v3.2.0.727

GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2015

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Our intangible assets consist of goodwill, customer relationships, supply contracts, technology and trade names. Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including, but not limited to, customer relationships, supply contracts, technology and trade names) acquired and liabilities assumed under acquisition accounting for business combinations.

Goodwill.    As of June 30, 2015, we have two segments that contain reporting units with goodwill and intangible assets: our chlorovinyls segment includes goodwill in its chlor-alkali and derivatives and compound reporting units and our building products segment includes goodwill primarily in its siding reporting unit. The following table provides the detail of the changes made to goodwill during the six months ended June 30, 2015.

(In millions)		Chlorovinyls			Building Products			Total
Gross goodwill at December 31, 2014		$	1,790.8		$	160.2		$	1,951.0
Accumulated impairment losses			(59.6	)		(150.4	)		(210.0	)
​	​	​	​	​	​	​	​	​	​	​
Net goodwill at December 31, 2014		$	1,731.2		$	9.8		$	1,741.0
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Gross goodwill at December 31, 2014		$	1,790.8		$	160.2		$	1,951.0
Foreign currency translation adjustment			(5.8	)		-			(5.8	)
​	​	​	​	​	​	​	​	​	​	​
Gross goodwill at June 30, 2015		​	1,785.0		​	160.2		​	1,945.2
Accumulated impairment losses			(59.6	)		(150.4	)		(210.0	)
​	​	​	​	​	​	​	​	​	​	​
Net goodwill at June 30, 2015		$	1,725.4		$	9.8		$	1,735.2
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

Indefinite-lived intangible assets.    As of June 30, 2015 and December 31, 2014, our indefinite-lived intangible assets consisted of certain trade names with a carrying value of $5.9 million and $6.0 million, respectively, net of cumulative translation adjustment.

Definite-lived intangible assets.    As of June 30, 2015 and December 31, 2014, we had definite-lived intangible assets related to: (i) customer relationships, supply contracts, technology and trade names in our chlorovinyls segment; and (ii) customer relationships and technology in our building products segment. The following table provides the definite-lived intangible assets, by reportable segment, as of June 30, 2015 and December 31, 2014.

		Chlorovinyls						Building Products						Total
(In millions)		June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014
Gross carrying amounts:		​			​			​			​			​			​
Customer relationships		$	1,142.3		$	1,142.3		$	32.2		$	32.2		$	1,174.5		$	1,174.5
Supply contracts		​	42.6		​	42.6		​	-		​	-		​	42.6		​	42.6
Technology			14.9			14.9			17.4			17.4			32.3			32.3
Trade names		​	6.0		​	6.0		​	-		​	-		​	6.0		​	6.0
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			1,205.8			1,205.8			49.6			49.6			1,255.4			1,255.4
Accumulated impairment charges:		​			​			​			​			​			​
Customer relationships			(2.9	)		(2.6	)		-			-			(2.9	)		(2.6	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		​	(2.9	)	​	(2.6	)	​	-		​	-		​	(2.9	)	​	(2.6	)
Accumulated amortization:
Customer relationships		​	(151.9	)	​	(121.1	)	​	(12.9	)	​	(12.1	)	​	(164.8	)	​	(133.2	)
Supply contracts			(5.1	)		(4.1	)		-			-			(5.1	)		(4.1	)
Technology		​	(1.6	)	​	(1.3	)	​	(13.4	)	​	(12.7	)	​	(15.0	)	​	(14.0	)
Trade names			(0.9	)		(0.7	)		-			-			(0.9	)		(0.7	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		​	(159.5	)	​	(127.2	)	​	(26.3	)	​	(24.8	)	​	(185.8	)	​	(152.0	)
Foreign currency translation adjustment:
Customer relationships		​	(14.2	)	​	(14.2	)	​	-		​	-		​	(14.2	)	​	(14.2	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			(14.2	)		(14.2	)		-			-			(14.2	)		(14.2	)
Net carrying amounts:		​			​			​			​			​			​
Customer relationships			973.3			1,004.4			19.3			20.1			992.6			1,024.5
Supply contracts		​	37.5		​	38.5		​	-		​	-		​	37.5		​	38.5
Technology			13.3			13.6			4.0			4.7			17.3			18.3
Trade names		​	5.1		​	5.3		​	-		​	-		​	5.1		​	5.3
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	1,029.2		$	1,061.8		$	23.3		$	24.8		$	1,052.5		$	1,086.6
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

The weighted average estimated useful lives remaining for customer relationships, supply contracts, technology and definite-lived trade names are approximately 16 years, 18 years, 16 years and 15 years, respectively, as of June 30, 2015. Amortization expense for the definite-lived intangible assets was $16.7 million and $16.8 million for the three months ended June 30, 2015 and 2014, respectively, and $33.3 million and $33.6 million for the six months ended June 30, 2015 and 2014, respectively. The estimated annual amortization expense for definite-lived intangible assets for the next five fiscal years is approximately $66.4 million per year.

Valuation of Goodwill and Indefinite-Lived Intangible Assets.    The carrying values of our goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, using a measurement date of October 1. In addition, we evaluate the carrying values of these assets for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amounts may be impaired. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in the estimated future cash flows of our reporting units, significant changes in capital market conditions and significant changes in our market capitalization. During the quarter ended June 30, 2015 we determined there were circumstances that required us to perform an interim impairment test in our reporting units that carry goodwill and indefinite-lived intangible assets. These factors include, but are not limited to the operating results during the six months ended June 30, 2015, the sustained deterioration of our industry market conditions and the resulting decline in our market capitalization.

Impairment testing for goodwill is a two-step test performed at the reporting unit level. The first step of the impairment analysis involves comparing the fair value of the reporting unit to its book value, including goodwill. If the fair value of the reporting unit exceeds the book value, goodwill is not considered impaired. If the book value exceeds the fair value, the second step of the impairment analysis is performed, in which we measure the amount of impairment. Our goodwill evaluations utilize discounted cash flow analyses and market multiple analyses in estimating fair value. The weighting of the discounted cash flow and market approaches vary by each reporting unit based on factors specific to each reporting unit. Inherent in our fair value determinations are certain judgments and estimates relating to future cash flows, including our interpretation of current economic indicators and market conditions, overall economic conditions and our strategic operational plans with regard to our business units. In addition, to the extent significant changes occur in market conditions, overall economic conditions or our strategic operational plan, it is possible that goodwill not currently impaired, may become impaired in the future. Based on our analysis, the estimated fair values of our compound and siding, reporting units exceeded the carrying values in each respective unit by more than 10 percent. The estimated fair value of our chlor-alkali and derivatives unit exceeded its carrying value at an amount that was less than 10 percent. Management does not believe the reporting unit is impaired and has not recorded an impairment charge. Management will continue to monitor the reporting unit for any future indicators of impairment.

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- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef



-Publisher FASB



-Name Accounting Standards Codification



-Topic 350



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-Name Accounting Standards Codification



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-URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267

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