GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Oct. 02, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The changes in the carrying amount of goodwill for the nine months ended October 2, 2021 were as follows:


	December 31, 2020		Goodwill Resulting from Business Combinations (1)		Impairments (2)		Foreign Currency Translation		October 2, 2021
HVAC reportable segment
Gross goodwill	$	492.2	$	—	$	—	$	(6.5)	$	485.7
Accumulated impairments	(340.6)		—		—		4.5		(336.1)
Goodwill	151.6		—		—		(2.0)		149.6

Detection and Measurement reportable segment
Gross goodwill	351.5		64.2		—		(3.6)		412.1
Accumulated impairments	(134.5)		—		(23.3)		0.1		(157.7)
Goodwill	217.0		64.2		(23.3)		(3.5)		254.4

Other
Gross goodwill	—		—		—		—		—
Accumulated impairments	—		—		—		—		—
Goodwill	—		—		—		—		—

Total
Gross goodwill	843.7		64.2		—		(10.1)		897.8
Accumulated impairments	(475.1)		—		(23.3)		4.6		(493.8)
Goodwill	$	368.6	$	64.2	$	(23.3)	$	(5.5)	$	404.0

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(1)Reflects (i) goodwill acquired with the Sealite and ECS acquisitions of $38.5 and $20.6, respectively, (ii) an increase in ULC's goodwill during 2021 of $3.1 resulting from revisions to the valuation of certain assets and liabilities and income tax accounts, and (iii) an increase in Sensors & Software's goodwill of $2.0 resulting from revisions to the valuation of certain assets and liabilities and income tax accounts. As indicated in Note 1, the acquired assets, including goodwill, and liabilities assumed in the Sealite, ECS and Sensors & Software acquisitions have been recorded at estimates of fair value and are subject to change upon completion of acquisition accounting.

(2)As indicated in Note 1, we concluded during the third quarter of 2021 that the operating and financial milestones related to the ULC contingent consideration would not be achieved, resulting in the reversal of the related liability of $24.3, with the offset to “Other operating (income) expense.” We also concluded that the lack of achievement of these milestones, along with lower than anticipated future cash flows, are indicators of potential impairment related to ULC’s indefinite-lived intangible assets and goodwill. As such, we tested ULC’s indefinite-lived intangible assets and goodwill for impairment during the quarter. Based on such testing, we determined that the carrying value of ULC’s net assets exceeded the implied fair value of the business. As a result, we recorded an impairment charge to “Other operating (income) expense” of $24.3 during the quarter, with $23.3 related to goodwill and the remainder to trademarks.

Other Intangibles, Net

Identifiable intangible assets at October 2, 2021 and December 31, 2020 comprised the following:


	October 2, 2021						December 31, 2020
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible assets with determinable lives (1):
Customer relationships	$	126.6	$	(23.7)	$	102.9	$	103.4	$	(16.2)	$	87.2
Technology	65.9		(10.5)		55.4		54.4		(6.8)		47.6
Patents	4.5		(4.5)		—		4.5		(4.5)		—
Other	22.4		(16.7)		5.7		18.8		(12.5)		6.3
	219.4		(55.4)		164.0		181.1		(40.0)		141.1
Trademarks with indefinite lives (2)	173.2		—		173.2		163.9		—		163.9
Total	$	392.6	$	(55.4)	$	337.2	$	345.0	$	(40.0)	$	305.0

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(1)The identifiable intangible assets associated with the Sealite and ECS acquisitions consist of customer backlog of $1.9 and $0.8, respectively, customer relationships of $12.1 and $12.6, respectively, technology of $6.6 and $5.8, respectively, and definite-lived trademarks of $0.0 and $1.2, respectively.

(2)Changes during the nine months ended October 2, 2021 related primarily to the acquisition of Sealite trademarks of $11.6 and, as previously discussed, the impairment charge of $1.0 related to ULC's trademarks.

In connection with the acquisitions of Sealite and ECS, which have definite-lived intangible assets as noted above, we increased our estimated annual amortization expense related to intangible assets to approximately $21.0 for the full year 2021, and $19.0 for 2022 and each of the four years thereafter.

At October 2, 2021, the net carrying value of intangible assets with determinable lives consisted of $22.4 in the HVAC reportable segment and $141.6 in the Detection and Measurement reportable segment. At October 2, 2021, trademarks with indefinite lives consisted of $105.5 in the HVAC reportable segment and $67.7 in the Detection and Measurement reportable segment.

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. A significant amount of judgment is involved in determining if an indication of impairment has occurred between annual testing dates. Such indication may include: a significant decline in expected future cash flows; a significant adverse change in legal factors or the business climate; unanticipated competition; and a more likely than not expectation of selling or disposing all, or a portion, of a reporting unit.

Based on our annual goodwill impairment testing during the fourth quarter of 2020, we concluded that the estimated fair value of each of our reporting units, exclusive of Cues, Inc. (“Cues”), Patterson-Kelley, LLC (“Patterson-Kelley”) and ULC, exceeded the carrying value of their respective net assets by over 75%. The estimated fair values of Cues and Patterson-Kelley exceeded the carrying value of their respective net assets by approximately 12% and 3%, while ULC's fair value approximates the carrying value of its net assets. The total goodwill for Cues, Patterson-Kelley and ULC was $47.9, $14.2 and $17.1, respectively, as of October 2, 2021. A change in assumptions used in valuing Cues, Patterson-Kelley, or ULC (e.g., projected revenues and profit growth rates, discount rates, industry price multiples, etc.) could result in these reporting units estimated fair value being less than the respective carrying value of their net assets. If any of these reporting units is unable to achieve its current financial forecast, we may be required to record an impairment charge in a future period related to its 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 (fair value based on unobservable inputs - Level 3, as defined in Note 17). The primary 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.