GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

Goodwill at December 31, 2012 and 2011 was approximately $566.6 million and $566.8 million, respectively, and reflects the excess of cost over fair market value of net identifiable assets of companies acquired. Goodwill attributable to companies acquired in 2012 has been valued at $2.0 million. ASC Topic 805, “Business Combinations” (“ASC 805”) requires that all business combinations be accounted for using the acquisition method and that certain identifiable intangible assets acquired in a business combination be recognized as assets apart from goodwill. ASC Topic 350, “Intangibles-Goodwill and Other” (“ASC 350”) requires goodwill and other identifiable intangible assets with indefinite useful lives not be amortized, such as trade names, but instead must be tested at least annually for impairment (which we test each October 1, absent any impairment indicators) and be written down if impaired. ASC 350 requires that goodwill be allocated to its respective reporting unit and that identifiable intangible assets with finite lives be amortized over their useful lives. As of December 31, 2012, approximately 63.8% of our goodwill related to our United States facilities services segment, approximately 35.5% related to our United States mechanical construction and facilities services segment and approximately 0.7% related to our United States electrical construction and facilities services segment.

We test for impairment of goodwill at the reporting unit level utilizing the two-step process as prescribed by ASC 350. The first step of this test compares the fair value of the reporting unit, determined based upon discounted estimated future cash flows, to the carrying amount, including goodwill. If the fair value exceeds the carrying amount, no further work is required and no impairment loss is recognized. If the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is potentially impaired and step two of the goodwill impairment test would need to be performed to measure the amount of an impairment loss, if any. In the second step, the impairment is computed by comparing the implied fair value of the reporting unit's goodwill with the carrying amount of the goodwill. If the carrying amount of the reporting unit's goodwill is greater than the implied fair value of its goodwill, an impairment loss in the amount of the excess is recognized and charged to operations. The weighted average cost of capital used in our annual testing for impairment as of October 1, 2012 was 12.8% and 12.1% for our domestic construction segments and our United States facilities services segment, respectively. The perpetual growth rate used for our annual testing was 2.7% for our domestic segments. For the years ended December 31, 2012 and 2011, no impairment of our goodwill was recognized.

During the third quarter of 2010 and prior to our October 1, 2010 annual impairment test, we concluded that impairment indicators may have existed within the United States facilities services segment based upon the then year to date results and recent forecasts. As a result of that conclusion, we performed a step one test as prescribed under ASC 350 for that particular reporting unit which concluded that impairment indicators existed within that reporting unit due to significant declines in year to date revenues and operating margins which caused us to revise our expectations for the strength of a near term recovery in our financial models for businesses within that reporting unit. Specifically, we reduced our net sales growth rates and operating margins within our discounted cash flow model, as well as our terminal value growth rates. In addition, we estimated a higher participant risk adjusted weighted average cost of capital. Therefore, the required second step of the assessment for the reporting unit was performed in which the implied fair value of that reporting unit's goodwill was compared to the book value of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, that is, the estimated fair value of the reporting unit is allocated to all of those assets and liabilities of that unit (including both recognized and unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's goodwill is greater than the implied fair value of that reporting unit's goodwill, an impairment loss is recognized in the amount of the excess and is charged to operations. We determined the fair value of the reporting unit using discounted estimated future cash flows. The weighted average cost of capital used in testing for impairment at the interim date was 12.5% with a perpetual growth rate of 2.8% for our United States facilities services segment. As a result of our interim impairment assessment in 2010, we recognized a $210.6 million non-cash goodwill impairment charge in the third quarter of 2010. Additionally, we performed our annual impairment test as of October 1, 2010, and no additional impairment of our goodwill was recognized for any of our reporting segments in the fourth quarter of 2010. The weighted average cost of capital used in our 2010 annual testing for impairment was 13.2% and 12.2% for our domestic construction segments and our United States facilities services segment, respectively. The perpetual growth rate used for our 2010 annual testing was 3.0% for our domestic construction segments and 2.8% for our United States facilities services segment, respectively.

We also test for the impairment of trade names that are not subject to amortization by calculating the fair value using the “relief from royalty payments” methodology. This approach involves two steps: (a) estimating reasonable royalty rates for each trade name and (b) applying these royalty rates to a net revenue stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of each trade name. If the carrying amount of the trade name is greater than the implied fair value of the trade name, an impairment in the amount of the excess is recognized and charged to operations. The annual impairment review of our trade names for the year ended December 31, 2011 resulted in a $1.0 million non-cash impairment charge as a result of a change in the fair value of trade names associated with certain prior acquisitions reported within our United States facilities services segment. This impairment primarily resulted from both lower forecasted revenues from, and lower operating margins at, specific companies within our United States facilities services segment. During the second and third quarters of 2010, we recorded non-cash impairment charges of $35.5 million associated with the fair value of trade names from prior acquisitions reported within our United States facilities services segment. For the year ended December 31, 2012, no impairment of our trade names was recognized.

