Note 5 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

5.             GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The Company records goodwill associated with its acquisitions of businesses when the consideration paid exceeds the fair value of the net tangible and identifiable intangible assets acquired. Goodwill balances are evaluated for potential impairment on an annual basis. The current guidance requires the Company to perform an annual impairment test of our goodwill or at an interim period if there is an event that occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We are required to perform our annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. As of December 31, 2021, the Company has five operating segments that are also considered reporting units for goodwill impairment testing. The five operating segments are: Front Line Power Construction, LLC, Orbital Power Inc., Eclipse Foundation Group, Orbital Solar Services, Gibson Technical Services, which includes  IMMCO, Inc. and Full Moon Telecom, LLC. The five operating segments are grouped into three reportable segments, Telecommunications (GTS  Renewables (OSS), and Electric Power (FLP, OPI, and EFG).

We would be required to recognize an impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value up to but not to exceed the amount of the goodwill. Based on management's evaluation, there were no such circumstances at December 31, 2021 or 2020 that would require us to perform an interim goodwill impairment test. Upon acquisition of Reach Construction Group, LLC, (now known as Orbital Solar Services ("OSS"), considered both a reporting unit and operating segment and included in the Renewables segment, the Company recorded $7.0 million of goodwill. Goodwill was valued as of April 1, 2020 by a third-party valuation expert and was recorded following the recognition of OSS's tangible assets and liabilities and $13.7 million of finite-lived identifiable intangible assets included in the table below. Factors that contributed to the Company's goodwill are OSS's skilled workforce and reputation within its industry. The Company also expects to achieve future synergies between the Renewables segment and the Electric Power segment. These synergies are expected to be achieved in the form of power line work necessary when bringing new solar power systems online. 

Throughout 2021, the Company acquired three companies that make up the Telecommunication reportable segment. Each company acquired, Gibson Technical Services, IMMCO, Inc., and Full Moon Telecom, LLC, is considered a reporting unit that together aggregate into one integrated operating segment called Gibson Technical Service. Goodwill for these three reporting units will be aggregated together and recognized at the operating segment level Gibson Technical Services.

Upon acquisition of Gibson Technical Services, the Company recorded $12.3 million of goodwill. Goodwill was valued as of April 13, 2021 by a third-party valuation expert and was recorded following the recognition of Gibson Technical Services’ tangible assets and liabilities and $22.8 million of finite- and indefinite-lived identifiable intangible assets. Factors that contribute to the Company’s goodwill in Gibson Technical Services (GTS) includes GTS’s sterling reputation within the telecommunications industry which when combined with the Company’s resources, provides synergies that will help OEG penetrate the telecommunications market.

Upon acquisition of IMMCO, Inc., the Company recorded $10.6 million of goodwill. Goodwill was valued as of  July 28, 2021 by a third-party valuation expert and was recorded following the recognition of IMMCO Inc.’s tangible assets and liabilities and $5.3 million of finite- and indefinite-lived identifiable intangible assets. Factors that contribute to the Company’s goodwill at IMMCO include the significant synergies added to the Company’s Telecommunications segment by expanding the depth and breadth of the customer solutions provided.

Upon acquisition of Full Moon Telecom, LLC, the Company recorded $0.8 million of goodwill. Goodwill was valued as of October 22, 2021, by a third-party valuation expert and was recorded following the recognition of Full Moon Telecom’s tangible assets and liabilities and $0.4 million of finite- and indefinite-lived identifiable intangible assets. Factors that contribute to the Company’s goodwill in Full Moon Telecom, LLC, include the highly skilled and technically competent workforce at Full Moon. This workforce when combined with Gibson Technical Services and IMMCO provide synergies that increase the unique portfolio of services provided to their customers and further penetrate the telecommunications market.

Upon acquisition of Front Line Power Construction, LLC, which is considered both a reporting unit and an operating segment, the Company recorded $70.2 million of goodwill. Goodwill was valued as of November 17, 2021 by a third-party valuation expert and was recorded following the recognition of Front Line Power Construction’s tangible assets and liabilities and $108.2 million of finite- and indefinite-lived identifiable intangible assets. Factors that contribute to the Company’s goodwill at Front Line Power Construction include the strong leadership of Kurt Johnson, Front Line Power Construction’s Founder and CEO, along with the skills and expertise brought by his team. Front Line Power Construction’s team provides synergies with Orbital Power Inc. that will add momentum to the comprehensive range of solutions by OEG’s Electric Power Segment.

For Orbital Solar Systems, (formally known as Reach Construction), management completed a quantitative analysis to determine potential impairment at the May 31st, 2021 annual impairment test date. Goodwill in the Telecommunications segment was qualitatively reviewed due to the fact that this review was performed within 50 days of the initial valuation of GTS. The qualitative review was performed to determine whether it was more likely than not that the fair value of its reporting unit was less than its carrying amount, including goodwill. To complete the qualitative review, management evaluated the fair value of the Goodwill and considered all known events and circumstances that might trigger an impairment of goodwill. Management determined that no additional testing was necessary and no impairment was necessary. During management's review of goodwill as of December 31, 2021, the Company determined that there were not indicators present and no triggering events to suggest that it was more likely than not that the fair value of each reporting unit and each indefinite-lived intangible was less than its carrying amount and thus no impairment was necessary.

