Goodwill and Other Intangibles Resulting from Business Acquisitions

6 Months Ended

Jun. 27, 2020

Goodwill and Other Intangibles Resulting from Business Acquisitions

Goodwill and Other Intangibles Resulting from Business Acquisitions

Note 3.  Goodwill and Other Intangibles Resulting from Business Acquisitions

Changes in the net carrying amount of goodwill for the six months ended June 27, 2020 by reportable segment are shown below.

	Label and		Retail Branding		Industrial and
	Graphic		and Information		Healthcare
(In millions)	Materials		Solutions		Materials		Total
Goodwill as of December 28, 2019	$	407.8	$	349.3	$	173.7	$	930.8
Acquisition(1)		—		110.5		—		110.5
Translation adjustments		(1.7)		.7		(.5)		(1.5)
Goodwill as of June 27, 2020	$	406.1	$	460.5	$	173.2	$	1,039.8

⁽¹⁾Goodwill acquired related to the acquisition of Smartrac, which is based on a preliminary allocation to the Retail Branding and Information Solutions reportable segment. In the first quarter of 2020, a portion of the goodwill related to the acquisition of Smartrac was reported under Label and Graphic Materials, reflecting sales through that segment's channels. To better align the reporting with our current organization structure, the goodwill associated with the acquisition was reclassified and is now included solely under Retail Branding and Information Solutions. The amount of goodwill recognized is not expected to be deductible for income tax purposes.

The duration and severity of COVID-19 could result in future impairment charges to our reportable segments’ goodwill balances. While we have concluded that a triggering event did not occur during the six months ended June 27, 2020, a prolonged pandemic could significantly impact our results of operations and result in changes to assumptions utilized in the determination of the estimated fair values of goodwill that could trigger an impairment.

Finite-Lived Intangible Assets

In connection with the Smartrac acquisition, we acquired approximately $78 million of identifiable intangible assets, which consisted of customer relationships, trade names and trademarks, and patents and other acquired technology. We utilized the income approach to estimate the fair values of the identifiable intangibles associated with the acquisition, primarily using Level 3 inputs. The discount rate we used to value these assets was 13.5%.

The table below summarizes the amounts and useful lives of these intangible assets as of the acquisition date.

			Amortization
	Amount		period
	(in millions)		(in years)
Patents and other acquired technology	$	60.0	11
Customer relationships		16.0	6
Trade names and trademarks		2.0	5

Refer to Note 2, “Acquisitions,” to the unaudited Condensed Consolidated Financial Statements for more information.