Goodwill and Intangible Assets

12 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

In fiscal 2022, the Company changed its reportable segments and correspondingly reallocated goodwill to the current reporting units: Battery & Lights North America, Battery & Lights International, Auto Care North America and Auto Care International. The Company performed an assessment of goodwill at October 1, 2021 before the change in segments, noting no impairments identified. Goodwill was reallocated to the reporting units based on the relative fair value of each reporting unit on October 1, 2021.

The following table sets forth goodwill by segment and represents the change in the carrying amount of goodwill at September 30, 2023 and 2022:


	Batteries & Lights		Auto Care		Total
Balance at October 1, 2021	$	900.3	$	153.5	$	1,053.8
Formulations acquisition	—		(1.0)		(1.0)
Non-cash impairment	—		(17.4)		(17.4)
Cumulative translation adjustment	(31.4)		(0.9)		(32.3)
Balance at September 30, 2022	$	868.9	$	134.2	$	1,003.1
Cumulative translation adjustment	13.1		—		13.1
Balance at September 30, 2023	$	882.0	$	134.2	$	1,016.2

Goodwill Annual Impairment Analysis

Goodwill and intangible assets deemed to have an indefinite life are not amortized, but are reviewed annually for impairment of value or when indicators of a potential impairment are present. As part of our business planning cycle, the Company performs the annual goodwill impairment testing for its reporting units in the fourth quarter each fiscal year. When performing a quantitative analysis, the Company estimates the fair value of each reporting unit under the income approach utilizing a discounted cash flow model which incorporates significant estimates and assumptions, including future cash flows driven by revenue and gross margin projections and discount rates reflecting the risk inherent in future cash flows. The Company uses the three-year strategic plan, the annual budget plan for the following fiscal year, and long-term category projections to determine forecasted cash flows and operating data for the discounted cash flow model. Specifically, revenue growth assumptions are based on historical trends and management’s expectations for future growth by category. Gross margin rate assumptions are based on historical trends and management's cost cutting strategies, as applicable. The discount rates are based on a weighted-average cost of capital utilizing industry market data of similar companies.

During fiscal 2023, the Company completed a quantitative analysis on the Auto Care North America reporting unit and a qualitative analysis over the Battery & Lights reporting units. No impairments were identified and the Auto Care North America reporting unit's fair value exceed its carrying value by more than 20%

During fiscal 2022, the Company completed a quantitative analysis on all four reporting units. As a part of the annual assessment, the Company identified a non-cash impairment within the Auto Care International reporting unit of $17.4. This non-cash impairment was primarily driven by significant sustained currency headwinds in the fourth quarter of fiscal 2022, which were expected to continue into fiscal 2023 and were included within the cash flow models, declines in the Auto Care category projections late in the fourth quarter of fiscal 2022, and an increased discount rate. There is no remaining goodwill allocated to this reporting unit after the non-cash impairment. This fair value measurement fell within Level 3 of the fair value hierarchy, see Note 16, Financial Instruments and Risk Management.

In fiscal 2022, the Battery & Lights reporting units estimated fair value exceeded their carrying values by more than 100%. The estimated fair value of the Auto Care North America reporting unit, which has a total of $134.2 of goodwill, exceeded its carrying value by 12%. Determining the fair value of a reporting unit requires the use of significant judgment, estimates and assumptions. Changes in the assumptions used to estimate the fair value of the Company's goodwill reporting units could result in impairment charges in future periods, which could be material. Additionally, certain factors have the potential to create variances in the estimated fair values of our indefinite-lived intangible assets, which also could result in material impairment charges. These factors include (i) failure to achieve forecasted revenue growth rates, (ii) failure to achieve cost cutting and margin improvement initiatives the Company is implementing, or (iii) increases in the discount rate.

For the year ended September 30, 2021, the Company completed a qualitative annual impairment assessment and no impairments were identified.

Indefinite-lived Intangible Asset Annual Impairment Analysis

During the fourth quarter of each fiscal year, the Company completes impairment testing on indefinite-lived intangible assets other than goodwill, which are trademarks/brand names used in the various battery, auto care and lighting product categories.

For fiscal 2023, a quantitative assessment was performed over the Rayovac and Armor All trade names due to the prior year impairments, and a qualitative assessment was performed over the Energizer, Eveready and Varta trade names. No impairments were identified and the Armor All trade name fair value exceed its carrying value by more than 20%.

For Rayovac, the fair value of the trade name exceeded its carrying value of $422.2 by approximately 5%. The quantitative estimate of fair value for the Rayovac trade name was determined using the multi-period excess earnings method, which requires significant assumptions, including estimates related to revenue growth rates, gross margin rates, operating expenses (SG&A, R&D, and A&P) and discount rates. The projections for the Rayovac fair value model were generated using the Company’s three-year strategic plan, the Company's annual budget plan for fiscal 2024, and long-term category projections, to determine forecasted cash flows and operating data. Specifically, the revenue growth assumption was based on historical trends and management’s expectations for future category trends. The gross margin rate assumption was based on historical trends, management's cost cutting strategies, and a market place participant's production capabilities. The gross margin rate utilized is consistent with rates achieved in fiscal 2023. Operating expenses are based on historical trends and management's annual budget plan for fiscal 2024, as well as long-term operating and advertising strategies. The discount rate used was based on a weighted-average cost of capital utilizing industry market data of similar companies.

