Goodwill and Intangible Assets

12 Months Ended

Jul. 26, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The Company's goodwill balance was $269.1 million as of July 26, 2014 and $267.8 million as of July 27, 2013. Changes in the carrying amount of goodwill for fiscal 2014 and fiscal 2013 are as follows:



	Goodwill		Accumulated Impairment Losses			Total
	(Dollars in thousands)
Balance as of July 28, 2012	$	370,616	$	(195,767	)	$	174,849
Goodwill from fiscal 2013 acquisitions	92,961		—			92,961
Balance as of July 27, 2013	463,577		(195,767		)	267,810
Goodwill from fiscal 2014 acquisitions	1,278		—			1,278
Balance as of July 26, 2014	$	464,855	$	(195,767	)	$	269,088

The full amount of goodwill related to businesses acquired during fiscal 2014 and fiscal 2013 is expected to be deductible for tax purposes. The Company's goodwill resides in multiple reporting units. The profitability of individual reporting units may suffer periodically from downturns in customer demand and other factors resulting from the cyclical nature of the Company's business, the high level of competition existing within the Company's industry, the concentration of the Company's revenues from a limited number of customers, and the level of overall economic activity, including in particular construction and housing activity. During times of slowing economic conditions, the Company's customers may reduce capital expenditures and defer or cancel pending projects. Individual reporting units may be more impacted by these factors than the Company as a whole. As a result, demand for the services of one or more of the Company's reporting units could decline, resulting in an impairment of goodwill or intangible assets.

The Company performed its annual impairment assessment as of the first day of the fourth quarter of each of fiscal 2014, 2013 and 2012 and concluded that no impairment of goodwill or the indefinite-lived intangible asset was indicated at any reporting unit for any of the years. During fiscal 2014, the Company performed qualitative assessments on reporting units that comprise less than 20% of its consolidated goodwill balance. The qualitative assessments indicated that it was more likely than not that the fair value exceeded carrying value for those reporting units. For the remaining reporting units, the Company performed the first step of the quantitative analysis described in ASC Topic 350. The key valuation assumptions contributing to the fair value estimates of the Company's reporting units were (a) a discount rate based on the Company's best estimate of the weighted average cost of capital adjusted for risks associated with the reporting units; (b) terminal value based on terminal growth rates; and (c) seven expected years of cash flow before the terminal value for each annual test. The table below outlines certain assumptions in each of the Company's fiscal 2014, 2013 and 2012 annual quantitative impairment analyses:



	2014	2013	2012
Terminal Growth Rate Range	1.5% - 3.0%	1.5% - 2.5%	1.5% - 3.0%
Discount Rate	11.5%	11.5%	13.0%

The discount rate reflects risks inherent within each reporting unit operating individually, which are greater than the risks inherent in the Company as a whole. For fiscal 2014, the discount rate was consistent with the fiscal 2013 analysis based on risk relative to industry conditions and the interest rate environment (cost of debt). The decrease in discount rates for fiscal 2013 from fiscal 2012 was a result of reduced risk relative to industry conditions and a lower interest rate environment at the time of the analysis. The Company believes the assumptions used in the impairment analysis each year are reflective of the risks inherent in the business models of its reporting units and within its industry.

In the fiscal 2014 impairment analysis, the fair value for three of the reporting units acquired in fiscal 2013 exceeded their carrying value by less than 25% each. The goodwill balances for these reporting units were $10.6 million, $4.8 million and $3.6 million. Recent operating performance, along with assumptions for specific customer and industry opportunities, were considered in the key assumptions used during the fiscal 2014 impairment analysis. Management has determined the goodwill balance of these reporting units may have an increased likelihood of impairment if a prolonged downturn in customer demand were to occur, or if the reporting units were not able to execute against customer opportunities, and the long-term outlook for their cash flows were adversely impacted. Furthermore, changes in the long-term outlook may result in changes to other valuation assumptions. Factors monitored by management which could result in a change to the reporting units' estimates include the outcome of customer requests for proposals and subsequent awards, strategies of competitors, labor market conditions and levels of overall economic activity, including construction and housing activity. As of July 26, 2014, the Company believes the goodwill is recoverable for all of the reporting units; however, there can be no assurances that the goodwill will not be impaired in future periods.

Current operating results, including any losses, are evaluated by the Company in the assessment of goodwill and other intangible assets. The estimates and assumptions used in assessing the fair value of the reporting units and the valuation of the underlying assets and liabilities are inherently subject to significant uncertainties. Changes in judgments and estimates could result in a significantly different estimate of the fair value of the reporting units and could result in impairments of goodwill or intangible assets at additional reporting units. Additionally, adverse conditions in the economy and future volatility in the equity and credit markets could impact the valuation of the Company's reporting units.

Intangible Assets

The Company's intangible assets consist of the following:



	Weighted Average Remaining Useful Lives	July 26, 2014		July 27, 2013
	(Years)	(Dollars in thousands)
Carrying amount:
Customer relationships	11.7	$	173,594	$	164,497
Contract backlog	1.8	15,285		15,285
Trade names	4.2	8,200		8,200
UtiliQuest trade name	—	4,700		4,700
Non-compete agreements	3.5	400		400
		202,179		193,082
Accumulated amortization:
Customer relationships		69,048		56,219
Contract backlog		13,490		9,433
Trade names		3,361		2,071
Non-compete agreements		164		84
		86,063		67,807
Net Intangible Assets		$	116,116	$	125,275

Amortization of the Company's customer relationships and contract backlog intangible assets is recognized on an accelerated basis as a function of the expected economic benefit. Amortization for the Company's other finite-lived intangibles is recognized on a straight-line basis over the estimated useful life of the intangible asset. Amortization expense for finite-lived intangible assets was $18.3 million, $20.7 million and $6.5 million for fiscal 2014, 2013 and 2012, respectively.

Estimated total amortization expense for each of the five succeeding fiscal years and thereafter is as follows:



Period		Amount
		(Dollars in thousands)
2015		$15,946
2016		$15,240
2017		$13,777
2018		$11,616
2019		$9,226
Thereafter		$45,611

As of July 26, 2014, the Company believes that the carrying amounts of its intangible assets are recoverable. However, if adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment and the assets could be impaired.

- 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.

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