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Goodwill, Identifiable Intangible Assets, And Other Long-Lived Assets | 12 Months Ended
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Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill, Identifiable Intangible Assets, And Other Long-Lived Assets | GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS Goodwill In connection with our acquisition of businesses, we have recorded goodwill, which represents the excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets acquired. Our goodwill balance at December 31, 2022 and 2021 was $919.2 million and $890.3 million, respectively, with goodwill attributable to companies acquired in 2022 and 2021 valued at $28.9 million and $38.3 million, respectively. Goodwill is not amortized but instead allocated to its respective reporting unit and evaluated for impairment annually, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. We have determined that our reporting units are consistent with the reportable segments identified in Note 18 - Segment Information of the notes to consolidated financial statements. As of December 31, 2022, approximately 19.4% of our goodwill related to our United States electrical construction and facilities services segment, approximately 34.3% of our goodwill related to our United States mechanical construction and facilities services segment, approximately 33.9% of our goodwill related to our United States building services segment and approximately 12.4% of our goodwill related to our United States industrial services segment. Absent any earlier identified impairment indicators, we perform our annual goodwill impairment assessment on October 1 each fiscal year. Qualitative indicators that may trigger the need for interim quantitative impairment testing include, among others, deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of a reporting unit. Additionally, an interim impairment test may be triggered by a significant change in business climate, a loss of a significant customer, increased competition, or a sustained decrease in share price. In assessing whether our goodwill is impaired, we compare the fair value of the reporting unit to its carrying amount, including goodwill. If the fair value exceeds the carrying amount, no impairment 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. We performed our 2022 annual impairment assessment of all reporting units as of October 1, 2022, and determined there was no impairment of goodwill. In completing our annual impairment assessment, we determined the fair value of each of our reporting units using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital. The weighted average cost of capital used in our annual impairment testing was 10.3% for our United States construction segments, 10.2% for our United States building services segment, and 11.2% for our United States industrial services segment. These weighted average cost of capital estimates were developed with the assistance of an independent third-party valuation specialist and reflect the overall level of inherent risk within the respective reporting unit and the rate of return a market participant would expect to earn. Our cash flow projections were derived from our most recent internal forecasts of anticipated revenue growth rates and operating margins, with cash flows beyond the discrete forecast period estimated using a terminal value calculation which incorporated historical and forecasted trends, an estimate of long-term growth rates, and assumptions about the future demand for our services. The perpetual growth rate used for our annual testing was 2.5% for all of our reporting units. NOTE 8 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS (Continued) For the year ended December 31, 2021, no impairment of our goodwill was recognized. However, during the second quarter of 2020, we concluded that the carrying amount of our United States industrial services segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of $225.5 million which was included within our results of operations for the year ended December 31, 2020. An interim impairment assessment was considered necessary as a result of the significant impact the COVID-19 pandemic and concurrent decline in demand for oil and other refined products had on our revenue and operating margin expectations for such segment. The valuation methodology utilized in this prior year interim impairment test was consistent with the approach described above. We did not identify indicators of impairment related to any other reporting unit that would have required an interim impairment assessment during 2020 and there was no other impairment of goodwill recognized for the year ended December 31, 2020. Due to the inherent uncertainties involved in making estimates, our assumptions may change in future periods. Estimates and assumptions made for purposes of our goodwill impairment testing may prove to be inaccurate predictions of the future, and other factors used in assessing fair value, such as the weighted average cost of capital, are outside the control of management. Unfavorable changes in certain of these key assumptions may affect future testing results. For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average cost 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 $90.9 million, $172.1 million, $92.8 million, and $24.1 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 $45.0 million, $94.2 million, $48.1 million, and $9.2 million, respectively. Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, the decreases in estimated fair values described above would not have significantly impacted the results of our 2022 impairment tests. Further, for each of our reporting units, other than our United States industrial services segment, a 10% decline in the estimated fair value of such reporting unit, due to other changes in our assumptions, including forecasted future cash flows, would not have significantly impacted the results of our 2022 impairment tests. In the case of our United States industrial services segment, however, such a decrease would cause the estimated fair value of this reporting unit to approximate its carrying value. The changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2022 and 2021 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, 2020 | $ | 142,545 |  |  | $ | 299,618 |  |  | $ | 302,132 |  |  | $ | 107,488 |  |  | $ | 851,783 |
