Goodwill and Identifiable Intangible Assets, Net

12 Months Ended

Dec. 31, 2021

Goodwill and Identifiable Intangible Assets, Net

Goodwill and Identifiable Intangible Assets, Net

6. 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, 2019	$	234,660	$	97,787	$	332,447
Acquisitions and purchase price adjustments (See Note 5)		72,788		59,157		131,945
Balance at December 31, 2020		307,448		156,944		464,392
Acquisitions and purchase price adjustments (See Note 5)		52,771		74,951		127,722
Impact of segment reorganization		1,101		(1,101)		—
Balance at December 31, 2021	$	361,320	$	230,794	$	592,114

The aggregate goodwill balance as of December 31, 2021 and 2020 includes $116.6 million of accumulated impairment charges, all of which relate to the mechanical services segment.

We perform our annual impairment testing on October 1, or more frequently, if events and circumstances indicate impairment may have occurred. As discussed in Note 2, “Summary of Significant Accounting Policies and Estimates,” we have the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying value.

During our annual impairment testing on October 1, 2021, we performed a qualitative assessment for all of our reporting units except one for which we performed a quantitative assessment, which considered various factors, including changes in the carrying value of the reporting unit, forecasted operating results, long-term growth rates and discount rates. Additionally, we considered qualitative key events and circumstances (i.e. macroeconomic environment, industry and market specific conditions, cost factors and events specific to the reporting unit, etc.). Based on this assessment, we concluded that it was more likely than not that the fair value of each of the reporting units was substantially greater than its carrying value. Accordingly, no further testing was required. For our Texas electrical operation, we performed a step 1 quantitative assessment, and the calculated fair value exceeded the carrying value by 32%. As a result of the reporting unit’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 December 31, 2021, the Texas electrical operation had a goodwill balance of $96.8 million.

For the years ended December 31, 2021, 2020 and 2019, no impairment of our goodwill was recorded.

There are significant inherent uncertainties and management judgment involved in estimating the fair value of each reporting unit. While we believe we have made reasonable estimates and assumptions to estimate the fair value of our reporting units, it is possible that a material change could occur. If actual results are not consistent with our current estimates and assumptions, or the current economic outlook worsens, goodwill impairment charges may be recorded in future periods.

Identifiable Intangible Assets, Net

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

	Weighted-Average	December 31, 2021				December 31, 2020
	Remaining Useful Lives	Gross Book		Accumulated		Gross Book		Accumulated
	in Years	Value		Amortization		Value		Amortization
Customer Relationships	7.6	$	330,572	$	(130,098)	$	255,692	$	(103,919)
Backlog	1.1		32,300		(20,091)		19,800		(12,600)
Trade Names	19.6		114,795		(22,697)		91,495		(18,661)
Total		$	477,667	$	(172,886)	$	366,987	$	(135,180)

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 years ended December 31, 2021, 2020 and 2019 was $40.5 million, $32.7 million and $27.1 million, respectively.

As of December 31, 2021, future amortization expense of identifiable intangible assets was as follows (in thousands):

Year ending December 31—
2022	$	46,505
2023		34,532
2024		32,343
2025		30,156
2026		29,312
Thereafter		131,933
Total	$	304,781