In addition, we review for the impairment of other identifiable intangible assets that are being amortized whenever facts and circumstances indicate that their carrying values may not be fully recoverable. This test compares their carrying values to the undiscounted pre-tax cash flows expected to result from the use of the assets. If the assets are impaired, the assets are written down to their fair values, generally determined based on their future discounted cash flows. Based on facts and circumstances that indicated an impairment may exist, we performed an impairment review of our other identifiable intangible assets for the year ended December 31, 2011. As a result of this review, we recognized a $2.8 million non-cash impairment charge as a result of a change in the fair value of customer relationships associated with certain prior acquisitions reported within our United States facilities services segment for the year ended December 31, 2011. For the years ended December 31, 2012 and 2010, no impairment of our other identifiable intangible assets was recognized.

Our development of the present value of future cash flow projections used in impairment testing is based upon assumptions and estimates by management from a review of our operating results, business plans, anticipated growth rates and margins and weighted average cost of capital, among others. Much of the information used in assessing fair value is outside the control of management, such as interest rates, and these assumptions and estimates can change in future periods. There can be no assurances that our estimates and assumptions made for purposes of our goodwill and identifiable intangible asset impairment testing will prove to be accurate predictions of the future. If our assumptions regarding business plans or anticipated growth rates and/or margins are not achieved, or there is a rise in interest rates, we may be required, as we did in 2011 and 2010, to record goodwill and/or identifiable intangible asset impairment charges in future periods.

During 2011, we recognized a $3.8 million non-cash impairment charge as discussed above. Of this amount, $2.8 million related to customer relationships and $1.0 million related to trade names. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such a charge would be material.

The changes in the carrying amount of goodwill by reportable segments during the years ended December 31, 2012 and 2011 were as follows (in thousands):



	United States electrical construction and facilities services segment		United States mechanical construction and facilities services segment		United States facilities services segment			Total
Gross balance at December 31, 2010	$	3,823	$	175,175	$	438,408		$	617,406
Accumulated impairment charge	—		—		(210,602		)	(210,602		)
Balance at December 31, 2010	3,823		175,175		227,806			406,804
Acquisitions, earn-out and purchase price adjustments	—		23,271		136,730			160,001
Balance at December 31, 2011	3,823		198,446		364,536			566,805
Acquisitions and purchase price adjustments	—		2,014		(2,231		)	(217		)
Transfers	—		690		(690		)	—
Balance at December 31, 2012	$	3,823	$	201,150	$	361,615		$	566,588

During 2011, pursuant to the purchase method of accounting, we recorded an aggregate of $1.9 million by reason of earn-out obligations in respect of a prior acquisition, which increased goodwill associated with this acquisition.

Identifiable intangible assets as of December 31, 2012 and 2011 consist of the following (in thousands):



	December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment Charge			Total
Contract backlog	$	47,580	$	(46,630	)	$	—		$	950
Developed technology/Vendor network	95,661		(25,078		)	—			70,583
Customer relationships	259,683		(61,718		)	(4,834		)	193,131
Non-competition agreements	8,269		(7,898		)	—			371
Trade names (amortized)	17,521		(3,951		)	—			13,570
Trade names (unamortized)	113,109		—			(47,966		)	65,143
Total	$	541,823	$	(145,275	)	$	(52,800	)	$	343,748



	December 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment Charge			Total
Contract backlog	$	47,580	$	(41,505	)	$	—		$	6,075
Developed technology/Vendor network	95,661		(19,943		)	—			75,718
Customer relationships	257,054		(45,213		)	(4,834		)	207,007
Non-competition agreements	8,269		(7,386		)	—			883
Trade names (amortized)	17,521		(1,466		)	—			16,055
Trade names (unamortized)	112,601		—			(47,966		)	64,635
Total	$	538,686	$	(115,513	)	$	(52,800	)	$	370,373

Identifiable intangible assets attributable to companies acquired in 2012 have been valued at $0.5 million. Identifiable intangible assets attributable to companies acquired in 2011 have been valued at $160.7 million. See Note 3 - Acquisitions of Businesses of the notes to consolidated financial statements for additional information. The identifiable intangible amounts are amortized on a straight-line basis. The weighted average amortization periods for the unamortized balances remaining are approximately 12 months for contract backlog, 14 years for developed technology/vendor network, 14 years for customer relationships, 12 months for non-competition agreements and 5.5 years for trade names.

Amortization expense related to identifiable intangible assets was $29.8 million, $26.4 million and $16.4 million for the years ended December 31, 2012, 2011 and 2010, respectively. The following table presents the estimated future amortization expense of identifiable intangible assets in the following years (in thousands):



2013	$	25,175
2014	23,884
2015	23,798
2016	23,131
2017	20,908
Thereafter	161,709
	$	278,605