Goodwill and Other Intangible Assets, Net

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

Goodwill activity for the three months ended March 31, 2020 is as follows (in millions):


													March 31, 2020
Segments	Net Book Value at December 31, 2019		Impairment Charges		Foreign Exchange and Other		Gross Carrying Amount		Accumulated Impairment Charges		Net Book Value
Appliances and Cookware	$	212	$	(212)	$	—	$	744	$	(744)	$	—
Food and Commercial	747		—		—		2,266		(1,519)		747
Home and Outdoor Living	164		—		—		2,155		(1,991)		164
Learning and Development	2,586		—		(14)		3,418		(846)		2,572

	$	3,709	$	(212)	$	(14)	$	8,583	$	(5,100)	$	3,483

During the first quarter of 2020, the Company concluded that a triggering event had occurred for all of its reporting units as a result of the COVID-19 global pandemic. Pursuant to the authoritative literature, the Company performed an impairment test and determined that the goodwill associated with its Appliances and Cookware reporting unit was fully impaired. During the three months ended March 31, 2020, the Company recorded an impairment charge of $212 million to reflect the impairment of its goodwill. See Footnote 1 for further information.

During the three months ended March 31, 2019, the Company recorded an impairment charge of $63 million to reflect a decrease in the carrying values of Mapa/Spontex and Quickie while these businesses were classified as held for sale.

Other intangible assets, net are comprised of the following at the dates indicated (in millions):


	March 31, 2020										December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Amortization Periods (in years)
Trade names — indefinite life	$	2,270	$	—	$	2,270	$	3,560	$	—	$	3,560	N/A
Trade names — other	158		(49)		109		169		(50)		119		2-15
Capitalized software	590		(445)		145		587		(435)		152		3-12
Patents and intellectual property	135		(106)		29		135		(102)		33		3-14
Customer relationships and distributor channels	1,308		(294)		1,014		1,328		(283)		1,045		3-30
Other	109		(109)		—		109		(102)		7		3-5
	$	4,570	$	(1,003)	$	3,567	$	5,888	$	(972)	$	4,916

Amortization expense for intangible assets for continuing operations was $43 million and $47 million for the three months ended March 31, 2020 and 2019, respectively. Amortization expense for intangible assets for discontinued operations was nil for the three months ended March 31, 2019, as the Company ceased amortizing other finite-lived intangible assets relating to businesses which satisfied the criteria to be classified as held for sale.

As a result of the impairment testing performed in connection with the COVID-19 pandemic triggering event, the Company determined that certain of its indefinite-lived intangible assets in the Appliances and Cookware, Home and Outdoor Living and Learning and Development segments were impaired. During the three months ended March 31, 2020 and 2019, the Company recorded impairment charges of $1.3 billion and nil, respectively, to reflect impairment of these indefinite-lived trade names because their carrying values exceeded their fair values as follows:


	Three Months Ended March 31, 2020
Impairment of indefinite-lived intangibles assets
Appliances and Cookware	$	87

Home and Outdoor Living	1,092
Learning and Development	78
	$	1,257

The Company believes the circumstances and global disruption caused by COVID-19 will affect its businesses, operating results, cash flows and financial condition and that the scope and duration of the pandemic is highly uncertain. In addition, some of the other inherent estimates and assumptions used in determining fair value of the reporting units are outside the control of management, including interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates, labor inflation and tariffs, including the current trade negotiations with China. Given the uncertainty of these factors, as well as the inherent difficulty in predicting the severity and duration of the COVID-19 global pandemic and associated recovery and the uncertainties regarding the potential financial impact on the Company's business and the overall economy, there can be no assurance that the Company's estimates and assumptions made for purposes of the goodwill and indefinite-lived intangible asset impairment testing performed during the first quarter of 2020 will prove to be accurate predictions of the future.

In addition, as a result of several impairment charges recorded over the past three years and as most recently as of December 1, 2019, some of the Company's reporting units and several of the Company's indefinite-lived tradenames were either recorded at fair value or with fair values within 10% of the associated carrying values. While the Company believes it has made reasonable estimates and assumptions to calculate the fair values of the reporting units and other indefinite-lived intangible assets which were based on facts and circumstances known at this time, it is possible that new events may occur or actual events may result in forecasted cash flows, revenue and earnings that differ from those that formed the basis of the Company’s estimates and assumptions. For each of the Company’s reporting units, particularly if the global pandemic caused by COVID-19 continues to persist for an extended period of time, the reporting unit’s actual results could be materially different from the Company’s estimates and assumptions used to calculate fair value. If so, the Company may be required to recognize material impairments to goodwill and/or indefinite-lived intangible assets. The Company will continue to monitor its reporting units for any triggering events or other signs of impairment. The Company may be required to perform additional impairment testing based on further deterioration of the global economic environment, continued disruptions to the Company’s business, further declines in operating results of the Company’s reporting units and/or tradenames, further sustained deterioration of the Company’s market capitalization, and other factors, which could result in impairment charges in the future. Although management cannot predict when improvements in macroeconomic conditions will occur, if consumer confidence and consumer spending decline significantly in the future or if commercial and industrial economic activity experiences a sustained deterioration from current levels, it is reasonably likely the Company will be required to record impairment charges in the future.

As of March 31, 2020, there were no reporting units and nine indefinite-lived trade names with fair values within 10% of the associated carrying values. A hypothetical 10% reduction in forecasted earnings before interest, taxes and amortization used in the discounted cash flows to estimate the fair value of the reporting unit would not have resulted in an incremental goodwill impairment charge. A hypothetical 10% reduction in the forecasted debt-free cash flows used in the excess earnings method to determine the fair of certain indefinite-lived intangibles in the Company’s Home and Outdoor Living and Learning and Development segments would have resulted in incremental impairment charges of $39 million and $13 million, respectively. A hypothetical 10% reduction in forecasted revenue used in the relief from royalty method to determine the fair value of certain indefinite-lived intangibles would have resulted in incremental impairment charges in the Company's following segments: Appliances and Cookware, Home and Outdoor Living and Learning and Development of $6 million