CoreCivic, Inc. Goodwill & Intangibles Disclosure

ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment", establishes accounting and reporting requirements for goodwill and other intangible assets. Goodwill was $5.9 million and $50.5 million as of December 31, 2020 and 2019, respectively.  Of these amounts, goodwill was $5.9 million and $7.9 million as of December 31, 2020 and 2019, respectively, for the Company's CoreCivic Safety segment, and was $42.6 million as of December 31, 2019, for its CoreCivic Community segment. This goodwill was established in connection with multiple business combination transactions.  

Under the provisions of ASU 2017-04, CoreCivic performs a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a quantitative impairment test.  If a quantitative test is required, CoreCivic performs an assessment to identify the existence of impairment and to measure the excess of a reporting unit's carrying amount over its fair value by using a combination of various common valuation techniques, including market multiples and discounted cash flows under valuation methodologies that include an income approach and a market approach. The income valuation approach includes certain significant assumptions impacting projected future cash flows, such as projected revenue, projected operating costs, and the weighted average cost of capital, which are affected by expectations about future market or economic conditions.  These impairment tests are required to be performed at least annually.  CoreCivic performs its impairment tests during the fourth quarter, in connection with its annual budgeting process, and whenever circumstances indicate the carrying value of goodwill may not be recoverable.   

In connection with the Company's annual impairment test for the goodwill associated with the Community reporting unit, during the fourth quarter of 2020, the Company performed a quantitative goodwill impairment test and concluded to record an impairment charge of $42.6 million, representing the full value of goodwill allocated to this reporting unit.  The Company's analysis considered numerous factors, with the impairment predominantly driven by the Company's consideration of the broad-based declines in the market capitalization of publicly-traded companies in the Company's industry, primarily during the second half of 2020, as well as the reduction in cash flows from the COVID-19 pandemic and the anticipated change in tax structure effective January 1, 2021. The Company intends to continue to pursue investments in this segment, which could generate additional goodwill from business combinations transacted in this segment in the future, which could result in additional charges if the goodwill becomes impaired under the requirements of ASU 2017-04.

The Company also performed qualitative assessments of goodwill recorded in its Safety reporting units in the fourth quarter of 2020, concluding there was no impairment for such goodwill.  The Company recorded certain interim event-driven impairment charges in 2020.  During the third quarter of 2020, the Company provided notice to the local county customers at two managed-only facilities of its intent to terminate the contracts.  The Company transitioned operations of the 1,046-bed Silverdale Detention Center in December 2020 and transitioned operations at the 1,348-bed Metro-Davidson County Detention Facility in October 2020.  As a result of these expected contract terminations, during the second quarter of 2020, the Company recognized goodwill impairments of $2.0 million associated with these two managed-only facilities' reporting units.