Goodwill

9 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

GOODWILL

Goodwill activity for each of the Company’s reportable segments for the nine months ended June 30, 2021 is as follows: 

	Electronic Materials		Performance Materials		Total
Balance at September 30, 2020 1	$	360,425	$	358,222	$	718,647
Additions due to acquisition	81,960		—		81,960
Foreign currency translation impact	3,684		1,907		5,591
Impairment	—		(215,392)		(215,392)
Balance at June 30, 2021	$	446,069	$	144,737	$	590,806

1 There are no accumulated impairment amounts at September 30, 2020.

During the quarter, the Company recorded goodwill within the Electronic Materials segment of $81,960 from the Acquisition discussed in Note 4.

During the second quarter, the Company recorded impairment charges related to the PIM and wood treatment reporting units within the Performance Materials segment. As a result of lower than anticipated recovery from a drop in demand for our PIM products due to the ongoing impact of the COVID-19 Pandemic (“Pandemic”), combined with a near-to-mid term increase in raw material cost for the PIM business, we determined that it was more likely than not that the fair value of the PIM reporting unit was below its carrying value, requiring the PIM reporting unit to be tested for impairment at March 31, 2021. Based on the results of the interim impairment test, the Company concluded that the carrying value of the PIM reporting unit exceeded the estimated fair value, and recognized a non-cash, pre-tax goodwill impairment charge of $201,550 for the three months ended March 31, 2021. The goodwill impairment charge is included in the Performance Materials segment and presented within Impairment charges, and the related tax benefit of $23,539 for the nine months ended June 30, 2021 is included in the Provision for income taxes in the Consolidated Statements of Income (Loss). The remaining carrying value of the PIM reporting unit as of June 30, 2021 of $581,716 includes $118,568 of goodwill and $46,000 of indefinite lived intangible assets.

In performing the impairment test, the estimated fair value of the PIM reporting unit was determined based on an average of a discounted cash flow model and a market approach based on earnings before interest, taxes, and depreciation for a group of guideline comparable companies. Key assumptions in estimating the fair value of the reporting unit included projected future revenue and gross margin, a 10.75% discount rate and a terminal growth rate of 3%. The Company’s projections for revenue and gross margin are based on the Company’s multiyear forecast. Components of the discount rate are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. As the inputs for testing, 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 reporting unit’s carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt. The Company estimated the fair value of its indefinite-lived intangible tradename utilizing its best estimate of future cash flows and royalty rate assumptions as of the period ending March 31, 2021.

Additionally, the Company recorded non-cash, pre-tax goodwill impairment charges of $3,090 and $13,842 for the three and nine months ended June 30, 2021, related to the wood treatment asset group and reporting unit due to the previously announced planned closure of the facilities. See Note 8 of this Report on Form 10-Q for a discussion of the wood treatment impairment.

We continue to actively monitor the industries in which we operate and our businesses’ performance for indicators of potential impairment. We perform an impairment assessment of goodwill and other intangible assets at the reporting unit level annually, or more frequently if circumstances indicate that the carrying value may not be recoverable. If current global macroeconomic conditions related to the Pandemic persist and continue to adversely impact our Company, we may have future additional impairments of goodwill or other intangible assets. Potential future impairments could be material to the Company’s Consolidated Balance Sheets and to the Consolidated Statements of Income (Loss), but we do not expect them to affect the Company’s reported Net cash provided by operating activities.