Purchased Intangible Assets and Goodwill

Purchased Intangibles

Changes in purchased intangibles balances are as follows:



(dollars in thousands)	Six months ended June 30, 2019
Beginning balance December 31, 2018	$	13,385
Amortization	(484		)
Impairment (see below)	(900		)
Foreign currency impact	(24		)
Ending balance June 30, 2019	$	11,977

Purchased intangible assets are composed of the following:



(dollars in thousands)	June 30, 2019		December 31, 2018
Indefinite life intangible assets	$	11,117	$	12,035
Definite life intangible assets, net of accumulated amortization of $20,472 and $20,006	860		1,350
Total	$	11,977	$	13,385

Indefinite life intangible assets are composed of trade names and trademarks that have an indefinite life and are therefore individually tested for impairment on an annual basis, or more frequently in certain circumstances where impairment indicators arise, in accordance with FASB ASC 350. Our on-going assessment of goodwill as of June 30, 2019 resulted in the need to test Libbey Holland's indefinite life intangible asset (Royal Leerdam^®trade name) for impairment. We used a relief from royalty method to determine the fair market value that was compared to the carrying value of the indefinite life intangible asset. The sales forecast for Royal Leerdam^®branded product was lowered due to declining performance of mid-tier retailers as consumers in EMEA move to discount and on-line retailers. As a result, the estimated fair value was determined to be lower than the carrying value, and we recorded a non-cash impairment charge of $0.9 million during the second quarter of 2019 in our EMEA reporting segment. The inputs used for this analysis are considered Level 3 inputs in the fair value hierarchy (see note 12).

The remaining definite life intangible assets at June 30, 2019 consist of customer relationships that are amortized over a period of 20 years and have a weighted average remaining life of 5.5 years. Amortization expense for definite life intangible assets was $0.5 million for the six months ended June 30, 2019. The future annual amortization expense remains unchanged from the Form 10-K for the year ended December 31, 2018.

Goodwill

Changes in goodwill balances are as follows:



(dollars in thousands)	U.S. & Canada			Latin America			Total
Beginning balance December 31, 2018:
Goodwill	$	43,872		$	125,681		$	169,553
Accumulated impairment losses	(5,441		)	(79,700		)	(85,141		)
Net beginning balance	38,431			45,981			84,412
Impairment (see below)	—			(45,981		)	(45,981		)
Ending balance June 30, 2019:
Goodwill	43,872			125,681			169,553
Accumulated impairment losses	(5,441		)	(125,681		)	(131,122		)
Net ending balance	$	38,431		$	—		$	38,431

As part of our on-going assessment of goodwill at June 30, 2019, we determined that a triggering event occurred due to the Company's market capitalization being less than the carrying value, resulting from the significant decline in the Company's share price during the quarter. Thus, an interim impairment test was performed. Additionally, during the second quarter, management updated its long-range plan; the updated plan contemplates lower sales and profitability within the Mexico reporting unit (within the Latin America reporting segment) as compared to the projections used in the most recent goodwill impairment testing performed as of October 1, 2018. As the impairment testing indicated that the carrying value of the Mexico reporting unit exceeded its fair value, we recorded a non-cash impairment charge of $46.0 million during the second quarter of 2019. After recording the impairment charge, there is no longer any goodwill on the balance sheet related to the Mexico acquisition.

When performing our test for impairment, we measured each reporting unit's fair value using a combination of "income" and "market" approaches on a shipping point basis. The income approach calculates the fair value of the reporting unit based on a discounted cash flow analysis, incorporating the weighted average cost of capital of a hypothetical third-party buyer. Significant estimates in the income approach include the following: discount rate; expected financial outlook and profitability of the reporting unit's business; and foreign currency impacts (all Level 3 inputs in the fair value hierarchy). Discount rates use the weighted average cost of capital for companies within our peer group, adjusted for specific company risk premium factors. The market approach uses the "Guideline Company" method, which calculates the fair value of the reporting unit based on a comparison of the reporting unit to comparable publicly traded companies. Significant estimates in the market approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, assessing comparable multiples, as well as consideration of control premiums (Level 2 inputs). The blended approach assigns a 70 percent weighting to the income approach and 30 percent to the market approach (Level 3 input). The higher weighting is given to the income approach due to some limitations of publicly available peer information used in the market approach. The blended fair value of both approaches is then compared to the carrying value, and to the extent that fair value exceeds the carrying value, no impairment exists. However, to the extent the carrying value exceeds the fair value, an impairment is recorded.

The estimated fair value of our other reporting unit that has goodwill continued to exceed its carrying value, by approximately 40 percent, and is in the U.S. and Canada reporting segment.