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Goodwill and Intangible Assets | 12 Months Ended
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Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill Goodwill is calculated as the excess of consideration transferred over the net assets recognized for acquired businesses and represents future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. Goodwill is assigned to reporting units at the date the goodwill is initially recorded and is reallocated as necessary based on the composition of reporting units over time. The Company assesses goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and upon the occurrence of a triggering event or change in circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A quantitative test performed upon the occurrence of a triggering event compares the fair value of a reporting unit with its carrying amount. The Company determines fair values for each of the reporting units, as applicable, using the market approach, when available and appropriate, or the income approach, or a combination of both. The Company assesses the valuation methodology based upon the relevance and availability of the data at the time the Company performs the valuation. If multiple valuation methodologies are used, the results are weighted appropriately. Valuations using the market approach are derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. A market approach is limited to reporting units for which there are publicly traded companies that have characteristics similar to the Company's businesses. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company uses its internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in the forecasts. The Company derives its discount rates using a capital asset pricing model and by analyzing published rates for industries relevant to its reporting units to estimate the cost of equity financing. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Fiscal year ended December 31, 2023 The Company performed its annual impairment assessment as of October 1, 2023 for its five reporting units. For the assessment, the fair values of the reporting units were determined using both a discounted cash flow methodology and a market approach methodology with peer company multiples. Under the discounted cash flow methodology, the present value of expected future cash flows utilized discount rates ranging from 12% to 14%, which have increased since the date of the Business Combination. The discounted cash flow used a terminal future cash flows growth rate of 3.5% for all reporting units. The Company also compared fair value to peer company multiples. The Company's quantitative impairment assessment in 2023 for all reporting units indicated fair values were in excess of their carrying values. The results of this assessment indicated that the DSD, Technologies Europe and Asia and Technologies North America reporting units had a fair value less than 20% in excess over carrying value, primarily due to the impairments recorded in the prior period discussed below and an increased discount rate utilized in the current year discounted cash flows. Fiscal year ended December 31, 2022 During the second quarter of the year ended December 31, 2022, the Company concluded that a triggering event had occurred in the Radiation Monitoring Systems ("RMS") reporting unit of the Technologies segment as a result of the Russia-Ukraine conflict. Goodwill in the Technologies segment was recognized as a result of the Mirion Business Combination in October 2021, at which time approximately $257.2 million of goodwill was attributed to the RMS reporting unit. In May 2022, one of the customers in the RMS reporting unit terminated a contract with a Russian state-owned entity to build a nuclear power plant in Finland. The remaining performance obligation related to this contract within our backlog was approximately $67 million, of which approximately 80% was scheduled to be recognized as revenue over the next five years. Therefore, due to the impact on our planned revenues, the Company conducted a quantitative test for the RMS reporting unit, determining the fair value by estimating the present value of expected future cash flows, discounted by the applicable discount rate of 10.5% (compared to 9% used in determining the initial goodwill from the Business Combination) and assumed a terminal future cash flows growth rate of 3.5%. The Company also compared fair value to peer company multiples which have decreased since the date of the Business Combination. As the carrying value exceeded the fair value, the Company recognized its best estimate of a non-cash impairment loss of $55.2 million during the second quarter of the year ended December 31, 2022. The impairment loss was recorded in the caption "Goodwill impairment" in our consolidated statements of operations. The Company performed its annual impairment assessment as of October 1, 2022. Concurrent with the assessment, the Company reorganized its reporting unit structure (six reporting units) to better align the Company's operations on a geographic basis (five reporting units). The reorganization did not impact the operating segments of the Company. The quantitative goodwill impairment analyses were performed