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Goodwill and Intangible Assets | 6 Months Ended
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Jun. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets |
9. | Goodwill and Intangible Assets
During the second quarter of 2020, with the exacerbated deterioration in uncoated freesheet market conditions arising from the COVID-19 pandemic and the estimated impact on our Paper segment and its projected future results of operations, we identified a triggering event indicating possible impairment of goodwill and our long lived assets within our Paper reporting unit. Goodwill Due to the triggering event identified above an interim quantitative impairment analysis was performed as of May 31, 2020 for the Paper reporting unit, which is the same as our Paper reportable segment. We estimated the fair value of the Paper reporting unit using a combination of the income approach and the market approach, as further described below. Based on the evaluation performed, we determined that the carrying value of the Paper reporting unit exceeded its fair value, which resulted in a goodwill impairment charge totaling $55.2 million. The impairment charge is included in “Goodwill impairment” on our unaudited Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2020 and is not tax deductible. For purposes of our goodwill impairment analysis, we estimated the fair value of the Paper reporting unit using a combination of the income approach and the market approach applying an equal weighting. The income approach incorporated the estimated future cash flows and a terminal value discounted to their present value using an appropriate risk-adjusted discount rate. The estimated future cash flows and terminal value were based on internal forecasts and industry trends, including the long-term outlook for the paper industry. Our expected cash flows include assumptions about industry pricing, expected paper demand, and anticipated input and conversion costs. The discount rate utilized in the income approach was 9%, which was derived using a capital asset pricing model based on relevant industry data to estimate the cost of equity financing. The discount rate is commensurate with the risks and uncertainties inherent in the business and the cash flow forecasts, updated for recent events. The market approach estimated the fair value of the Paper reporting unit by using valuation metrics of publicly traded companies or historically completed transactions of comparable businesses. The valuation of our Paper reporting unit requires significant judgment in evaluating recent indicators of market activity and estimated future cash flows, discount rates, and other factors. Our impairment analysis contains inherent uncertainties due to uncontrollable events that could positively or negatively impact anticipated future economic and operating conditions. In making these estimates, the weighted-average cost of capital is utilized to calculate the present value of future cash flows and terminal value. Many variables go into estimating future cash flows, including estimates of our future revenue growth and operating results. When estimating our projected revenue growth and future operating results, we considered industry trends, economic data, and our competitive situation. Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At both June 30, 2020 and December 31, 2019, we had $863.5 million of goodwill recorded in our Packaging segment. At June 30, 2020 and December 31, 2019, we had $0 million and $55.2 million of goodwill recorded in our Paper segment, respectively. Changes in the carrying amount of our goodwill are as follows (dollars in millions):
|  | Goodwill |
Balance at January 1, 2020 |  | $ | 918.7 |
Impairment of Paper segment |  |  | (55.2 | )
Balance at June 30, 2020 |  | $ | 863.5 |
Intangible Assets Intangible assets are primarily comprised of customer relationships and trademarks and trade names. As a result of the triggering event described above, we also performed a recoverability test on our long-lived assets within the Paper segment, including long lived intangible assets, as of May 31, 2020. The recoverability test was based on forecasts of undiscounted cash flows. The results of the recoverability test indicated that the long lived assets within our Paper segment, inclusive of the long lived intangible assets, were 100% recoverable. The weighted average remaining useful life, gross carrying amount, and accumulated amortization of our intangible assets were as follows (dollars in millions):
|  | June 30, 2020 |  |  | December 31, 2019 |
|  | Weighted Average Remaining Useful Life (in Years) |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Weighted Average Remaining Useful Life (in Years) |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |
Customer relationships (a) |  |  | 9.4 |  |  | $ | 503.8 |  |  | $ | 202.7 |  |  |  | 10.0 |  |  | $ | 503.8 |  |  | $ | 180.2 |
Trademarks and trade names |  |  | 9.3 |  |  |  | 34.8 |  |  |  | 21.8 |  |  |  | 9.5 |  |  |  | 34.8 |  |  |  | 20.6 |
Other |  |  | 1.6 |  |  |  | 4.3 |  |  |  | 3.5 |  |  |  | 2.1 |  |  |  | 4.3 |  |  |  | 3.3 |
Total intangible assets (excluding goodwill) |  |  | 9.4 |  |  | $ | 542.9 |  |  | $ | 228.0 |  |  |  | 9.9 |  |  | $ | 542.9 |  |  | $ | 204.1 |
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(a) | During the second quarter of 2020, the Company recorded a $4.5 million adjustment to decrease the remaining book value of the customer relationships intangible asset as a result of the closure of the San Lorenzo, California corrugated products facility.
During the six months ended June 30, 2020 and 2019, amortization expense was $23.9 million and $19.2 million, respectively.

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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