Long-lived Assets and Goodwill

9 Months Ended

Sep. 30, 2025

Goodwill and Intangible Assets Disclosure [Abstract]

Long-lived Assets and Goodwill

Long-lived Assets

The Company reviews long-lived assets, including tangible assets and intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets assessed for impairment are grouped by asset group, the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset group from its use and eventual disposition of that asset group. Assets are considered to be impaired if the carrying amount of an asset exceeds the future undiscounted cash flows.

Due to the recent operating losses and the downward revision of forecasts for the North American Chlorovinyls asset group, which comprises PVC, VCM, caustic soda, chlorine and related derivatives assets in North America, and certain other asset groups in the third quarter of 2025, the Company evaluated these asset groups' long-lived assets for recoverability during the third quarter of 2025. Recoverability tests were performed for each of these asset groups to compare the carrying amounts of the asset group to the future net undiscounted cash flow expected to be generated by the asset group. The undiscounted cash flow projections were based on historical results, estimates made by management of future market conditions supplemented by information prepared by third party consultants including input cost and sales price, current and future strategic and operational plans and future financial performance projected through the remaining useful life of the primary asset in the asset group. Based on the recoverability tests, the Company determined that the carrying amounts of the assets of the North American Chlorovinyls and certain other asset groups are recoverable.

Goodwill

The carrying amounts and changes in the carrying amount of goodwill for the nine months ended September 30, 2025 were as follows:


	Performance and Essential Materials Segment		Housing and Infrastructure Products Segment		Total
Gross balances at December 31, 2024	$	1,021	$	1,138	$	2,159
Accumulated goodwill impairment losses at December 31, 2024	(128)		—		(128)
Net balances at December 31, 2024	893		1,138		2,031


Impairment of goodwill	(727)		—		(727)
Effects of changes in foreign exchange rates	4		6		10
Net balances at September 30, 2025	170		1,144		1,314
Accumulated goodwill impairment losses at September 30, 2025	(855)		—		(855)
Gross balances at September 30, 2025	$	1,025	$	1,144	$	2,169

Goodwill Impairment

Goodwill is evaluated for impairment when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying amount, and otherwise at least annually. As part of the Company's continuous assessment of changes in the macroeconomic environment in the performance and essential materials industry and recent operating performance and updated forecasts, the Company identified triggering events associated with the North American Chlorovinyls reporting unit in the third quarter of 2025. Due to the recent operating losses and downward revision in the third quarter 2025 of forecasts for the North American Chlorovinyls reporting unit along with negative chlorovinyls industry trends, the Company performed a quantitative assessment in the third quarter of 2025 to determine if the fair value of this reporting unit had reduced below its carrying amount.

The Company also performed a quantitative impairment assessment in the third quarter of 2025 for all other reporting units within the Performance and Essential Materials and the Housing and Infrastructure Products segments to assess the overall fair value of the Company as compared to its market capitalization.

The fair values of the reporting units were determined using a weighting of both a discounted cash flow methodology and a market value methodology. The fair values of the Company's reporting units were classified as Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information. Both of these methodologies require estimates, assumptions, and judgments about future results. The Company's analysis is based on the Company's internally developed long-range plan, which is developed from historical results, estimates by management of future market conditions supplemented by information prepared by third party consultants, including projected feedstock, energy and power costs and product selling prices, and current and future strategies, production capacities, operating rates and plans. Valuation assumptions used in the Company's discounted cash flow valuation also include projected capital expenditures, earnings before interest expense, income taxes, depreciation and amortization expense (EBITDA) margin, depreciation expense, working capital investment, discount rates, tax rates and terminal growth rates. Valuation assumptions used in the Company's market approach include a determination of appropriate market comparable peers, EBITDA, weighting of periods, market participant acquisition premium and the estimated multiples of EBITDA buyers are willing to pay in the market place.

Based on the quantitative tests performed during the third quarter of 2025, the Company determined that the fair value of the North American Chlorovinyls reporting unit did not exceed its carrying amount. This resulted in a non-cash goodwill impairment charge of $727 taken in the third quarter of 2025, representing all the goodwill associated with the North American Chlorovinyls reporting unit recognized within the Performance and Essential Materials segment. The goodwill impairment charge is reported as impairment of goodwill on the consolidated statements of operations. For all other reporting units, the Company determined that the fair value of each of the reporting units was in excess of the carrying amounts.

- Definition

The entire disclosure for goodwill.

+ References + Details

WESTLAKE CORP 10-Q