Goodwill and Identifiable Intangible Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Identifiable Intangible Assets

5.	Goodwill and Identifiable Intangible Assets

We had goodwill of $1,852.8 million and $1,833.8 million as of September 30, 2017 and December 31, 2016, respectively. The $19.0 million increase was primarily due to the acquisition-related adjustments in our Plumbing segment (See Note 4) and foreign translation adjustments. The change in the net carrying amount of goodwill by segment was as follows:


(In millions)	Cabinets		Plumbing		Doors		Security		Total Goodwill
Goodwill at December 31, 2016 ^(a)	$	924.3	$	670.2	$	143.0	$	96.3	$	1,833.8
Year-to-date translation adjustments		3.3		4.6		—		1.5		9.4
Acquisition-related adjustments		—		9.6		—		—		9.6

Goodwill at September 30, 2017 ^(a)	$	927.6	$	684.4	$	143.0	$	97.8	$	1,852.8

^(a)

Net of accumulated impairment losses of $399.5 million in the Doors segment.

We also had net identifiable intangible assets, principally tradenames, of $1,105.4 million and $1,107.0 million as of September 30, 2017 and December 31, 2016, respectively.

The gross carrying value and accumulated amortization by class of identifiable intangible assets as of September 30, 2017 and December 31, 2016 were as follows:


(In millions)	As of September 30, 2017							As of December 31, 2016
	Gross Carrying Amounts		Accumulated Amortization			Net Book Value		Gross Carrying Amounts		Accumulated Amortization			Net Book Value
Indefinite-lived tradenames	$	682.6	$	—		$	682.6	$	671.8	$	—		$	671.8

Amortizable intangible assets
Tradenames		18.6		(9.4	)		9.2		15.8		(7.3	)		8.5
Customer and contractual relationships		627.1		(226.0	)		401.1		611.9		(203.1	)		408.8
Patents/proprietary technology		57.2		(44.7	)		12.5		61.9		(44.0	)		17.9

Total		702.9		(280.1	)		422.8		689.6		(254.4	)		435.2

Total identifiable intangibles	$	1,385.5	$	(280.1	)	$	1,105.4	$	1,361.4	$	(254.4	)	$	1,107.0

The $24.1 million increase in gross identifiable intangible assets was primarily due to acquisition-related adjustments in our Plumbing segment (See Note 4) as well as foreign translation adjustments, partially offset by impairment charges during the first quarter of 2017 related to our decision to sell Field ID (See Note 6).

Amortizable identifiable intangible assets, principally tradenames and customer relationships, are subject to amortization on a straight-line basis over their estimated useful life, ranging from 2 to 30 years, based on the assessment of a number of factors that may impact useful life. These factors include historical and tradename performance with respect to consumer name recognition, geographic market presence, market share, plans for ongoing tradename support and promotion, customer attrition rates and other relevant factors.

As of December 31, 2016, the fair value of one of the tradenames in the Cabinets segment and one of the tradenames in the Doors segment exceeded their carrying value by less than 10%. In the second quarter of 2017, we performed an interim impairment test on the tradename in the Cabinets segment and concluded the fair value continues to exceed its carrying value. A further reduction in fair value of these tradenames may result in an impairment charge in future periods. As of September 30, 2017, the carrying values of these tradenames was $168 million. We did not identify any impairment triggers during the third quarter of 2017. In addition to evaluating the interim events that may require more frequent impairment testing, we will conduct our annual impairment testing in the fourth quarter of 2017.

The Company cannot predict the occurrence of certain events that might adversely affect the carrying value of goodwill and other intangible assets. The events and/or circumstances that could have a potential negative effect on the estimated fair value of our reporting units and indefinite-lived tradenames include: actual new construction and repair and remodel growth rates that lag our assumptions, actions of key customers, volatility of discount rates, continued economic uncertainty, higher levels of unemployment, weak consumer confidence, lower levels of discretionary consumer spending, a decrease in royalty rates and decline in the trading price of our common stock. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill and indefinite-lived intangible assets.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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