XML 34 R13.htm IDEA: XBRL DOCUMENT v3.20.4
Goodwill and Intangible Assets
 12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Intangible Assets
Goodwill
The following table presents the changes in the carrying amount of goodwill since its inception through December 31, 2020:
(in thousands)CivilBuildingSpecialty
Contractors		Total
Gross goodwill as of December 31, 2018$492,074 $424,724 $156,193 $1,072,991 
Accumulated impairment as of December 31, 2018(76,716)(411,269)— (487,985)
Goodwill as of December 31, 2018415,358 13,455 156,193 585,006 
2019 impairment(210,215)(13,455)(156,193)(379,863)
Goodwill as of December 31, 2019205,143 — — 205,143 
Current year activity— — — — 
Goodwill as of December 31, 2020(a)
$205,143 $— $— $205,143 
_____________________________________________________________________________________________________________
(a)As of December 31, 2020, accumulated impairment was $867.8 million.
The Company performed its annual impairment test in the fourth quarter of 2020 and concluded goodwill was not impaired. In addition, the Company determined that no triggering events occurred and no circumstances changed since the date of our annual impairment test that would more likely than not reduce the fair value of the Civil reporting unit below its carrying amount.
During the year ended December 31, 2020, the novel coronavirus (“COVID-19”) pandemic, as well as the actions taken to contain and mitigate its public health effects, caused disruptions in domestic and global economies and financial markets. The vast majority of the Company’s projects, especially in its Civil reporting unit, have been designated as essential business, which allows the Company to continue its work on those projects. However, due to the fluidity of the pandemic, uncertainties as to its scope and duration, and ongoing changes in the way that governments, businesses and individuals are affected, the pandemic's future impact on the Company’s business, financial condition or performance remains uncertain. Among other things, governments could prohibit the continuation of certain projects that to date have been designated as “essential” or could impose health, safety and other operational requirements on such projects that could result in delays or suspensions of such projects. In addition, employees and contractors working on such projects could be unable or unwilling to continue working on them, perhaps for extended periods, because they may be unable or unwilling to be immunized against COVID-19, or for other reasons. The COVID-19 pandemic also could negatively affect the ability of counterparties or joint venture partners to make required payments on a timely basis or at all.
The Company considered the above factors in its annual impairment test in the fourth quarter of 2020. The Company will continue to monitor events and circumstances for changes that indicate the Civil reporting unit goodwill would need to be reevaluated for impairment during future interim periods prior to the annual impairment test. These future events and
circumstances include, but are not limited to, changes in the overall financial performance of the Civil reporting unit, impacts to our business as a result of the COVID-19 pandemic, as well as other quantitative and qualitative factors which could indicate potential triggering events for possible impairment.
Second Quarter of 2019 Goodwill Impairment
The net change in the carrying amount of goodwill for the year ended December 31, 2019 was primarily due to a goodwill impairment charge of $379.9 million recorded in the second quarter of 2019. In connection with the preparation of its quarterly financial statements during the second quarter of 2019, the Company assessed the changes in circumstances that occurred during the quarter to determine whether it was more likely than not that the fair values of any of its reporting units were below their carrying amounts. While there was no single determinative event or factor, potential triggering events identified in the accounting guidance (ASC 350, Intangibles – Goodwill and Other) developed during the second quarter of 2019, which led the Company to conclude that, when considering the events and factors in totality, it was more likely than not that the fair values of each of its reporting units were below their carrying amounts. The triggering factors included:
•The Company faced a declining stock price and observed a sustained decrease subsequent to the filing of the Company’s first quarter Form 10-Q on May 8, 2019, in both absolute terms and relative to its peers. Consistent with the average stock prices of companies in its peer group, the Company’s stock price had been trending lower over several prior periods; however, during the second quarter of 2019, the Company’s stock price dropped to a 52-week low while the average stock price of companies in its peer group increased. The Company believes that delays experienced in resolving certain claims and unapproved change orders, which when combined with the increased working capital needs and significant negative operating cash flows in the first quarter of 2019, has contributed significantly to the sustained decrease in the Company’s stock price;
•The Company experienced significant negative operating cash flows from each of its reporting units in the first quarter of 2019, and that trend continued at the beginning of the second quarter; and
•The Company’s debt rating was downgraded by a major credit rating agency on May 17, 2019.
As the Company determined that it was more likely than not that the fair values of its reporting units were below their carrying amounts, the Company performed an interim impairment test as of June 1, 2019 (the “Interim Test”) and, as described below, recognized a non-cash impairment loss totaling $379.9 million.
The decrease in the Company’s stock price reduced its total market capitalization and increased the implied control premium to a level beyond observable market-comparable data. As a result, when performing the Interim Test, the Company increased the discount rates and the projected investments in working capital compared to the assumptions used in the previous October 1, 2018 test, which extended the timing of certain expected future cash flows in the calculation of fair value under the income-based approach. The Company believes these changes were consistent with market participant inputs as reflected in the decrease in the Company’s market valuation at that time.
