GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Jul. 02, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

The following table displays a rollforward of the carrying amount of goodwill by reportable segment:


	U.S. Consumer		Hawthorne		Other		Total










Goodwill	$	245.7	$	444.8	$	11.1	$	701.6
Accumulated impairment losses	(1.8)		(94.6)		—		(96.4)
Balance at September 30, 2021	243.9		350.2		11.1		605.2
Acquisitions and measurement-period adjustments	—		180.8		—		180.8
Foreign currency translation	—		(8.6)		(0.3)		(8.9)
Impairment	—		(522.4)		—		(522.4)


Goodwill	$	245.7	$	617.0	$	10.8	$	873.5
Accumulated impairment losses	(1.8)		(617.0)		—		(618.8)
Balance at July 2, 2022	$	243.9	$	—	$	10.8	$	254.7

The following table presents intangible assets, net of accumulated amortization and impairment charges:


	July 2, 2022						September 30, 2021
	Gross Carrying Amount		Accumulated Amortization/ Impairment Charges		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization/ Impairment Charges		Net Carrying Amount

Finite-lived intangible assets:
Trade names	$	322.1	$	(151.0)	$	171.1	$	293.4	$	(73.3)	$	220.1
Customer relationships	252.9		(143.1)		109.8		228.3		(91.7)		136.6
Technology	49.2		(43.0)		6.2		49.2		(41.3)		7.9
Other	35.6		(19.5)		16.1		35.3		(14.2)		21.1
Total finite-lived intangible assets, net					303.2						385.7
Indefinite-lived intangible assets:
Indefinite-lived trade names					168.2						168.2
Roundup® marketing agreement amendment					155.7						155.7

Total indefinite-lived intangible assets					323.9						323.9
Total intangible assets, net					$	627.1					$	709.6

During the third quarter of fiscal 2022, the Company’s Hawthorne reporting unit continued to experience adverse financial results driven by an oversupply of cannabis, which has slowed down indoor and outdoor cultivation, and higher transportation and warehousing costs. As a result, the Company made further revisions to its internal forecasts relating to its Hawthorne reporting unit. The Company concluded that the changes in circumstances in this reporting unit and the decline in the Company’s market capitalization triggered the need for an interim impairment review of its goodwill. These changes in circumstances also indicated that the carrying amounts of Hawthorne’s long-lived assets, including trade names and customer relationships, may not be recoverable. Accordingly, the Company performed a recoverability test for long-lived assets as of July 2, 2022. The Company concluded that the carrying value of long-lived assets exceeded their estimated fair value and recorded impairment charges of $69.0 related to trade names and $41.0 related to customer relationships in the “Impairment,

restructuring and other” line in the Condensed Consolidated Statements of Operations. The fair values of long-lived assets were determined using income-based approaches, including the relief-from-royalty method for trade names, that include market participant expectations of cash flows that the assets will generate over the remaining useful life discounted to present value using an appropriate discount rate. These fair value estimates utilize significant unobservable inputs and thus represent Level 3 fair value measurements.

After adjusting the carrying values of the finite-lived intangible assets, the Company completed an interim quantitative impairment test for goodwill. This quantitative test resulted in a non-cash, pre-tax goodwill impairment charge of $522.4 related to the Hawthorne reporting unit, which was recorded in the “Impairment, restructuring and other” line in the Condensed Consolidated Statements of Operations. The carrying value of goodwill of the Hawthorne reporting unit, after recognizing the impairment, is zero. The estimated fair value of the Hawthorne reporting unit was based upon an equal weighting of the income-based and market-based approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. The fair value estimate utilizes significant unobservable inputs and thus represents a Level 3 fair value measurement.