Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

The table below presents changes in the carrying amount of goodwill and our accumulated impairment losses (in thousands):


Goodwill (gross) at December 31, 2019	$	198,475
Acquired goodwill	82,497
Foreign currency translation and other adjustments	584
Goodwill (gross) at December 31, 2020	281,556

Accumulated impairment losses at December 31, 2019	(9,879)
Goodwill impairment	(3,510)
Accumulated impairment losses at December 31, 2020	(13,389)

Goodwill (net) at December 31, 2020	$	268,167

Goodwill (gross) at December 31, 2020	$	281,556
Acquired goodwill (1)	422,126
Foreign currency translation and other adjustments	(1,929)
Goodwill (gross) at December 31, 2021	701,753

Accumulated impairment losses at December 31, 2020	(13,389)
Goodwill impairment	—
Accumulated impairment losses at December 31, 2021	(13,389)

Goodwill (net) at December 31, 2021	$	688,364

(1)Primarily includes the acquisition of Porpoise Pool & Patio, Inc.

On December 16, 2021, we acquired Porpoise Pool & Patio, Inc. (“Porpoise”) for $788.7 million, net of cash acquired, subject to certain customary closing adjustments. The purchase price of Porpoise was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Tangible assets acquired were $84.2 million, which included $57.4 million of acquired land and buildings. As a result of the acquisition, we recognized goodwill of $403.5 million, which represents anticipated cost synergies from combined operations. Other intangible assets of $301.0 million acquired as part of our acquisition of Porpoise included the following:

•$169.0 million for the Pinch A Penny brand name, which was determined to be indefinite-lived;

•$109.0 million for customer relationships and $22.0 million for franchise agreements, both of which were determined to have useful lives of 20 years; and

•$1.0 million for a non-compete agreement.

We determined the Pinch A Penny brand name to be indefinite-lived based on our plan of continued franchise expansion using the brand name and Pinch A Penny’s well-established reputation and recognized brand name within the swimming pool industry, including their competitive market position, and history of successful performance by branded stores.

The fair value of intangible assets was determined using income methodologies. We valued the acquired brand name and franchise agreements using the relief from royalty method. For customer relationships, we used the multi-period excess earnings method. Significant assumptions (Level 3 inputs) used in developing these valuations included the estimated annual net cash flows for each intangible asset, royalty rates, the discount rate that appropriately reflects the risk inherent in each future cash flow stream and the assessment of each asset’s life cycle, among other factors. We determined the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions. The final allocation of the fair value of the Porpoise acquisition, including the allocation of goodwill and intangible assets, is not complete, but will be finalized within the allowable measurement period.

In October 2021 and October 2020, we performed our annual goodwill impairment test and did not record any goodwill impairment at the reporting unit level. As of October 1, 2021, we had 247 reporting units with allocated goodwill balances. The most significant goodwill balance for a reporting unit was $12.1 million and the average goodwill balance per reporting unit was $1.1 million.

In the period ended March 31, 2020, we recorded impairment equal to the total goodwill and intangibles carrying amounts of our five Australian reporting units, which included goodwill impairment of $3.5 million and intangibles impairment, related to the Pool Systems tradename and trademark, of $0.9 million. We recorded these amounts in Impairment of goodwill and other assets on our Consolidated Statements of Income. We determined certain impairment triggers had occurred due to the impact of the COVID-19 pandemic on expected future operating cash flows, and performed interim goodwill impairment analyses, which included discounted cash flow analyses, and determined that the estimated fair values of our Australian reporting units no longer exceeded their carrying values.

The determination of our reporting units’ goodwill and intangibles fair values includes numerous assumptions that are subject to various risks and uncertainties. The principal assumptions, all of which are considered Level 3 inputs, used in our cash flow analyses consisted of changes in market conditions, forecasted future operating results (including sales growth rates and operating margins) and discount rates (including our weighted-average cost of capital).

Other intangible assets consisted of the following (in thousands):


	December 31,												Weighted Average Useful Life
	2021						2020
	Intangibles Gross		Accumulated Amortization		Intangibles Net		Intangibles Gross		Accumulated Amortization		Intangibles Net
Horizon tradename	$	8,400	$	—	$	8,400	$	8,400	$	—	$	8,400	Indefinite
Pinch A Penny brand name	169,000		—		169,000		—		—		—		Indefinite
National Pool Tile (NPT) tradename	1,500		(1,037)		463		1,500		(962)		538		20
Non-compete agreements	8,096		(3,891)		4,205		6,917		(3,674)		3,243		4.58
Customer relationships	109,000		(214)		108,786		—		—		—		20
Franchise agreements	22,000		(40)		21,960		—		—		—		20
Total other intangibles	$	317,996	$	(5,182)	$	312,814	$	16,817	$	(4,636)	$	12,181

The Horizon tradename and Pinch A Penny brand name each have an indefinite useful life and are not subject to amortization. However, we evaluate the useful life of these intangible assets and test for impairment annually. The NPT tradename, our non-compete agreements, customer relationships and franchise agreements have finite useful lives, and we amortize the estimated fair value of these agreements using the straight-line method over their respective useful lives. We have not identified any indicators of impairment related to these assets. The useful lives for our non-compete agreements are based on their contractual terms.

Other intangible amortization expense was $1.3 million in 2021 and $1.0 million in both 2020 and 2019.

The table below presents estimated amortization expense for other intangible assets for the next five years (in thousands):


2022	$	7,854
2023	7,802
2024	7,426
2025	7,335
2026	6,932