Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

8. Goodwill and Other Intangible Assets

A significant portion of our logistics business has historically been from long-term, take-or-pay contracts with Murray American Coal, Inc. ("Murray") and Foresight Energy LLC ("Foresight"), which have been adversely impacted by declining coal export prices and domestic demand. Murray filed for Chapter 11 bankruptcy on October 29, 2019. Foresight engaged outside counsel and financial advisors to assess restructuring options during 2019 and subsequently filed for Chapter 11 bankruptcy on March 10, 2020. Both Murray and Foresight's contracts with CMT were subsequently rejected by the bankruptcy courts.

Impairment of Goodwill

The Company concluded the impact of the events discussed above could more likely than not reduce the fair value of the Logistics reporting unit below its carrying value, requiring SunCoke to perform its annual goodwill test as of September 30, 2019. The fair value of the Logistics reporting unit, which was determined based on a discounted cash flow analysis, did not exceed the carrying value of the reporting unit. Key assumptions in our goodwill impairment test included reduced forecasted volumes and reduced rates from Foresight, no further business from Murray, incremental merchant business and a discount rate of 12 percent, representing the estimated weighted average cost of capital for this business line. As a result, the Company recorded a $73.5 million non-cash, pre-tax impairment charge to the Logistics segment on the Consolidated Statements of Operations during 2019, which represents a full impairment of the Logistics goodwill balance.

Goodwill allocated to SunCoke's reportable segments as of December 31, 2020 and December 31, 2019 and changes in the carrying amount of goodwill during the fiscal year ended December 31, 2020 are shown below. There were no changes in the carrying amount of goodwill during the fiscal year ended December 31, 2020.


	Domestic Coke		Logistics		Total
	(Dollars in millions)
Net balances at December 31, 2018	$	3.4	$	73.5	$	76.9
Impairment	—		(73.5)		(73.5)
Net balances at December 31, 2019 and 2020	$	3.4	$	—	$	3.4

Impairment of Long-Lived Assets

As a result of our logistics customers' events discussed above, CMT's long-lived assets, including customer contracts, customer relationships, permits and properties, plant and equipment, were also assessed for impairment as of September 30, 2019. The Company re-evaluated its projections for throughput volumes, pricing and customer performance against the existing long-term, take-or-pay contracts. The resulting undiscounted cash flows were lower than the carrying value of the asset group. Therefore, the Company assessed the fair value of the asset group to measure the amount of impairment. The fair value of the CMT long-lived assets was determined to be $112.1 million based on discounted cash flows, asset replacement cost and adjustments for capacity utilization, which are considered Level 3 inputs in the fair value hierarchy as defined in Note 18. Key assumptions in our discounted cash flows included reduced forecasted volumes and reduced rates from Foresight, no further business from Murray, incremental merchant business and a discount rate of 11 percent, representing the estimated weighted average cost of capital for this asset group. As a result, during 2019, the Company recorded a total non-cash, pre-tax long-lived asset impairment charge of $173.9 million included in long-lived asset and goodwill impairment on the Consolidated Statements of Operations, all of which was attributable to the Logistics segment. The charge included an impairment of CMT's long-lived intangible assets of $113.3 million and of CMT's property, plant and equipment of $60.6 million.

Components of other intangible assets, net

The components of other intangible assets, net, excluding fully amortized intangible assets, were as follows:


		December 31, 2020						December 31, 2019
	Weighted - Average Remaining Amortization Years	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
		(Dollars in millions)
Customer contracts	—	$	—	$	—	$	—	$	7.7	$	7.2	$	0.5
Customer relationships	4	6.7		4.5		2.2		6.7		3.9		2.8
Permits	22	31.7		1.7		30.0		31.7		0.3		31.4
Other	30	1.6		—		1.6		—		—		—
Total		$	40.0	$	6.2	$	33.8	$	46.1	$	11.4	$	34.7

The permits above represent the environmental and operational permits required to operate a coal export terminal in accordance with the U.S. Environmental Protection Agency ("EPA") and other regulatory bodies. Intangible assets are amortized over their useful lives in a manner that reflects the pattern in which the economic benefit of the asset is consumed. The permits’ useful lives were estimated to be 27 years at acquisition based on the expected useful life of the significant operating equipment at the facility. We have historical experience of renewing and extending similar arrangements at our other facilities and intend to continue to renew our permits as they come up for renewal for the foreseeable future. The permits were renewed regularly prior to our acquisition of CMT. These permits have an average remaining renewal term of approximately 3.4 years.

Total amortization expense for intangible assets subject to amortization was $2.5 million, $8.8 million and $11.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. Based on the carrying value of finite-lived intangible assets as of December 31, 2020, we estimate amortization expense for each of the next five years as follows:


	(Dollars in millions)
2021	$	2.0
2022	2.0
2023	2.0
2024	1.9
2025	1.5
Thereafter	24.4
Total	$	33.8