Goodwill and Other Intangible Assets

9 Months Ended

Sep. 27, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

A summary of the changes in goodwill by segment for the nine months ended September 27, 2020 is as follows:


	Consumer Packaging		Display and Packaging		Paper and Industrial Converted Products		Protective Solutions		Total
Goodwill at December 31, 2019	$	691,243	$	203,414	$	303,041	$	231,648	$	1,429,346
2020 Acquisitions	12,359		—		1,050		—		13,409

Reclassified to assets held for sale	—		(76,828)		—		—		(76,828)

Foreign currency translation	(685)		—		442		(268)		(511)
Measurement period adjustments	3,251		—		616		—		3,867
Goodwill at September 27, 2020	$	706,168	$	126,586	$	305,149	$	231,380	$	1,369,283

The Company recorded goodwill totaling $12,359 related to the August 2020 acquisition of Can Packaging and $1,050 related to the January 2020 acquisition of a small tube and core operation in Jacksonville, Florida. Measurement period adjustments were made in the first nine months of 2020 to the fair values of the assets acquired and the liabilities

assumed in the 2019 acquisitions of Corenso and TEQ resulting in increases in goodwill of $616 and $3,251, respectively. See Note 3 for additional information.

As of September 27, 2020, the Company has reclassified $76,828 of goodwill related to its European contract packaging operations to assets held for sale. Prior to September 27, 2020, these operations were included in the Display and Packaging reporting unit. The allocation of goodwill to the European operations was based on the relative fair value of this business to the fair value of the reporting unit as a whole. See Note 1 for additional information.

The Company assesses goodwill for impairment annually during the third quarter, or from time to time when warranted by the facts and circumstances surrounding individual reporting units or the Company as a whole. The Company completed its most recent annual goodwill impairment testing during the third quarter of 2020. As part of this testing, the Company analyzed certain qualitative and quantitative factors in determining whether a goodwill impairment existed. The Company's assessments reflected a number of significant management assumptions and estimates including the Company's forecast of sales, profit margins, and discount rates. Changes in these assumptions could materially impact the Company's conclusions. Based on its assessments, as part of its annual impairment test during the third quarter of 2020, the Company concluded that there was no impairment of goodwill for any of its reporting units.

Although no reporting units failed the assessments noted above, in management's opinion, the goodwill of the Display and Packaging reporting unit, excluding the European operations held for sale, is at risk of impairment in the near term if there is a negative change in the long-term outlook for the business or in other factors, such as the discount rate. A large portion of projected sales in this reporting unit is concentrated in several major customers, the loss of any of which could impact the Company's conclusion regarding the likelihood of goodwill impairment for the unit. Total goodwill associated with this reporting unit was $126,586 at September 27, 2020. In the latest annual impairment test, the estimated fair value of the Display and Packaging reporting unit was determined to exceed its carrying value by approximately 5.2%. In this analysis, projected future cash flows for Display and Packaging were discounted at 9.1%. Based on the discounted cash flow model and holding other valuation assumptions constant, Display and Packaging projected operating profits across all future periods would have to be reduced approximately 2.1%, or the discount rate increased to 10.6%, in order for the estimated fair value to fall below the reporting unit’s carrying value.

In addition, the results of the Conitex reporting unit have been negatively impacted by the economic impact of the COVID-19 pandemic due to end-market weakness, particularly in textiles, as well as certain customers' plants being temporarily shut down to contain the spread of the virus. Management currently expects customer demand will begin to increase over the next few quarters and approach pre-pandemic levels late next year or the year after. However, should it become apparent that the post-COVID-19 recovery is likely to be weaker, or significantly delayed, compared to management’s current expectations, a goodwill impairment charge may be possible in the future. Total goodwill associated with this reporting unit was $32,109 at September 27, 2020. In the latest annual impairment test, the estimated fair value of the Conitex reporting unit was determined to exceed its carrying value by approximately 6.9%. In this analysis, projected future cash flows for Conitex were discounted at 10.8%. Based on the discounted cash flow model and holding other valuation assumptions constant, Conitex projected operating profits across all future periods would have to be reduced approximately 6.2%, or the discount rate increased to 12.2%, in order for the estimated fair value to fall below the reporting unit’s carrying value.

Other Intangible Assets

A summary of other intangible assets as of September 27, 2020 and December 31, 2019 is as follows:


	September 27, 2020		December 31, 2019
Other Intangible Assets, gross:
Patents	$	32,764	$	26,096
Customer lists	651,828		632,036
Trade names	32,409		32,427
Proprietary technology	24,492		24,525
Other	2,808		2,297
Other Intangible Assets, gross	$	744,301	$	717,381

Accumulated Amortization:
Patents	$	(13,831)	$	(11,669)
Customer lists	(323,052)		(287,831)
Trade names	(11,677)		(9,985)
Proprietary technology	(19,524)		(17,910)
Other	(1,843)		(1,694)
Total Accumulated Amortization	$	(369,927)	$	(329,089)
Other Intangible Assets, net	$	374,374	$	388,292

The Company recorded $25,750 in intangible assets, primarily customer lists and patents, related to the August 2020 acquisition of Can Packaging. These intangibles will be amortized over an average useful life of fourteen years. Measurement period adjustments were made in the first nine months of 2020 to the fair values of the assets acquired and the liabilities assumed in the 2019 acquisitions of TEQ and Corenso resulting in an increase in amortizable intangibles, primarily customer lists, of $800. See Note 3 for additional information.

Other Intangible Assets are amortized on a straight-line basis over their respective useful lives, which generally range from three to forty years. The Company has no intangible assets with indefinite lives.

Aggregate amortization expense was $12,993 and $12,145 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $39,624 and $38,035 for the nine months ended September 27, 2020 and September 29, 2019, respectively. Amortization expense on other intangible assets is expected to total approximately $52,500 in 2020, $51,900 in 2021, $49,200 in 2022, $44,500 in 2023 and $35,900 in 2024.