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Acquisitions | 12 Months Ended
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Dec. 31, 2019
Acquisitions |
Acquisitions | 4. Acquisitions Walker Acquisition ​ On April 1, 2019, we acquired all of the issued and outstanding equity interests of Walker TX Holding Company, LLC and each of its wholly owned subsidiaries (collectively “Walker”). Walker is a full-service electrical contracting and network infrastructure engineering business serving commercial and industrial clients with headquarters in Irving, Texas and operations throughout the state of Texas. As a result of the acquisition, Walker is a wholly owned subsidiary of the Company reported in our electrical services segment. Revenue attributable to Walker was $343.2 million for the nine months from the acquisition date. ​ The following summarizes the acquisition date fair value of consideration transferred and the acquisition date fair value of the identifiable assets acquired and liabilities assumed, including an amount for goodwill (in thousands): ​
​ | ​ | ​
Consideration transferred: | ​ | ​
Cash paid at closing | $ | 178,000
Advance to former owners | ​ | 20,500
Working capital adjustment | ​ | (7,809)
Notes issued to former owners | ​ | 25,000
Tax equalization payment | ​ | 202
Estimated fair value of contingent earn-out payments | ​ | 19,500
​ | $ | 235,393
Recognized amounts of identifiable assets acquired and liabilities assumed: | ​ | ​
Cash and cash equivalents | $ | 4,850
Billed and unbilled accounts receivable | ​ | 92,309
Other current assets | ​ | 8,225
Other long-term assets | ​ | 53
Property and equipment | ​ | 4,970
Goodwill | ​ | 96,686
Identifiable intangible assets | ​ | 90,200
Lease right-of-use asset | ​ | 9,195
Accounts payable | ​ | (20,220)
Accrued compensation and benefits | ​ | (974)
Billings in excess of costs and estimated earnings | ​ | (31,553)
Other current liabilities | ​ | (11,205)
Long-term lease liabilities | ​ | (7,143)
​ | $ | 235,393
​ The allocation of the purchase price to the assets acquired and liabilities assumed is preliminary and, therefore, subject to change pending the completion of the final valuation of intangible assets and accrued liabilities. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. All of the goodwill recognized as a result of this transaction is tax deductible. ​ In estimating the fair value of the acquired intangible assets, we utilized the valuation methodology determined to be the most appropriate for the individual intangible asset. In order to estimate the fair value of the backlog and customer relationships, we utilized an excess earnings methodology, which consisted of the projected cash flows attributable to these assets discounted to present value using a risk-adjusted discount rate that represented the required rate of return. The trade name value was determined based on the relief-from-royalty method, which applies a royalty rate to the revenue stream attributable to this asset, and the resulting royalty payment is tax effected and discounted to present value. Some of the more significant estimates and assumptions inherent in determining the fair value of the identifiable intangible assets are associated with forecasting cash flows and profitability, which represent Level 3 inputs. The primary assumptions used were generally based upon the present value of anticipated cash flows discounted at rates ranging from 8.5%-11.5%. Estimated years of projected earnings generally follow the range of estimated remaining useful lives for each intangible asset class. ​ The acquired intangible assets include the following (dollars in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Valuation Method | ​ | Estimated Useful Life | ​ | ​ | Estimated Fair Value
Backlog | ​ | Excess earnings | ​ | 2 years | ​ | $ | 4,600
Trade Names | ​ | Relief-from-royalty | ​ | 25 years | ​ | ​ | 32,600
Customer Relationships | ​ | Excess earnings | ​ | 10 years | ​ | ​ | 53,000
Total | ​ | ​ | ​ | ​ | ​ | $ | 90,200
​ The contingent earn-out obligation is associated with the achievement of specified earnings milestones over a five year period, and the range of estimated milestone payments is from $1 million to $11 million (undiscounted). We determined the initial fair value of the contingent earn-out obligation based on the Monte Carlo Simulation method, which represents a Level 3 measurement. Cash flows were discounted using a 10.2% discount rate, which we believe is appropriate and representative of a market participant assumption. Subsequent to the acquisition date, the contingent earn-out obligation is re-measured at fair value each reporting period. Changes in the estimated fair value of the contingent payments subsequent to the acquisition date are recognized immediately in earnings. ​ Pro Forma Impact of the Acquisition ​ The following unaudited pro forma information presents the consolidated results of the Company and Walker for the twelve months ended December 31, 2019 and 2018, with adjustments to give effect to pro forma events that are directly attributable to the acquisition and have a continuing impact. The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the results of operations of future periods or the results of operations that actually would have been realized had the entities been a single company during the periods presented or the results that the company will experience after the acquisition. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any operating efficiencies that may be associated with the acquisition. ​ The unaudited pro forma consolidated results of operations, assuming the acquisition had occurred on January 1, 2018, are as follows (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
​ | ​ | 2019 | ​ | 2018
Revenue | ​ | $ | 2,703,638 | ​ | $ | 2,574,206
Pre-tax income | ​ | $ | 152,136 | ​ | $ | 143,473
​ Pro forma pre-tax income in 2018 includes compensation expenses of approximately $9.6 million of Walker’s former owners under terms that are not included in their post-transaction employment agreements. ​ Other Acquisitions ​ In addition to the Walker acquisition, we completed one acquisition in the first quarter of 2019 and one acquisition in the second quarter of 2019 with a total preliminary purchase price of $2.6 million for the year ended December 31, 2019. We completed two acquisitions in the third quarter of 2018, three acquisitions in the second quarter of 2018 and two acquisitions in the first quarter of 2018, with a total purchase price of $96.4 million for the year ended December 31, 2018. One acquisition completed in the third quarter of 2018 reports as a separate operating location and the remainder were “tucked-in” with existing operations. Our consolidated Balance Sheet includes preliminary allocations of the purchase price to the assets acquired and liabilities assumed pending the completion of the final valuation of intangible assets and accrued liabilities. ​ In the second quarter of 2017, we acquired all of the issued and outstanding stock of BCH Holdings, Inc. and each of its wholly-owned subsidiaries (collectively “BCH”) for $121.3 million of which $97.0 million was allocated to goodwill and identifiable intangible assets. The total purchase price included $95.4 million in cash, $14.3 million in notes payable to former owners and an $11.6 million contingent earn-out obligation. BCH is an integrated, single-source provider of mechanical service, maintenance and construction with headquarters in Tampa, Florida and operations throughout the southeastern region of the United States, which reports as a separate operating location. In addition to the BCH acquisition, we completed four additional acquisitions in 2017. The total purchase price for these additional acquisitions, including earn-outs, was $9.4 million. ​ The results of operations of acquisitions are included in our consolidated financial statements from their respective acquisition dates. The acquisitions completed in the current and prior year were not material, individually or in the aggregate. Additional contingent purchase price (“earn-out”) has been or will be paid if certain acquisitions achieve predetermined profitability targets. Such earn-outs, when they are not subject to the continued employment of the sellers, are estimated as of the purchase date and included as part of the consideration paid for the acquisition. If we have an earn-out where continued employment is a condition to receive payment, then the earn-out is recorded as compensation expense over the period earned.

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