NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill:

The changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016, by reportable segment and for the “Other” category, were as follows:

In millions
	Domestic and Canada RCS			International RCS			Other			Total
Balance as of January 1, 2016	$	2,842.7		$	632.5		$	283.0		$	3,758.2
Goodwill acquired during year		41.5			8.4			2.9			52.8
Purchase accounting adjustments		(77.2	)		(78.9	)		(5.1	)		(161.2	)
Write-offs related to disposition and assets held for sale		-			(7.5	)		-			(7.5	)
Changes due to foreign currency fluctuations		4.8			(56.1	)		-			(51.3	)
Balance as of December 31, 2016		2,811.8			498.4			280.8			3,591.0
Goodwill acquired during year		36.9			4.9			4.7			46.5
Purchase accounting adjustments		(10.1	)		1.2			1.5			(7.4	)
Impairments during the year		-			(65.0	)		-			(65.0	)
Write-offs related to disposition and assets held for sale		-			(7.1	)		-			(7.1	)
Changes due to foreign currency fluctuations		11.6			34.4			-			46.0
Balance as of December 31, 2017	$	2,850.2		$	466.8		$	287.0		$	3,604.0

In our Form 10-Q for the quarter ended September 30, 2017, we disclosed that we were in the process of completing the valuation of our reporting units with the assistance of our external valuation specialist. At that time, we were evaluating the impact of the prolonged declining market trends in Latin America and continued softness in the Company’s Manufacturing and Industrial regional hazardous waste business. We have experienced cost pressures in Latin America due to the strength of local competition resulting in an increasing inability to pass along inflationary price increases to our customers. In addition, the cost savings initiatives that were anticipated in 2017 have taken longer than expected to implement and are extending into 2018. In the fourth quarter 2017, we finalized our long rang plan (LRP) to reflect these challenging conditions in Latin America partially offset by incorporating the impact Business Transformation will have on our prospective results.

As a result, we recorded a $65.0 million non-cash goodwill impairment charge related to the Company’s Latin America reporting unit which is reflected as part of SG&A in the Consolidated Statements of Income. The impairment charge recognized was the amount by which the carrying value of the Latin America reporting unit exceeded its fair value. The result of the factors described above on our LRP was an overall decline in the forecasted financial information included in our income approach valuation model. The fair value of the reporting unit is classified as a Level 3 measurement within the fair value hierarchy due to significant unobservable inputs such as discount rates, projections of revenue, cost of revenue and operating expense growth rates, long-term growth rates and income tax rates.

Current period adjustments to goodwill for certain prior year acquisitions are primarily due to the finalization of intangible asset valuations among other opening balance sheet adjustments.

Other Intangible Assets:

At December 31, 2017 and 2016, the values of other intangible assets were as follows:

In millions
	2017						2016
	Gross Carrying Amount		Accumulated Amortization		Net Value		Gross Carrying Amount		Accumulated Amortization		Net Value
Amortizable intangibles:
Customer relationships	$	1,613.4	$	381.4	$	1,232.0	$	1,553.4	$	261.3	$	1,292.1
Covenants not-to-compete		7.9		5.9		2.0		9.5		6.4		3.1
Tradenames		6.0		1.8		4.2		5.7		1.4		4.3
Other		17.0		3.4		13.6		19.1		2.5		16.6
Indefinite lived intangibles:
Operating permits		222.3		-		222.3		229.4		-		229.4
Tradenames		317.4		-		317.4		316.5		-		316.5
Total	$	2,184.0	$	392.5	$	1,791.5	$	2,133.6	$	271.6	$	1,862.0

The changes in the carrying amount of intangible assets since January 1, 2016 were as follows:

In millions
	Total
Balance as of January 1, 2016	$	1,842.6
Intangible assets acquired during the year		35.5
Valuation adjustments for prior year acquisitions		169.0
Write-offs due to disposition and amounts reclassified to assets held for sale		(16.0	)
Impairments during the year		(1.4	)
Amortization during the year		(129.3	)
Changes due to foreign currency fluctuations		(38.4	)
Balance as of December 31, 2016		1,862.0
Intangible assets acquired during the year		28.2
Valuation adjustments for prior year acquisitions		7.9
Reclassification to assets held for sale		(2.6	)
Impairments during the year		(21.0	)
Amortization during the year		(118.4	)
Changes due to foreign currency fluctuations		35.4
Balance as of December 31, 2017	$	1,791.5

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 perform our annual impairment test as of October 1.

During 2017, 2016, and 2015, we impaired $21.0 million, $1.4 million, and $4.2 million, respectively. Intangibles impaired in 2017 included $14.0 million of operating permits, $5.8 million of tradenames, and $1.2 million of customer relationships due to rationalizing certain operations across all segments.

Our finite-lived intangible assets are amortized over their useful lives using the straight-line method. Our customer relationships have useful lives ranging from 5 to 30 years, based upon the type of customer, and a weighted average remaining useful life of 11.9 years. We have covenants not-to-compete with useful lives ranging from 5 to 14 years and a weighted average remaining useful life of 2.6 years. Our tradenames have useful lives ranging from 4 to 40 years and a weighted average remaining useful life of 15.5 years. Other intangibles mainly consist of landfill air rights with a weighted average remaining useful life of 16.7 years.

We evaluate the useful life of our intangible assets annually to determine whether events and circumstances warrant a revision to the remaining useful life and changes are reflected prospectively as the intangible asset is amortized over the revised remaining useful life. In the fourth quarter of 2017, the Company performed its annual assessment of the useful life of its finite-lived intangibles and concluded its domestic medical waste customer relationship intangibles should be revised from 40 years to 30 years due to the change in mix of small and large quantity customer relationships. The change in life is a change in estimate to be accounted for prospectively with an estimated increase to amortization expense of approximately $7.0 million annually.

During the years ended December 31, 2017, 2016 and 2015, the aggregate intangible asset amortization expense was $118.4 million, $129.3 million, and $45.5 million, respectively.

The estimated amortization expense for each of the next five years (based upon foreign exchange rates at December 31, 2017) is as follows for the years ended December 31:

In millions
2018	$	126.8
2019		126.6
2020		125.8
2021		125.4
2022		125.3