INTEGRYS ENERGY GROUP, INC. | 2013 | FY | 3

Goodwill and Other Intangible Assets

The following table shows changes to our gross amount of goodwill and accumulated impairment losses by segment for the years ended December 31, 2013, and 2012:
 
 
Natural Gas Utility
 
Integrys Energy Services
 
Holding Company and Other
 
Total
(Millions)
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Balance as of January 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross goodwill
 
$
933.5

 
$
933.5

 
$
6.6

 
$
6.6

 
$
15.8

 
$
15.9

 
$
955.9

 
$
956.0

Accumulated impairment losses
 
(297.6
)
 
(297.6
)
 
—

 
—

 
—

 
—

 
(297.6
)
 
(297.6
)
Net goodwill
 
635.9

 
635.9

 
6.6

 
6.6

 
15.8

 
15.9

 
658.3

 
658.4

Adjustment to Trillium and Pinnacle purchase price
 
—

 
—

 
—

 
—

 
—

 
(0.1
)
 
—

 
(0.1
)
Adjustment to ITF patents/intellectual property *
 
—

 
—

 
—

 
—

 
3.8

 
—

 
3.8

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross goodwill
 
933.5

 
933.5

 
6.6

 
6.6

 
19.6

 
15.8

 
959.7

 
955.9

Accumulated impairment losses
 
(297.6
)
 
(297.6
)
 
—

 
—

 
—

 
—

 
(297.6
)
 
(297.6
)
Net goodwill
 
$
635.9

 
$
635.9

 
$
6.6

 
$
6.6

 
$
19.6

 
$
15.8

 
$
662.1

 
$
658.3


*
An immaterial adjustment was made to the gross goodwill balance at ITF in the second quarter of 2013 due to a correction to the life of certain intangible assets.

In the second quarter of 2013, annual impairment tests were completed at all of our reporting units that carried a goodwill balance. No impairments resulted from these tests.

The identifiable intangible assets other than goodwill listed below are part of other current and long-term assets on the balance sheets. An insignificant amount was recorded as assets held for sale on the balance sheets.
 
 
December 31, 2013
 
December 31, 2012
(Millions)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Amortized intangible assets
 
 
 
 

 
 

 
 

 
 

 
 

Customer-related (1)
 
$
26.8

 
$
(15.7
)
 
$
11.1

 
$
22.4

 
$
(14.7
)
 
$
7.7

Contractual service agreements (2)
 
15.6

 
(1.8
)
 
13.8

 
—

 
—

 
—

Renewable energy credits (3)
 
8.4

 
—

 
8.4

 
3.1

 
—

 
3.1

Compressed natural gas fueling contract assets (4)
 
5.6

 
(2.7
)
 
2.9

 
5.6

 
(1.3
)
 
4.3

Customer-owned equipment modifications (5)
 
4.0

 
(0.9
)
 
3.1

 
4.0

 
(0.5
)
 
3.5

Natural gas and electric contract assets (6)
 
3.9

 
(0.5
)
 
3.4

 
—

 
—

 
—

Nonregulated easements (7) 
 
3.7

 
(1.1
)
 
2.6

 
3.8

 
(0.9
)
 
2.9

Patents/intellectual property (8)
 
3.4

 
(0.5
)
 
2.9

 
7.2

 
(0.3
)
 
6.9

Other
 
0.5

 
(0.3
)
 
0.2

 
0.5

 
(0.2
)
 
0.3

Total
 
$
71.9

 
$
(23.5
)
 
$
48.4

 
$
46.6

 
$
(17.9
)
 
$
28.7

 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized intangible assets
 
 

 
 

 
 

 
 

 
 

 
 

MGU trade name
 
$
5.2

 
$
—

 
$
5.2

 
$
5.2

 
$
—

 
$
5.2

Trillium trade name (9)
 
3.5

 
—

 
3.5

 
3.5

 
—

 
3.5

Pinnacle trade name (9)
 
1.5

 
—

 
1.5

 
1.5

 
—

 
1.5

Total intangible assets
 
$
82.1

 
$
(23.5
)
 
$
58.6

 
$
56.8

 
$
(17.9
)
 
$
38.9


(1) 
Represents customer relationship assets associated with PELLC’s former nonregulated retail natural gas and electric operations, ITF's compressed natural gas fueling operations, and Compass Energy Services. See Note 3, Acquisitions, for more information regarding Integrys Energy Services' acquisition of Compass Energy Services. The remaining weighted-average amortization period for customer-related intangible assets at December 31, 2013, was approximately 11 years.

(2) 
Represents contractual service agreements related to maintenance on the combustion turbine generators at the Fox Energy Center. The remaining amortization period for these intangible assets at December 31, 2013, was approximately six years.

(3) 
Used at Integrys Energy Services to comply with state Renewable Portfolio Standards and to support customer commitments.

(4) 
Represents the fair value of ITF contracts acquired in September 2011. The remaining amortization period at December 31, 2013, was approximately seven years.

(5) 
Relates to modifications made by Integrys Energy Services and ITF to customer-owned equipment. These intangible assets are amortized on a straight-line basis, with a remaining weighted-average amortization period at December 31, 2013, of approximately ten years.

(6) 
Represents the fair value of certain natural gas and electric customer contracts acquired by Integrys Energy Services during 2013 that were not considered to be derivative instruments. The remaining amortization period for these intangible assets at December 31, 2013, was approximately four years.

(7) 
Relates to easements supporting a pipeline at Integrys Energy Services. The easements are amortized on a straight-line basis, with a remaining amortization period at December 31, 2013, of approximately ten years.

(8) 
Represents the fair value of patents/intellectual property at ITF related to a system for more efficiently compressing natural gas to allow for faster fueling. An immaterial adjustment was made to the intangible assets balance in the second quarter of 2013 as a result of a correction to the life of the intangible assets. The remaining amortization period at December 31, 2013, was approximately nine years.

(9) 
Trillium USA (Trillium) and Pinnacle CNG Systems (Pinnacle) are wholly owned subsidiaries of ITF.

Amortization expense recorded as a component of nonregulated cost of sales in the statements of income for the years ended December 31, 2013, 2012, and 2011, was $2.1 million, $2.5 million, and $1.3 million, respectively.

Amortization expense recorded as a component of depreciation and amortization expense in the statements of income for the years ended December 31, 2013, 2012, and 2011, was $4.2 million, $2.5 million, and $3.4 million, respectively.

An insignificant amount of amortization expense was recorded in discontinued operations for the years ended December 31, 2013, 2012, and 2011.

Amortization expense for the next five fiscal years is estimated to be:
 
 
For the Year Ending December 31
(Millions)
 
2014
 
2015
 
2016
 
2017
 
2018
Amortization to be recorded in nonregulated cost of sales
 
$
3.4

 
$
2.0

 
$
1.1

 
$
0.9

 
$
0.8

Amortization to be recorded in depreciation and amortization expense
 
4.3

 
4.2

 
4.0

 
3.9

 
3.8

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