Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill activity for each of the Company’s reportable segments for the years ended September 30, 2021 and 2020 is as follows:
1.There are no accumulated impairment amounts at September 30, 2020 or 2019. During fiscal 2021, 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. The goodwill impairment charge is included in the Performance Materials segment and presented within Impairment charges, and the related tax benefit of $23,539 is included in the Provision for income taxes in the Consolidated Statements of (Loss) Income for the year ended September 30, 2021. In connection with our annual impairment assessment, the estimated fair value of the PIM reporting unit was determined to exceed the carrying value by approximately 5% as of July 1, 2021 and no additional impairment was recognized. The most significant estimates and assumptions inherent in the discounted cash flows model are the forecasted revenue growth rate, forecasted gross margin, the discount rate and the terminal growth rate. These assumptions are classified as level 3 inputs. The Company’s projections for revenue and gross margin are based on the Company’s multiyear forecast, which reflects a recovery from the Pandemic during the forecast period and normalization of raw material costs. The discount rate was based on an estimated weighted average cost of capital (“WACC”) for the PIM reporting unit. The components of WACC 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. The remaining carrying value of the PIM reporting unit as of September 30, 2021 of $566,300 includes $118,235 of goodwill and $46,000 of indefinite lived intangible assets. Additionally, the Company recorded non-cash, pre-tax goodwill impairment charge of $25,576 for the year ended September 30, 2021, related to the wood treatment asset group and reporting unit due to the previously announced planned closure of the facilities. See Note 10 of this Annual Report on Form 10-K for discussion of the wood treatment impairment. The components of other intangible assets are as follows:
1.Other indefinite-lived intangibles not subject to amortization primarily consist of trade names.
1.Refer to Note 4 of this Annual Report on Form 10-K for additional information regarding the ITS acquisition. 2.Refer to Note 10 of this Annual Report on Form 10-K for additional information regarding the wood treatment impairment. Amortization expense was $81,083, $85,557 and $59,931 for fiscal 2021, 2020 and 2019, respectively. Estimated future amortization expense of intangible assets as of September 30, 2021 for the five succeeding fiscal years is as follows:
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