Annual report pursuant to Section 13 and 15(d)

Goodwill and Other Intangible Assets

v3.10.0.1
Goodwill and Other Intangible Assets
 12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
14. Goodwill and Other Intangible Assets:
The changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2017 is summarized as follows:
 
 
Environmental
Catalysts &
Services
 
Performance
Materials &
Chemicals
 
Total 
Balance as of December 31, 2016
 
$
388,923

 
$
852,506

 
$
1,241,429

Goodwill recognized
 
—

 
37,584

 
37,584

Foreign exchange impact
 
2,410

 
24,533

 
26,943

Balance as of December 31, 2017
 
$
391,333

 
$
914,623

 
$
1,305,956

Goodwill recognized
 
—

 
649

 
649

Goodwill adjustments(1)
 
—

 
(34,811
)
 
(34,811
)
Foreign exchange impact and other
 
(1,682
)
 
(15,183
)
 
(16,865
)
Balance as of December 31, 2018
 
$
389,651

 
$
865,278

 
$
1,254,929

 
 
 
 
 
 
 

 
(1) 
Represents the measurement period adjustments on the net assets acquired as part of the Acquisition (see Note 8 to these consolidated financial statements for further information regarding the Acquisition).
The Company completed its annual goodwill impairment assessments as of October 1, 2018 and 2017. For the annual assessments, the Company bypassed the option to perform the qualitative assessment and proceeded directly to performing the first step of the two-step goodwill impairment test for each of its reporting units. For each of the October 1, 2018 and 2017 assessments, the Company identified four reporting units, two in each of its operating segments (EC&S and PM&C).
The Company determined the fair value of its reporting units using a split between a market approach and an income, or discounted cash flow, approach. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Estimating the fair value of a reporting unit requires various assumptions including the use of projections of future cash flows and discount rates that reflect the risks associated with achieving those cash flows. The key assumptions used in estimating the fair value were the operating margin growth rates, revenue growth rates from implementation of strategic plans, the weighted average cost of capital, the perpetual growth rate, and the estimated earnings market multiples of each reporting unit. The market value was estimated using publicly traded comparable company values by applying their most recent annual EBITDA multiples to the reporting unit’s trailing twelve months EBITDA. The income approach value was estimated using a discounted cash flow approach. The assumptions about future cash flows and growth rates are based on management’s assessment of a number of factors including the reporting unit’s recent performance against budget as well as management’s ability to execute on planned future strategic initiatives. Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows.
As of October 1, 2018 and 2017, the fair values of each of the Company’s reporting units exceeded their respective carrying values and therefore, the second step of the two-step goodwill impairment test was not required.
In addition to the annual goodwill impairment assessment, the Company also performed the annual impairment test over its other indefinite-lived intangible assets as of October 1, 2018 and 2017. The fair values of these intangible assets were in excess of their carrying amounts as of the respective testing dates, and as such, there was no impairment of the Company’s indefinite-lived intangible assets for the years ended December 31, 2018 and 2017.
As a result of the Company’s 2016 test, the Company determined that the trade names related to its performance chemicals reporting unit within the PM&C segment and its catalysts reporting unit within the EC&S segment were impaired as of October 1, 2016. The impaired intangibles related to those identified as part of the Business Combination. The fair value of the respective trade names was determined using the relief-from-royalty method based on the discounted cash flows used in the goodwill impairment test. Slower sales growth rates for both reporting units led to the recognition of the impairment charges. Based on the testing performed, the Company recorded non-cash impairment charges of $5,350 related to trade names within the performance chemicals reporting unit and $1,523 related to trade names within the catalysts reporting unit for the year ended December 31, 2016. The impairment charges are included in the other operating expense, net line item of the Company’s consolidated statement of operations.
Gross carrying amounts and accumulated amortization for intangible assets other than goodwill are as follows:
 
December 31, 2018
 
December 31, 2017
 
Gross
Carrying
Amount
Accumulated
Amortization
Net
Balance
 
Gross
Carrying
Amount
Accumulated
Amortization
Net
Balance
Technical know-how
$
211,067

$
(32,112
)
$
178,955

 
$
212,599

$
(21,138
)
$
191,461

Customer relationships
361,150

(95,399
)
265,751

 
366,021

(63,860
)
302,161

Contracts
19,800

(13,139
)
6,661

 
19,800

(9,205
)
10,595

Trademarks
36,657

(6,451
)
30,206

 
35,202

(3,911
)
31,291

Permits
9,100

(7,432
)
1,668

 
9,100

(5,612
)
3,488

Total definite-lived intangible assets
637,774

(154,533
)
483,241

 
642,722

(103,726
)
538,996

Indefinite-lived trade names
157,813

—

157,813

 
158,059

—

158,059

Indefinite-lived trademarks
80,582

—

80,582

 
82,289

—

82,289

In-process research and development
6,800

—

6,800

 
6,800

—

6,800

Total intangible assets
$
882,969

$
(154,533
)
$
728,436

 
$
889,870

$
(103,726
)
$
786,144

 
 

 

 

 
 

 

 

The Company amortizes technical know-how over periods that range from eleven to twenty years, customer relationships over periods that range from seven to fifteen years, trademarks over an eleven to fifteen year period, contracts over periods that range from two to sixteen years, and permits over five years.
Amortization of intangibles included in cost of goods sold on the consolidated statements of operations was $17,569, $20,579 and $13,573 for the years ended December 31, 2018, 2017 and 2016, respectively. Amortization of intangibles included in other operating expense, net on the consolidated statements of operations was $35,025, $32,010 and $25,263 for the years ended December 31, 2018, 2017 and 2016, respectively.
Estimated future aggregate amortization expense of intangible assets is as follows:
Year 
 
Amount 
2019
 
$
50,652

2020
 
47,101

2021
 
46,159

2022
 
46,092

2023
 
42,175

Thereafter
 
251,062

Total estimated future aggregate amortization expense
 
$
483,241