Impairment - Wood Treatment

3 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

IMPAIRMENT - WOOD TREATMENT

As a result of our previously announced planned closure of the Company's wood treatment business’ facilities by approximately the end of calendar year 2021 and the finite remaining cash flow through the closure date, the company concluded that it is more likely than not that the fair value of the wood treatment reporting unit is below its carrying value, requiring the wood treatment asset group and reporting unit to be tested for impairment.

Impairment of Long-Lived Assets

The Company tested the recoverability of its long-lived assets and determined the carrying amount of the assets exceeded the sum of the expected undiscounted future cash flows, and as a result, we compared the fair value of the wood treatment asset group, which was determined based on a discounted cash flow model, to its carrying value. We recognized a non-cash pre-tax impairment charge of $3,266 for the quarter ended December 31, 2020. There is no remaining carrying value of definite-lived intangible assets or Property, plant and equipment in the wood treatment asset group after this impairment. As a result of the previously announced planned facility closures by approximately the end of calendar 2021, the Company adjusted the remaining useful lives such that they do not extend beyond such date. Key assumptions in testing the assets for recoverability and development of the fair value of the asset group included projected future revenue and gross margin. As the inputs for testing recoverability, including estimates of future revenue and gross margin, are not generally observable in active markets, the Company considers such measurements to be Level 3 measurements in the fair value hierarchy. The duration of the future revenue and gross margin estimates are limited to the period through the closure date.

Impairment of Goodwill

The fair value of the wood treatment reporting unit, which was determined based on a discounted cash flow model, did not exceed the carrying value of the reporting unit. Key assumptions in our goodwill impairment test included projected future revenue and gross margin. As a result, the Company recorded a $4,081 non-cash, pre-tax impairment charge during the first quarter ended December 31, 2020.

As the Company approaches the closure date of the facilities and there are finite estimated future cash flows, the carrying value of the wood treatment reporting unit will not be recoverable, resulting in future impairments of goodwill. The remaining carrying value of the wood treatment reporting unit as of December 31, 2020 includes $30.9 million of goodwill, which will be periodically impaired through the closure date, resulting in no fair value ascribed to the wood treatment business by the date of closure. The amount of the periodic impairments will vary depending on the timing of the remaining future cash flows of the business and carrying value of the reporting unit at each reporting period.

Presentation of Impairment Charge

The long-lived assets and goodwill impairment charges, both included in the Performance Materials segment, are presented within Asset impairment charges and the related tax benefit of $606 is included in the Provision for income taxes for the quarter ended December 31, 2020 in the Consolidated Statements of Income. The impairment charge related to goodwill was not tax deductible. The impairment charge was allocated as follows:


	Three Months Ended December 31, 2020
Property, plant, and equipment, net	$	91
Goodwill	4,081
Other intangible assets – Product technology	583
Other intangible assets – Acquired patents and licenses	173
Other intangible assets – Customer relationships, distribution rights, and other	2,419
Total Asset impairment charges	$	7,347

Goodwill activity for each of the Company’s reportable segments for the three months ended December 31, 2020:


	Electronic Materials		Performance Materials		Total
Balance at September 30, 2020	$	360,425	$	358,222	$	718,647

Foreign currency translation impact	5,602		1,453		7,055
Impairment	—		(4,081)		(4,081)
Balance at December 31, 2020	$	366,027	$	355,594	$	721,621