Note 5 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2022

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, 2022, the Company has four operating segments that are also considered reporting units for goodwill impairment testing. The four operating segments are: Front Line Power Construction, LLC, Orbital Power Inc., Orbital Solar Services, and Gibson Technical Services, which includes  IMMCO, Inc., Full Moon Telecom, LLC, and Coax Fiber Solutions. The four operating segments are grouped into three reportable segments, Telecommunications (GTS),  Renewables (OSS), and Electric Power (FLP and OPI).

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. The Company acquired Coax Fiber Solutions in the first quarter of 2022 and recorded $1.5 million of goodwill associated with the acquisition. As of May 31, 2022, the annual testing date, the Company completed a quantitative analysis to determine whether the carrying value, including goodwill, exceeded the fair value for each reporting unit. To complete the review, management evaluated the fair value of the Goodwill and considered all known events and circumstances that might trigger an impairment of goodwill. The review of goodwill determined that the fair value of each of the reporting units exceeded the carrying value and thus no impairment was necessary during the quarter ended June 30, 2022.

The Company performed a second goodwill impairment analysis as of  June 30, 2022 due to a 42-percent drop in the Company's stock price between  May 31, 2022 and  June 30, 2022, that caused an overall decrease in the Company’s market capitalization. We performed the interim impairment tests consistent with our approach for annual impairment testing, including similar models, inputs, and assumptions. As a result of the interim impairment testing, no impairment was identified as of  June 30, 2022. 

During the third quarter of 2022, triggering events were identified which led to performing interim goodwill impairment testing of our reporting units as of  September 30, 2022. These events included a further decrease in the Company's market capitalization, the significant loss in the Renewables segment in the third quarter of 2022, interest rate increases and limitations on accessing capital, which raised substantial doubt regarding the Company’s ability to continue as a going concern. The fair value for our reporting units for the interim testing was valued using a market approach. The impairment assessment resulted in a conclusion that goodwill in the Front Line Power and GTS reporting units was impaired by $70.2 million and $25.8 million, respectively, during the three months ended  September 30, 2022. The impairment assessment concluded that the fair value of the Renewables reporting unit was in excess of its carrying amount, which was negative. After impairments the Company had $7.0 million of goodwill remaining associated with Orbital Solar Services ("OSS") acquired in 2020. At the same time as the goodwill impairment, the Company assessed the other intangibles in the Renewables segment and determined that the Customer relationship intangible was fully impaired and the remaining $4.3 million of book value was written off. 

In the fourth quarter of 2022, triggering events were identified which led to performing an additional Indefinite-lived intangibles impairment test. These events included a further decrease in the Company's market capitalization, the significant loss in the Renewables segment, interest rate increases and limitations on accessing capital, which raised substantial doubt regarding the Company's ability to continue as a going concern.  The Company's intangible assets were valued using a relief from royalties method which resulted in impairment. The impairment assessment included significant assumptions related to revenue growth rates, royalty rates, and discount rates. For the year ended December 31, 2022, management concluded that Indefinite-lived intangibles were impaired by $9.3 million dollars primarily attributable to the Front Line and GTS trade names.

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.

The following table reflects the carrying amount of goodwill as of  December 31, 2022 and 2021, and the 2022 activity:

(In thousands)	Electric Power			Telecommunications			Renewables		Other		Total
Balance, December 31, 2021	$	70,151		$	23,742		$	7,006	$	—	$	100,899
Acquisition of Coax Fiber Solutions		—			1,530			—		—		1,530
Working capital adjustment		—			528			—		—		528
Impairment		(70,151	)		(25,800	)		—		—		(95,951	)
Balance, December 31, 2022	$	—		$	—		$	7,006	$	—	$	7,006

See Note 17 - Business Combinations for more information on Goodwill.

