GOODWILL AND OTHER INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

Grainger tests reporting units' goodwill and intangible assets for impairment annually during the fourth quarter and more frequently if impairment indicators exist. Accordingly, Grainger performs quarterly qualitative assessments of significant events and circumstances such as reporting units' historical and current results, assumptions regarding future performance, strategic initiatives and overall economic factors, including the current global outbreak of the Coronavirus (COVID-19 pandemic) and macro-economic developments, to determine the existence of potential indicators of impairment and assess if it is more likely than not that the fair value of reporting units or intangible assets is less than their carrying value. If indicators of impairment are identified a quantitative impairment test is performed.

Qualitative tests for the quarter indicated the existence of impairment indicators for Fabory (included in other businesses). Some of these indicators for Fabory included revenue slowdown in key markets, gross profit pressures and a flat-to-declining operating margin against a backdrop of industrial sector declines across Europe, which was further amplified by the long-term implications of the COVID-19 pandemic, among other factors. As a result, the

Company concluded that Fabory’s goodwill and tradenames were fully impaired. Concurrently, consistent with the circumstances leading to the goodwill impairment, the Company performed a recoverability and fair value test of Fabory’s long-lived assets, including customer lists and relationships and concluded to impair those assets. The aggregate impairment charge for Fabory’s goodwill and intangible assets in the three months ended March 31, 2020 amounted to approximately $132 million and was recorded in SG&A. See Note 6 for further discussion of the impairment of Fabory's long-lived assets.

The balances and changes in the carrying amount of Goodwill by segment, including the Fabory impairment, are as follows (in millions of dollars):



	United States		Canada			Other businesses			Total
Balance at January 1, 2019	$	192	$	120		$	112		$	424
Translation	—		6			(1		)	5
Balance at December 31, 2019	192		126			111			429
Impairment	—		—			(58		)	(58		)
Translation	—		(10		)	—			(10		)
Balance at March 31, 2020	$	192	$	116		$	53		$	361



	United States		Canada		Other businesses		Total
Cumulative goodwill impairment charges, December 31, 2019	$	—	$	32	$	152	$	184
Impairment	—		—		58		58
Cumulative goodwill impairment charges, March 31, 2020	$	—	$	32	$	210	$	242

During the three months ended March 31, 2020, the Company recorded a $58 million goodwill impairment charge in SG&A in connection with an impairment of the Fabory business. There were no goodwill impairments during the three months ended March 31, 2019.

The balances in Intangible assets, net are as follows (in millions of dollars):



		March 31, 2020						December 31, 2019
	Weighted average life	Gross carrying amount		Accumulated amortization/impairment		Net carrying amount		Gross carrying amount		Accumulated amortization/impairment		Net carrying amount
Customer lists and relationships	14.1 years	$	287	$	229	$	58	$	401	$	301	$	100
Trademarks, trade names and other	14.2 years	34		20		14		36		20		16
Non-amortized trade names and other	Indefinite	61		34		27		100		38		62
Capitalized software	4.2 years	637		510		127		626		500		126
Total intangible assets	7.8 years	$	1,019	$	793	$	226	$	1,163	$	859	$	304

With the exception of Fabory, based on the operating results for the three months ended March 31, 2020 and other considerations, the Company believes that it is more likely than not that the enterprise value for each of its reporting units and the fair value of intangibles is still greater than their carrying values. Accordingly, no goodwill impairment indicators were present at March 31, 2020 that would necessitate an interim impairment assessment. The Company

will continue to monitor business plans throughout 2020 to determine if an interim goodwill evaluation should be conducted. Changes in assumptions regarding future business performance and macroeconomic conditions, particularly the COVID-19 pandemic and oil and gas prices in Canada, may have a significant impact on future cash flows and reporting unit or intangible valuations. A significant downturn in global economic growth, or recessionary conditions in the U.S., Canada and Japan for prolonged periods, may lead to reduced customer demand in Grainger’s major reporting units or material supply chain interruptions or product shortages. To the extent that such developing economic conditions negatively impact customer demand for the Company's products or product availability over a long period, the Company's businesses, results of operations and financial condition could be significantly and adversely affected, which could result in future impairments of goodwill and intangible assets.