Goodwill and Intangible Assets

9 Months Ended

Oct. 01, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

The Company performs its annual testing of goodwill and indefinite-lived intangibles in the fourth quarter of each year. Between annual testing dates, the Company monitors factors such as its market capitalization, comparable company market multiples and macroeconomic conditions to identify conditions that could impact the Company’s assumptions utilized in the determination of the estimated fair values of the Company’s reporting units and indefinite-lived intangible assets significantly enough to trigger an impairment.

The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgements and assumptions using the discounted cash flows under the income approach classified in Level 3 of the fair value hierarchy and comparable company market valuation classified in Level 2 of the fair value hierarchy approaches. The Company has identified Global Ceramic, Flooring NA and Flooring ROW as its reporting units for the purposes of allocating goodwill and intangibles as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgements and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital ("WACC") and comparable company market multiples.

As a result of a decrease in the Company’s market capitalization, comparable company market multiples, projected future cash flows and an increase in the WACC due to increases in the risk free rate and applicable risk premiums, the Company determined that a triggering event occurred requiring goodwill impairment testing for each of its reporting units as of October 1, 2022. The impairment test indicated a pre-tax, non-cash goodwill impairment charge related to the Global Ceramic reporting unit of $688,514 ($679,664 net of tax) which the Company recorded during the three months ended October 1, 2022. The Company concluded goodwill of its other reporting units was not impaired at October 1, 2022.

The Company compared the estimated fair values of its indefinite-lived intangibles to their carrying values and determined that there were impairments of $7,257 ($5,939 net of tax) in the Flooring ROW and Flooring NA reporting units during the three months ended October 1, 2022.

A significant or prolonged deterioration in economic conditions, continued increases in the costs of raw materials and energy combined with an inability to pass these costs on to customers, a further decline in the Company’s market capitalization or comparable company market multiples, projected future cash flows, or increases in the WACC, could impact the Company’s assumptions and require a reassessment of goodwill or indefinite-lived intangible assets for impairment in future periods. The excess of fair value over carrying value for the Flooring ROW reporting unit was approximately 20% and the excess of fair value over carrying value for the Flooring NA reporting unit was less than 5% as of October 1, 2022. Future declines in estimated after tax cash flows, increases in the WACC or a decline in market capitalization could result in an additional indication of impairment in one or more of the Company’s reporting units.

The components of goodwill and other intangible assets are as follows:

Goodwill:


	Global Ceramic Segment		Flooring NA Segment	Flooring ROW Segment	Total
Balance as of December 31, 2021
Goodwill	$	1,563,267	874,198	1,497,869	3,935,334
Accumulated impairment losses	(531,930)		(343,054)	(452,441)	(1,327,425)
Balance as of December 31, 2021, net	1,031,337		531,144	1,045,428	2,607,909

Goodwill adjustments related to acquisitions	—		—	(2,722)	(2,722)
Goodwill recognized during the period	—		56,172	—	56,172
Impairment charge during the period	(688,514)		—	—	(688,514)
Currency translation during the period	(2,355)		—	(142,522)	(144,877)

Balance as of October 1, 2022
Goodwill	1,560,912		930,370	1,352,625	3,843,907
Accumulated impairment losses	(1,220,444)		(343,054)	(452,441)	(2,015,939)
Balance as of October 1, 2022, net	$	340,468	587,316	900,184	1,827,968

Intangible assets not subject to amortization:


	Tradenames
Balance as of December 31, 2021	$	694,905

Impairment charge	(7,257)
Currency translation during the period	(40,987)
Balance as of October 1, 2022	$	646,661

Intangible assets subject to amortization:


Gross carrying amounts:	Customer relationships		Patents	Other	Total
Balance as of December 31, 2021	$	680,177	256,336	6,786	943,299
Intangible assets acquired during the period	13,064		—	1,900	14,964

Currency translation during the period	(65,593)		(34,607)	(868)	(101,068)
Balance as of October 1, 2022	$	627,648	221,729	7,818	857,195

Accumulated amortization:	Customer relationships		Patents	Other	Total
Balance as of December 31, 2021	$	483,748	252,414	2,062	738,224
Amortization during the period	20,277		468	172	20,917
Currency translation during the period	(44,161)		(34,116)	(108)	(78,385)
Balance as of October 1, 2022	$	459,864	218,766	2,126	680,756

Intangible assets subject to amortization, net as of October 1, 2022	$	167,784	2,963	5,692	176,439


	Three Months Ended			Nine Months Ended
	October 1, 2022		October 2, 2021	October 1, 2022	October 2, 2021
Amortization expense	$	6,918	7,247	20,917	22,081