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Goodwill and Intangible Assets | 12 Months Ended
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Dec. 31, 2019
Goodwill and Intangible Assets [Abstract] |
Goodwill and Intangible Assets | 6. Goodwill and Intangible Assets Goodwill The following table presents the changes in the carrying amount of goodwill since its inception through December 31, 2019:
|  |  |  |  |  |  | Specialty |  |  |
(in thousands) | Civil |  |  | Building |  | Contractors |  | Total
Gross goodwill | $ | 492,074 |  | $ | 424,724 |  | $ | 156,193 |  | $ | 1,072,991
Accumulated impairment |  | (76,716) |  |  | (411,269) |  |  | — |  |  | (487,985)
Balance as of December 31, 2018 |  | 415,358 |  |  | 13,455 |  |  | 156,193 |  |  | 585,006
Second quarter 2019 impairment |  | (210,215) |  |  | (13,455) |  |  | (156,193) |  |  | (379,863)
Balance as of December 31, 2019(a) | $ | 205,143 |  | $ | — |  | $ | — |  | $ | 205,143
_____________________________________________________________________________________________________________ (a)As of December 31, 2019, accumulated impairment was $867.8 million. The net change in the carrying amount of goodwill for the year ended December 31, 2019 was primarily due to a goodwill impairment charge of $379.9 million recorded in the second quarter of 2019. In connection with the preparation of its quarterly financial statements during the second quarter of 2019, the Company assessed the changes in circumstances that occurred during the quarter to determine whether it was more likely than not that the fair values of any of its reporting units were below their carrying amounts. While there was no single determinative event or factor, potential triggering events identified in the accounting guidance (ASC 350, Intangibles – Goodwill and Other) developed during the second quarter of 2019, which led the Company to conclude that, when considering the events and factors in totality, it was more likely than not that the fair values of each of its reporting units were below their carrying amounts. The triggering factors included: The Company faced a declining stock price and observed a sustained decrease subsequent to the filing of the Company’s first quarter Form 10-Q on May 8, 2019, in both absolute terms and relative to its peers. Consistent with the average stock prices of companies in its peer group, the Company’s stock price had been trending lower over several prior periods; however, during the second quarter of 2019, the Company’s stock price dropped to a 52-week low while the average stock price of companies in its peer group increased. The Company believes that delays experienced in resolving certain claims and unapproved change orders, which when combined with the increased working capital needs and significant negative operating cash flows in the first quarter of 2019, has contributed significantly to the sustained decrease in the Company’s stock price; The Company experienced significant negative operating cash flows from each of its reporting units in the first quarter of 2019, and that trend continued at the beginning of the second quarter; and The Company’s debt rating was downgraded by a major credit rating agency on May 17, 2019. As the Company determined that it was more likely than not that the fair values of its reporting units were below their carrying amounts, the Company performed an interim impairment test as of June 1, 2019 (the “Interim Test”) and, as described below, recognized a non-cash impairment loss totaling $379.9 million. The decrease in the Company’s stock price reduced its total market capitalization and increased the implied control premium to a level beyond observable market-comparable data. As a result, when performing the Interim Test, the Company increased the discount rates and the projected investments in working capital compared to the assumptions used in the previous October 1, 2018 test, which extended the timing of certain expected future cash flows in the calculation of fair value under the income-based approach. The Company believes these changes were consistent with market participant inputs as reflected in the decrease in the Company’s market valuation at that time. Consistent with the previous October 1, 2018 test, the Company utilized a weighted-average of (1) an income approach and (2) a market approach to determine the fair value of the Company and each of its reporting units for the Interim Test. The income approach was based on estimated present value of future cash flows for each reporting unit. The market approach was based on assumptions about how market data relates to each reporting unit. The weighting of these two approaches was based on their individual correlation to the economics of each reporting unit as impacted by factors such as the availability of comparable market data for each reporting unit. Assessing impairment inherently involves management judgments as to the assumptions used to calculate fair value of the reporting units and the impact of market conditions on those assumptions. The key inputs that the Company uses in its assumptions to estimate the fair value of its reporting units under the income-based approach are as follows: Weighted-average cost of capital (“WACC”), the risk-adjusted rate used to discount the projected cash flows; Cash flows generated from existing work and new awards; and Projected operating margins. Expected future after-tax operating cash flows of each reporting unit are discounted to a present value using a risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning future operating performance including cash flows generated from existing work and new awards, projected operating margins, variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows, as well as future economic conditions, which may differ from actual future cash flows. The discount rate, which is intended to reflect the risks inherent in future cash flow projections, used in estimating the present value of future cash flows, is based on estimates of the WACC of market participants relative to the reporting units. Financial and credit market volatility can directly impact certain inputs and assumptions used to develop the WACC. To develop the cash flows generated from new awards and future operating margins, the Company tracks known prospects of significance for each of its reporting units and considers the estimated timing of when the work is expected to be bid, started and completed. The Company also gives consideration to its relationships with