GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2018

NOTE 9. GOODWILL AND INTANGIBLE ASSETS

Changes in goodwill for the nine months ended September 30, 2018 consisted of the following:


					Field &
	Environmental				Industrial
	Services				Services
			Accumulated				Accumulated
$s in thousands	Gross		Impairment		Gross		Impairment		Total
Balance at December 31, 2017	$	150,699	$	(5,457)	$	44,131	$	—	$	189,373
ES&H Dallas acquisition		—		—		8,925		—		8,925
Impairment charges		—		(1,413)		—		—		(1,413)
Foreign currency translation		(506)		—		—		—		(506)
Balance at September 30, 2018	$	150,193	$	(6,870)	$	53,056	$	—	$	196,379

We assess goodwill for impairment during the fourth quarter as of October 1 of each year, and also if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

In connection with our annual budgeting process commencing in the third quarter and review of the projected future cash flows of our reporting units used in our annual assessment of goodwill, it was determined that the projected future cash flows of our Mobile Recycling reporting unit (described below), which is part of our Environmental Services segment, indicated that the fair value of the reporting unit may be below its carrying amount. Accordingly, we performed an interim assessment of the reporting unit’s goodwill as of September 30, 2018. Based on the results of that assessment, goodwill was deemed impaired and we recognized an impairment charge of $1.4 million in the third quarter of 2018, representing the reporting unit’s entire goodwill balance.

Our Mobile Recycling reporting unit operates a fleet of mobile solvent recycling stills that provide on-site recycling services throughout the Eastern United States. The trailer mounted stills are self-contained units that perform solvent distillation at the point of generation. Waste solvents are processed in 500 to 7,500 gallon batches, and clean solvent is returned for reuse. The factors contributing to the $1.4 million goodwill impairment charge principally related to declining business and cash flows, which negatively impacted the reporting unit’s prospective financial information in its discounted cash flow model and the reporting unit's estimated fair value as compared to previous estimates.

Intangible assets, net consisted of the following:


	September 30, 2018						December 31, 2017
			Accumulated						Accumulated
$s in thousands	Cost		Amortization		Net		Cost		Amortization		Net
Amortizing intangible assets:
Permits, licenses and lease	$	111,200	$	(14,324)	$	96,876	$	111,818	$	(12,459)	$	99,359
Customer relationships		87,751		(24,158)		63,593		84,977		(20,168)		64,809
Technology - formulae and processes		7,049		(1,755)		5,294		7,250		(1,630)		5,620
Customer backlog		3,652		(1,565)		2,087		3,652		(1,291)		2,361
Tradename		4,290		(4,290)		—		4,318		(4,318)		—
Developed software		2,898		(1,522)		1,376		2,926		(1,319)		1,607
Non-compete agreements		1,092		(757)		335		748		(748)		—
Internet domain and website		536		(121)		415		540		(100)		440
Database		388		(166)		222		393		(153)		240
Total amortizing intangible assets		218,856		(48,658)		170,198		216,622		(42,186)		174,436
Nonamortizing intangible assets:
Permits and licenses		46,424		—		46,424		48,241		—		48,241
Tradename		132		—		132		135		—		135
Total intangible assets	$	265,412	$	(48,658)	$	216,754	$	264,998	$	(42,186)	$	222,812

In connection with the interim goodwill impairment assessment of the Mobile Recycling reporting unit, we also assessed the reporting unit’s indefinite-lived permit intangible asset and other finite-lived tangible and intangible assets for impairment as of September 30, 2018. Based on the results of that assessment, the carrying amounts of the indefinite-lived permit intangible asset and other finite-lived intangible assets exceeded their estimated fair values and, as a result, we recognized a $2.3 million impairment charge in the third quarter of 2018. The factors and timing contributing to the indefinite-lived intangible asset and the other finite-lived intangible assets impairment charges were the same as the factors and timing described above with regards to the Mobile Recycling reporting unit goodwill impairment charge.

During the nine months ended September 30, 2018, the Company acquired ES&H Dallas and recorded $8.9 million of goodwill and $3.9 million of amortizing intangible assets (consisting primarily of customer relationships) as a result of the acquisition. See Note 3 for additional information.

Amortization expense was $2.3 million for each of the three months ended September 30, 2018 and 2017. Amortization expense for the nine months ended September 30, 2018 and 2017 was $6.9 million and $7.6 million, respectively. Foreign intangible asset carrying amounts are affected by foreign currency translation.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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