Ingevity Corp

Note 8: Goodwill and Other Intangible Assets, net

Goodwill

Impairment Assessment(s) and Goodwill Impairment Charge

Impairment Assessment

Our fiscal year 2024 annual goodwill impairment assessment was performed as of October 1, 2024. We determined that the fair value of our reporting units were in excess of their carrying value and therefore concluded that no goodwill impairment existed.

The results of our October 1st annual review calculated that our APT reporting unit headroom, defined as the percentage difference between the fair value of a reporting unit and its carrying value, is 12 percent. Since the fair value of our APT reporting unit is higher than the carrying value, we have concluded that no impairment to goodwill is necessary. Our analysis includes significant assumptions such as revenue growth rate, Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") margin, and discount rate, which are judgmental, and variations in any assumptions could result in materially different calculations of fair value.

There were no events or circumstances indicating that goodwill might be impaired as of December 31, 2024.

Goodwill Impairment Charge

Beginning in fiscal year 2023, we began to see depressed volumes in our industrial end markets, constraining our ability to offset the continued crude tall oil (“CTO”) price inflation we were experiencing, and negatively impacting earnings and cash flow within our Performance Chemicals reporting unit, particularly in our industrial specialties product line. As a result, we concluded that a triggering event occurred in the third quarter of 2023. Our third quarter 2023 impairment analysis included significant assumptions, such as the execution of several measures in 2023 to pursue greater cost efficiency, including a reorganization to streamline certain functions and reduce ongoing costs, and expectations of decreased CTO costs beginning in the second half of 2024. We concluded that no impairment was necessary as a result of that third quarter 2023 interim analysis or at our annual impairment assessment, dated October 1, 2023.

Index

During the second quarter of 2024, our contracted long-term supplier of CTO provided new information regarding the cost of CTO for the second half of 2024, which significantly exceeded our forecasted costs, resulting in a triggering event for our Performance Chemicals reporting unit. We performed an analysis of the reporting unit’s goodwill, intangibles, and long-lived assets. Our analysis included significant assumptions such as: revenue growth rate, EBITDA margin, and discount rate, which are judgmental, and variations in any assumptions could result in materially different calculations of fair value.

Our analysis reassessed the expected cash flows in light of current performance and expected lack of near term recovery in our industrial specialties product line, resulting in lower volume and profitability expectations. As a result, we concluded that the carrying amount of the Performance Chemicals reporting unit exceeded its fair value, resulting in a non-cash goodwill impairment charge of $349.1 million, which represented all of the goodwill within the Performance Chemicals' reportable segment. The charge was is included within Goodwill impairment charge on the consolidated statements of operations for the year ended December 31, 2024. Specific to our long-lived assets, we determined that the undiscounted cash flows were in excess of the carrying values and therefore concluded that no impairment existed.

Other Intangible Assets

(1) Represents trademarks, trade names, and know-how.

(2) As a result of the Performance Chemicals repositioning, as further described in Note 15, we retired certain customer contract and relationships, and developed technology finite-lived intangible assets.

(3) The weighted average amortization period remaining for all intangibles is 10.7 years, while the weighted average amortization period remaining for customer contracts and relationships, brands, and developed technology is 11.8 years,10.4 years, and 7.0 years, respectively.

(4) As a result of the Performance Chemicals repositioning, as further described in Note 15, we accelerated the amortization of certain customer contract and relationship finite-lived intangible assets. This resulted in $22.1 million and $37.4 million of additional expense for the years ended December 31, 2024 and 2023, which is included in Restructuring and other (income) charges, net within the consolidated statements of operations.

Index

Intangible assets subject to amortization were allocated among our business segments as follows:

(1) Refer to footnote 4 in the preceding Other Intangible Assets table for more information on the change in amortization in 2024.

The amortization expense related to our intangible assets in the table above is shown in the table below.

(1) Amounts recorded to Restructuring and other (income) charges, net are not included within segment depreciation and amortization.

Based on the current carrying values of intangible assets, estimated pre-tax amortization expense for the next five years is as follows: 2025 - $30.0 million, 2026 - $29.3 million, 2027 - $29.3 million, 2028 - $29.3 million and 2029 - $29.3 million. The estimated pre-tax amortization expense may fluctuate due to changes in foreign currency exchange rates.