GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill:

The changes in the carrying amount of goodwill were as follows:

In millions
	North America RWCS			International RWCS			All Other			Total
Balance as of January 1, 2018	$	2,850.2		$	466.8		$	287.0		$	3,604.0
Goodwill acquired during year		32.2			-			-			32.2
Purchase accounting adjustments		(16.9	)		-			(0.7	)		(17.6	)
Impairments during the year					(72.4	)		(286.3	)		(358.7	)
Impairments related to divestitures (Note 4)		(5.8	)		-			-			(5.8	)
Changes due to foreign currency fluctuations		(11.3	)		(20.6	)		-			(31.9	)
Balance as of December 31, 2018		2,848.4			373.8			-			3,222.2
Purchase accounting adjustments (Note 3)		(4.3	)		-			-			(4.3	)
Impairments during the year		(207.4	)		(20.9	)		-			(228.3	)
Impairments related to divestitures (Note 4)		(2.4	)		(6.2	)		-			(8.6	)
Changes due to foreign currency fluctuations and other		(2.7	)		3.9			-			1.2
Balance as of December 31, 2019	$	2,631.6		$	350.6		$	-		$	2,982.2

Accumulated non-cash impairment charges by segment as of December 31, 2019 and 2018 were as follows:

In millions
	2019		2018
North America RWCS	$	215.6	$	5.8
International RWCS		171.6		144.5
All Other		286.3		286.3
Total	$	673.5	$	436.6

2019 Impairments

The Company performed its annual goodwill assessment as of October 1, 2019, and determined that the Domestic Environmental Solutions and Canada reporting units’ carrying values were in excess of their estimated fair value.

Factors that contributed to the estimated fair value of the reporting units being below their carrying values included:

• Domestic Environmental Solutions:  During 2019, we experienced higher operating costs, particularly related to hazardous waste disposal costs. In addition, we anticipate that the timeline for achieving the betterment plans for both revenue quality and cost improvements has been extended. The Company also gathered insights from the process of evaluating Domestic Environmental Solutions as part of the Company’s portfolio rationalization criteria.

• Canada: During 2019, we experienced competitive pricing pressure in both SID Services and Regulated Medical Waste Solutions, lower SOP pricing, higher medical and hazardous waste costs including Canada based operating costs due to a reliance on third-party disposal and U.S.-based enabling support costs. We expect these challenges to have a prolonged impact and have adjusted for them in our current year long-range plan.

These challenges were factored into updates to the Company’s long-range plan and forecasted cash-flow assumptions. The Company also made certain adjustments to the risk premiums within the discount rates used to present value these forecasted cash-flows.  As a result, the Company recognized $80.8 million of non-cash impairment charges related its Domestic Environmental Solutions reporting unit and $126.6 million to fully impair the goodwill associated with its Canada reporting unit.

During the first quarter of 2019, there were business, and market developments and insights gathered from the Company’s portfolio rationalization considerations, which negatively impacted the estimated cash flows of the Company’s Latin America reporting unit and triggered an interim assessment as of March 31, 2019.  The Company determined that the Latin America reporting unit’s carrying value was in excess of its estimated fair value and recognized $20.9 million of non-cash goodwill impairment charges related to the Latin America reporting unit.  Following the impairment, the Latin America reporting unit has no remaining goodwill.

2018 Impairments

The Company performed its annual goodwill assessment as of October 1, 2018, and an interim assessment as of December 31, 2018. The Company determined that the Domestic CRS and Latin America reporting units’ carrying values were in excess of their estimated fair values.

Factors that contributed to the estimated fair value of the reporting units being below their carrying value included:

• Domestic CRS: The Company experienced a progressive decrease in revenues and operating margins in 2018 due to (i) continued declines in large recall events leading to a higher level of uncertainty of these occurring in future periods. (ii) recall events that had a smaller number of units and significantly lower revenue per event than experienced in recent years, and (iii) continued decline in the volume of inbound/outbound call volumes for the live voice services. The Company also gathered insights from its portfolio rationalization considerations which were initiated in 2018.

• Latin America: The Company continued to experience prolonged challenges and volatility in certain markets due to declining market trends and cost pressures. Revenue increases in the M&I business due to inflationary price increases in Argentina were offset by the impact of currency devaluation and the continuing declines in several local economies.

These challenges were factored into updates to the Company’s forecasted cash-flow assumptions during the fourth quarter of 2018 to reflect its current outlook and the Company made certain adjustments to the discount rates used to present value these forecasted cash-flows. As a result of these impairment assessments, the Company recognized $286.3 million of non-cash goodwill impairment charges to fully impair the Domestic CRS reporting unit. In addition, the Company recognized $72.4 million of non-cash goodwill impairment charges related to the Latin America reporting unit.

