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Goodwill and Purchased Intangible Assets | 12 Months Ended
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Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Purchased Intangible Assets | 12. Goodwill and Purchased Intangible Assets Goodwill and other indefinite-lived intangible assets are not amortized but are reviewed for impairment annually or more frequently if potential interim indicators exist that could result in impairment. The Company performs its annual impairment test in the fourth quarter of each year. As of October 1, 2023, the Company performed its annual impairment review relative to goodwill and indefinite-lived intangible assets (principally non-amortiza ble trade names). To derive the fair value of its reporting units, the Company utilized both the income and market approaches. For the annual impairment testing, the Company used a weighted-average cost of capital, depending on the reporting unit, of 12.0% to 14.5% (11.5% to 13.0% at October 1, 2022) and a terminal growth rate of 3.0% (3.0% at October 1, 2022). Under the market approach, the Company derived the fair value of its reporting units based on revenue and earnings multiples of compara ble publicly traded companies. As a corroborative source of information, the Company reconciles its estimated fair value to within a reasonable range of its market capitalization, which includes an assumed control premium (an adjustment reflecting an estimated fair value on a controlling basis), to verify the reasonableness of the fair value of its reporting units obtained through the aforementioned methods. The control premium is estimated based upon control premiums observed in comparable market transactions. To derive the fair value of its trade names, the Company utilized the “relief from royalty” approach. Based on the Company’s annual impairment review, the Company concluded that there was no impairment of goodwill or indefinite-lived intangible assets. Changes in estimates or the application of alternative assumptions could have produced significantly different results. The Company had one reporting unit within the Defense segment with an estimated fair value exceeding its carrying value by approximately 10%. The carrying value of the goodwill allocated to this reporting unit was $44.4 million at December 31, 2023. At December 31, 2023, approximately 75% of the Company’s recorded goodwill and indefinite-lived intangible assets were concentrated within the JLG reporting unit in the Access segment. Assumptions utilized in the impairment analysis are highly judgmental. While the Company currently believes that an impairment of intangible assets at JLG is unlikely, events and conditions that could result in the impairment of intangibles at JLG include a sharp prolonged decline in economic conditions, significantly increased pricing pressure on JLG’s margins or other factors leading to reductions in expected long-term sales or profitability at JLG. Upon acquiring AeroTech on August 1, 2023 and Hinowa on January 31, 2023, goodwill was recorded within the Vocational and Access segments, respectively. See Note 3 for additional information. The following table presents changes in goodwill (in millions):
|  | Access |  |  | Defense |  |  | Vocational |  |  | Total |
Net goodwill at December 31, 2021 |  | $ | 877.6 |  |  | $ | 44.4 |  |  | $ | 127.0 |  |  | $ | 1,049.0 |
Foreign currency translation |  |  | (11.8 | ) |  |  | — |  |  |  | (0.5 | ) |  |  | (12.3 | )
Acquisition |  |  | — |  |  |  | — |  |  |  | 7.4 |  |  |  | 7.4 |
Impairment |  |  | — |  |  |  | — |  |  |  | (2.1 | ) |  |  | (2.1 | )
Net goodwill at December 31, 2022 |  |  | 865.8 |  |  |  | 44.4 |  |  |  | 131.8 |  |  |  | 1,042.0 |
Foreign currency translation |  |  | 7.1 |  |  |  | — |  |  |  | — |  |  |  | 7.1 |
Acquisitions |  |  | 107.0 |  |  |  | — |  |  |  | 260.3 |  |  |  | 367.3 |
Net goodwill at December 31, 2023 |  | $ | 979.9 |  |  | $ | 44.4 |  |  | $ | 392.1 |  |  | $ | 1,416.4 |
