency rates or impairment of intangible assets.