Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets. We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”) as it relates to the accounting for goodwill in our condensed consolidated financial statements. These provisions require that we, on at least an annual basis, evaluate the fair value of the reporting units to which goodwill is assigned and attributed and compare that fair value to the carrying value of the reporting unit to determine if an impairment has occurred. We perform our annual impairment testing during the fourth quarter. Impairment testing takes place more often than annually if events or circumstances indicate a change in status that would indicate a potential impairment. We believe that there have been no events or circumstances which would more likely than not reduce the fair value for our reporting units below its carrying value. A reporting unit is an operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment (a “component”), in which case the component would be the reporting unit. As of March 31, 2020, we had eight reporting units.

In March of 2020, we observed a significant decline in the market valuation of our common shares as a result of the COVID-19 pandemic. As such, we performed sensitivity analyses based on more recent assumptions, including entity-specific and macroeconomic factors resulting from the COVID-19 pandemic. We concluded that it was not more likely than not that the fair values of the reporting units were below their carrying values. While we believe we have made reasonable estimates and assumptions, it is possible a material change could occur. If actual results are not consistent with management’s estimates and assumptions, goodwill may then be determined to be overstated and a charge would need to be taken against net earnings.

Changes to goodwill are as follows:



(in millions)	Fluid Handling			Payment & Merchandising Technologies			Aerospace & Electronics			Engineered Materials		Total
Balance as of December 31, 2018	$	240.8		$	789.2		$	202.4		$	171.3	$	1,403.7
Additions	—			63.4			—			—		63.4
Currency translation	0.1			5.2			—			—		5.3
Balance as of December 31, 2019	$	240.9		$	857.8		$	202.4		$	171.3	$	1,472.4
Additions	108.1			—			—			—		108.1
Adjustments to purchase price allocations	—			(3.1		)	—			—		(3.1		)
Currency translation	(3.1		)	(9.0		)	(0.1		)	—		(12.2		)
Balance at March 31, 2020	$	345.9		$	845.7		$	202.3		$	171.3	$	1,565.2

For the three months ended March 31, 2020, additions to goodwill represent the preliminary purchase price allocation related to the January 2020 acquisition of I&S and an adjustment to the purchase price allocation for the December 2019 acquisition of Cummins-Allison. For the year ended December 31, 2019, additions to goodwill represent the preliminary purchase price allocation related to the acquisition of Cummins-Allison and the finalization of the purchase price allocation of the January 2018 acquisition of Crane Currency. See discussion in Note 2, “Acquisitions” for further details.

As of March 31, 2020, we had $545.4 million of net intangible assets, of which $69.4 million were intangibles with indefinite useful lives, consisting of trade names. As of December 31, 2019, we had $505.1 million of net intangible assets, of which $69.9 million were intangibles with indefinite useful lives, consisting of trade names. Intangibles with indefinite useful lives are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment. If the carrying amount of an indefinite lived intangible asset exceeds its fair value, the intangible asset is written down to its fair value. Fair value is calculated using relief from royalty method. We amortize the cost of definite-lived intangibles over their estimated useful lives. We also review all of our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

In March of 2020, we observed a significant decline in the market valuation of our common shares as a result of the COVID-19 pandemic. As such, we performed sensitivity analyses based on more recent assumptions, including entity-specific and macroeconomic factors resulting from the COVID-19 pandemic. We concluded that it was not more likely than not that the fair values of our indefinite-lived intangible assets were below their carrying values. While we believe we have made reasonable estimates and assumptions, it is possible a material change could occur. If actual results are not consistent with management’s estimates and assumptions, indefinite-lived intangible assets may then be determined to be overstated and a charge would need to be taken against net earnings.

Changes to intangible assets are as follows:



(in millions)	Three Months Ended March 31, 2020			Year Ended December 31, 2019
Balance at beginning of period, net of accumulated amortization	$	505.1		$	481.8
Additions	52.5			66.0
Amortization expense	(11.0		)	(40.0		)
Currency translation	(1.2		)	(2.7		)
Balance at end of period, net of accumulated amortization	$	545.4		$	505.1

For the three months ended March 31, 2020, additions to intangible assets represent the preliminary purchase price allocation related to the January 2020 acquisition of I&S. For the year ended December 31, 2019, additions to intangible assets represent the preliminary purchase price allocation related to the acquisition of Cummins-Allison. See discussion in Note 2, “Acquisitions” for further details.

A summary of intangible assets follows:



		March 31, 2020						December 31, 2019
(in millions)	Weighted Average Amortization Period of Finite Lived Assets (in years)	Gross Asset		Accumulated Amortization		Net		Gross Asset		Accumulated Amortization		Net
Intellectual property rights	15.7	$	135.3	$	56.0	$	79.3	$	134.2	$	56.8	$	77.4
Customer relationships and backlog	18.4	649.1		245.8		403.3		603.1		241.3		361.8
Drawings	40.0	11.1		10.5		0.6		11.1		10.5		0.6
Other	11.7	140.3		78.1		62.2		141.6		76.3		65.3
Total	17.9	$	935.8	$	390.4	$	545.4	$	890.0	$	384.9	$	505.1

Future amortization expense associated with intangible assets is expected to be:



(in millions)
Remainder of 2020	$	34.2
2021	42.7
2022	42.3
2023	42.1
2024 and after	314.7