Goodwill and Identifiable Intangible Assets, Net

6 Months Ended

Jun. 30, 2020

Goodwill and Identifiable Intangible Assets, Net

Goodwill and Identifiable Intangible Assets, Net

5. Goodwill and Identifiable Intangible Assets, Net

Goodwill

The changes in the carrying amount of goodwill are as follows (in thousands):

	Mechanical Services		Electrical Services
	Segment		Segment		Total
Balance at December 31, 2018	$	235,182	$	—	$	235,182
Acquisitions and purchase price adjustments (See Note 4)		579		96,686		97,265
Impact of segment reorganization		(1,101)		1,101		—
Balance at December 31, 2019		234,660		97,787		332,447
Acquisitions and purchase price adjustments (See Note 4)		73,409		14,926		88,335
Balance at June 30, 2020	$	308,069	$	112,713	$	420,782

During the fourth quarter of 2019, the Company performed its annual goodwill impairment test resulting in no impairment charges, as the calculated fair values for the majority of the Company’s reporting units that have goodwill were significantly in excess (all greater than 80%) of the respective reporting unit’s carrying value, while two reporting units that were recently acquired had calculated fair values in excess of carrying value of at least 27%. During the first quarter of 2020, we considered the economic impacts of COVID-19 to be a triggering event for review of goodwill impairment at each of our reporting units. After performing a qualitative goodwill impairment assessment as of March 31, 2020, we determined that we did not have a goodwill impairment as of that date. We reassessed one reporting unit’s (Walker) fair value in the second quarter and determined that the fair value exceeded carrying value by approximately 29% as of June 30, 2020, up from 27% in our 2019 annual impairment test. As a result of uncertainty caused by COVID-19 and Walker’s smaller excess of fair value percentage, this reporting unit is more susceptible to impairment risk from additional adverse changes in its operating environment, including micro- and macroeconomic environment conditions that could negatively impact them. Such adverse changes could include worsening economic conditions in the locations or markets they primarily serve whether due to COVID-19 or other events and conditions. As of June 30, 2020, Walker had a goodwill balance of $96.8 million.

Identifiable Intangible Assets, Net

Identifiable intangible assets consist of the following (dollars in thousands):

	Estimated	June 30, 2020				December 31, 2019
	Useful Lives	Gross Book		Accumulated		Gross Book		Accumulated
	in Years	Value		Amortization		Value		Amortization
Customer relationships	1 - 15	$	231,492	$	(91,882)	$	183,061	$	(80,813)
Backlog	1 - 2		12,600		(10,822)		7,400		(6,388)
Tradenames	2 - 25		85,695		(16,919)		71,995		(15,281)
Total		$	329,787	$	(119,623)	$	262,456	$	(102,482)

The amounts attributable to customer relationships and tradenames are amortized to “Selling, General and Administrative Expenses” based upon the estimated consumption of their economic benefits, or a straight-line method over periods from one to twenty-five years if the pattern of economic benefit cannot otherwise be reliably estimated. The amounts attributable to backlog are being amortized to “Cost of Services” on a proportionate method over the remaining backlog period. Amortization expense for the three and six months ended June 30, 2020 was $10.9 million and $17.1 million, respectively. Amortization expense for the three and six months ended June 30, 2019 was $8.1 million and $13.0 million, respectively.

At June 30, 2020, future amortization expense of identifiable intangible assets is as follows (in thousands):

Year ended December 31—
2020 (remainder of the year)	$	15,557
2021		24,610
2022		21,989
2023		20,535
2024		19,185
Thereafter		108,288
Total	$	210,164