Acquisitions and purchase price adjustments | 24,467 |  |  | 4,269 |  |  | 9,749 |  |  | — |  |  | 38,485 |
Intersegment transfers | (7,500) |  |  | — |  |  | 900 |  |  | 6,600 |  |  | — |
Balance at December 31, 2021 | 159,512 |  |  | 303,887 |  |  | 312,781 |  |  | 114,088 |  |  | 890,268 |
Acquisitions and purchase price adjustments | 17,601 |  |  | 6,942 |  |  | 4,340 |  |  | — |  |  | 28,883 |
Intersegment transfers | 900 |  |  | 4,500 |  |  | (5,400) |  |  | — |  |  | — |
Balance at December 31, 2022 | $ | 178,013 |  |  | $ | 315,329 |  |  | $ | 311,721 |  |  | $ | 114,088 |  |  | $ | 919,151 |
The aggregate goodwill balance as of December 31, 2020 included $493.6 million of accumulated impairment charges, which were comprised of $139.5 million within the United States building services segment and $354.1 million within the United States industrial services segment. NOTE 8 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS (Continued) Identifiable Intangible Assets and Other Long-Lived Assets Our identifiable intangible assets, arising out of the acquisition of businesses, include customer relationships, subsidiary trade names, developed technology/vendor network, and contract backlog, all of which are subject to amortization. In addition, our identifiable intangible assets include certain other subsidiary trade names, which are indefinite-lived and therefore not subject to amortization. Absent earlier indicators of impairment, we test for impairment of subsidiary trade names that are not subject to amortization on an annual basis (October 1). In performing this test, we calculate the fair value of each trade name 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. In addition, we review for impairment of identifiable intangible assets that are being amortized as well as other long-lived assets 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 discounted estimated future cash flows. For the years ended December 31, 2022 and 2021, no impairment of our indefinite-lived intangible assets, finite-lived intangible assets, or other long-lived assets was recognized. However, during the second quarter of 2020, given the external market conditions disclosed above, we evaluated certain of our identifiable intangible assets and other long-lived assets for impairment. Such assets included those associated with the businesses in our United States industrial services segment. As a result of these assessments, we recorded non-cash impairment charges of $7.3 million, which were included within our results of operations for the year ended December 31, 2020. Identifiable intangible assets as of December 31, 2022 and 2021 consisted of the following (in thousands):
| December 31, 2022
| Gross Carrying Amount |  | Accumulated Amortization |  | Accumulated Impairment Charge |  | Total
Customer relationships | $ | 762,516 |  |  | $ | (427,211) |  |  | $ | (4,834) |  |  | $ | 330,471 |
Trade names (indefinite-lived) | 289,121 |  |  | — |  |  | (58,933) |  |  | 230,188 |
Developed technology/Vendor network | 95,661 |  |  | (74,238) |  |  | — |  |  | 21,423 |
Trade names (finite-lived) | 33,791 |  |  | (25,690) |  |  | — |  |  | 8,101 |
Contract backlog | 83,245 |  |  | (79,453) |  |  | — |  |  | 3,792 |
Total | $ | 1,264,334 |  |  | $ | (606,592) |  |  | $ | (63,767) |  |  | $ | 593,975 |
| December 31, 2021
| Gross Carrying Amount |  | Accumulated Amortization |  | Accumulated Impairment Charge |  | Total
Customer relationships | $ | 717,666 |  |  | $ | (374,764) |  |  | $ | (4,834) |  |  | $ | 338,068 |
Trade names (indefinite-lived) | 274,721 |  |  | — |  |  | (58,933) |  |  | 215,788 |
Developed technology/Vendor network | 95,661 |  |  | (69,688) |  |  | — |  |  | 25,973 |
Trade names (finite-lived) | 32,366 |  |  | (24,180) |  |  | — |  |  | 8,186 |
Contract backlog | 77,995 |  |  | (76,645) |  |  | — |  |  | 1,350 |
Total | $ | 1,198,409 |  |  | $ | (545,277) |  |  | $ | (63,767) |  |  | $ | 589,365 |
NOTE 8 - GOODWILL, IDENTIFIABLE INTANGIBLE ASSETS, AND OTHER LONG-LIVED ASSETS (Continued) Identifiable intangible assets attributable to businesses acquired in 2022 and 2021 have been valued at $65.9 million and $70.6 million, respectively, and consist of customer relationships, trade names, and contract backlog. See Note 4 - Acquisitions of Businesses of the notes to consolidated financial statements for additional information with respect to acquisitions. Identifiable intangible assets are amortized in a manner that best approximates the pattern in which the economic benefits of such assets are consumed, which is generally on a straight-line basis. The weighted average amortization periods for the unamortized balances remaining are, in the aggregate, approximately 7.00 years, which are comprised of the following: 7.25 years for customer relationships, 7.00 years for trade names, 4.75 years for developed technology/vendor network, and 1.00 year for contract backlog. Amortization expense related to identifiable intangible assets with finite lives was $61.3 million, $64.1 million, and $60.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. The following table presents the estimated future amortization expense of identifiable intangible assets in the following years (in thousands):
2023 | $ | 63,366 |
2024 | 59,507 |
2025 | 58,002 |
2026 | 51,883 |
2027 | 38,949 |
Thereafter | 92,080 |
| $ | 363,787 |
Other Considerations As referenced above, impairment testing is based upon assumptions and estimates determined by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations. In addition, estimates of weighted average costs of capital are developed with the assistance of an independent third-party valuation specialist. These assumptions and estimates may change in future periods, especially in times of uncertain economic conditions and rising interest rates. Such assumptions and estimates may also be impacted by supply chain, production, and other logistical issues currently impacting our business. Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future impairment charges. It is not possible at this time to determine if any future impairment charge will result or, if it does, whether such a charge would be material to our results of operations.

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