Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The changes in the carrying amount of goodwill during the six months ended June 30, 2020 were as follows:


(in thousands)
Beginning balance	$	4,959,658
Acquisitions	259,488

Other	215
Ending balance	$	5,219,361

There were no material measurement period adjustments to purchase price allocations. The Company had no accumulated goodwill impairment losses as of June 30, 2020 and December 31, 2019.

Other Intangible Assets

The gross carrying amounts, accumulated amortization, and net carrying amounts of the Company’s other intangible assets as of June 30, 2020 and December 31, 2019 were as follows:


	June 30, 2020										December 31, 2019
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Definite-lived intangible assets:
Contracts and related customer relationships	$	8,067,110	$	(4,366,510)	$	3,700,600	$	7,889,864	$	(3,798,319)	$	4,091,545
Dealer relationships	1,518,020		(339,499)		1,178,521		1,518,020		(299,459)		1,218,561
Other	205,175		(182,768)		22,407		210,775		(184,236)		26,539
Total definite-lived intangible assets	9,790,305		(4,888,777)		4,901,528		9,618,659		(4,282,014)		5,336,645
Indefinite-lived intangible assets:
Trade name	1,333,000		—		1,333,000		1,333,000		—		1,333,000
Intangible assets	$	11,123,305	$	(4,888,777)	$	6,234,528	$	10,951,659	$	(4,282,014)	$	6,669,645

For the six months ended June 30, 2020, the changes in the net carrying amount of contracts and related customer relationships were as follows:


(in thousands)
Beginning balance	$	4,091,545
Acquisition of customer relationships	17,000
Customer contract additions, net of dealer charge-backs	160,046
Amortization	(568,191)

Other	200
Ending balance	$	3,700,600

The Company paid $144 million to purchase contracts with customers under the ADT Authorized Dealer Program and from other third parties during the six months ended June 30, 2020. In connection with the Defenders Acquisition, the Company received an advance payment of $39 million for the estimated future dealer charge-backs related to accounts purchased from Defenders prior to the Defenders Acquisition. This amount is included in dealer generated customer accounts and bulk account purchases in the Condensed Consolidated Statement of Cash Flows and is anticipated to be materially realized as a reduction to contracts and related customer relationships over the course of a 13-month charge-back period.

The weighted-average amortization period for contracts with customers purchased under the ADT Authorized Dealer Program and from other third parties was 15 years during the six months ended June 30, 2020.

Amortization expense for definite-lived intangible assets for the periods presented was as follows:


	For the Three Months Ended						For the Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Definite-lived intangible asset amortization expense	$	305,407	$	311,221	$	612,363	$	617,528

Goodwill and Indefinite-Lived Intangible Assets Impairment

Goodwill and indefinite-lived intangible assets are not amortized and are tested for impairment at least annually as of the first day of the fourth quarter of each year and more often if an event occurs or circumstances change which indicate it is more-likely-than-not that fair value is less than carrying amount.

Goodwill

As a result of the macroeconomic decline due to the ongoing COVID-19 Pandemic, the Company quantitatively tested the goodwill associated with its reporting units for impairment as of March 31, 2020.

Under the quantitative approach, the Company estimated the fair value of each reporting unit and compared it to its carrying amount. The fair values of the reporting units were determined using the income approach, which discounts projected cash flows using market participant assumptions. The income approach included significant assumptions including, but not limited to, forecasted revenue, operating profit margins, operating expenses, cash flows, perpetual growth rates, and long-term discount rates. In developing these assumptions, the Company relied on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data.

Based on the results of the tests, the Company did not record any goodwill impairment losses associated with its reporting units. Due to the COVID-19 Pandemic, the assumptions made in connection with the Company’s goodwill impairment assessments could be impacted in the future as a result of the evolving and uncertain nature of economic conditions. As a result, the Company’s reporting units are considered at risk of future impairment. If the Company’s assumptions are not realized, or if there are changes in any of the assumptions in the future due to a change in economic conditions, it is possible that an impairment charge may need to be recorded in the future.