Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

During the fourth quarter of 2020, the Company changed its reporting units, which included the reassignment of assets, liabilities, and financial operating results related to the Company’s commercial customers, as well as an applicable portion of goodwill based on a relative fair value approach, from the U.S. reporting unit (now referred to as CSB) into the former Red Hawk reporting unit (now referred to as Commercial).

As discussed in Note 1 “Description of Business and Summary of Significant Accounting Policies,” effective in the first quarter of 2021, the Company’s operating and reportable segments are CSB, which is now comprised of the CSB reporting unit, and Commercial, which is now comprised of the Commercial reporting unit. Both of the Company’s reporting units were previously included in a single operating and reportable segment. The change in reportable segments did not further impact the Company’s reporting units.

The following table presents changes in the carrying amount of goodwill by reportable segment during the six months ended June 30, 2021:


(in thousands)	CSB		Commercial		Total Goodwill
Beginning balance, as previously reported	N/A		N/A		$	5,236,302

Beginning balance, after change in reportable segments	$	4,915,857	$	320,445	$	5,236,302
Acquisitions	—		6,654		6,654
Other	(25)		1,754		1,729
Ending balance	$	4,915,832	$	328,853	$	5,244,685

_________________

N/A—Not applicable.

The Company had no accumulated goodwill impairment losses as of June 30, 2021 and December 31, 2020.

There were no material measurement period adjustments to purchase price allocations during the six months ended June 30, 2021.

Other Intangible Assets

The following table summarizes the gross carrying amounts, accumulated amortization, and net carrying amounts of the Company’s other intangible assets:


	June 30, 2021						December 31, 2020
(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	$	8,377,539	$	(5,192,041)	$	3,185,498	$	8,306,746	$	(4,932,590)	$	3,374,156
Dealer relationships	1,518,020		(419,390)		1,098,630		1,518,020		(379,475)		1,138,545
Other	225,923		(193,587)		32,336		247,536		(186,547)		60,989
Total definite-lived intangible assets	10,121,482		(5,805,018)		4,316,464		10,072,302		(5,498,612)		4,573,690
Indefinite-lived intangible assets:
Trade name	1,333,000		—		1,333,000		1,333,000		—		1,333,000
Intangible assets	$	11,454,482	$	(5,805,018)	$	5,649,464	$	11,405,302	$	(5,498,612)	$	5,906,690

The following table presents changes in the net carrying amount of contracts and related customer relationships during the six months ended June 30, 2021:


(in thousands)
Beginning balance	$	3,374,156
Acquisition of customer relationships	5,333
Customer contract additions, net of dealer charge-backs	354,492
Amortization	(548,483)
Ending balance	$	3,185,498

During the six months ended June 30, 2021, the Company paid $340 million to purchase contracts with customers under the ADT Authorized Dealer Program and from other third parties. The weighted-average amortization period for contracts with customers purchased under the ADT Authorized Dealer Program and from other third parties during the six months ended June 30, 2021 was 13 years.

Contracts and related customer relationships includes the purchase of customer accounts from a third-party in February 2021 for a total contractual purchase price of $91 million, subject to reduction based on customer retention. The Company paid cash at closing of $73 million, which is included in dealer generated customer accounts and bulk account purchases on the Condensed Consolidated Statements of Cash Flows.

The following table presents amortization expense for definite-lived intangible assets:


	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Definite-lived intangible asset amortization expense	$	300,208	$	305,407	$	599,535	$	612,363

Intangible Asset Impairments

During the first quarter of 2021, the Company recognized $18 million in impairment losses on its other definite-lived intangible assets primarily due to lower than expected benefits from the Cell Bounce developed technology intangible asset, which is included in the CSB segment, as a result of recent worldwide shortages for certain electronic components. The fair value was determined using an income-based approach, and the loss is reflected in merger, restructuring, integration, and other in the Condensed Consolidated Statements of Operations.