Impairment of Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Impairment of Goodwill and Intangible Assets

Impairment of Goodwill and Intangible Assets

The Company tests goodwill and indefinite lived intangibles for impairment at least annually or more frequently whenever events or circumstances occur indicating that it might be impaired. There were no events or circumstances that indicated an impairment in the first quarter of 2021. During the first quarter of 2020, the Company’s market capitalization declined significantly, driven by macroeconomic and geopolitical conditions due in large part to the COVID-19 outbreak, which contributed to a decline in demand for the Company’s products, a decline in overall financial performance, partially due to the decline in oil prices, and a decline in industry and market conditions. Based on these events, the Company concluded that it was more-likely-than-not that the fair value of certain of its reporting units were less than their carrying values. Therefore, the Company performed an interim goodwill impairment test.

Goodwill impairment is evaluated at each of the Company’s reporting units, of which there were four in the first quarter of 2020. The Company determined the fair values of two reporting units with goodwill and certain of its indefinite lived intangibles exceeded their respective carrying values. Additionally, the Company determined the fair value of its Southwest Wire Rope reporting unit’s tradenames was below their carrying value, and as a result, recorded an impairment charge of $0.2 million in March 2020.

Houston Wire & Cable CO 10-Q