the prospective owners; the pool of competitors that are capable of performing large, complex work; business strategy; and the Company’s history of success in winning new work in each reporting unit. With regard to operating margins, the Company gives consideration to its historical reporting unit operating margins in the end markets that the prospective work opportunities are most significant, expected margins from existing work, current market trends in recent new work procurement, and business strategy. The Company also estimated the fair value of its reporting units under a market-based approach by applying industry-comparable multiples of revenues and operating earnings to its reporting units’ revenues and operating earnings. The conditions and prospects of companies in the engineering and construction industry depend on common factors such as overall demand for services. The Company believes that the discount rates, timing of cash flows and other inputs and assumptions used in the Interim Test were consistent with those that a market participant would use based on the events described above which occurred during the second quarter of 2019 and were reflective of the market assessment of the fair value of its reporting units at that time. In addition, the Company believes that its estimates and assumptions about future revenues and margin projections in the Interim Test were reasonable and consistent with the estimates and assumptions used in the annual goodwill impairment test as of October 1, 2018. As an additional step to corroborate the Interim Test results, the Company compared its implied control premium with those of recent comparable market transactions and concluded that the implied control premium was within the range of control premiums observed in prior industry-specific M&A transactions. The assumption changes described above were relatively larger in the Specialty Contractors reporting unit than in the Civil or Building reporting units, as Specialty Contractors had not met recent market expectations at the time of the Interim Test. Subsequent to the Interim Test, the Company performed its annual impairment test in the fourth quarter of 2019 using a weighted-average of an income and a market approach. These approaches utilize various valuation assumptions, and small changes to the assumptions could have a significant impact on the concluded fair value. Based on this assessment, the Company concluded goodwill was not impaired since the estimated fair value of the Civil reporting unit exceeded its carrying value; therefore, no further adjustment to goodwill was necessary. In addition, no events or circumstances have occurred since the annual test that would indicate any additional impairment of goodwill. Intangible Assets As of December 31, 2019 and 2018, the Company had the following: (1) non-amortizable trade names with a carrying value of $50.4 million; (2) amortizable trade names with a gross carrying value of $51.1 million and accumulated amortization as of December 31, 2019 and 2018 of $21.3 million and $18.8 million, respectively; (3) amortizable customer relationships with a gross carrying value of $23.2 million and accumulated amortization as of December 31, 2019 and 2018 of $21.0 million and $20.0 million, respectively; and (4) amortizable construction contract backlog with a gross carrying value as of December 31, 2019 and 2018 of $149.3 million and $73.7 million, respectively, and accumulated amortization as of December 31, 2019 and 2018 of $76.4 million and $73.7, respectively. The increase in amortizable construction contract backlog of $75.6 million is due to the acquisition of an additional interest in a joint venture, as discussed in Note 13. Amortization expense related to amortizable intangible assets was $6.2 million and $3.5 million for the years ended December 31, 2019 and 2018, respectively. Future amortization expense related to amortizable intangible assets for the years 2020, 2021 and 2022 will be approximately $31.2 million, $31.1 million and $20.2 million, respectively, and $2.5 million for the years 2023 and 2024. The weighted-average amortization period for amortizable trade names, customer relationships and construction contract backlog is approximately 20 years, 12 years and 3 years, respectively. In conjunction with its Interim Test for goodwill during the second quarter of 2019, the Company also evaluated its non-amortizable trade names for potential impairment due to the second quarter triggering factors related to goodwill mentioned above. The Company performed its interim impairment test by comparing the carrying value of its indefinite-lived intangible assets to their calculated fair value, which is determined by the income approach (relief from royalty method). This income-based valuation approach involves similar key assumptions to the goodwill impairment analysis discussed above. The interim impairment test performed in the second quarter of 2019 resulted in an estimated fair value for the non-amortizable trade names that substantially exceeded their respective net book values; therefore, no impairment charge was necessary for the second quarter. While the key assumptions used in the impairment test of the non-amortizable trade names are similar to those used in the evaluation of goodwill, historically, the headroom (the excess of calculated fair value over carrying value) has been relatively higher for non-amortizable trade names than for goodwill. Unlike goodwill, trade names possess inherent value based on market perception which is valued considering the cost savings available through ownership and the avoidance of paying royalties associated with revenue generation. The discounted value is not impacted by cash flow related assumptions such as working capital investment. Consequently, goodwill was impaired while the non-amortizable trade name intangible assets were not. The Company also performed an annual impairment assessment of its non-amortizable trade names in the fourth quarter of 2019 using a qualitative approach to determine whether conditions existed to indicate that it is more likely than not that the fair value of trade names is less than their carrying values. Based on this assessment, the Company concluded that it was more likely than not that the fair value of the non-amortizable trade names was greater than their carrying values, and therefore a quantitative analysis was not required.

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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