Other intangible assets

At December 31, 2021 and 2020, the gross carrying amount and accumulated amortization of intangible assets, other than goodwill, are as follows:

Finite-lived intangible assets (in thousands)		(In years)		December 31, 2021							December 31, 2020
Telecommunications	Estimated Useful Life (in years)	Weighted average remaining amortization period		Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization
Customer Relationships-GTS	10		9.29	$	16,075	$	(1,152	)	$	14,923	$	—	$	—		$	—
Customer Relationships-IMMCO	10		9.58		3,800		(158	)		3,642		—		—			—
Customer Relationships - Full Moon	10		9.82		210		(4	)		206		—		—			—
Technology - Know How	4		3.58		1,459		(152	)		1,307		—		—			—
Software-IMMCO	3		2.57		547		(93	)		454		—		—			—
Non-compete agreements-GTS	5		4.29		385		(55	)		330		—		—			—
Total Telecommunications					22,476		(1,614	)		20,862		—		—			—
Electric Power
Order backlog	1		0.88		9,186		(1,148	)		8,038		—		—			—
Customer relationships - Front Line	15		14.89		84,012		(700	)		83,312		—		—			—
Total Electric Power					93,198		(1,848	)		91,350		—		—			—
Renewables
Customer Relationships	5		3.25		8,647		(3,027	)		5,620		8,647		(1,297	)		7,350
Trade name - Reach Construction Group	1		—		1,878		(1,878	)		-		1,878		(1,409	)		469
Non-compete agreements	5		3.25		3,212		(1,124	)		2,088		3,212		(482	)		2,730
Total Renewables					13,737		(6,029	)		7,708		13,737		(3,188	)		10,549
Other category
Computer software	3		0.08		713		(713	)		—		713		(709	)		4
Product certifications	3		—		36		(36	)		—		36		(36	)		—
Total Other category					749		(749	)		—		749		(745	)		4
Total identifiable finite-lived other intangible assets				$	130,160	$	(10,240	)	$	119,920	$	14,486	$	(3,933	)	$	10,553
Identifiable indefinite-lived other intangible assets
Electric Power
Trade name - Front line					15,027		—			15,027		—		—			—
Telecommunications
Trade name - GTS					6,388		—			6,388		—		—			—
Trade name - IMMCO					1,162		—			1,162		—		—			—
Trade name - Full Moon					159		—			159		—		—			—
Total Telecommunications					7,709		—			7,709		—		—			—
Total identifiable indefinite-lived other intangible assets					22,736		—			22,736		—		—			—
Total identifiable other intangible assets					152,896		(10,240	)		142,656		14,486		(3,933	)		10,553

Intangible asset amortization by category was as follows:

	For the Years Ended December 31,
(In thousands)	2021		2020
Trademarks and trade name	$	469	$	1,409
Customer lists/relationships		3,744		1,297
Technology-Know How		152		—
Computer software		96		18
Noncompete agreements		697		482
Order Backlog		1,148		—
Intangibles held by discontinued operations		1,396		1,215
Total amortization	$	7,702	$	4,421

Estimated future amortization by category of finite-lived intangible assets at  December 31, 2021 was as follows:

	For the Years Ended December 31,
											2027 and
(In thousands)	2022		2023		2024		2025		2026		thereafter		Totals
Trademarks and trade name	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Customer lists/relationships		9,339		9,339		9,339		8,042		7,609		64,035		107,703
Technology-Know How		365		365		365		212		—		—		1,307
Computer software		222		222		10		—		—		—		454
Order Backlog		8,038		—		—		—		—		—		8,038
Non-compete agreements		719		719		719		238		23		—		2,418
Total amortization	$	18,683	$	10,645	$	10,433	$	8,492	$	7,632	$	64,035	$	119,920

Management reviews other intangible assets for impairment when facts or circumstances suggest. As of December 31, 2021, management has evaluated the remaining finite-lived and indefinite-lived intangible assets and believes no impairment exists.

The following table reflects the carrying amount of goodwill as of  December 31, 2021 and 2020, and the 2021 activity. 

(In thousands)	Telecommunications		Electric Power		Renewables		Other		Total
Balance, December 31, 2020	$	—	$	—	$	7,006	$	—	$	7,006
Acquisition of Gibson Technical Services		12,339		—		—		—		12,339
Acquisition of IMMCO Inc.		10,577		—		—		—		10,577
Acquisition of Full Moon Telecom, LLC		826		—		—		—		826
Acquisition of Front Line Power Construction, LLC		—		70,151		—		—		70,151
Balance, December 31, 2021	$	23,742	$	70,151	$	7,006	$	—	$	100,899