GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

NOTE 11 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill:

As discussed in Note 15 – Segment Reporting, we changed the composition of our operating segments. Due to these changes, part of our Domestic Regulated Waste and Compliance Services operating segment was combined with the legacy Domestic Regulated Recall and Returns Management Services operating segment to form a new operating segment, Domestic Communication and Related Services (“Domestic CRS”) in Q2 2016 and the Domestic Regulated Waste and Compliance Solutions operating segment (“Domestic RCS") will now become Domestic and Canada Regulated Waste and Compliance services. The operations in Canada had previously been reported as part of the International RCS operating segment.

In Q4, we determined that our former International RCS reporting unit should be disaggregated into three new reporting units for goodwill impairment testing purposes which is one level below the operating segment (referred to as a “component”). In addition, the four components of the Domestic and Canada RCS operating segment will now be the reporting units. This was primarily a result of some of the business and economic challenges we have recently faced in M&I and internationally. As a result of the changes, goodwill from the former International RCS reporting unit was reallocated to the four new reporting units including Canada based on their relative fair values. We completed a similar reallocation of goodwill for the new Domestic and Canada RCS reporting units.

Due to the establishment of the new reporting units in Q4 2016 and the change in our annual goodwill impairment testing date discussed in Note 2 – Summary of Significant Accounting Policies, we performed a goodwill impairment evaluation for all reporting units as of October 1, 2016. There was no impairment of goodwill because the fair value of those reporting units exceeded their carrying values. We also tested the former reporting units for goodwill impairment immediately prior to the establishment of the new reporting units and there was no impairment of goodwill.

The changes in the carrying amount of goodwill since January 1, 2015, by reportable segment and for the “Other” category, were as follows:

In thousands
	Domestic and Canada RCS			International RCS			Other			Total
Balance at January 1, 2015 (1)	$	1,638,529		$	521,338		$	258,965		$	2,418,832
Goodwill acquired during year		1,231,219			192,737			26,994			1,450,950
Purchase accounting adjustments		(8,072	)		(17,221	)		(2,984	)		(28,277	)
Other changes		—			(440	)		—			(440	)
Changes due to foreign currency fluctuations		(18,965	)		(63,923	)		—			(82,888	)
Balance at December 31, 2015		2,842,711			632,491			282,975			3,758,177
Goodwill acquired during year		41,517			8,381			2,871			52,769
Purchase accounting adjustments		(77,247	)		(78,894	)		(5,048	)		(161,189	)
Goodwill write-offs related to disposition and assets held for sale		—			(7,486	)		—			(7,486	)
Changes due to foreign currency fluctuations		4,820			(56,071	)		—			(51,251	)
Balance at December 31, 2016	$	2,811,801		$	498,421		$	280,798		$	3,591,020

(1)

The January 1, 2015 balances have been recast to reflect the new organizational structure. Domestic and Canada RCS goodwill from the International RCS and Other includes resulting from the changes described.

Other Intangible Assets:

At December 31, 2016 and 2015, the values of other intangible assets were as follows:

In thousands
	2016						2015
	Gross Carrying Amount		Accumulated Amortization		Net Value		Gross Carrying Amount		Accumulated Amortization		Net Value
Amortizable intangibles:
Customer relationships	$	1,553,398	$	261,306	$	1,292,092	$	1,304,388	$	144,020	$	1,160,368
Covenants not-to-compete		9,491		6,371		3,120		6,878		5,141		1,737
Tradenames		5,708		1,365		4,343		3,819		948		2,871
Other		19,076		2,526		16,550		18,902		916		17,986
Indefinite lived intangibles:
Operating permits		229,396		—		229,396		233,101		—		233,101
Tradenames		316,472		—		316,472		426,498		—		426,498
Total	$	2,133,541	$	271,568	$	1,861,973	$	1,993,586	$	151,025	$	1,842,561

The changes in the carrying amount of intangible assets since January 1, 2015 were as follows:

In thousands
	Total
Balance as of January 1, 2015	$	909,645
Intangible assets acquired during the year		1,016,775
Valuation adjustments for prior year acquisitions		35,241
Impairments during the year		(4,177	)
Amortization during the year		(45,498	)
Changes due to foreign currency fluctuations		(69,425	)
Balance as of December 31, 2015		1,842,561
Intangible assets acquired during the year		35,564
Valuation adjustments for prior year acquisitions		168,979
Intangible write-offs due to disposition and assets held for sale		(15,961	)
Impairments during the year		(1,406	)
Amortization during the year		(129,300	)
Changes due to foreign currency fluctuations		(38,464	)
Balance at December 31, 2016	$	1,861,973

Our indefinite-lived intangible assets include permits and certain tradenames. We have determined that our permits and certain tradenames have indefinite lives due to our ability to renew them with minimal additional cost, and therefore these are not amortized. We changed our annual impairment testing date for indefinite-lived intangibles from December 31 to October 1 as described in Note 2 – Summary of Significant Accounting Policies. In 2016 and 2015, we recognized $1.4 million and $4.2 million, respectively, of impairment charge as part of SG&A on the Consolidated Statements of Income as a result of the testing performed.

Our finite-lived intangible assets are amortized over their useful lives. We have determined that our customer relationships have useful lives ranging from 5 to 40 years based upon the type of customer and a weighted average remaining useful life of 15.2 years. We have covenants not-to-compete intangibles with useful lives ranging from 5 to 14 years and a weighted average remaining useful life of 3.5 years. We have tradename intangibles with useful lives ranging from 10 to 40 years and a weighted average remaining useful life of 17.6 years. Other intangibles mainly consist of landfill air rights with a weighted average remaining useful life of 17.4 years.

During the years ended December 31, 2016, 2015 and 2014, the aggregate intangible amortization expense was $129.3 million, $45.5 million and $32.7 million, respectively.

The estimated amortization expense for each of the next five years is as follows for the years ended December 31:

In thousands
2017	$	116,265
2018		116,127
2019		115,738
2020		115,045
2021		113,919

The estimates for amortization expense noted above are based upon foreign exchange rates at December 31, 2016.

- 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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