Goodwill and Intangible Assets, Net

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

9.  Goodwill and Intangible Assets, Net

Goodwill consists of the following:

	December 31, 2020
	Automotive		Food Packaging		Metals		Home Fashion		Pharma		Consolidated
	(in millions)
Gross carrying amount, Jan 1	$	336	$	6	$	4	$	23	$	—	$	369
Acquisitions		5		—		—		1		13		19
Gross carrying amount, Dec 31		341		6		4		24		13		388
Accumulated impairment, Jan 1		(87)		—		—		—		—		(87)
Impairment		—		—		—		(3)		—		(3)
Accumulated impairment, Dec 31		(87)		—		—		(3)		—		(90)
Net carrying value, Dec 31	$	254	$	6	$	4	$	21	$	13	$	298

	December 31, 2019
	Automotive		Food Packaging		Metals		Home Fashion		Consolidated
	(in millions)
Gross carrying amount, Jan 1	$	328	$	6	$	—	$	—	$	334
Acquisitions		8		—		4		22		34
Foreign exchange		—		—		—		1		1
Gross carrying amount, Dec 31		336		6		4		23		369
Accumulated impairment, Jan 1		(87)		—		—		—		(87)
Impairment		—		—		—		—		—
Accumulated impairment, Dec 31		(87)		—		—		—		(87)
Net carrying value, Dec 31	$	249	$	6	$	4	$	23	$	282

Intangible assets, net consists of the following:

	December 31, 2020						December 31, 2019
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Value		Amount		Amortization		Value
	(in millions)
Definite-lived intangible assets:
Customer relationships	$	399	$	(176)	$	223	$	397	$	(155)	$	242
Developed technology		254		(6)		248		4		(4)		—
Other		269		(163)		106		269		(142)		127
	$	922	$	(345)	$	577	$	670	$	(301)	$	369
Indefinite-lived intangible assets					$	83					$	62
Intangible assets, net					$	660					$	431

Amortization expense associated with definite-lived intangible assets for the years ended December 31, 2020, 2019 and 2018 was $44 million, $40 million and $47 million, respectively. We utilize the straight-line method of amortization, recognized over the estimated useful lives of the assets.

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

Year	Amount
	(in millions)
2021	$	63
2022		60
2023		60
2024		59
2025		57
Thereafter		278
	$	577

Acquisitions

Acquisitions during the year ended December 31, 2020 were not material individually or in the aggregate. As a result of Vivus’ emergence from bankruptcy in December 2020, our Pharma segment allocated $13 million to goodwill and $271 million to intangible assets during 2020, of which $250 million relates to developed technologies and $21 million relates to in process research and development. The fair value of the developed technologies recognized were

based on estimates of the future discounted cash flows expected to be generated over the useful lives of the developed technologies. The developed technologies consist of two approved therapies estimated to have useful lives ranging from 5 and 18 years. The allocations to goodwill and intangible assets are not final and are subject to change.

Impairment of Goodwill

When performing the quantitative analysis for goodwill impairment testing, 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.

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.

During the first quarter of 2020, due to the COVID-19 pandemic and its impact on our Automotive segment’s operations, we performed an interim goodwill impairment analysis. At such time, our Automotive segment had $249 million of goodwill, all of which was allocated to its Service reporting unit. Based on the interim impairment analysis, we determined that the fair value of our Automotive segment’s Service reporting unit was significantly in excess of its carrying value and therefore, no impairment is required.

During 2019, our Automotive segment considered qualitative factors to determine that goodwill at its Service reporting unit did not require further testing for impairment.

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.

Home Fashion

We perform the annual goodwill impairment test for our Home Fashion segment as of October 1 of each year, or more frequently if impairment indicators exist. During the second quarter of 2020, our Home Fashion segment impaired a portion of its goodwill in the amount of $3 million.