Caraustar Industries (CSAR)

Goodwill

The Company accounts for goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” This statement requires the Company to perform a goodwill impairment test at least annually. In accordance with SFAS 142 the Company defines each of its operating segments as a reporting unit. The test for goodwill impairment involves the use of significant accounting judgments and estimates as to future operating results and discount rates. Changes in estimates or use of different assumptions could produce significantly different results. An impairment loss is generally recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The Company uses discounted cash flow analysis to estimate the fair value of its reporting units. The Company also considers its current market capitalization in evaluating its enterprise value in comparison to the aggregate fair value of its reporting units determined using discounted cash flows. During the third quarter of 2008, due to the continuing decline in the Company’s share price and resulting market capitalization decline, the Company determined that it was necessary to perform a goodwill impairment test. As a result of the analysis, the Company determined that its goodwill was fully impaired. Accordingly, the Company recorded a non-cash charge of $125.3 million in the third quarter to recognize the impairment of goodwill, comprised of $68.4 million relating to the Paperboard segment, $3.8 million relating to the Recovered Fiber segment and $53.1 million relating to the Tube and Core segment.

Goodwill

During the third quarter of 2008, the continuing decline in the Company’s share price and resulting market capitalization decline led the Company to conclude that it was necessary to perform a goodwill impairment test. As a result of the analysis the Company determined that its goodwill was fully impaired. Accordingly, the Company recorded a non-cash charge of $125.3 million in the third quarter to recognize the impairment of goodwill, comprised of $68.4 million relating to the Paperboard segment, $3.8 million relating to the Recovered Fiber segment and $53.1 million relating to the Tube and Core segment.

The following is a summary of the changes in the carrying amount of goodwill, by segment, for the years ended December 31, 2007 and 2008 (in thousands):

In September 2007, the Company recognized a $5.0 million disposal of goodwill in the tube and core segment related to the divestiture of the segment’s composite container and plastics businesses. This impairment was also recorded in discontinued operations.

Goodwill

Goodwill

The Company accounts for goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”) and tests goodwill for impairment at least annually, and when events occur or circumstances change to the extent that there is a probability that the fair value of a reporting unit is reduced below its carrying amount. In accordance with SFAS 142 the Company defines each of its operating segments as a reporting unit. The test for goodwill impairment involves the use of significant accounting judgments and estimates as to future operating results and discount rates. Changes in estimates or use of different assumptions could produce significantly different results. An impairment loss is generally recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The Company uses discounted cash flow analysis to estimate the fair value of its reporting units. The Company also considers its current market capitalization in evaluating its enterprise value in comparison to the aggregate fair value of its reporting units determined using discounted cash flows. During the third quarter of 2008, due to the continuing decline in the Company share price and resulting market capitalization decline the Company determined that these circumstances triggered the need to perform a goodwill impairment test. As a result of the analysis the Company determined that its goodwill was fully impaired. Accordingly, the Company recorded a non-cash charge of approximately $125.3 million in the third quarter to recognize the impairment of goodwill, comprised of $68.4 million relating to the Paperboard segment, $3.8 million relating to the Recovered Fiber segment and $53.1 million relating to the Tube and Core segment.

The following is a summary of the changes in the carrying amount of goodwill, by segment, for the nine months ended September 30, 2008 (in thousands):

Goodwill

The Company accounts for goodwill and other intangible assets pursuant to SFAS No. 142, “Goodwill and Other Intangible Assets.” Under this pronouncement, the Company performs an impairment test at least annually. The Company’s most recent impairment test was performed during the fourth quarter of 2007 and did not result in an impairment charge. During the third quarter of 2007 the Company recognized a $5.0 million write-off of goodwill in the tube and core segment related to the divestiture of the segment’s composite container and plastics businesses. This impairment was recorded in discontinued operations. During the first quarter of 2008, the Company acquired Mayers Fibre Tube & Core, located in Winnipeg, Manitoba, Canada, and allocated approximately $2.9 million of the purchase price to goodwill.

The following is a summary of the changes in the carrying amount of goodwill, by segment, for the six months ended June 30, 2008 (in thousands):

Goodwill

The Company accounts for goodwill and other intangible assets pursuant to SFAS No. 142, “Goodwill and Other Intangible Assets.” Under this pronouncement, the Company performs an impairment test at least annually. The Company’s most recent impairment test was performed during the fourth quarter of 2007 and did not result in an impairment charge. During the third quarter of 2007 the Company recognized a $5.0 million write-off of goodwill in the tube and core segment related to the divestiture of the segment’s composite container and plastics businesses. This impairment was recorded in discontinued operations. During the first quarter of 2008, the Company acquired Mayers Fibre Tube & Core, located in Winnipeg, Manitoba, Canada, and allocated approximately $2.8 million of the purchase price to goodwill.

The following is a summary of the changes in the carrying amount of goodwill, by segment, for the three months ended March 31, 2008 (in thousands):

Goodwill

The following is a summary of the changes in the carrying amount of goodwill, by segment, for the years ended December 31, 2006 and 2007 (in thousands):

45

Table of Contents

CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2007, 2006 and 2005

In February 2006, the Company recognized a $1.7 million disposal of goodwill in the tube and core segment related to the divesture of the segment’s partition operations. In September 2007, the Company recognized a $5.0 million disposal of goodwill in the tube and core segment related to the divestiture of the segment’s composite container and plastics businesses. These impairments were also recorded in discontinued operations.

Goodwill

SIZE="1"> 

The Company accounts for goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.”
This statement requires the Company to perform a goodwill impairment test at least annually. The Company’s most recent annual impairment test was performed as of November 1, 2007 and did not result in an impairment. In December 2005,
however, the Company recognized certain impairment indicators related to the Company’s decision at that time to exit the coated recycled paperboard business. As a result, the Company retested its goodwill as of December 31, 2005 and
recorded a goodwill impairment charge of $49.8 million at December 31, 2005. Of this amount, approximately $10.5 million was recorded in the Company’s paperboard segment and the remaining $39.3 million was recorded in its folding carton
segment. The goodwill impairment recorded in the folding carton segment resulted from the loss of synergies that existed between the Company’s coated recycled paperboard business and its folding carton segment. The folding carton segment lost
some of these synergies following the disposition of a portion of the coated recycled paperboard business.

FACE="Times New Roman" SIZE="2">Impairment of Long-Lived Assets

FACE="Times New Roman" SIZE="2">Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company periodically evaluates long-lived assets, including property, plant and equipment and definite
lived intangible assets whenever events or changes in conditions may indicate that the carrying value may not be recoverable. Factors that management considers important that could initiate an impairment review include the following:

Goodwill

The Company accounts for goodwill and other intangible assets pursuant to SFAS No. 142, “Goodwill and Other Intangible Assets.” Under this pronouncement, the Company performs an impairment test at least annually. The Company’s most recent impairment test was performed during the fourth quarter of 2006 and did not result in an impairment charge. During the third quarter of 2007 the Company recognized a $5.0 million write-off of goodwill in the tube and core segment related to the divestiture of the segment’s composite container and plastics businesses. This impairment was recorded in discontinued operations.

The following is a summary of the changes in the carrying amount of goodwill, by segment, for the nine months ended September 30, 2006 (in thousands):