Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2023

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, 2023, 2022, and 2021 are as follows:

	Europe		Americas		Total
Balance as of January 1, 2021	$	933	$	1,018	$	1,951
Divestiture related adjustments				(3)		(3)
Reclassified as held for sale				(18)		(18)
Translation effects		(67)		(23)		(90)
Balance as of December 31, 2021		866		974		1,840
Translation effects		(48)		21		(27)
Balance as of December 31, 2022		818		995		1,813
Impairment				(445)		(445)
Translation effects		30		75		105
Balance as of December 31, 2023	$	848	$	625	$	1,473

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 revenue growth, earnings before interest, taxes, depreciation and amortization (EBITDA) margin, and the weighted average cost of capital, and are classified as Level 3 in the fair value hierarchy.

During the fourth quarter of 2023, the Company completed its annual impairment testing and determined that the goodwill balance on its North America reporting unit was fully impaired. The primary driver of this impairment was management’s update to its long-range plan, which indicated lower estimated future cash flows for its North America reporting unit (in the Americas segment) as compared to the projections used in the prior goodwill impairment test performed as of October 1, 2022. The Company’s business in North America has experienced declining shipments to its alcoholic beverage customers, especially in the second half of 2023, and this trend is likely to continue for the foreseeable future. As a result, in the fourth quarter of 2023, the Company permanently closed a plant and two additional furnaces in the North America reporting unit to better balance its long-term manufacturing supply with lower demand. The update to management’s long-range plan, combined with the impact of a higher weighted average cost of capital given higher interest rates and the narrow difference between the estimated fair value and carrying value of the North America reporting unit as of October 1, 2022, resulted in the BEV of the Company’s North America reporting unit declining to less than its carrying value. As a result, the Company recorded a non-cash impairment charge of $445 million in the fourth quarter of 2023, which was equal to the remaining goodwill balance on its North America reporting unit.

The BEVs of the Company’s Europe and Latin America reporting units substantially exceeded their carrying values as of October 1, 2023. 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 2023 may have indicated an impairment of the goodwill related to the Europe and Latin America 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, 2023, the Company considered whether any events and/or changes in circumstances had resulted in the likelihood that the goodwill of its Europe and Latin America reporting units may have been impaired and has determined that no such events have occurred.

Goodwill for the Americas segment is net of accumulated impairment losses of $1,040 million and $595 million as of December 31, 2023 and 2022, respectively.

Intangible Assets

Customer list intangible assets are amortized using the accelerated amortization method over their 20 year lives. Net intangible asset values were $254 million and $262 million, which included accumulated amortization of $316 million and $284 million, for the years ended December 31, 2023 and 2022, respectively. Amortization expense for intangible assets was $32 million, $33 million and $34 million for the years ended December 31, 2023, 2022, and 2021, respectively. Estimated amortization related to intangible assets through 2028 is as follows: 2024, $30 million; 2025, $28 million; 2026, $27 million; 2027, $25 million and 2028, $23 million. No impairment existed on these assets at December 31, 2023.

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.