Goodwill and Other Intangible Assets, Net

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

Goodwill activity for the nine months ended September 30, 2020 is as follows (in millions):


					September 30, 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)	$	—
Commercial Solutions	747		—		—		1,241		(494)		747
Home Solutions	164		—		—		2,392		(2,228)		164
Learning and Development	2,586		—		26		3,458		(846)		2,612
Outdoor and Recreation	—		—		—		788		(788)		—
	$	3,709	$	(212)	$	26	$	8,623	$	(5,100)	$	3,523

During the third quarter of 2020, the Company divested a product line in its Learning and Development segment and allocated $3 million of reporting unit goodwill to the calculation of loss on disposal of business. This reduction of reporting unit goodwill is included in Foreign Exchange and Other in the table above.

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 nine months ended September 30, 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 and nine months ended September 30, 2019, the Company recorded an impairment charge of $83 million and $157 million, respectively, to reflect a decrease in the carrying values of Mapa/Spontex and Quickie while these businesses were classified as held for sale.

During the third quarter of 2019, in connection with the Company’s state income tax payable/receivable reconciliation process, the Company identified that its state income tax receivable was overstated by $20 million. Upon further analysis, the Company determined the $20 million state income tax receivable was recorded during March 2017 with a corresponding reduction to goodwill. As such, the Company recorded an entry to increase goodwill with a corresponding reduction to its state income tax receivable for $20 million. The Company was required to allocate the goodwill to the Company’s businesses and reporting units to determine whether or not the goodwill should have been included in the carrying value of a disposal group or reporting unit that was previously sold or impaired. Based on its analysis, the Company concluded that the entire $20 million goodwill balance would have been impaired or recognized as a loss on disposal in previously issued financial statements. The Company concluded the effects of such adjustments are not material to the current period or previously issued financial statements. As such, the Company recorded pretax out-of-period impairment charges of $12 million reflected in loss from continuing operations and $8 million ($6 million after tax) loss on sale of divested businesses, included in loss from discontinued operations, net of tax, in the Company’s Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2019.

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


	September 30, 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	$	2,315	$	—	$	2,315	$	3,560	$	—	$	3,560	N/A
Trade names — other	158		(55)		103		169		(50)		119		2-15
Capitalized software	620		(475)		145		587		(435)		152		3-12
Patents and intellectual property	123		(104)		19		135		(102)		33		3-14
Customer relationships and distributor channels	1,251		(266)		985		1,328		(283)		1,045		3-30
Other	—		—		—		109		(102)		7		3-5
	$	4,467	$	(900)	$	3,567	$	5,888	$	(972)	$	4,916

Amortization expense for intangible assets for continuing operations was $39 million and $52 million for the three months ended September 30, 2020 and 2019, respectively, and $121 million and $145 million for the nine months ended September 30, 2020 and 2019, respectively. Amortization expense for intangible assets for discontinued operations was nil for the three and nine months ended September 30, 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.

In 2018, as part of the ATP, the Company approved a plan to market for sale the Commercial Business. This business had been classified as held for sale in the Company's historical Consolidated Balance Sheets. During the third quarter of 2019, due to a change in strategy, the Company decided not to sell the business. As a result, the business no longer satisfied the requirements to be classified as held for sale in the Company's Consolidated Balance Sheet as of September 30, 2019. The Company measured the business at the lower of its (i) carrying amount before it was classified as held for sale, adjusted for depreciation and amortization expense that would have been recognized had the business been continuously classified as held and used, or (ii) fair value at the date the decision not to sell was made. The Company recorded a charge of $4 million in the third quarter of 2019 relating to the amount of amortization expense that would have been recorded in prior periods had the asset been continuously classified as held and used.

During the third quarter of 2020, the Company concluded that a triggering event had occurred for an indefinite-lived intangible asset in the Learning and Development segment as a result of a product line divestiture. Pursuant to the authoritative literature, the Company performed an impairment test and determined that the indefinite-lived intangible asset was impaired as its carrying value exceeded its fair value. During the three and nine months ended September 30, 2020, the Company recorded a non-cash charge of $2 million to reflect the impairment of this indefinite-lived intangible asset.

As a result of the impairment testing performed in connection with the COVID-19 pandemic triggering event during the first quarter of 2020, the Company determined that certain of its indefinite-lived intangible assets in the Appliances and Cookware, Commercial Solutions, Home Solutions, Learning and Development and Outdoor and Recreation segments were impaired. During the nine months ended September 30, 2020, the Company recorded impairment charges of $1.3 billion to reflect impairment of these indefinite-lived trade names because their carrying values exceeded their fair values.

During the three months ended September 30, 2019, as a result of the Company’s annual other indefinite-lived intangible impairment testing, the Company recorded impairment charges of $976 million to reflect impairment of intangible assets related to certain of the Company’s indefinite-lived trade names.

The impairment charges were allocated to the Company’s reporting segments as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019 (1)		2020		2019 (1)
Impairment of indefinite-lived intangibles assets
Appliances and Cookware	$	—	$	607	$	87	$	607
Commercial Solutions	—		152		320		152
Home Solutions	—		152		290		152
Learning and Development	2		—		80		—
Outdoor and Recreation	—		65		482		65
	$	2	$	976	$	1,259	$	976

(1)In the Appliances and Cookware segment, the impairment charge was recorded within the Appliances and Cookware reporting unit. In the Commercial Solutions segment, impairment charges of $130 million and $22 million were recorded in the Quickie and Mapa/Spontex businesses, respectively. In the Home Solutions segment, impairment charge of $152 million was recorded within the Home Fragrance reporting unit. In the Outdoor and Recreation segment, the impairment charge was recorded within Outdoor and Recreation reporting unit. The carrying value of certain Appliances and Cookware trade names exceeded their fair value primarily due to the announced tariffs on Chinese imports as well as a decline in sales volume due to a loss in market share for certain appliance categories driven by the success of newly launched competitive products. Both of these factors resulted in downward revisions to forecasted results. The carrying value of certain Home Solutions trade names exceeded their fair value primarily within the Home Fragrance reporting unit.

The Company believes the circumstances and global disruption caused by COVID-19 will continue to 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 most recently at September 30, 2020, 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 changes 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.

At 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 value of certain indefinite-lived intangibles in the Company’s Home Solutions 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 Solutions and Learning and Development of $6 million, $6 million and $16 million, respectively. As a result of updating the sensitivity analysis completed at March 31, 2020 for the $2 million impairment recorded during the three months ended September 30, 2020, a hypothetical 10% reduction in forecasted revenue used in the relief from royalty method to determine the fair value of the indefinite-lived intangible asset within the Learning and Development segment would have resulted in an incremental impairment charge of $15 million at September 30, 2020.