Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2023

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 judgments 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 judgments 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, macroeconomic conditions and an increase in the WACC, the Company determined that a triggering event occurred requiring goodwill impairment testing for each of its reporting units as of September 30, 2023. The impairment test indicated a pre-tax, non-cash goodwill impairment charge related to all 3 reporting units of $869,115 ($858,090 net of tax) which the Company recorded during the three months ended September 30, 2023.

The Company compared the estimated fair values of its indefinite-lived intangibles to their carrying values and determined that there were impairment charges of $6,994 ($5,181 net of tax) in all 3 reporting units during the three months ended September 30, 2023.

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. 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		Flooring NA	Flooring ROW	Total



Balance as of December 31, 2022 (1)	$	339,834	591,985	995,940	1,927,759
Goodwill adjustments related to acquisitions	—		(4,888)	3,217	(1,671)
Goodwill recognized during the period	85,892		—	—	85,892
Impairment charges during the period	(422,651)		(214,830)	(231,634)	(869,115)
Currency translation during the period	(3,075)		—	(14,356)	(17,431)




Balance as of September 30, 2023	$	—	372,267	753,167	1,125,434

(1) Net of accumulated impairment losses of $2,015,939 ($1,220,444 in Global Ceramic, $343,054 in Flooring NA and $452,441 in Flooring ROW).

Intangible assets not subject to amortization:


	Tradenames
Balance as of December 31, 2022	$	668,328
Intangible assets acquired during the period	37,530
Impairment charges	(6,994)
Currency translation during the period	(15,063)
Balance as of September 30, 2023	$	683,801

Intangible assets subject to amortization:


	Customer relationships		Patents	Other	Total




Balance as of December 31, 2022
Gross carrying amount	$	673,586	242,089	8,511	924,186
Accumulated amortization	(493,361)		(239,010)	(2,195)	(734,566)
Net intangible assets subject to amortization	180,225		3,079	6,316	189,620
Balance as of September 30, 2023
Gross carrying amount	670,800		239,113	8,514	918,427
Accumulated amortization	(509,162)		(236,535)	(2,104)	(747,801)
Net intangible assets subject to amortization	$	161,638	2,578	6,410	170,626


	Three Months Ended			Nine Months Ended
	September 30, 2023		October 1, 2022	September 30, 2023	October 1, 2022
Amortization expense	$	6,975	6,918	21,197	20,917