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Goodwill and Intangible Assets
6 Months Ended
Jun. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

6.

Goodwill and Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reportable segment:

 

 

 

Commercial

 

 

Government

 

 

 

 

 

($ in thousands)

 

Services

 

 

Solutions

 

 

Total

 

Balance at December 31, 2019

 

$

424,404

 

 

$

159,746

 

 

$

584,150

 

Foreign currency translation adjustment

 

 

(2,535

)

 

 

 

 

 

(2,535

)

Balance at June 30, 2020

 

$

421,869

 

 

$

159,746

 

 

$

581,615

 

 

Intangible assets consist of the following as of the respective period-ends:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

Average

 

Gross

 

 

 

 

 

 

Average

 

Gross

 

 

 

 

 

 

 

Remaining

 

Carrying

 

 

Accumulated

 

 

Remaining

 

Carrying

 

 

Accumulated

 

($ in thousands)

 

Useful Life

 

Amount

 

 

Amortization

 

 

Useful Life

 

Amount

 

 

Amortization

 

Trademarks

 

0.9 years

 

$

32,067

 

 

$

24,209

 

 

1.5 years

 

$

32,127

 

 

$

19,106

 

Non-compete agreements

 

2.5 years

 

 

62,555

 

 

 

31,119

 

 

3.0 years

 

 

62,549

 

 

 

24,834

 

Customer relationships

 

6.4 years

 

 

365,368

 

 

 

103,204

 

 

6.9 years

 

 

366,533

 

 

 

82,903

 

Developed technology

 

2.8 years

 

 

165,520

 

 

 

80,615

 

 

3.3 years

 

 

165,708

 

 

 

65,631

 

Gross carrying value of intangible assets

 

 

 

 

625,510

 

 

$

239,147

 

 

 

 

 

626,917

 

 

$

192,474

 

Less: accumulated amortization

 

 

 

 

(239,147

)

 

 

 

 

 

 

 

 

(192,474

)

 

 

 

 

Intangible assets, net

 

 

 

$

386,363

 

 

 

 

 

 

 

 

$

434,443

 

 

 

 

 

 

Amortization expense was $23.5 million and $23.1 million for the three months ended June 30, 2020 and 2019, respectively, and was $47.1 million and $46.3 million for the six months ended June 30, 2020 and 2019, respectively.

 

Estimated amortization expense in future years is expected to be:

 

($ in thousands)

 

 

 

 

Remainder of 2020

 

$

46,823

 

2021

 

 

85,379

 

2022

 

 

80,654

 

2023

 

 

52,157

 

2024

 

 

41,671

 

Thereafter

 

 

79,679

 

Total

 

$

386,363

 

 

Interim Goodwill Impairment Review

 

During the fourth quarter of each fiscal year, we perform our annual goodwill impairment test for each of our reporting units. Our reporting units are the same as our two reportable segments (Government Solutions and Commercial Services). We also test goodwill for impairment whenever events or circumstances occur which, in our judgment, could more likely than not reduce the fair value of one or more reporting units below its carrying amount. Potential impairment indicators include, but are not limited to, (i) a deterioration of the business environments in which we operate; (ii) downward revisions to internal forecasts, and the magnitude thereof, if any; and (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any.

 

During the first half of fiscal 2020, our market capitalization declined significantly compared to December 31, 2019. Over the same period, the equity value of our key Commercial Services customers, our peer group companies and the overall U.S. stock market also declined significantly amid market volatility. These declines were driven by the uncertainty surrounding the outbreak of the novel coronavirus (“COVID-19”) and other macroeconomic events. Based on these factors, we concluded that a triggering event occurred and, accordingly, an interim quantitative impairment test was performed as of March 31, 2020 and updated as of June 30, 2020.

 

Based upon the results of our interim impairment tests, we concluded that the fair values of the Government Solutions and Commercial Services reporting units exceeded their carrying value. The current economic conditions due to COVID-19 are still evolving and any significant adverse changes in future periods to our internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect our key assumptions and may result in a future goodwill impairment charge, which could be material.