Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2020, 2019, and 2018 are as follows:

	Europe		Americas		Other		Total
Balance as of January 1, 2018	$	913	$	1,672	$	5	$	2,590
Translation effects		(39)		(38)				(77)
Balance as of December 31, 2018		874		1,634		5		2,513
Acquisition (divestiture) related adjustments				21		(5)		16
Impairment				(595)				(595)
Translation effects		(15)		15
Balance as of December 31, 2019		859		1,075				1,934
Translation effects		74		(57)				17
Balance as of December 31, 2020	$	933	$	1,018	$	—	$	1,951

Goodwill is tested for impairment annually as of October 1 (or more frequently if impairment indicators arise) by comparing the business enterprise value (“BEV”) of each reporting unit with its carrying value. The BEV is computed based on estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value for any reporting unit, then any excess of the carrying value over the BEV will be recorded as an impairment loss. The calculations of the BEV of the Company’s reporting units were determined based on valuation techniques using the best available information of significant unobservable inputs, primarily future cash flows of the reporting units, discount rates, terminal business values, and are classified as Level 3 in the fair value hierarchy.

The COVID-19 pandemic had an adverse impact on the Company’s business during the second quarter of 2020, resulting in a significant decline in revenue and earnings, along with a decline in the Company’s stock price and associated market capitalization. The Company determined that the impact of COVID-19 was a triggering event that required the Company to perform a quantitative interim goodwill impairment test in the second quarter of 2020. This interim test indicated that the BEV of each of the Company’s reporting units exceeded its carrying amount in the second quarter of 2020; therefore, no goodwill impairment existed. During the fourth quarter of 2020, the Company completed its annual impairment testing and determined that no impairment existed.

There can be no assurance that anticipated financial results will be achieved and the goodwill balances remain susceptible to future impairment charges. The goodwill related to the North America reporting unit, which was approximately $446 million and is included in the Americas segment above, was determined to have the greatest risk of future impairment charges given the difference (approximately 19%) between the BEV and

carrying value of this reporting unit as of October 1, 2020. The BEVs of the Company’s Europe and Latin America reporting units more substantially exceeded their carrying values as of October 1, 2020. If the Company’s projected future cash flows were lower, or if the assumed weighted average cost of capital were higher, the testing performed in the fourth quarter of 2020 may have indicated an impairment of the goodwill related to one or more of the Company’s reporting units. Any impairment charges that the Company may take in the future could be material to its consolidated results of operations and financial condition.

During the time subsequent to the annual evaluation, and at December 31, 2020, 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 and has determined that no such events have occurred.

During the third quarter of 2019, the Company determined that indicators of impairment had occurred which required the Company to perform a quantitative interim goodwill impairment test. The triggering events were management’s update to its long-range plan, which indicated lower projected future cash flows for its North American reporting unit (in the Americas segment) and a significant reduction in the Company’s share price. During 2019, the Company’s business in North America experienced declining shipments to its alcoholic beverage customers, primarily in the beer category. As a result of the goodwill impairment test, the Company recorded a non-cash impairment charge of $595 million in the third quarter of 2019, which was equal to the excess of the North American reporting unit's carrying value over its fair value (BEV). Goodwill related to the Company’s other reporting units was determined to not be impaired as a result of the interim impairment analysis in the third quarter of 2019. During the fourth quarter of 2019, the Company completed its annual impairment testing and determined that no impairment existed.

The acquisition-related adjustment in the Americas segment (Latin America reporting unit) in 2019 relates to the Nueva Fanal acquisition that the Company completed on June 28, 2019. See Note 21 for additional details.

Goodwill for the Americas segment is net of accumulated impairment losses of $595 million as of December 31, 2020 and 2019.

Intangible Assets

Customer list intangible assets are amortized using the accelerated amortization method over their 20 year lives. Net intangible asset values were $325 million and $371 million, which included accumulated amortization of $216 million and $183 million, for the years ended December 31, 2020 and 2019, respectively. Amortization expense for intangible assets was $33 million, $41 million and $40 million for the years ended December 31, 2020, 2019, and 2018, respectively. Estimated amortization related to intangible assets through 2025 is as follows: 2021, $32 million; 2022, $30 million; 2023, $27 million; 2024, $25 million; and 2025, $24 million. No impairment existed on these assets at December 31, 2020.

The Company has determined that the fair value measurements related to the customer list intangible assets are based on significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.