CARPENTER TECHNOLOGY CORPCRS
CARPENTER TECHNOLOGY CORP Goodwill & Intangibles Disclosure
Goodwill and Other Intangible Assets, Net
Goodwill
Goodwill is not amortized but instead is tested at least annually for impairment as of June 1, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired by performing a multi-step impairment test. For the fiscal year 2025 annual impairment test, the Company performed a Step 0 qualitative approach for the SAO reporting unit and the Dynamet reporting unit whereas historically a Step 1 quantitative approach was performed. The Company determined that it is more likely than not that the carrying value of each of our reporting units exceeded their respective fair value and no goodwill impairment was recorded.
As of June 30, 2025, the Company has two reporting units with goodwill recorded. Goodwill associated with the SAO reporting unit as of June 30, 2025, was $195.5 million and represents 86 percent of total goodwill. The remaining goodwill of $31.8 million is associated with the Dynamet reporting unit in the PEP segment.
During fiscal year 2024, the fair value for the Company's reporting units was estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques. When preparing the quantitative impairment test, potential impairment is identified by comparing the fair value of a reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value, any impairment loss is measured by the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying amount of goodwill. The fair value is estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques for the SAO reporting unit and the Dynamet reporting unit. The discounted cash flow analysis for each reporting unit tested requires significant estimates and assumptions related to cash flow forecasts, discount rates, terminal values and income tax rates. The cash flow forecasts include significant judgments and assumptions related to revenue growth rates, which include perpetual growth rates, gross margin and weighted average cost of capital. The cash flow forecasts are developed based on assumptions about each reporting unit's markets, product offerings, pricing, capital expenditure and working capital requirements as well as cost performance.
In preparing the financial statements for the quarter ended March 31, 2024, the Company identified an impairment triggering event in the Latrobe Distribution reporting unit within the PEP segment related to a decline in customer ordering patterns. This combined with market headwinds due to general industrial macroeconomic conditions including rising interest rates contributed to lower sales and profit margins compared to the established annual operation plan for fiscal year 2024. Despite efforts of the Company to mitigate the market challenges, results did not improve for the Latrobe Distribution reporting unit during the quarter ended March 31, 2024. In light of the market conditions at the time, the pace of growth in the future projections for the Latrobe Distribution reporting unit were lowered.
The Company determined the goodwill associated with the Latrobe Distribution reporting unit was impaired and recorded an impairment charge of $14.1 million during the quarter ended March 31, 2024, which represented the entire balance of goodwill. The fair value was estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques.
Goodwill associated with the SAO reporting unit is tested at the SAO segment level. As of June 1, 2024, the fair value of the SAO reporting unit exceeded the carrying value by 203 percent. The discounted cash flows analysis for the SAO reporting unit includes assumptions related to our ability to increase volume, improve mix, expand product offerings and continue to implement opportunities to reduce costs over the next several years. For purposes of the discounted cash flow analysis for SAO's fair value, a weighted average cost capital of 9.5 percent and a terminal growth rate assumption of 2.5 percent were used. If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2024, the SAO reporting unit would have a fair value that exceeded the carrying value by approximately 196 percent.
Goodwill associated with the PEP segment is tested at the Dynamet reporting unit level. As of June 1, 2024, the fair value of the Dynamet reporting unit exceeded the carrying value by 144 percent. For purposes of the discounted cash flow analysis for Dynamet's fair value, a weighted average cost capital of 11.0 percent and a terminal growth rate assumption of 2.5 percent were used. If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2024, the Dynamet reporting unit would have a fair value that exceeded the carrying value by approximately 140 percent.
The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value of the reporting units.
Accumulated goodwill impairment losses of $148.7 million are related solely to the PEP segment. The changes in the carrying amount of goodwill by reportable segment for fiscal years 2025 and 2024 were as follows:
| June 30, | ||||||||||||||||||||||||||
| ($ in millions) | 2023 | Impairment | 2024 | 2025 | ||||||||||||||||||||||
| Goodwill | $ | 376.0 | $ | — | $ | 376.0 | $ | 376.0 | ||||||||||||||||||
| Accumulated impairment losses | (134.6) | (14.1) | (148.7) | (148.7) | ||||||||||||||||||||||
| Total goodwill | $ | 241.4 | $ | (14.1) | $ | 227.3 | $ | 227.3 | ||||||||||||||||||
| Specialty Alloys Operations | $ | 195.5 | $ | — | $ | 195.5 | $ | 195.5 | ||||||||||||||||||
| Performance Engineered Products | 45.9 | (14.1) | 31.8 | 31.8 | ||||||||||||||||||||||
| Total goodwill | $ | 241.4 | $ | (14.1) | $ | 227.3 | $ | 227.3 | ||||||||||||||||||
Other Intangible Assets, Net
Other intangible assets, net consisted of the following as of June 30, 2025 and 2024:
| June 30, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Useful Life (in Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||||||||||
| Trademarks and trade names | 30 | $ | 29.9 | $ | (28.2) | $ | 1.7 | $ | 29.9 | $ | (27.3) | $ | 2.6 | |||||||||||||||||||||||||||||||
| Customer relationships | 15 | 70.8 | (63.0) | 7.8 | 70.8 | (58.2) | 12.6 | |||||||||||||||||||||||||||||||||||||
| Total other intangibles | $ | 100.7 | $ | (91.2) | $ | 9.5 | $ | 100.7 | $ | (85.5) | $ | 15.2 | ||||||||||||||||||||||||||||||||
The Company recorded $5.7 million of amortization expense related to intangible assets during fiscal year 2025, $6.5 million during fiscal year 2024 and $6.8 million during fiscal year 2023. The estimated annual amortization expense related to intangible assets for each of the succeeding five fiscal years is $5.7 million in fiscal year 2026, $3.8 million in fiscal year 2027 and $0.0 million in fiscal years 2028, 2029 and 2030.
As a result of the actions taken to streamline operations in the Carpenter Additive business, in the quarter ended June 30, 2024, the Company announced the planned closure of the Carpenter Additive operations in the United Kingdom. As a result, the Company recorded an impairment charge of $7.0 million related to a certain definite lived intangible asset during fiscal year 2024. There was no remaining carrying value for this asset as of June 30, 2024.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 12, 2025 | Showing above |
| 2024 | Aug 13, 2024 | |
| 2023 | Aug 11, 2023 | |
| 2022 | Aug 15, 2022 | |
| 2021 | Aug 19, 2021 | |
| 2020 | Sep 4, 2020 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.