NL INDUSTRIES INC Goodwill & Intangibles Disclosure
Note 7 - Goodwill:
All of our goodwill is related to our component products operations and was generated from CompX’s acquisitions of certain business units. There have been no changes in the carrying amount of our goodwill during the past three years.
We assign goodwill based on the reporting unit (as that term is defined in ASC Topic 350-20-20 Goodwill) which corresponds to CompX’s security products operations. We test for goodwill impairment at the reporting unit level. In accordance with ASC 350-20-35, we test for goodwill impairment during the third quarter of each year or when circumstances arise that indicate an impairment might be present.
In 2021, 2022 and 2023, our goodwill was tested for impairment only in the third quarter of each year in connection with our annual testing. No impairment was indicated as part of such annual review of goodwill. As permitted by GAAP, during 2021, 2022 and 2023 we used the qualitative assessment of ASC 350-20-35 for our annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test. Prior to 2021, all of the goodwill related to CompX’s marine components operations (which aggregated $10.1 million) was impaired, and all of the goodwill related to our wholly-owned subsidiary EWI Re, Inc., (EWI) which was formerly an insurance brokerage and risk management services company (which aggregated $6.4 million), was impaired. Our gross goodwill at December 31, 2023 was $43.7 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Mar 6, 2024 | Showing above |
| 2021 | Mar 9, 2022 | |
| 2020 | Mar 10, 2021 | |
| 2019 | Mar 11, 2020 | |
| 2018 | Mar 11, 2019 | |
| 2017 | Mar 12, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Mar 10, 2016 | |
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.