Goodwill and Other Intangible Assets

9 Months Ended

Oct. 03, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

During the first quarter of 2021, the Company changed its operating and reporting structure and, as a result, realigned certain of its reportable segments effective January 1, 2021. During the third quarter of 2021, the Company discovered that the effect of this segment realignment was not properly reflected in its goodwill footnote disclosures for the first two quarters of 2021. While the consolidated goodwill presented in the financial statements and the reported changes in activity presented in the notes were correctly stated in the previous filings, the disclosed balances by segment were incorrect. A summary of the changes in goodwill by quarter, as well as the corrected goodwill balances by segment, for the nine months ended October 3, 2021 is as follows:


	Consumer Packaging		Industrial Paper Packaging		All Other		Total
Goodwill at December 31, 2020, as reported	$	592,310	$	317,958	$	478,987	$	1,389,255
Adjustment to correct goodwill by segment	(11,066)		51,357		(40,291)		—
Goodwill at December 31, 2020, as corrected	$	581,244	$	369,315	$	438,696	$	1,389,255
2021 Acquisitions	—		—		—		—
Dispositions	—		—		(53,039)		(53,039)
Foreign currency translation	(4,536)		(4,286)		(692)		(9,514)
Measurement period adjustments	1,512		—		—		1,512
Goodwill at April 4, 2021, as corrected	$	578,220	$	365,029	$	384,965	$	1,328,214
2021 Acquisitions	—		917		—		917
Dispositions	—		—		—		—
Foreign currency translation	2,471		1,328		470		4,269
Measurement period adjustments	—		—		—		—
Goodwill at July 4, 2021, as corrected	$	580,691	$	367,274	$	385,435	$	1,333,400
2021 Acquisitions	—		—		—		—
Dispositions	(1,058)		—		—		(1,058)

Foreign currency translation	(4,744)		(2,911)		(964)		(8,619)
Measurement period adjustments	—		—		—		—
Goodwill at October 3, 2021	$	574,889	$	364,363	$	384,471	$	1,323,723

Goodwill from 2021 acquisitions relates to the acquisition of TuboTec. Measurement period adjustments relate to final working capital settlements made in the first quarter of 2021 for the prior-year acquisition of Can Packaging. Dispositions of goodwill in 2021 relate to the divestiture of the Company's U. S. display and packaging business in April 2021 and the divestiture of a small plastics foods thermoforming business in September 2021. 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 2021, 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.

Although no reporting units failed the annual impairment test, in management’s opinion, the goodwill of the Plastics - Healthcare reporting unit is at risk of impairment in the near term if the reporting unit's operations do not perform in line with management's expectations, or if there is a negative change in the long-term outlook for the business or in other factors such as the discount rate.

Although beginning to benefit from economic recovery, the results of the Plastics – Healthcare reporting unit have been negatively impacted by end-market weakness due to the COVID-19 pandemic. In addition, the unit is facing near-term headwinds from higher raw material and other cost increases. Assuming COVID-19 infection rates continue to decline, management expects market demand will improve over the coming year and that selling price increases and/or cost reductions, including restructuring actions and investments in production efficiency projects, will mitigate the impacts of recent raw material and other cost inflation. However, should it become apparent that the ongoing post-COVID-19 recovery is likely to be significantly weaker, delayed, or prolonged compared to management’s current expectations, significant negative price/cost relationships will persist over the long-term, or profit margins do not improve as expected, goodwill impairment charges may be possible in the future.

In its annual goodwill impairment analysis as of October 3, 2021, projected future cash flows for the Plastics -Healthcare reporting unit were discounted at 8.3%. Total goodwill associated with this reporting unit was $64,425 at October 3, 2021. In the latest annual impairment test, the estimated fair value of the Plastics - Healthcare reporting unit was determined to exceed its carrying value by approximately 13.3%. 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 13.0%, or the discount rate increased to 9.3%, in order for the estimated fair value of the reporting unit to fall below carrying value.

Other Intangible Assets

A summary of other intangible assets as of October 3, 2021 and December 31, 2020 is as follows:


	October 3, 2021		December 31, 2020
Other Intangible Assets, gross:
Patents	$	29,314	$	29,325
Customer lists	585,108		622,430
Trade names	32,086		32,088
Proprietary technology	22,870		22,813
Other	2,808		2,831
Total Other Intangible Assets, gross	$	672,186	$	709,487

Accumulated Amortization:
Patents	$	(15,843)	$	(14,511)
Customer lists	(338,039)		(339,159)
Trade names	(13,658)		(12,156)
Proprietary technology	(21,130)		(19,833)
Other	(1,983)		(1,894)
Total Accumulated Amortization	$	(390,653)	$	(387,553)
Other Intangible Assets, net	$	281,533	$	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 $12,257 and $12,993 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $37,117 and $39,624 for the nine-months ended October 3, 2021 and September 27, 2020, respectively. Amortization expense on other intangible assets is expected to total approximately $49,500 in 2021, $45,600 in 2022, $41,200 in 2023, $34,100 in 2024 and $24,700 in 2025.