Goodwill and Other Intangible Assets, Net

12 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

Goodwill and Other Intangible Assets, Net

Goodwill

As of June 30, 2021, the Company has three reporting units with goodwill recorded. Goodwill associated with the SAO reporting unit as of June 30, 2021 was $195.5 million and represents approximately 81 percent of total goodwill as of June 30, 2021. The remaining goodwill is associated with the PEP segment, which includes two reporting units, Dynamet and Latrobe Distribution, with goodwill recorded as of June 30, 2021 of $31.9 million and $14.0 million, respectively.

The Company conducts goodwill impairment testing at least annually as of June 30, or more often if events, changes or circumstances indicate that the carrying amount may not be recoverable. In preparing the financial statements for the quarter ended December 31, 2020, the Company identified an impairment triggering event related to the Additive reporting unit within the PEP segment. This reporting unit has experienced slower than expected growth due to customers shifting their near-term focus away from this emerging area as a result of the continuing impacts of the COVID-19 pandemic. During the quarter ended December 31, 2020 the Company also made strategic decisions to reduce resources allocated to the Additive reporting unit to concentrate on the essential manufacturing business. In light of these decisions and current market conditions, the pace of growth in the future projections for the Company's Additive reporting unit were lowered.

The fair value for the Additive reporting unit was estimated using a discounted cash flow technique. The Company determined the goodwill associated with the Additive reporting unit was impaired and recorded an impairment charge of $52.8 million during the quarter ended December 31, 2020, which represented the entire balance of goodwill.

Goodwill associated with the SAO reporting unit is tested at the SAO segment level. The fair value is estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques. As of June 30, 2021, the fair value of the SAO reporting unit exceeded the carrying value by approximately 26.3 percent. The discounted cash flows analysis for the SAO reporting unit includes assumptions related to our ability to increase volume, improve mix, expand product offerings and continue to implement opportunities to reduce costs over the next several years. For purposes of the discounted cash flow analysis for SAO's fair value, the Company used a weighted average cost capital of 9.0 percent and a terminal growth rate assumption of 3.0 percent. If the long-term growth rate of this reporting unit had been hypothetically reduced by 0.5 percent at June 30, 2021, the SAO reporting unit would have a fair value that exceeded the carrying value by approximately 22.0 percent.

All other goodwill is associated with the PEP segment, which includes two reporting units with goodwill recorded. The fair value is estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques for the PEP segment reporting units. The fair values of the two remaining PEP segment reporting units exceeded their carrying values, in each case, by 45 percent or more. The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value of the reporting units. Given the evolving nature of and uncertainty driven by the COVID-19 pandemic, the Company will continue to evaluate the impact on the reporting units as adverse changes to these assumptions could result in future impairments.

Accumulated goodwill impairment losses of $134.6 million are related solely to the PEP segment. The changes in the carrying amount of goodwill by reportable segment for fiscal years 2021 and 2020 were as follows:

($ in millions)	June 30, 2019		Impairment		Other		June 30, 2020		Impairment		Other		June 30, 2021
Goodwill	$	373.6	$	—	$	(1.4)	$	372.2	$	—	$	3.8	$	376.0
Accumulated impairment losses	(47.2)		(34.6)		—		(81.8)		(52.8)		—		(134.6)
Total goodwill	$	326.4	$	(34.6)	$	(1.4)	$	290.4	$	(52.8)	$	3.8	$	241.4
Specialty Alloys Operations	$	195.5	$	—	$	—	$	195.5	$	—	$	—	$	195.5
Performance Engineered Products	130.9		(34.6)		(1.4)		94.9		(52.8)		3.8		45.9
Total goodwill	$	326.4	$	(34.6)	$	(1.4)	$	290.4	$	(52.8)	$	3.8	$	241.4

Other Intangible Assets, Net

		June 30, 2021						June 30, 2020
($ in millions)	Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Impairment		Net Carrying Amount
Trademarks and trade names	15 - 30	$	29.9	$	(24.3)	$	5.6	$	33.5	$	(25.4)	$	(1.5)	$	6.6
Customer relationships	10 - 15	70.8		(44.1)		26.7		76.9		(41.2)		(1.2)		34.5
Non-compete agreements	5	—		—		—		0.2		(0.1)		(0.1)		—
Technology	10 - 15	3.6		(2.8)		0.8		7.3		(1.5)		(4.5)		1.3
Patents	14 - 20	11.4		(1.4)		10.0		11.4		(1.7)		—		9.7
Total		$	115.7	$	(72.6)	$	43.1	$	129.3	$	(69.9)	$	(7.3)	$	52.1

The Company recorded $6.9 million of amortization expense related to intangible assets during fiscal year 2021, $8.3 million during fiscal year 2020 and $7.3 million during fiscal year 2019. The estimated annual amortization expense related to intangible assets for each of the succeeding five fiscal years is $6.8 million in fiscal years 2022 and 2023, $6.6 million in fiscal year 2024 and $6.5 million in fiscal years 2025 and 2026.

During the year ended June 30, 2021, the Company impaired $4.3 million of net carrying amount related to technology and customer relationships within the Additive reporting unit. The impairment was the result of a restructuring plan to consolidate certain operations within the Additive business in the PEP segment. There was no remaining carrying value for these assets as of June 30, 2021.

As a result of targeted cost reduction activities, in fiscal year 2020 the Company approved a plan to exit the oil and gas business and closed two powder facilities in the PEP segment. As a result, the Company recorded an impairment charge of $7.3 million of net carrying amount related to definite lived intangible assets during fiscal year 2020. There was no remaining carrying value for these assets as of June 30, 2020.