GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2020

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. The Company’s reporting units are its operating segments. The Company assesses goodwill for impairment on an annual basis during the second quarter. If circumstances change significantly, the Company would complete an interim goodwill assessment of a reporting unit prior to its next annual assessment.

During the second quarter of 2020, the Company completed its annual goodwill impairment assessment for each of its eleven reporting units using quantitative analyses consisting of discounted cash flow approaches that incorporated assumptions regarding future growth rates, terminal values, and discount rates. If the carrying value of a reporting unit is greater than its fair value, the Company will recognize an impairment loss for the amount by which the reporting unit’s carrying value exceeds its fair value, but not to exceed the carrying amount of goodwill assigned to that reporting unit. The Company’s goodwill impairment assessment for 2020 indicated the estimated fair values of each of its reporting units exceeded their carrying amounts by significant margins.

There has been no impairment of goodwill in any of the years presented.

The changes in the carrying amount of goodwill for each of the Company's reportable segments during the six-month period ended June 30, 2020 were as follows:

					Global
	Global		Global		Healthcare and		Global
(millions)	Industrial		Institutional		Life Sciences		Energy		Other		Total
December 31, 2019		$2,799.2		$1,147.7		$-		$1,417.9		$204.3		$5,569.1
Segment changes (a)		1,124.6		(599.4)		859.3		(1,417.9)		33.4		-
December 31, 2019 revised		3,923.8		548.3		859.3		-		237.7		5,569.1
Current year business combinations (b)		272.7		-		-		-		-		272.7
Prior year business combinations (c)		-		-		0.3		-		-		0.3
Dispositions		(47.6)		-		-		-		-		(47.6)
Effect of foreign currency translation		(32.4)		(0.4)		(1.2)		-		(0.6)		(34.6)
June 30, 2020		$4,116.5		$547.9		$858.4		$-		$237.1		$5,759.9

(a) Relates to reclassifications made to reportable segments in the current year. The ChampionX business was previously recorded in the Global Energy reportable segment and has been reported in discontinued operations. The Downstream operating segment, which was previously included in the Global Energy reportable segment has been aggregated into the Global Industrial reportable segment. In addition, the Company established the Global Healthcare and Life Sciences reportable segment which is comprised of the Healthcare and Life Sciences operating segments, which were previously included in the Global Institutional and Global Industrial reportable segment, respectively. These were and continue to be reporting units therefore no goodwill allocation was performed. Refer to Note 16 for further information.

(b) Represents goodwill associated with the CID Lines acquisition. No goodwill resulting from this acquisition is expected to be tax deductible.

(c) Represents the purchase price allocation adjustments for acquisitions deemed preliminary as of the end of the prior year.

Other Intangible Assets

The Nalco trade name is the Company’s only indefinite life intangible asset. During the second quarter of 2020, the Company completed its annual test for indefinite life intangible asset impairment using the relief from royalty discounted cash flow method, which incorporates assumptions regarding future sales projections, royalty rates and discount rates. Based on this testing, the estimated fair value of the asset exceeded its carrying amount by a significant margin; therefore, no adjustment to the $1.2 billion carrying value of this asset was necessary. There has been no impairment of the Nalco trade name intangible since it was acquired.

The Company’s intangible assets subject to amortization primarily include customer relationships, trademarks, patents and other technology primarily acquired through business combinations. The fair value of identifiable intangible assets acquired in business combinations is estimated primarily using discounted cash flow valuation methods at the time of acquisition. Intangible assets are amortized on a straight-line basis over their estimated lives. Total amortization expense related to intangible assets during the second quarter of 2020 and 2019 was $50.8 million and $52.7 million, respectively. Total amortization expense related to intangible assets during the first six months of 2020 and 2019 was $103.2 and $103.5 million, respectively. Estimated amortization for the remaining six-month period of 2020 related to amortizable intangible assets is expected to be approximately $109 million.