Goodwill and Other Intangible Assets

9 Months Ended

Oct. 01, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

A summary of the changes in goodwill for the nine-month period ended October 1, 2023 is as follows:


	Consumer Packaging		Industrial Paper Packaging		All Other		Total
Goodwill at December 31, 2022	$	898,625	$	394,826	$	381,860	$	1,675,311
Acquisitions	—		92,657		—		92,657
Divestitures	—		(6,375)		—		(6,375)
Foreign currency translation	(1,022)		1,903		(34)		847
Measurement period adjustments	439		(468)		—		(29)
Goodwill at October 1, 2023	$	898,042	$	482,543	$	381,826	$	1,762,411

Goodwill activity reflected under the caption “Acquisitions” relates to the September 8, 2023 acquisitions of the remaining interest in RTS Packaging and the Chattanooga Mill. Goodwill activity reflected under the caption “Divestitures” relates to the sales of the Company’s S3 business on January 26, 2023 and the U.S. BulkSak business on July 1, 2023. Goodwill activity reflected under the caption “Measurement period adjustments” relates to the prior year acquisitions of Metal Packaging, Skjern and Nordeste. 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 2023 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 growth, gross 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 balance of the Plastics-Medical reporting unit, previously known as Plastics-Healthcare, 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. At October 1, 2023, the total goodwill associated with the Plastics-Medical reporting unit was $62,627.

In the annual goodwill impairment analysis completed during the third quarter of 2023, projected future cash flows for the Plastics-Medical reporting unit were discounted at 12.0% and its estimated fair value was determined to exceed its carrying value by approximately 29.9%. Based on the discounted cash flow model and holding other valuation assumptions constant, the discount rate would have to be increased to 14.5% in order for the estimated fair value of the reporting unit to fall below carrying value.

During the time subsequent to the annual evaluation, and at October 1, 2023, the Company considered whether any events and/or changes in circumstances had resulted in the likelihood that the goodwill of any of its reporting units may have been impaired. It is management’s opinion that no such events and/or changes in circumstances have occurred.

Other Intangible Assets

A summary of other intangible assets as of October 1, 2023 and December 31, 2022 is as follows:


	October 1, 2023		December 31, 2022
Other Intangible Assets, gross:
Patents	$	45,765	$	29,303
Customer lists	1,268,759		1,092,232
Trade names	32,783		34,220
Proprietary technology	56,837		57,720
Other	6,169		6,721
Total Other Intangible Assets, gross	$	1,410,313	$	1,220,196

Accumulated Amortization:
Patents	$	(19,238)	$	(17,889)
Customer lists	(469,913)		(417,034)
Trade names	(17,328)		(15,892)
Proprietary technology	(27,763)		(25,113)
Other	(2,553)		(2,670)
Total Accumulated Amortization	(536,795)		(478,598)
Other Intangible Assets, net	$	873,518	$	741,598

The acquisitions of the remaining interest in RTS Packaging and the Chattanooga Mill on September 8, 2023 resulted in the addition of $199,560 of intangible assets, primarily related to customer lists. These intangibles will be amortized over an average useful life of 17.5 years. The fair value of intangible assets associated with these acquisitions was determined using an income valuation approach.

Other intangible assets, primarily customer lists, with a net book value of $2,704 were written off as a result of the divestiture of the U.S. BulkSak business on July 1, 2023. See Note 3 for additional information.

Other intangible assets are amortized using the straight-line method over their respective useful lives when management has determined that the straight-line method approximates the pattern of consumption of the respective intangible assets or in relation to the asset’s specific pattern of consumption if management has determined that the straight-line method does not provide a fair approximation of the consumption of benefits. These lives generally range from three to forty years. The Company has no intangible assets with indefinite lives.

Aggregate amortization expense was $21,379 and $20,690 for the three-month periods ended October 1, 2023 and October 2, 2022, respectively, and $63,082 and $60,361 for the nine-month periods ended October 1, 2023 and October 2, 2022, respectively. Amortization expense on other intangible assets is expected to total approximately $85,000 in 2023, $84,200 in 2024, $75,700 in 2025, $73,200 in 2026 and $70,200 in 2027.