Goodwill and Other Intangible Assets

12 Months Ended

Oct. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill by segment for the years ended October 31, 2019 and 2018:



(in millions)	Rigid Industrial Packaging & Services ⁽¹⁾			Paper Packaging & Services		Flexible Products & Services⁽¹⁾		Land Management		Total
Balance at October 31, 2017	$	725.9		$	59.5	$	—	$	—	$	785.4
Goodwill acquired	—			—		—		—		—
Goodwill allocated to divestitures and businesses held for sale	(0.7		)	—		—		—		(0.7		)
Goodwill adjustments	—			—		—		—		—
Goodwill impairment charge	—			—		—		—		—
Currency translation	(8.7		)	—		—		—		(8.7		)
Balance at October 31, 2018	$	716.5		$	59.5	$	—	$	—	$	776.0
Goodwill acquired	22.3			726.6		—		—		748.9
Goodwill allocated to divestitures and businesses held for sale	—			—		—		—		—
Goodwill adjustments	—			—		—		—		—
Goodwill impairment charge	—			—		—		—		—
Currency translation	(7.1		)	—		—		—		(7.1		)
Balance at October 31, 2019	$	731.7		$	786.1	$	—	$	—	$	1,517.8

⁽¹⁾Accumulated goodwill impairment loss was $63.3 million as of October 31, 2019, 2018 and 2017. Included in the accumulated goodwill impairment loss was $13.0 million related to the Rigid Industrial Packaging & Services segment and $50.3 million related to the Flexible Products & Services segment.

The Caraustar Acquisition added $726.6 million of goodwill to the Paper Packaging & Services segment and the Tholu Acquisition added $22.3 million of goodwill to the Rigid Industrial Packaging & Services segment. See Note 2 to the Consolidated Financial Statements for additional disclosure of goodwill added by these acquisitions.

The Company reviews goodwill by reporting unit and indefinite-lived intangible assets for impairment as required by ASC 350, “Intangibles – Goodwill and Other,” either annually August 1, or whenever events and circumstances indicate impairment may have occurred. A reporting unit is the operating segment, or a business unit one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by segment management. The components are aggregated into reporting units for purposes of goodwill impairment testing to the extent they share similar qualitative and quantitative characteristics.

The Company performed its annual goodwill impairment test as of August 1, 2019 which resulted in no goodwill impairment. The majority of the Company's goodwill reporting units were tested utilizing a qualitative assessment. However, for the Rigid Industrial Packaging & Services - Asia Pacific reporting unit, the Company proceeded directly to the quantitative impairment test. The fair value of the reporting unit exceeded the carrying value by 32%, resulting in no impairment. Discount rates, growth rates and cash flow projections are the assumptions that are most sensitive and susceptible to change as they require significant management judgment. In addition, certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual and expected consumption and demand, could result in changes to these assumptions and judgments. A revision of these assumptions could cause the fair value of the reporting unit to fall below its respective carrying value. As for all of the Company's reporting units, if in future years, the reporting unit's actual results are not consistent with the Company's estimates and assumptions used to calculate fair value, the Company may be required to recognize material impairments to goodwill.

The Company performed its annual goodwill review as of August 1, 2018, for each of the reporting units, which resulted in no goodwill impairment. The majority of the Company's goodwill reporting units were tested utilizing a qualitative assessment. However, for the Rigid Industrial Packaging & Services - Asia Pacific reporting unit, the Company proceeded directly to the quantitative impairment test. The fair value of the reporting unit exceeded the carrying value by 20%, resulting in no impairment. Discount rates, growth rates and cash flow projections are the assumptions that are most sensitive and susceptible to change as they require significant management judgment. In addition, certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual and expected consumption and demand, could result in changes to these assumptions and judgments. A revision of these assumptions could cause the fair value of the reporting unit to fall below its respective carrying value. As for all of the Company's reporting units, if in future years, the reporting unit's actual results are not consistent with the Company's estimates and assumptions used to calculate fair value, the Company may be required to recognize material impairments to goodwill.