In fiscal 2022, a quantitative assessment was performed over the Armor All, STP and Rayovac trade names, resulting in non-cash impairments of $370.4, $26.3, and $127.8, respectively. For Armor All and STP, the non-cash impairments were primarily due to declines in their respective Auto Care category projections late in the fourth quarter of fiscal 2022, significant increases in input costs, and a higher discount rate. The Rayovac non-cash impairment was primarily caused by significant sustained currency headwinds in the fourth quarter of fiscal 2022, which were expected to continue into fiscal 2023 and were included within the cash flow models, a decrease in the branded sales forecast, increases in input costs, and a higher discount rate.

The quantitative estimated fair values were determined using the multi-period excess earnings method, which requires significant assumptions for each brand, including estimates related to revenue growth rates, gross margin rates, operating expenses (SG&A, R&D, and A&P) and discount rates. The projections for our Armor All, STP and Rayovac fair value models were generated using the company’s three-year strategic plan, the Company's annual budget plan for fiscal 2023, and long-term category projections to determine forecasted cash flows and operating data. Specifically, revenue growth assumptions are based on historical trends and management’s expectations for future growth by brand and category. Gross margin rate assumptions are based on historical trends and management's cost cutting strategies. Operating expenses are based on historical trends and management's annual budget plan for fiscal 2023, as well as long-term operating and advertising strategies. The discount rates used in the trade name fair value estimates ranged between 9.5% and 10.0%, and are based on a weighted-average cost of capital utilizing industry market data of similar companies. The new carrying values for Armor All, STP, and Rayovac trade names are $228.5, $76.4, and $422.2, respectively. These fair value measurement fell within Level 3 of the fair value hierarchy, see Note 16, Financial Instruments and Risk Management.

STP is within the fuel and oil additives category and due to the current expectation for an increased percentage of electric vehicles in the car parc over the long term, the Company converted the STP trade name into a definite-life intangible asset with a 25 year useful life. This conversion resulted in additional annual pre-tax amortization expense of approximately $3.0, which was included in Amortization of intangible assets expense in fiscal 2023.

Changes in the assumptions used to estimate the fair value of the Company's indefinite-lived intangible assets could result in impairment charges in future periods, which could be material. Additionally, certain factors have the potential to create variances in the estimated fair values of our indefinite-lived intangible assets, which also could result in material impairment charges. These factors include (i) failure to achieve forecasted revenue growth rates, (ii) failure to achieve cost cutting and margin improvement initiatives the Company is implementing, (iii) failure to meet forecasted operating expenses, or (iv) increases in the discount rate.

For the year ended September 30, 2022, a qualitative analysis was performed over the Energizer, Eveready and Varta trade names and no impairments were identified.

For the year ended September 30, 2021 the Company completed a qualitative annual impairment assessment and no impairments were identified.

Total intangible assets at September 30, 2023 are as follows:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trademarks and trade names	$	142.4	$	(29.4)	$	113.0
Customer Relationships	394.2		(139.7)		254.5
Patents	33.9		(18.2)		15.7
Proprietary technology	172.5		(100.0)		72.5
Proprietary formulas	29.2		(10.0)		19.2
Vendor relationships	7.5		(7.5)		—
Total amortizable intangible assets	$	779.7	$	(304.8)	$	474.9
Trademarks and trade names - indefinite lived	762.8		—		762.8
Total Other intangible assets, net	$	1,542.5	$	(304.8)	$	1,237.7

Total intangible assets at September 30, 2022 are as follows:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trademarks and trade names	$	141.8	$	(21.4)	$	120.4
Customer Relationships	393.5		(112.6)		280.9
Patents	33.4		(15.7)		17.7
Proprietary technology	172.5		(81.5)		91.0
Proprietary formulas	29.2		(6.3)		22.9

Vendor relationships	6.9		(6.5)		$	0.4
Total amortizable intangible assets	$	777.3	$	(244.0)	$	533.3
Trademarks and trade names - indefinite lived	762.5		—		762.5
Total Other intangible assets, net	$	1,539.8	$	(244.0)	$	1,295.8

The indefinite lived intangible asset balance difference between the periods is driven by currency adjustments.

During the fiscal year ended September 30, 2022, the Company purchased auto care appearance trade names and formulas in Latin America through an asset acquisition for $14.7. Approximately $7 was assigned as the value to trade name and formula intangibles acquired, respectively. The weighed average useful life for both acquired intangibles is 10 years.

Amortizable intangible assets, with a weighted average remaining life of 10.7 years, are amortized on a straight-line basis over expected lives of 3 to 25 years. Amortization expense for intangible assets totaled $59.4, $61.1, and $61.2 for the twelve months ended September 30, 2023, 2022 and 2021, respectively.

Estimated amortization expense for amortizable intangible assets at September 30, 2023 are as follows:


	Estimated amortization expense
2024	$	58.1
2025	58.0
2026	53.2
2027	51.6
2028	46.8
Thereafter	207.2
Estimated future amortization expense	$	474.9