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Goodwill and Identifiable Intangible Assets | 12 Months Ended
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Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Identifiable Intangible Assets | GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS Goodwill at December 31, 2017 and 2016 was approximately $964.9 million and $979.6 million, respectively, and reflects the excess of cost over fair market value of net identifiable assets of companies acquired. Goodwill attributable to companies acquired in 2017 and 2016 has been valued at $40.6 million and $138.0 million, respectively. ASC Topic 805, “Business Combinations” (“ASC 805”) requires that all business combinations be accounted for using the acquisition method and that certain identifiable intangible assets acquired in a business combination be recognized as assets apart from goodwill. ASC Topic 350, “Intangibles-Goodwill and Other” (“ASC 350”) requires goodwill and other identifiable intangible assets with indefinite useful lives, such as trade names, not be amortized, but instead tested at least annually for impairment (which we test each October 1, absent any impairment indicators) and be written down if impaired. ASC 350 requires that goodwill be allocated to its respective reporting unit and that identifiable intangible assets with finite lives be amortized over their useful lives. As of December 31, 2017, approximately 33.9% of our goodwill related to our United States industrial services segment, approximately 26.6% of our goodwill related to our United States mechanical construction and facilities services segment, approximately 26.5% of our goodwill related to our United States building services segment and approximately 13.0% of our goodwill related to our United States electrical construction and facilities services segment. We test for impairment of our goodwill at the reporting unit level. Our reporting units are consistent with the reportable segments identified in Note 17, “Segment Information”, of the notes to consolidated financial statements. In assessing whether our goodwill is impaired, we compare the fair value of the reporting unit to the carrying amount, including goodwill. If the fair value exceeds the carrying amount, no impairment loss is recognized. However, if the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is impaired and an impairment loss in the amount of the excess is recognized and charged to operations. The fair value of each of our reporting units is generally determined using discounted estimated future cash flows; however, in certain circumstances, consideration is given to a market approach whereby fair value is measured based on a multiple of earnings. Despite a recent increase in crude oil prices, we continue to experience a decrease in demand for new heat exchangers due to a prolonged curtailment in capital spending from customers within our United States industrial services segment. In addition, adverse market conditions throughout this segment, including increased foreign competition within our shop services operations, have resulted in a decrease in our billing rates and related gross profit margins. Finally, economic uncertainty within certain South American markets has caused us to limit our pursuit of opportunities within such countries for our shop services operations. Consequently, we have tempered our expectations regarding the strength of a near-term recovery and recorded a non-cash impairment charge of $57.5 million within this segment as part of our annual goodwill impairment review for the year ended December 31, 2017. For the years ended December 31, 2016 and 2015, no impairment of our goodwill was recognized. The weighted average cost of capital used in our annual testing for impairment as of October 1, 2017 was 10.6%, 10.0% and 11.0% for our domestic construction segments, our United States building services segment and our United States industrial services segment, respectively. The perpetual growth rate used for our annual testing was 2.7% for all of our domestic segments. Unfavorable changes in these key assumptions may affect future testing results. For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average costs of capital would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment and our United States industrial services segment to decrease by approximately $51.1 million, $74.9 million, $53.3 million and $20.0 million, respectively. In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment and our United States industrial services segment to decrease by approximately $25.1 million, $41.0 million, $28.1 million and $10.0 million, respectively. Although not significant for any of our other domestic segments, such decreases within our United States industrial services segment would have resulted in an increased impairment charge. We also test for the impairment of trade names that are not subject to amortization by calculating the fair value of such trade names using the “relief from royalty payments” methodology. This approach involves two steps: (a) estimating reasonable royalty rates for each trade name and (b) applying these royalty rates to a net revenue stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of each trade name. If the carrying amount of the trade name is greater than the implied fair value of the trade name, an impairment in the amount of the excess is recognized and charged to operations. The annual impairment review of our trade names for the years ended December 31, 2017 and 2016 resulted in $0.3 million and $2.4 million, respectively, of non-cash impairment charges as a result of a change in the fair value of subsidiary trade names associated with certain prior acquisitions reported within our United States building services segment and our United States mechanical construction and facilities services segment, respectively. For the year ended December 31, 2015, no