Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

8. GOODWILL AND OTHER INTANGIBLE ASSETS

Our intangible assets consist of goodwill, customer relationships, supply contracts, technology, and trade names. Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets acquired (including, but not limited to, customer relationships, supply contracts, technology, and trade names) and liabilities assumed under acquisition accounting for business combinations.

As of March 31, 2016, our chlorovinyls segment includes goodwill in its chlor-alkali and derivatives and compound reporting units and our building products segment includes goodwill primarily in its siding reporting unit.

Valuation of Goodwill and Indefinite-Lived Intangible Assets. The carrying values of our goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, using a measurement date of October 1. In addition, we evaluate the carrying values of these assets for impairment between annual impairment tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in the estimated future cash flows of our reporting units, significant changes in capital market conditions and significant changes in our market capitalization.

Impairment testing for goodwill is a two-step test performed at the reporting unit level. The first step of the impairment analysis involves comparing the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit exceeds the carrying value, goodwill is not considered impaired. If the carrying value exceeds the fair value, the second step of the impairment analysis is performed, in which we measure the amount of impairment. Our goodwill evaluations utilize discounted cash flow analyses (the “income approach”) and market multiple analyses (the “market approach”), in estimating fair values. Inherent in our fair value determinations are certain judgments and estimates relating to future cash flows, including our interpretation of current economic indicators and market conditions, overall economic conditions and our strategic and operational plans with regard to our business units. In addition, to the extent significant changes occur in market conditions, overall economic conditions or our strategic or operational plans, it is possible that goodwill not currently impaired may become impaired in the future.

Goodwill. During the three months ended March 31, 2016, we wrote-off $3.3 million of goodwill pertaining to the sale of our compound reporting unit’s Solucor business and Concord, Ontario compounding operations in our chlorovinyls segment, which was recognized as a component of the loss on sale of assets in the restructuring and divestiture costs in our unaudited condensed consolidated statements of operations. The following table provides the detail of the changes made to goodwill during the three months ended March 31, 2016.


*(In millions)*	Chlorovinyls		Building Products		Total
Gross goodwill at December 31, 2015	$	1,766.0	$	160.2	$	1,926.2
Accumulated impairment losses		(923.7)		(150.4)		(1,074.1)

Net goodwill at December 31, 2015	$	842.3	$	9.8	$	852.1


Gross goodwill at December 31, 2015	$	1,766.0	$	160.2	$	1,926.2
Goodwill write-downs from sale of assets		(3.3)		-		(3.3)
Foreign currency translation adjustment		7.4		-		7.4

Gross goodwill at March 31, 2016		1,770.1		160.2		1,930.3
Accumulated impairment losses		(923.7)		(150.4)		(1,074.1)

Net goodwill at March 31, 2016	$	846.4	$	9.8	$	856.2

Indefinite-lived intangible assets. As of March 31, 2016 and December 31, 2015, our indefinite-lived intangible assets consisted of certain trade names with a carrying value of $5.6 million and $5.9 million, respectively, net of cumulative translation adjustment. In connection with the sale of our compound reporting unit’s Solucor business and Concord, Ontario compounding operations in our chlorovinyls segment, we wrote-off $0.3 million of indefinite-lived intangible assets.

Definite-lived intangible assets. As of March 31, 2016 and December 31, 2015, we had definite-lived intangible assets related to: (i) customer relationships, supply contracts, technology and trade names in our chlorovinyls segment; and (ii) customer relationships and technology in our building products segment. During the three months ended March 31, 2016, we wrote-off $4.8 million of definite-lived intangible assets and the associated accumulated amortization pertaining to the sale of our window and door profiles business in our building products segment. All prior period amounts have been reclassified to reflect the sale as a discontinued operations in our unaudited condensed consolidated balance sheets. The following table provides the definite-lived intangible assets, by reportable segment, as of March 31, 2016 and December 31, 2015.


	Chlorovinyls				Building Products				Total
*(In millions)*	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Gross carrying amounts:
Customer relationships	$	1,142.3	$	1,142.3	$	27.4	$	27.4	$	1,169.7	$	1,169.7
Supply contracts		42.6		42.6		-		-		42.6		42.6
Technology		14.9		14.9		17.4		17.4		32.3		32.3
Trade names		6.0		6.0		-		-		6.0		6.0

Total		1,205.8		1,205.8		44.8		44.8		1,250.6		1,250.6
Accumulated impairment charges:
Customer relationships		(2.9)		(2.9)		-		-		(2.9)		(2.9)

Total		(2.9)		(2.9)		-		-		(2.9)		(2.9)
Accumulated amortization:
Customer relationships		(198.3)		(182.9)		(9.3)		(8.9)		(207.6)		(191.8)
Supply contracts		(6.8)		(6.3)		-		-		(6.8)		(6.3)
Technology		(2.1)		(2.0)		(14.5)		(14.1)		(16.6)		(16.1)
Trade names		(1.1)		(1.0)		-		-		(1.1)		(1.0)

Total		(208.3)		(192.2)		(23.8)		(23.0)		(232.1)		(215.2)
Foreign currency translation adjustment:
Customer relationships		(20.3)		(24.6)		-		(0.1)		(20.3)		(24.7)

Total		(20.3)		(24.6)		-		(0.1)		(20.3)		(24.7)
Net carrying amounts:
Customer relationships		920.8		931.9		18.1		18.4		938.9		950.3
Supply contracts		35.8		36.3		-		-		35.8		36.3
Technology		12.8		12.9		2.9		3.3		15.7		16.2
Trade names		4.9		5.0		-		-		4.9		5.0

Total	$	974.3	$	986.1	$	21.0	$	21.7	$	995.3	$	1,007.8

The weighted average estimated useful lives remaining for definite-lived customer relationships, supply contracts, technology and trade names are approximately 15 years, 17 years, 16 years and 14 years, respectively, as of March 31, 2016. Amortization expense for the definite-lived intangible assets was $17.0 million and $17.1 million for the three months ended March 31, 2016 and 2015, respectively. The estimated annual amortization expense for definite-lived intangible assets for the next five fiscal years is approximately $68.0 million per year.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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