Goodwill and Other Intangible Assets

6 Months Ended

Jul. 04, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

A summary of the changes in goodwill by segment for the six months ended July 4, 2021 is as follows:


	Consumer Packaging		Industrial Paper Packaging		All Other		Total
Goodwill at December 31, 2020	$	592,310	$	317,958	$	478,987	$	1,389,255
2021 Acquisitions	—		917		—		917
Dispositions	—		—		(53,039)		(53,039)

Foreign currency translation	(2,065)		(2,958)		(222)		(5,245)
Measurement period adjustments	1,512		—		—		1,512
Goodwill at July 4, 2021	$	591,757	$	315,917	$	425,726	$	1,333,400

Goodwill from 2021 acquisitions relates to the first quarter acquisition of TuboTec while measurement period adjustments relate to final working capital settlements made in the first quarter of 2021 for the prior year acquisition of Can Packaging, which resulted in a $1,512 increase in goodwill. See Note 3 for additional information.

The Company assesses goodwill for impairment annually during the third quarter, or from time to time when warranted by the facts and circumstances surrounding individual reporting units or the Company as a whole. The Company completed its most recent annual goodwill impairment testing during the third quarter of 2020, and analyzed certain qualitative and quantitative factors in determining whether a goodwill impairment existed. The Company's assessments reflected a number of significant management assumptions and estimates including the Company's forecast of sales, profit margins, and discount rates. Changes in these assumptions could materially impact the Company's conclusions. Based on its assessments, the Company concluded that there was no impairment of goodwill for any of its reporting units.

Additionally, in conjunction with the January 1, 2021 realignment of its reportable segments, as described in Note 15, several of the Company’s reporting units were realigned and the resulting reporting units were tested for impairment both before and after the realignment following the same methodology used by the Company in its annual goodwill impairment testing.

Although no reporting units failed the annual impairment test or the testing performed as a result of the segment realignment noted above, in management’s opinion, the goodwill of the Conitex, Retail Packaging, and Plastics – Healthcare reporting units are at risk of impairment in the near term if these reporting units' operations do not perform in line with management's expectations, or if there is a negative change in the long-term outlook for these businesses or in other factors such as the discount rate.

The results of these three reporting units have been negatively affected by the economic impact of the COVID-19 pandemic due to end-market weakness, as well as recent raw material price increases. Management currently expects customer demand will improve over the next few quarters and approach pre-pandemic levels in late 2021 or 2022 and that announced and/or planned selling price increases will mitigate higher raw material costs. However, should it become apparent that the post-COVID-19 recovery is likely to be weaker, or significantly delayed, compared to management’s current expectations, or significant negative price/cost relationships will persist over the long-term, goodwill impairment charges may be possible in the future. Total goodwill associated with the Conitex, Retail Packaging, and Plastics – Healthcare reporting units was $33,189, $70,139 and $65,733, respectively, at July 4, 2021. Based on their most recent impairment tests, the estimated fair values of the Conitex, Retail Packaging, and Plastics – Healthcare reporting units exceeded their individual carrying values by 6.9%, 17.3%, and 11.7%, respectively.

In its annual goodwill impairment analysis as of September 27, 2020, projected future cash flows for Conitex were discounted at 10.8%. Based on the discounted cash flow model and holding other valuation assumptions constant, Conitex's projected operating profits across all future periods would have to be reduced approximately 6.2%, or the discount rate increased to 12.2%, in order for the estimated fair value to fall below the reporting unit’s carrying value.

In the goodwill impairment analysis performed in conjunction with the 2021 reportable segment realignment, projected future cash flows for Retail Packaging were discounted at 7.7%. Based on the discounted cash flow model and holding other valuation assumptions constant, projected operating profits across all future periods would have to be reduced approximately 8.0%, or the discount rate increased to 10.6%, in order for the estimated fair value to fall below the reporting unit’s carrying value.

In the goodwill impairment analysis performed in conjunction with the 2021 reportable segment realignment, projected future cash flows for Plastics - Healthcare were discounted at 7.9%. Based on the discounted cash flow model and holding other valuation assumptions constant, projected operating profits across all future periods would have to be reduced approximately 5.6%, or the discount rate increased to 9.1%, in order for the estimated fair value to fall below the reporting unit’s carrying value.

Other Intangible Assets

A summary of other intangible assets as of July 4, 2021 and December 31, 2020 is as follows:


	July 4, 2021		December 31, 2020
Other Intangible Assets, gross:
Patents	$	29,320	$	29,325
Customer lists	588,410		622,430
Trade names	32,118		32,088
Proprietary technology	22,868		22,813
Other	2,818		2,831
Total Other Intangible Assets, gross	$	675,534	$	709,487

Accumulated Amortization:
Patents	$	(15,401)	$	(14,511)
Customer lists	(329,056)		(339,159)
Trade names	(13,221)		(12,156)
Proprietary technology	(20,704)		(19,833)
Other	(1,959)		(1,894)
Total Accumulated Amortization	$	(380,341)	$	(387,553)
Other Intangible Assets, net	$	295,193	$	321,934

Other Intangible Assets are amortized on a straight-line basis over their respective useful lives, which generally range from three to forty years. The Company has no intangible assets with indefinite lives.

Aggregate amortization expense was $12,111 and $13,359 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $24,860 and $26,631 for the six-months ended July 4, 2021 and June 28, 2020, respectively. Amortization expense on other intangible assets is expected to total approximately $45,700 in 2021, $41,100 in 2022, $34,100 in 2023, $24,700 in 2024 and $22,100 in 2025.