Other intangible assets

At December 31, 2022 and 2021, 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, 2022										December 31, 2021
	Estimated Useful Life (in years)		Weighted average remaining amortization period		Gross Carrying Amount		Accumulated Amortization			Impairment			Identifiable Intangible Assets, less Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Identifiable Intangible Assets, less Accumulated Amortization
Electric Power
Order backlog		1		—		9,186		(9,186	)		—			—		9,186		(1,148	)		8,038
Customer relationships - Front Line		15		13.89		84,012		(6,301	)		—			77,711		84,012		(700	)		83,312
Total Electric Power						93,198		(15,487	)		—			77,711		93,198		(1,848	)		91,350
Telecommunications
Customer Relationships - GTS		10		8.29	$	16,075	$	(2,760	)	$	—		$	13,315	$	16,075	$	(1,152	)	$	14,923
Customer Relationships - IMMCO		10		8.58		3,800		(547	)		—			3,253		3,800		(158	)		3,642
Customer Relationships - Full Moon		10		8.82		210		(25	)		—			185		210		(4	)		206
Technology - Know How		4		2.58		1,459		(519	)		—			940		1,459		(152	)		1,307
Software - IMMCO		3		1.23		1,126		(519	)		—			607		547		(93	)		454
Non-compete agreements - GTS		5		3.29		385		(132	)		—			253		385		(55	)		330
Total Telecommunications						23,055		(4,502	)		—			18,553		22,476		(1,614	)		20,862
Renewables
Customer Relationships		5		—		—		—			(4,323	)		—		8,647		(3,027	)		5,620
Trade name - Reach Construction Group		1		—		1,878		(1,878	)		—			—		1,878		(1,878	)		—
Non-compete agreements		5		2.25		3,212		(1,767	)		—			1,445		3,212		(1,124	)		2,088
Total Renewables						5,090		(3,645	)		(4,323	)		1,445		13,737		(6,029	)		7,708
Other category
Computer software		3		—		726		(726	)		—			—		713		(713	)		—
Product certifications		3		—		—		—			—			—		36		(36	)		—
Total Other category						726		(726	)		—			—		749		(749	)		—
Total identifiable finite-lived other intangible assets						122,069		(24,360	)		(4,323	)		97,709		130,160		(10,240	)		119,920
Identifiable indefinite-lived other intangible assets
Electric Power
Trade name - Front Line						15,027		—			(7,383	)		7,644		15,027		—			15,027
Telecommunications
Trade name - GTS						6,388		—			(1,746	)		4,642		6,388		—			6,388
Trade name - IMMCO						1,162		—			(182	)		980		1,162		—			1,162
Trade name - Full Moon						159		—			—			159		159		—			159
Total Telecommunications						7,709		—			(1,928	)		5,781		7,709		—			7,709
Total identifiable indefinite-lived other intangible assets						22,736		—			(9,311	)		13,425		22,736		—			22,736
Total identifiable other intangible assets					$	144,805	$	(24,360	)	$	(13,634	)	$	111,134	$	152,896	$	(10,240	)	$	142,656

Intangible asset amortization by category was as follows:

	For the Years Ended December 31,
(In thousands)	2022		2021
Trade name	$	—	$	469
Customer relationships		8,915		3,744
Technology - Know How		368		152
Computer software		427		96
Noncompete agreements		720		697
Order Backlog		8,038		1,148
Intangibles held by discontinued operations		—		1,396
Total amortization	$	18,468	$	7,702

Estimated future amortization by category of finite-lived intangible assets at  December 31, 2022 was as follows:

	For the Years Ended December 31,
											2028 and
(In thousands)	2023		2024		2025		2026		2027		thereafter		Totals
Customer relationships	$	7,609	$	7,609	$	7,609	$	7,609	$	7,609	$	56,419	$	94,464
Technology-Know How		365		365		210		—		—		—		940
Computer software		466		141		—		—		—		—		607
Non-compete agreements		719		719		238		22		—		—		1,698
Total amortization	$	9,159	$	8,834	$	8,057	$	7,631	$	7,609	$	56,419	$	97,709

The Company tests for impairment of Indefinite-lived intangibles in the second quarter of each year and when events or circumstances indicate that the carrying amount of Indefinite-lived intangibles exceeds its fair value and may not be recoverable.

During the third and fourth quarter of 2022, triggering events were identified which led to performing Indefinite-lived intangibles impairment testing.  These events included a further decrease in the Company's market capitalization, the significant loss in the Renewables segment, interest rate increases and limitations on accessing capital, which raised substantial doubt regarding the Company's ability to continue as a going concern.  The Company's intangible assets were valued using a relief from royalties method which resulted in impairment in Q4 2022. For the year ended  December 31, 2022, management concluded that Indefinite-lived intangibles were impaired by $9.3 million dollars.