Goodwill and Intangible Assets, Net

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

Goodwill and Intangible Assets, Net.

Goodwill consists of the following:

	December 31, 2018									December 31, 2017
	Automotive			Food Packaging			Consolidated			Automotive		Food Packaging		Consolidated
	(in millions)
Gross carrying amount, Jan 1	$	320		$	7		$	327		$	320	$	4	$	324
Acquisitions	8			—			8			—		3		3
Foreign exchange	—			(1		)	(1		)	—		—		—
Gross carrying amount, Dec 31	328			6			334			320		7		327
Accumulated impairment, Jan 1	—			—			—			—		—		—
Impairment	(87		)	—			(87		)	—		—		—
Accumulated impairment, Dec 31	(87		)	—			(87		)	—		—		—
Net carrying value, Dec 31	$	241		$	6		$	247		$	320	$	7	$	327

Intangible assets, net consists of the following:

	December 31, 2018							December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
	(in millions)
Definite-lived intangible assets:
Customer relationships	$	396	$	(134	)	$	262	$	397	$	(115	)	$	282
Other	316		(139		)	177		334		(134		)	200
	$	712	$	(273	)	$	439	$	731	$	(249	)	$	482
Indefinite-lived intangible assets						$	62						$	62
Intangible assets, net						$	501						$	544

We recorded amortization expense associated with definite-lived intangible assets for the years ended December 31, 2018, 2017 and 2016 of $47 million, $41 million and $32 million, respectively. We utilize the straight-line method of amortization, recognized over the estimated useful lives of the assets. Additionally, during the years ended December 31, 2017 and 2016, we impaired intangible assets by $1 million and $3 million, respectively.

The estimated future amortization expense for our definite-lived intangible assets is as follows:

Year	Amount
	(in millions)
2019	$	45
2020	44
2021	37
2022	36
2023	34
Thereafter	243
	$	439

Acquisitions

Acquisitions during the year ended December 31, 2018 were not material individually or in the aggregate. As a result of certain acquisitions, our Automotive segment allocated $8 million to goodwill during the year ended December 31, 2018. In addition, our Automotive segment allocated $2 million to definite-lived intangible assets. The purchase price allocations for the above acquisitions are not all final and are subject to change.

Impairment of Goodwill

Prior to 2017, with respect to our reporting units that are allocated goodwill, the first step of the goodwill impairment analysis ("Step 1") involved comparing the fair value of each of our reporting units' assets to their respective carrying values to determine the potential for goodwill impairment. The second step of the goodwill impairment test ("Step 2"), if necessary, involved quantifying the level of goodwill impairment after performing a recoverability analysis of other long-lived assets for impairment first. Beginning with our goodwill impairment analysis in 2017, Step 2 of the goodwill impairment test was eliminated and the determination and quantification of goodwill impairment, if any, was the result of applying Step 1 of the goodwill impairment analysis.

We base the fair value of our reporting units on consideration of various valuation methodologies, including projecting future cash flows discounted at rates commensurate with the risks involved ("DCF"). Assumptions used in a DCF require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. The forecasted cash flows are based on current plans and for years beyond that plan, the estimates are based on assumed growth rates. We believe that our assumptions are consistent with the plans and estimates used to manage the underlying businesses. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in a DCF are based on estimates of the weighted-average cost of capital of a market participant. Such estimates are derived from our analysis of peer companies and consider the industry weighted average return on debt and equity from a market participant perspective.

Energy

We perform the annual goodwill impairment test for our Energy segment as of April 30 of each year, or more frequently if impairment indicators exist.

During the first quarter of 2016, due to worsening sales trends for our Energy segment's petroleum reporting unit, we performed an interim goodwill impairment analysis. Based on this analysis, we recognized a goodwill impairment charge of $574 million for our Energy segment, which represented the full amount of its remaining goodwill.

Automotive

We perform the annual goodwill impairment test for our Automotive segment as of October 1 of each year, or more frequently if impairment indicators exist.

In the fourth quarter of 2018, coinciding with our annual goodwill impairment analysis, we reorganized our Automotive segment's reporting units. Prior to the reorganization, our Automotive segment had two reporting units, Pep-Boys and AutoPlus, with all of its goodwill allocated to the Pep-Boys reporting unit. A goodwill impairment analysis just prior to the reorganization did not have an impact on the Pep-Boys reporting unit goodwill. Upon reorganization of the reporting units, a portion of the Pep-Boys reporting unit was reallocated to the AutoPlus reporting unit, which resulted in our Automotive segment continuing to have two redefined reporting units, Service and Parts. As a result, a portion of the goodwill was reallocated using a relative fair

value allocation approach, which resulted in approximately 27% of the goodwill being reallocated to the Parts reporting unit. Based on our annual goodwill impairment analysis for our Automotive segment, which reflected our reorganized reporting units, we determined that the carrying value of its Parts reporting unit exceeded its fair value and as a result, we recognized a goodwill impairment charge of $87 million in the fourth quarter of 2018, which represented the full amount of the goodwill allocated to the Parts reporting unit. This impairment was the result of our reporting unit reorganization, which resulted in a significant amount of carrying value of net assets being reallocated to the Parts reporting unit, primarily for inventory, with a significantly lesser fair value due to the future projected cash flows of the Parts reporting unit, which resulted in the Parts reporting unit having a carrying value in excess of its fair value. Therefore, the goodwill reallocated to the Parts reporting unit was immediately impaired. We also determined that the fair value of our Automotive segment's Service reporting unit was significantly in excess of its carrying value and therefore, no additional impairment is required. As of December 31, 2018, our Automotive segment had remaining goodwill of $241 million, which is allocated entirely to its Service reporting unit.