Goodwill and Acquired Intangible Assets

6 Months Ended

Jun. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The carrying value of goodwill by segment was as follows (in millions):


	Digital Imaging		Instrumentation		Aerospace and Defense Electronics		Engineered Systems		Total


















Balance at December 31, 2023	$	6,877.0	$	944.8	$	163.4	$	17.6	$	8,002.8
Current year acquisitions	63.8		23.3		—		—		87.1
Foreign currency changes and other	(42.0)		(7.5)		(0.2)		—		(49.7)
Balance at June 30, 2024	$	6,898.8	$	960.6	$	163.2	$	17.6	$	8,040.2


Acquired intangible assets (in millions):	June 30, 2024						December 31, 2023
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Proprietary technology	$	1,686.9	$	730.0	$	956.9	$	1,696.6	$	663.0	$	1,033.6
Customer list/relationships	609.0		236.5		372.5		609.5		219.4		390.1
Patents	0.6		0.6		—		0.6		0.6		—
Non-compete agreements	0.9		0.9		—		0.9		0.9		—
Trademarks	12.2		6.6		5.6		10.2		5.8		4.4
Backlog	16.3		16.3		—		16.4		16.4		—
Total intangibles subject to amortization	2,325.9		990.9		1,335.0		2,334.2		906.1		1,428.1
Intangibles not subject to amortization:
Trademarks	847.9		—		847.9		850.0		—		850.0
Total acquired intangible assets	$	3,173.8	$	990.9	$	2,182.9	$	3,184.2	$	906.1	$	2,278.1

An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Based on the results of the Company’s annual assessment in the fourth quarter of 2023, all reporting units with the exception of the FLIR reporting unit had estimated fair values that exceeded their respective carrying value by more than 100%. At the assessment date in the fourth quarter of 2023, the estimated fair value of the FLIR reporting unit exceeded its carrying value by approximately $460 million or 6%, and the FLIR reporting unit had $5,832.4 million of goodwill at the prior year assessment date. As of June 30, 2024, the FLIR reporting unit had $5,850.8 million of goodwill, with the change in value from the prior year assessment date related to the impact of foreign currency translation.

Although the assumptions used in the Company’s prior year discounted cash flow model and market approach are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results of the FLIR reporting unit. Changes in forecast estimates or the application of alternative assumptions could produce significantly different results. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure.

Although no impairment existed for the FLIR reporting unit as of the prior year assessment date, a non-cash impairment of goodwill could result from a number of circumstances, including different assumptions used in determining the fair value of the reporting unit, changes to customer spending priorities, or a sharp increase in interest rates without a corresponding increase in future net sales.

For all reporting units, including the FLIR reporting unit, there have been no events or changes in circumstances which indicate an interim impairment review is required in 2024. The Company will perform its annual analysis during the fourth quarter of 2024.

Based on the results of the Company’s annual assessment in the fourth quarter of 2023, the estimated fair value of all material indefinite-lived trademarks, with the exception of the FLIR indefinite-lived trademark, significantly exceeded their respective carrying value. Trademarks of recently acquired businesses generally represent a higher inherent risk of impairment, which

typically decreases as the businesses are integrated into the Company. At the prior year annual assessment date, the FLIR indefinite-lived trademark had a carrying value of $685.3 million and a fair value of $694.9 million. The most significant assumptions utilized in the determination of the fair value of the FLIR trademark are the net sales growth rates (including residual growth rates), discount rate and royalty rate. Although the FLIR sales forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results of the FLIR business. Changes in sales forecast estimates or the application of alternative assumptions could produce significantly different results. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. The royalty rate was driven by historical and estimated future profitability of the underlying FLIR business, and the royalty rate assumption was consistent with assumptions used by the Company as part of the purchase price allocation of FLIR in 2021. The royalty rate may be impacted by significant adverse changes in long-term operating margins. Although no impairment exists for the FLIR trademark, a non-cash impairment of the trademark could result from a number of circumstances, including different assumptions used in determining the fair value of the trademark, changes to customer spending priorities, or a sharp increase in interest rates without a corresponding increase in future net sales.

For all indefinite-lived trademarks, including the FLIR trademark, there have been no events or changes in circumstances which indicate an interim impairment review is required in 2024. The Company will perform its annual analysis during the fourth quarter of 2024.