Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Note 9 - Goodwill and Other Intangible Assets

The Company tests goodwill and indefinite-lived intangible assets for impairment at least annually, performing its annual impairment test as of October 1st. Goodwill and indefinite-lived intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The Company reviews goodwill for impairment at the reporting unit level. The Engineered Bearings segment has one reporting unit and the Industrial Motion segment has six reporting units.

During the first three months of 2023, the Company reviewed goodwill for impairment for its reporting units due to the change in reporting segments that went into effect January 1, 2023. The Company utilized both an income approach and a market approach in testing goodwill for impairment. The Company utilized updated forecasts for the income approach as part of the goodwill impairment review. Based on the earnings and cash flow forecasts for the Belts & Chain reporting unit within the Industrial Motion segment, the Company determined that the reporting unit could not support the carrying value of its goodwill. As a result, the Company recorded a pretax impairment loss of $28.3 million during the first three months of 2023, which was reported in impairment and restructuring charges on the Consolidated Statement of Income.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2024 were as follows:


	Engineered Bearings		Industrial Motion		Total
Beginning balance, January 1	$	692.3	$	677.3	$	1,369.6
Acquisitions	—		79.8		79.8

Foreign currency translation adjustments and other changes	8.2		7.9		16.1
Ending balance	$	700.5	$	765.0	$	1,465.5

The acquisition of CGI added goodwill of $79.8 million in 2024. Goodwill arising from this acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining the companies. The goodwill related to CGI is not deductible for tax purposes.

The following table displays intangible assets as of September 30, 2024 and December 31, 2023:


	Balance at September 30, 2024						Balance at December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	832.8	$	(260.8)	$	572.0	$	776.5	$	(222.8)	$	553.7
Technology and know-how	369.5		(117.5)		252.0		343.3		(100.9)		242.4
Trade names	124.3		(16.0)		108.3		71.3		(11.2)		60.1
Capitalized software	302.8		(275.5)		27.3		299.5		(272.8)		26.7
Other	11.6		(10.3)		1.3		10.8		(8.7)		2.1
	$	1,641.0	$	(680.1)	$	960.9	$	1,501.4	$	(616.4)	$	885.0
Intangible assets not subject to amortization:
Trade names	$	89.9			$	89.9	$	137.7			$	137.7
FAA air agency certificates	8.7				8.7		8.7				8.7
	$	98.6			$	98.6	$	146.4			$	146.4
Total intangible assets	$	1,739.6	$	(680.1)	$	1,059.5	$	1,647.8	$	(616.4)	$	1,031.4

Amortization expense for intangible assets was $64.2 million and $53.1 million for the nine months ended September 30, 2024 and 2023, respectively. Amortization expense for intangible assets is projected to be approximately $86 million in 2024; $84 million in 2025; $81 million in 2026; $78 million in 2027; and $77 million in 2028.

TIMKEN CO 10-Q