Note 8 - Goodwill

12 Months Ended

Dec. 31, 2014

Disclosure Text Block Supplement [Abstract]

Goodwill

Goodwill represents the excess of the cost of companies acquired over the fair value of their net assets at the dates of acquisition. GAAP requires that goodwill not be amortized and that goodwill is to be tested for impairment at least annually at the reporting unit level. The Company tests for goodwill impairment on October 1st of each calendar year. There are two steps involved in the testing of goodwill, excluding a qualitative analysis. The first step compares the book value of the Company’s stock (stockholders’ equity or net assets) to the adjusted fair market value of those shares. If the adjusted fair value of the stock is greater than the calculated book value of the stock, goodwill is deemed not to be impaired and no further testing is required. If the adjusted fair value is less than the calculated book value, then step two of determining the fair value of net assets must be taken to determine the impairment amount.

To determine the fair value of the Company’s net assets, the Company used the weighted average of the following valuation techniques: market capitalization plus control premium (market) approach and a discounted cash flow (income) approach. The market approach includes level one fair value inputs, such as the Company’s stock price, at October 1, 2014, and level two fair value inputs, such as the control premiums based on prior year sales transactions of construction contractors and engineering services, similar sized transactions based on the Company’s market capitalization, and all-inclusive total industries transactions. The income approach includes level three inputs such as the Company’s calculated weighted average cost of capital and future income projections that include assumptions about revenue and gross profit growth, along with other assumptions.

Based on our calculation, we determined that the fair value of the Company’s equity was approximately 19% above the carrying value of the Company’s equity for our 2014 step one test. Testing under step one in 2013 and 2012 also did not indicate that the adjusted fair value of the Company’s stock was less than its book value.

The following table details changes in recorded goodwill (amounts in thousands):

Balance at January 1, 2012	$	54,050
Additional goodwill related to acquisitions		360
Goodwill adjustments		410
Balance at December 31, 2013 and 2014	$	54,820

After the annual test was completed, the Company’s stock price decreased from $7.54 on October 1, 2014 to $6.39 on December 31, 2014. Due to the decrease in the stock price, the Company noted that a goodwill impairment triggering event occurred during the fourth quarter of 2014. Therefore, the Company updated its annual goodwill impairment assessment using the two valuation methods discussed above. The methods now included fourth quarter information which incorporated the Company’s stock price at December 31, 2014 and reduced gross margins used in our discounted cash flow model projections. Based on this revised testing, there was no goodwill impairment and we determined that the fair value of the Company’s equity was approximately 13% above the carrying value of the Company’s equity.

Refer to Note 21 for further information regarding the Company’s assessment of Goodwill after considering certain subsequent events.