Goodwill Impairment

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill Impairment

Goodwill Impairment

At September 30, 2020, the Company had $238.4 million of goodwill on its consolidated balance sheet, all of which relates to

the HPMC segment. Goodwill decreased $287.4 million at September 30, 2020 compared to December 31, 2019, due to a $287.0 million interim impairment charge in the HPMC segment and $0.4 million from the impact of foreign currency translation on goodwill denominated in functional currencies other than the U.S. dollar.

The Company performs its annual goodwill impairment evaluations in the fourth quarter of each year. During the second quarter of 2020, the Company performed an interim goodwill impairment analysis on the Forged Products reporting unit and its $460.4 million goodwill balance based on assessed potential indicators of impairment, including recent disruptions to the global

commercial aerospace market resulting from the COVID-19 pandemic, and the increasing uncertainty of near-term demand requirements of aero-engine and airframe markets based on government responses to the pandemic and ongoing interactions with customers. In the previous 2019 annual goodwill impairment evaluation, this reporting unit had a fair value that exceeded carrying value by approximately 30%. For the 2020 interim impairment analysis, fair value was determined by a quantitative assessment that used a discounted cash flow technique, which represents Level 3 unobservable information in the fair value hierarchy. As a result of the second quarter 2020 interim goodwill impairment evaluation, the Company determined that the fair value of the Forged Products reporting unit was below carrying value, including goodwill, by $287.0 million. This was primarily due to changes in the timing and amount of expected cash flows resulting from lower projected revenues, profitability and cash flows due to near-term reductions in commercial aerospace market demand. Consequently, during the second quarter of 2020, the Company recorded a $287.0 million impairment charge for the partial impairment of the Forged Products reporting unit goodwill, most of which was assigned from the Company’s 2011 Ladish acquisition that was not deductible for income tax purposes. This goodwill impairment charge was excluded from 2020 HPMC business segment results. Accumulated goodwill impairment losses as of September 30, 2020 and December 31, 2019 were $528.0 million and $241.0 million, respectively.

The $238.4 million of goodwill remaining as of September 30, 2020 on the Company’s consolidated balance sheet is comprised of $173.4 million at Forged Products and $65.0 million at Specialty Materials. No indicators of impairment were observed in the third quarter 2020 associated with any of the Company’s long-lived assets.