2017 Impairments

The Company performed its annual goodwill assessment, as of October 1, 2017 and evaluated the impact of prolonged declining market trends in Latin America and continued softness in the Company’s M&I regional hazardous waste business. Estimated cash flows were updated to reflect these challenging conditions in Latin America and, as a result of the impairment assessment, the Company recognized a $65.0 million non-cash goodwill impairment charge.  The impairment charge recognized was the amount by which the carrying value of the Latin America reporting unit exceeded its fair value.

The fair value of reporting units, used in both the annual and any interim goodwill impairment assessments in 2019, 2018 and 2017, are classified as Level 3 measurements 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.  The fair value methodology is described further in Note 1 – Basis of Presentation and Summary of Significant Accounting Policies.

Current year 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, the values of other intangible assets were as follows:

In millions
	2019						2018
	Gross Carrying Amount		Accumulated Amortization		Net Value		Gross Carrying Amount		Accumulated Amortization		Net Value
Amortizable intangibles:
Customer relationships	$	1,460.8	$	575.8	$	885.0	$	1,591.5	$	492.0	$	1,099.5
Covenants not-to-compete		4.9		3.8		1.1		5.1		3.2		1.9
Operating permits		4.1		1.6		2.5		-		-		-
Tradenames		3.6		1.1		2.5		3.9		1.2		2.7
Other		8.6		2.6		6.0		12.3		3.5		8.8
Indefinite-lived intangibles:
Operating permits		211.1		-		211.1		212.5		-		212.5
Tradenames		314.2		-		314.2		312.3		-		312.3
Total	$	2,007.3	$	584.9	$	1,422.4	$	2,137.6	$	499.9	$	1,637.7

The changes in the carrying amount of intangible assets since January 1, 2018 were as follows:

In millions
	Total
Balance as of January 1, 2018	$	1,791.5
Intangible assets acquired during the year		34.0
Purchase accounting adjustments for prior year acquisitions		10.2
Divestitures (Note 4)		(14.4	)
Impairments during the year		(16.0	)
Amortization during the year		(130.3	)
Changes due to foreign currency fluctuations		(37.3	)
Balance as of December 31, 2018		1,637.7
Intangible assets acquired during the year		0.5
Reclassification of capitalized permit costs		7.7
Purchase accounting adjustments for prior year acquisitions (Note 3)		4.2
Divestitures (Note 4)		(67.5	)
Impairments during the year		(17.7	)
Amortization during the year		(145.2	)
Changes due to foreign currency fluctuations		2.7
Balance as of December 31, 2019	$	1,422.4

The Company’s indefinite-lived intangible assets include operating permits and certain tradenames.  The Company has determined that certain of our operating permits and certain tradenames have indefinite lives due to our ability to renew them with minimal additional cost, and therefore they are not amortized.

The Company recognized non-cash impairment charges relating to customer lists, permits and tradenames in the following reportable segments:

In millions
	2019		2018		2017
North America RWCS	$	-	$	0.5	$	3.1
International RWCS		17.3		15.5		12.1
All Other		0.4		-		5.8
	$	17.7	$	16.0	$	21.0

In 2019, the Company recognized non-cash impairment charges of $14.7 million, to write-off customer relationship, permits, tradenames and other intangibles presented in the table above, and $3.6 million in respect to certain property plant and equipment (See Note 5 – Property, Plant and Equipment) related to the Company’s Brazilian operations. Brazil has continued to experience challenges including commercial pricing pressure and higher customer attrition which contributed to actual and forecasted declines in cash flows reflected in our long-range plan finalized in the fourth quarter of 2019.

The remaining $3.0 million in 2019, relates to the write-off of various customer relationship and permit intangibles in EMEA, LATAM and North America as a result of rationalizing certain operations.

The non-cash impairment charges recognized during the year ended December 31, 2018 included $10.3 million related to customer relationship and permit intangibles, which were impaired as a result of actual and forecasted business declines, primarily in LATAM.

The remaining non-cash impairment charges incurred during the year ended December 31, 2018 and 2017 were recognized due to rationalizing certain operations across all segments.

Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method with each category having weighted average remaining useful lives as follows:

In years
	Estimated useful lives	Weighted average remaining useful lives
Customer relationships	10-25		8.5
Covenants not-to-compete	5-14		2.4
Tradenames	15-40		17.6
Landfill air rights	5-26		14.4

The useful life of intangible assets is assessed annually to determine whether events and circumstances warrant a revision to their 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 2019, we performed the annual assessment of the useful life of our finite-lived intangibles and no changes were required.

During the years ended December 31, 2019, 2018, and 2017, our aggregate intangible asset amortization expense was $145.2 million, $130.3 million, and $118.4 million, respectively.

Our estimated intangible asset amortization expense for each of the next five years (based upon foreign exchange rates as of December 31, 2019) is as follows for the years ended December 31:

In millions
2020	$	131.6
2021		125.0
2022		123.4
2023		120.9
2024		118.3