Consistent with the previous October 1, 2018 test, the Company utilized a weighted average of (1) an income approach and (2) a market approach to determine the fair value of the Company and each of its reporting units for the Interim Test. The income approach was based on estimated present value of future cash flows for each reporting unit. The market approach was based on assumptions about how market data relates to each reporting unit. The weighting of these two approaches was based on their individual correlation to the economics of each reporting unit as impacted by factors such as the availability of comparable market data for each reporting unit.
Assessing impairment inherently involves management judgments as to the assumptions used to calculate fair value of the reporting units and the impact of market conditions on those assumptions. The key inputs that the Company uses in its assumptions to estimate the fair value of its reporting units under the income-based approach are as follows:
•Weighted-average cost of capital (“WACC”), the risk-adjusted rate used to discount the projected cash flows;
•Cash flows generated from existing work and new awards; and
•Projected operating margins.
Expected future after-tax operating cash flows of each reporting unit are discounted to a present value using a risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning future operating performance including cash flows generated from existing work and new awards, projected operating margins, variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows, as well as future economic conditions, which may differ from actual future cash flows. The discount rate, which is intended to reflect the risks inherent in future cash flow projections, used in estimating the present value of future cash flows, is based on estimates of the WACC of
market participants relative to the reporting units. Financial and credit market volatility can directly impact certain inputs and assumptions used to develop the WACC.
To develop the cash flows generated from new awards and future operating margins, the Company tracks known prospects of significance for each of its reporting units and considers the estimated timing of when the work is expected to be bid, started and completed. The Company also gives consideration to its relationships with the prospective owners; the pool of competitors that are capable of performing large, complex work; business strategy; and the Company’s history of success in winning new work in each reporting unit. With regard to operating margins, the Company gives consideration to its historical reporting unit operating margins in the end markets that the prospective work opportunities are most significant, expected margins from existing work, current market trends in recent new work procurement, and business strategy.
The Company also estimated the fair value of its reporting units under a market-based approach by applying industry-comparable multiples of revenues and operating earnings to its reporting units’ revenues and operating earnings. The conditions and prospects of companies in the engineering and construction industry depend on common factors such as overall demand for services.
The Company believes that the discount rates, timing of cash flows and other inputs and assumptions used in the Interim Test were consistent with those that a market participant would use based on the events described above which occurred during the second quarter of 2019 and were reflective of the market assessment of the fair value of its reporting units at that time. In addition, the Company believes that its estimates and assumptions about future revenues and margin projections in the Interim Test were reasonable and consistent with the estimates and assumptions used in the annual goodwill impairment test as of October 1, 2018. As an additional step to corroborate the Interim Test results, the Company compared its implied control premium with those of recent comparable market transactions and concluded that the implied control premium was within the range of control premiums observed in prior industry-specific M&A transactions.
The assumption changes described above were relatively larger in the Specialty Contractors reporting unit than in the Civil or Building reporting units, as Specialty Contractors had not met recent market expectations at the time of the Interim Test.
Intangible Assets
Intangible assets consist of the following:
As of December 31, 2020Weighted-Average Amortization Period
(in thousands)CostAccumulated
Amortization		Accumulated Impairment ChargeCarrying Value
Trade names (non-amortizable)$117,600 $— $(67,190)$50,410 Indefinite
Trade names (amortizable)74,350 (23,754)(23,232)27,364 20 years
Contractor license6,000 — (6,000)— N/A
Customer relationships39,800 (22,103)(16,645)1,052 12 years
Construction contract backlog149,290 (105,001)— 44,289 3 years
Total$387,040 $(150,858)$(113,067)$123,115 
As of December 31, 2019Weighted-Average Amortization Period
(in thousands)CostAccumulated
Amortization		Accumulated Impairment ChargeCarrying Value
Trade names (non-amortizable)$117,600 $— $(67,190)$50,410 Indefinite
Trade names (amortizable)74,350 (21,267)(23,232)29,851 20 years
Contractor license6,000 — (6,000)— N/A
Customer relationships39,800 (21,048)(16,645)2,107 12 years
Construction contract backlog149,290 (76,388)— 72,902 3 years
Total$387,040 $(118,703)$(113,067)$155,270 
The Company performs its annual quantitative impairment assessment during the fourth quarter of each year for non-amortizable trade names. If the estimated fair value for the non-amortizable trade names exceeds their respective net book
values, no impairment charge is necessary. Other amortizable intangible assets are reviewed for impairment whenever circumstances indicate that the future cash flows generated by the assets might be less than the assets’ net carrying value. The Company had no impairment of intangible assets during the years ended December 31, 2020 or 2019.
Amortization expense related to amortizable intangible assets was $32.2 million and $6.2 million for the years ended December 31, 2020 and 2019, respectively. The increase in accumulated amortization for construction contract backlog was due to the acquisition of an additional interest in a joint venture during the fourth quarter of 2019, as discussed in Note 12. Future amortization expense related to amortizable intangible assets for the years 2021 and 2022 will be approximately $32.4 million and $17.9 million, respectively, $2.5 million for the years 2023, 2024 and 2025, and $14.9 million thereafter.