In September 2022, the Company identified a triggering event that indicated a potential impairment of goodwill within one of its reporting units in the Commercial segment. The Company’s impairment test confirmed that the fair value of the reporting unit was below its carrying value. As a result, the Company recorded a $2.1 million impairment charge for goodwill in the third quarter of 2022. The following table presents details of the Company’s goodwill allocated to the reportable segments (in millions):
|  | December 31, 2023 |  |  | December 31, 2022 |
|  | Gross |  |  | Accumulated Impairment |  |  | Net |  |  | Gross |  |  | Accumulated Impairment |  |  | Net |
Access |  | $ | 1,912.0 |  |  | $ | (932.1 | ) |  | $ | 979.9 |  |  | $ | 1,797.9 |  |  | $ | (932.1 | ) |  | $ | 865.8 |
Defense |  |  | 44.4 |  |  |  | — |  |  |  | 44.4 |  |  |  | 44.4 |  |  |  | — |  |  |  | 44.4 |
Vocational |  |  | 561.5 |  |  |  | (169.4 | ) |  |  | 392.1 |  |  |  | 303.5 |  |  |  | (171.7 | ) |  |  | 131.8 |
|  | $ | 2,517.9 |  |  | $ | (1,101.5 | ) |  | $ | 1,416.4 |  |  | $ | 2,145.8 |  |  | $ | (1,103.8 | ) |  | $ | 1,042.0 |
Details of the Company’s total purchased intangible assets are as follows (in millions):
|  | December 31, 2023 |
|  | Weighted- Average Life |  |  | Gross |  |  | Accumulated Amortization |  |  | Net |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  | 11.5 |  |  | $ | 819.5 |  |  | $ | (574.6 | ) |  | $ | 244.9 |
Trade names |  |  | 12.6 |  |  |  | 118.6 |  |  |  | (7.5 | ) |  |  | 111.1 |
Technology-related |  |  | 10.0 |  |  |  | 166.5 |  |  |  | (108.2 | ) |  |  | 58.3 |
Distribution network |  |  | 39.2 |  |  |  | 55.3 |  |  |  | (38.4 | ) |  |  | 16.9 |
Other |  |  | 6.1 |  |  |  | 37.5 |  |  |  | (25.2 | ) |  |  | 12.3 |
|  |  | 12.5 |  |  |  | 1,197.4 |  |  |  | (753.9 | ) |  |  | 443.5 |
Non-amortizable trade names |  |  |  |  |  | 386.7 |  |  |  | — |  |  |  | 386.7 |
|  |  |  |  | $ | 1,584.1 |  |  | $ | (753.9 | ) |  | $ | 830.2 |
|  | December 31, 2022 |
|  | Weighted- Average Life |  |  | Gross |  |  | Accumulated Amortization |  |  | Net |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  | 12.6 |  |  | $ | 576.6 |  |  | $ | (557.3 | ) |  | $ | 19.3 |
Trade names |  |  | 10.0 |  |  |  | 26.7 |  |  |  | — |  |  |  | 26.7 |
Technology-related |  |  | 12.0 |  |  |  | 108.3 |  |  |  | (104.4 | ) |  |  | 3.9 |
Distribution network |  |  | 39.2 |  |  |  | 55.3 |  |  |  | (37.0 | ) |  |  | 18.3 |
Other |  |  | 11.9 |  |  |  | 23.5 |  |  |  | (22.1 | ) |  |  | 1.4 |
|  |  | 14.2 |  |  |  | 790.4 |  |  |  | (720.8 | ) |  |  | 69.6 |
Non-amortizable trade names |  |  |  |  |  | 387.4 |  |  |  | — |  |  |  | 387.4 |
|  |  |  |  | $ | 1,177.8 |  |  | $ | (720.8 | ) |  | $ | 457.0 |
When determining the value of customer relationships for purposes of allocating the purchase price of an acquisition, the Company looks at existing customer contracts of the acquired business to determine if they represent a reliable future source of income and hence, a valuable intangible asset for the Company. The Company determines the fair value of the customer relationships based on the estimated future benefits the Company expects from the acquired customer contracts. In performing its evaluation and estimation of the useful lives of customer relationships, the Company looks to the historical growth rate of revenue of the acquired company’s existing customers as well as historical customer attrition rates. In connection with the valuation of intangible assets, a 40-year life was assigned to the value of the Pierce distribution network (net book value of $16.9 million at December 31, 2023). The Company believes Pierce maintains the largest North American fire apparatus distribution network. Pierce has exclusive contracts with each distributor related to the fire apparatus product offerings manufactured by Pierce. The useful life of the Pierce distribution network was based on a historical turnover analysis. Amortization of purchased intangible assets was $41.7 million in 2023 (including $8.9 million that was recognized in "Cost of sales" in the Consolidated Statements of Income), $11.6 million in 2022, $2.8 million for the three months ended December 31, 2021 and $9.6 million in fiscal 2021. The estimated future amortization expense of purchased intangible assets for the next five years are as follows: 2024 - $62.7 million; 2025 - $54.2 million; 2026 - $51.4 million; 2027 - $51.4 million and 2028 - $48.9 million.

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