both before and after the reorganization. For both assessments, the fair values of the reporting units were determined using both a discounted cash flow methodology and a market approach methodology with peer company multiples. Under the discounted cash flow methodology, the present value of expected future cash flows utilized discount rates ranging from 11% to 13%, which have increased since the date of the Business Combination. The discounted cash flow used a terminal future cash flows growth rate of 3.5% for all reporting units. The Company also compared fair value to peer company multiples, which have decreased since the date of the Business Combination. The Company's quantitative impairment assessments in 2022 for all of its pre-reorganization reporting units indicated that four out of six reporting units had fair value in excess of their carrying value, while two reporting units (DMD EA and DSD) had fair value less than their carrying value, resulting in impairment charges of $69.3 million and $87.3 million for the Technologies and Medical segment, respectively. The Company performed the impairment assessments again following the reorganization and impairment charges, including reallocating goodwill of impacted reporting units based on relative fair values, and no additional impairments were recognized. The results of this assessment indicated that three out of five post reorganization reporting units (DSD, Technologies North America and Technologies Europe and Asia) had fair values less than 10% in excess over carrying value. The following table shows changes in the carrying amount of goodwill by reportable segment as of December 31, 2023 and December 31, 2022 (in millions):
| Medical |  | Industrial |  | Consolidated
Balance—December 31, 2021 | $ | 712.5 |  |  | $ | 950.1 |  |  | $ | 1,662.6 |
Business Combination and other acquisitions - measurement period adjustments | (1.9) |  |  | 5.3 |  |  | 3.4 |
CI acquisition |  |  | 4.9 |  |  | 4.9 |
Goodwill impairment | (87.3) |  |  | (124.5) |  |  | (211.8) |
Goodwill reclassified as assets held for sale | (7.3) |  |  | — |  |  | (7.3) |
Translation adjustment | — |  |  | (33.8) |  |  | (33.8) |
Balance—December 31, 2022 | $ | 616.0 |  |  | $ | 802.0 |  |  | $ | 1,418.0 |
Measurement Period Adjustment | — |  |  | 0.9 |  |  | 0.9 |
Acquisition of EC2 | 17.4 |  |  | — |  |  | 17.4 |
Translation Adjustment | — |  |  | 11.3 |  |  | 11.3 |
Balance—December 31, 2023 | $ | 633.4 |  |  | $ | 814.2 |  |  | $ | 1,447.6 |
A portion of goodwill is deductible for income tax purposes. Gross carrying amounts and cumulative goodwill impairment losses are as follows (in millions):
| December 31, 2023 |  | December 31, 2022
| Gross Carrying Amount |  | Cumulative Impairment |  | Gross Carrying Amount |  | Cumulative Impairment
Goodwill | $ | 1,659.4 |  |  | $ | (211.8) |  |  | $ | 1,629.8 |  |  | $ | (211.8) |
Intangible Assets Intangible assets consist of our developed technology, customer relationships, backlog, trade names, and non-compete agreements at the time of acquisition through business combinations. The customer relationships definite lived intangible assets are amortized using the double declining balance method while all other definite lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Many of our intangible assets are not deductible for income tax purposes. A summary of intangible assets useful lives, gross carrying value and related accumulated amortization is below (in millions):
Successor
|  |  | December 31, 2023
| Original Average Life in Years |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Book Value
Customer relationships | 6 - 13 |  | $ | 340.8 |  |  | $ | (143.1) |  |  | $ | 197.7 |
Distributor relationships | 7 - 13 |  | 60.9 |  |  | (16.0) |  |  | 44.9 |
Developed technology | 5 - 16 |  | 264.1 |  |  | (67.8) |  |  | 196.3 |
Trade names | 3 - 10 |  | 99.7 |  |  | (22.1) |  |  | 77.6 |
Backlog and other | 1 - 4 |  | 76.0 |  |  | (53.7) |  |  | 22.3 |
Total |  |  | $ | 841.5 |  |  | $ | (302.7) |  |  | $ | 538.8 |
|  |  | December 31, 2022
| Original Average Life in Years |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Book Value
Customer relationships | 6 - 13 |  | $ | 336.8 |  |  | $ | (83.1) |  |  | $ | 253.7 |
Distributor relationships | 7 - 13 |  | 60.9 |  |  | (8.7) |  |  | 52.2 |
Developed technology | 5 - 16 |  | 248.9 |  |  | (36.3) |  |  | 212.6 |
Trade names | 3 - 10 |  | 98.2 |  |  | (12.0) |  |  | 86.2 |
Backlog and other | 1 - 4 |  | 74.8 |  |  | (29.1) |  |  | 45.7 |
Total |  |  | $ | 819.6 |  |  | $ | (169.2) |  |  | $ | 650.4 |
Aggregate amortization expense for intangible assets included in cost of revenues and operating expenses was as follows (in millions):
| Successor |  |  | Predecessor
| Fiscal Year Ended December 31, 2023 |  | Fiscal Year Ended December 31, 2022 |  | From October 20, 2021 to December 31, 2021 |  |  | From July 1, 2021 through October 20, 2021 |  | Fiscal Year Ended June 30, 2021
Amortization expense for intangible assets in: |  |  |  |  |  |  |  |  |  |
Cost of revenues | $ | 27.1 |  |  | $ | 26.5 |  |  | $ | 5.6 |  |  |  | $ | 6.6 |  |  | $ | 20.9 |
Operating expenses | $ | 104.2 |  |  | $ | 119.3 |  |  | $ | 26.4 |  |  |  | $ | 13.1 |  |  | $ | 41.9 |

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