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Goodwill and Identifiable Intangible Assets | 9 Months Ended
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Sep. 30, 2019
Goodwill And Intangible Assets Disclosure [Abstract] |
Goodwill and Identifiable Intangible Assets |
5. | Goodwill and Identifiable Intangible Assets
We had goodwill of $2,084.9 million and $2,080.3 million as of September 30, 2019 and December 31, 2018, respectively. 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, 2018(a) |  | $ | 924.0 |  |  | $ | 743.7 |  |  | $ | 412.6 |  |  | $ | 2,080.3 |
Year-to-date translation adjustments |  |  | 1.1 |  |  |  | (1.2 | ) |  |  | 0.4 |  |  |  | 0.3 |
Acquisition-related adjustments |  |  | — |  |  |  | — |  |  |  | 4.3 |  |  |  | 4.3 |
Goodwill at September 30, 2019(a) |  | $ | 925.1 |  |  | $ | 742.5 |  |  | $ | 417.3 |  |  | $ | 2,084.9 |
| (a) | Net of accumulated impairment losses of $399.5 million in the Doors & Security segment.
We also had net identifiable intangible assets of $1,186.1 million and $1,246.8 million as of September 30, 2019 and December 31, 2018, respectively. The $28.2 million decrease in gross identifiable intangible assets was primarily due to a tradename impairment charge of $29.5 million in our Cabinets segment slightly offset by foreign translation adjustments.
5. | Goodwill and Identifiable Intangible Assets (Continued)
The gross carrying value and accumulated amortization by class of identifiable intangible assets as of September 30, 2019 and December 31, 2018 were as follows:
(In millions) |  | As of September 30, 2019 |  |  | As of December 31, 2018 |
|  | Gross Carrying Amounts |  |  | Accumulated Amortization |  |  | Net Book Value |  |  | Gross Carrying Amounts |  |  | Accumulated Amortization |  |  | Net Book Value |
Indefinite-lived tradenames |  | $ | 645.1 |  |  | $ | — |  |  | $ | 645.1 |  |  | $ | 673.9 |  |  | $ | — |  |  | $ | 673.9 |
Amortizable intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tradenames |  |  | 20.3 |  |  |  | (12.6 | ) |  |  | 7.7 |  |  |  | 19.8 |  |  |  | (11.9 | ) |  |  | 7.9 |
Customer and contractual relationships |  |  | 800.6 |  |  |  | (289.4 | ) |  |  | 511.2 |  |  |  | 800.3 |  |  |  | (260.2 | ) |  |  | 540.1 |
Patents/proprietary technology |  |  | 73.3 |  |  |  | (51.2 | ) |  |  | 22.1 |  |  |  | 73.5 |  |  |  | (48.6 | ) |  |  | 24.9 |
Total |  |  | 894.2 |  |  |  | (353.2 | ) |  |  | 541.0 |  |  |  | 893.6 |  |  |  | (320.7 | ) |  |  | 572.9 |
Total identifiable intangibles |  | $ | 1,539.3 |  |  | $ | (353.2 | ) |  | $ | 1,186.1 |  |  | $ | 1,567.5 |  |  | $ | (320.7 | ) |  | $ | 1,246.8 |
Amortizable identifiable intangible assets, principally customer relationships, are subject to amortization 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, which includes customer attrition rates and other relevant factors. In the third quarter of 2019, the decline in actual revenue combined with updated 2019 revenue forecasts for the remainder of the fiscal year and preliminary 2020 revenue forecast as compared to revenue forecasts included in our previous estimates of fair value with respect to an indefinite-lived tradename within the Cabinets segment led us to conclude that it was more likely than not that the indefinite-lived tradename was impaired. Therefore we performed an interim impairment test as of September 30, 2019. As a result of the interim impairment test, we recorded a pre-tax impairment charge of $29.5 million. In the fourth quarter of 2018, we recorded an impairment charge of $35.5 million related to this indefinite-lived tradename. These charges were primarily the result of a continuing shift in demand from semi-custom cabinetry products to value-priced cabinetry products, which led to consecutive downward adjustments of internal revenue forecasts associated with the tradename. As of September 30, 2019, the carrying value of this tradename was $85.0 million. During the third quarter of 2018, we recorded a pre-tax impairment charge of $27.1 million related to a second indefinite-lived tradename within the Cabinets segment. The 2018 impairment charge was primarily the result of reduced revenue growth expectations associated with Cabinets operations in Canada, including the announced closure of Company-owned retail locations. The fair value of the impaired tradenames was measured using the relief-from-royalty approach, which estimates the present value of royalty income that could be hypothetically earned by licensing the tradename to a third party over its remaining useful life. Some of the more significant assumptions inherent in estimating the fair value include estimated future annual net revenues for the tradename, assumed royalty rate, and a discount rate that reflects the level of risk associated with the tradenames’ future revenues and profitability. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated growth rates, and management plans. These assumptions represent level 3 inputs of the fair value hierarchy (refer to Note 9). A reduction in the estimated fair value of these two tradenames could trigger an additional impairment in future periods. In addition, future impairment could be triggered on a third tradename in the event of lower than expected sales in our custom cabinetry product line. As of September 30, 2019, the total carrying value of the three tradenames was approximately $174 million. Factors influencing our fair value estimates of the tradenames are described in the following paragraph. 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 fall below our assumptions, actions of key customers, increases in 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.

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