Goodwill and Other Intangible Assets |
Goodwill and Other Intangible Assets Goodwill consisted of the following (in millions): | | | | | | | | | | | | | | | | | | | ADESA Auctions | | AFC | | Total | Balance at December 31, 2018 | $ | 1,413.2 | | | $ | 263.7 | | | $ | 1,676.9 | | Increase for acquisition activity | 142.6 | | | — | | | 142.6 | | Foreign currency | 2.2 | | | — | | | 2.2 | | Balance at December 31, 2019 | $ | 1,558.0 | | | $ | 263.7 | | | $ | 1,821.7 | | Increase for acquisition activity | 354.8 | | | — | | | 354.8 | | Decrease for disposition activity | — | | | (22.8) | | | (22.8) | | Impairment | (25.5) | | | — | | | (25.5) | | Foreign currency | 12.0 | | | — | | | 12.0 | | Balance at December 31, 2020 | $ | 1,899.3 | | | $ | 240.9 | | | $ | 2,140.2 | |
Goodwill represents the excess cost over fair value of identifiable net assets of businesses acquired. Goodwill increased in 2020 and 2019 primarily as a result of acquisitions. Goodwill decreased in the AFC segment in 2020 as a result of the sale of PWI. A portion of the goodwill resulting from the businesses acquired in 2019 is expected to be deductible for tax purposes and none of the goodwill resulting from the business acquired in 2020 is expected to be deductible for tax purposes. The Company tests goodwill for impairment at the reporting unit level annually in the second quarter, or more frequently as impairment indicators arise. In light of the impact that the COVID-19 pandemic has had on the economy, forecasts for all reporting units were revised. These economic circumstances contributed to lower sales, operating profits and cash flows at ADESA Remarketing Limited (doing business as ADESA U.K.) through the first part of 2020 as compared to 2019, and the outlook for the business was significantly reduced. As a result of the updated forecasts, an impairment analysis of goodwill and intangibles was conducted. The change in circumstances resulted in the impairment of the goodwill balance totaling $25.5 million in our ADESA Remarketing Limited reporting unit and a non-cash goodwill impairment charge was recorded for this amount in the second quarter of 2020. The fair value of that reporting unit was estimated using the expected present value of future cash flows. Goodwill was tested for impairment in all of the Company's reporting units in the second quarter of 2020 and no impairment was identified, other than the impairment previously discussed in the ADESA Remarketing Limited reporting unit. Future events and changing market conditions, including the impact of COVID-19, may require us to re-evaluate the estimates used in our fair value measurements, which could result in additional impairment of goodwill and other intangible assets in future periods and could have a material effect on our operating results. A summary of customer relationships is as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Carrying Value | | Gross Carrying Amount | | Accumulated Amortization | | Carrying Value | Customer relationships | 5 - 19 | | $ | 879.9 | | | $ | (668.6) | | | $ | 211.3 | | | $ | 845.3 | | | $ | (637.4) | | | $ | 207.9 | |
The increase in customer relationships in 2020 and 2019 was primarily related to customer relationships acquired, partially offset by the amortization of existing customer relationships and impairment charges recognized. As discussed above, ADESA Remarketing Limited has been negatively impacted in light of the COVID-19 pandemic and the economy. As a result, in the second quarter of 2020, a non-cash customer relationship impairment charge of approximately $4.3 million was also recorded in the ADESA Remarketing Limited reporting unit, representing the impairment in the value of this reporting unit’s customer relationships. The fair value of the customer relationships was estimated using the expected present value of future cash flows. A summary of other intangibles is as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Carrying Value | | Gross Carrying Amount | | Accumulated Amortization | | Carrying Value | Tradenames | 2 - Indefinite | | $ | 150.8 | | | $ | (12.2) | | | $ | 138.6 | | | $ | 147.6 | | | $ | (10.7) | | | $ | 136.9 | | Computer software & technology | 3 - 13 | | 501.1 | | | (349.5) | | | 151.6 | | | 443.0 | | | (281.5) | | | 161.5 | | Covenants not to compete | 5 | | 0.3 | | | (0.3) | | | — | | | 0.3 | | | (0.2) | | | 0.1 | | Total | | | $ | 652.2 | | | $ | (362.0) | | | $ | 290.2 | | | $ | 590.9 | | | $ | (292.4) | | | $ | 298.5 | |
Other intangibles increased in 2020 and 2019 primarily as a result of computer software additions and acquisitions, partially offset by the amortization of existing intangibles. The carrying amount of tradenames with an indefinite life was approximately $131.5 million at December 31, 2020 and 2019. Amortization expense for customer relationships and other intangibles was $128.2 million, $122.9 million and $111.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. Estimated amortization expense on existing intangible assets for the next five years is $108.2 million for 2021, $73.1 million for 2022, $44.5 million for 2023, $23.6 million for 2024 and $18.3 million for 2025.
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