impairment of our trade names was recognized. In addition, we review for the impairment of other identifiable intangible assets that are being amortized whenever facts and circumstances indicate that their carrying values may not be fully recoverable. This test compares their carrying values to the undiscounted pre-tax cash flows expected to result from the use of the assets. If the assets are impaired, the assets are written down to their fair values, generally determined based on their future discounted cash flows. For the years ended December 31, 2017, 2016 and 2015, no impairment of our other identifiable intangible assets was recognized. Our development of the present value of future cash flow projections used in impairment testing is based upon assumptions and estimates by management from a review of our operating results, business plans, anticipated growth rates and margins and weighted average cost of capital, among others. Those assumptions and estimates can change in future periods, and other factors used in assessing fair value are outside the control of management, such as interest rates. There can be no assurances that estimates and assumptions made for purposes of our goodwill and identifiable intangible asset impairment testing will prove to be accurate predictions of the future. If our assumptions regarding future business performance or anticipated growth rates and/or margins are not achieved, or there is a rise in interest rates, we may be required to record goodwill and/or identifiable intangible asset impairment charges in future periods. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such a charge would be material. The changes in the carrying amount of goodwill by reportable segments during the years ended December 31, 2017 and 2016 were as follows (in thousands):
| United States electrical construction and facilities services segment |  | United States mechanical construction and facilities services segment |  | United States building services segment |  | United States industrial services segment |  | Total
Balance at December 31, 2015 | $ | 3,823 |  |  | $ | 226,071 |  |  | $ | 228,637 |  |  | $ | 384,639 |  |  | $ | 843,170 |
Acquisitions, sales and purchase price adjustments | 119,777 |  |  | 525 |  |  | 16,156 |  |  | — |  |  | 136,458 |
Balance at December 31, 2016 | 123,600 |  |  | 226,596 |  |  | 244,793 |  |  | 384,639 |  |  | 979,628 |
Acquisitions, sales and purchase price adjustments | 2,107 |  |  | 30,969 |  |  | 9,640 |  |  | — |  |  | 42,716 |
Transfers | — |  |  | (1,300 | ) |  | 1,300 |  |  | — |  |  | — |
Impairment | — |  |  | — |  |  | — |  |  | (57,451 | ) |  | (57,451 | )
Balance at December 31, 2017 | $ | 125,707 |  |  | $ | 256,265 |  |  | $ | 255,733 |  |  | $ | 327,188 |  |  | $ | 964,893 |
The aggregate goodwill balance as of December 31, 2015 included $210.6 million of accumulated impairment charges, which were comprised of $139.5 million within the United States building services segment and $71.1 million within the United States industrial services segment. Identifiable intangible assets as of December 31, 2017 and 2016 consist of the following (in thousands):
| December 31, 2017
| Gross Carrying Amount |  | Accumulated Amortization |  | Accumulated Impairment Charge |  | Total
Contract backlog | $ | 55,545 |  |  | $ | (55,229 | ) |  | $ | — |  |  | $ | 316 |
Developed technology/Vendor network | 95,661 |  |  | (50,479 | ) |  | — |  |  | 45,182 |
Customer relationships | 500,756 |  |  | (206,319 | ) |  | (4,834 | ) |  | 289,603 |
Non-competition agreements | 10,220 |  |  | (10,178 | ) |  | — |  |  | 42 |
Trade names (amortized) | 32,848 |  |  | (19,461 | ) |  | — |  |  | 13,387 |
Trade names (unamortized) | 198,739 |  |  | — |  |  | (52,233 | ) |  | 146,506 |
Total | $ | 893,769 |  |  | $ | (341,666 | ) |  | $ | (57,067 | ) |  | $ | 495,036 |
| December 31, 2016
| Gross Carrying Amount |  | Accumulated Amortization |  | Accumulated Impairment Charge |  | Total
Contract backlog | $ | 48,645 |  |  | $ | (48,412 | ) |  | $ | — |  |  | $ | 233 |
Developed technology/Vendor network | 95,661 |  |  | (45,616 | ) |  | — |  |  | 50,045 |
Customer relationships | 466,556 |  |  | (173,156 | ) |  | (4,834 | ) |  | 288,566 |
Non-competition agreements | 10,220 |  |  | (10,041 | ) |  | — |  |  | 179 |
Trade names (amortized) | 32,848 |  |  | (15,847 | ) |  | — |  |  | 17,001 |
Trade names (unamortized) | 183,239 |  |  | — |  |  | (51,865 | ) |  | 131,374 |
Total | $ | 837,169 |  |  | $ | (293,072 | ) |  | $ | (56,699 | ) |  | $ | 487,398 |
Identifiable intangible assets attributable to companies acquired in 2017 and 2016 have been valued at $56.6 million and $57.9 million, respectively. See Note 3 - Acquisitions of Businesses of the notes to consolidated financial statements for additional information. The identifiable intangible amounts are amortized on a straight-line basis, as it approximates the pattern in which the economic benefits of the identifiable intangible assets are consumed. The weighted average amortization periods for the unamortized balances remaining are, in the aggregate, approximately 9.5 years, which are comprised of the following: 0.25 years for contract backlog, 9.5 years for developed technology/vendor network, 9.5 years for customer relationships, 0.5 years for non-competition agreements and 11 years for trade names. Amortization expense related to identifiable intangible assets with finite lives was $48.6 million, $40.9 million and $37.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. The following table presents the estimated future amortization expense of identifiable intangible assets in the following years (in thousands):
2018 | $ | 40,579 |
2019 | 38,281 |
2020 | 38,100 |
2021 | 37,306 |
2022 | 35,103 |
Thereafter | 159,161 |
| $ | 348,530 |

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- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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