During the fourth quarter of 2017, the Company performed an assessment of its operating segments and determined that as a result of changes in the way the chief operating decision maker receives and reviews financial information, a realignment of its operating segment structure was necessary. As a result of the operating segment realignment, the Company's reporting unit structure was updated for consistency. As of August 1, 2017, the Company realigned its operating segments to include eight operating segments: Rigid Industrial Packaging & Services – North America; Rigid Industrial Packaging & Services – Latin America; Rigid Industrial Packaging & Services – Europe, Middle East and Africa; Rigid Industrial Packaging & Services – Asia Pacific; Rigid Industrial Packaging & Services – Tri-Sure; Paper Packaging & Services; Flexible Products & Services; and Land Management. The Company's eight operating segments are aggregated into four reportable business segments by combining the Rigid Industrial Packaging & Services – North America; Rigid Industrial Packaging & Services – Latin America; Rigid Industrial Packaging & Services – Europe, Middle East and Africa; Rigid Industrial Packaging & Services – Asia Pacific; and Rigid Industrial Packaging & Services – Tri-Sure operating segments. The Company’s reporting units are the same as the operating segments. As a result of the realignment, goodwill was reassigned to each of the Rigid Industrial Packaging & Services reporting units using a relative fair value approach.

The Company performed its annual goodwill review as of August 1, 2017, for each of the reporting units with a goodwill balance under both the former and current reporting unit structure. The impairment test under the former reporting unit structure concluded that no impairment existed as of August 1, 2017. The impairment test under the updated reporting unit structure concluded that the carrying value of the Rigid Industrial Packaging & Services – Latin America reporting unit exceeded the fair value of the reporting unit and the goodwill of the Rigid Industrial Packaging & Services – Latin America reporting unit of $13.0 million was fully impaired.

The fair value of the Rigid Industrial Packaging & Services – Latin America reporting unit was determined using a combination of the income approach by discounting estimated future cash flows and the market multiple approach. The cash flow projections were prepared based upon the evaluation of the historical performance and future growth expectations for the reporting unit. Revenue was based on the 2017 forecast as of August 1, 2017 with a long-term growth rate applied to future periods. The most critical assumptions within the cash flow projections are revenue growth rates and forecasted gross margin percentages. The most critical assumption within the market multiple calculation is the multiple selected.

See Note 2 to the Consolidated Financial Statements for further discussion regarding goodwill allocated to divestitures and businesses held for sale.

The following table summarizes the carrying amount of net intangible assets by class as of October 31, 2019 and 2018:



(in millions)	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
October 31, 2019:
Indefinite lived:
Trademarks and patents	$	13.1	$	—	$	13.1
Definite lived:
Customer relationships	$	890.6	$	150.3	$	740.3
Trademarks and patents	27.0		9.3		17.7
Non-compete agreements	2.3		0.7		1.6
Other	21.9		18.1		3.8
Total	$	954.9	$	178.4	$	776.5

October 31, 2018:
Indefinite lived:
Trademarks and patents	$	13.3	$	—	$	13.3
Definite lived:
Customer relationships	$	162.2	$	105.8	$	56.4
Trademarks and patents	10.9		5.1		5.8
Other	21.2		16.1		5.1
Total	$	207.6	$	127.0	$	80.6

Gross intangible assets increased by $747.3 million for the year ended October 31, 2019. The increase was attributable to $725.5 million from the Caraustar Acquisition, $24.1 million from the Tholu Acquisition and $0.3 million of asset adjustment, offset by $2.6 million of currency fluctuations. See Note 2 to the Consolidated Financial Statements for additional disclosure of intangibles added by these acquisitions.

Amortization expense was $53.2 million, $15.2 million and $13.5 million for the years ended October 31, 2019, 2018 and 2017, respectively. Amortization expense for the next five years is expected to be $69.3 million in 2020, $67.1 million in 2021, $59.1 million in 2022, $56.3 million in 2023 and $52.9 million in 2024.

Definite lived intangible assets for the periods presented are subject to amortization and are being amortized using the straight-line method over periods that are contractually or legally determined, or over the period a market participant would benefit from the asset. Indefinite lived intangibles of approximately $13.1 million as of October 31, 2019, related primarily to the Tri-Sure trademark and trade names related to Closures, Blagden Express, Closed-loop, Box Board and Pachmas, are not amortized.