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Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2013
Goodwill and Intangible Assets  
Goodwill and Intangible Assets

(6)                       Goodwill and Intangible Assets

 

The Company tests goodwill and intangible assets with indefinite lives for impairment by applying a fair value test in the fourth quarter of each year and between annual tests if events occur or circumstances change that suggest a material adverse change to the most recently concluded valuation.  Intangible assets with finite lives are also tested for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. The Company did not observe any changes in facts or circumstances during the three months ended September 30, 2013 that would suggest a material decline in the value of goodwill and intangible assets as concluded in the fourth quarter of the year ended December 31, 2012.  At December 31, 2012, the fair value of the Management Services reporting unit exceeded its carrying value by 4.5%, while the fair values of the Building, Civil and Specialty Contractors reporting units exceeded their carrying values by more than 10%.  The Management Services reporting unit experienced a shortfall in its performance during the first nine months of 2013 compared to previous expectations primarily due to a deteriorating security environment in Afghanistan and constraints in government funding necessary for construction to proceed. The impacts of sequestration, the temporary U.S. government shutdown, debt ceiling negotiations and the temporary resolutions reached subsequent to the period ended September 30, 2013 have led to inconsistent hesitations on the part of several agencies and programs to commit monies to full-scale, high-dollar projects despite previous commitments and legislative resolutions. Despite these political impacts, the Management Services reporting unit and its competitors have been awarded Indefinite-delivery-indefinite-quantity (“IDIQ”) contracts with significant funding ceilings, although the timing of the actual funding and subsequent release of individual task orders under those contracts continues to be sporadic. These cost cutting measures have not happened in all areas nor in any consistent manner to date. The Company will continue to assess whether the current uncertainty around government funding is short-term or long-term in nature, will consider additional opportunities not linked to U.S. government funding, and will conclude on the impacts that this may or may not have on the valuation of the Management Services reporting unit during its annual test in the fourth quarter of 2013.

 

The following table presents the carrying amount of goodwill allocated to the Company’s reporting units as of September 30, 2013:

 

 

 

 

 

 

 

Specialty

 

Management

 

 

 

 

 

Building

 

Civil

 

Contractors

 

Services

 

Total

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Goodwill Balance

 

$

420,267

 

$

429,893

 

$

141,833

 

$

66,638

 

$

1,058,631

 

Accumulated Impairment

 

(409,765

)

(55,740

)

 

(22,480

)

(487,985

)

Balance at December 31, 2012

 

$

10,502

 

$

374,153

 

$

141,833

 

$

44,158

 

$

570,646

 

Goodwill recorded in connection with an acquisition

 

 

 

1,286

 

 

1,286

 

Balance at September 30, 2013

 

$

10,502

 

$

374,153

 

$

143,119

 

$

44,158

 

$

571,932

 

 

During the quarter ended September 30, 2013, the Company acquired a small fire protection systems contractor.  As this acquisition is immaterial, no proforma disclosures are presented herein.

 

Intangible assets consist of the following:

 

 

 

September 30, 2013

 

Weighted

 

 

 

 

 

 

 

Accumulated

 

 

 

Average

 

 

 

 

 

Accumulated

 

Impairment

 

Carrying

 

Amortization

 

 

 

Cost

 

Amortization

 

Charge

 

Value

 

Period

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names (non-amortizable)

 

$

117,600

 

$

 

$

(67,190

)

$

50,410

 

Indefinite

 

Trade names (amortizable)

 

74,350

 

(5,719

)

(23,232

)

45,399

 

20 years

 

Contractor license

 

6,000

 

 

(6,000

)

 

Indefinite

 

Customer relationships

 

39,800

 

(13,993

)

(16,645

)

9,162

 

11.4 years

 

Construction contract backlog

 

73,706

 

(61,667

)

 

12,039

 

3.6 years

 

Total

 

$

311,456

 

$

(81,379

)

$

(113,067

)

$

117,010

 

 

 

 

 

 

December 31, 2012

 

Weighted

 

 

 

 

 

 

 

Accumulated

 

 

 

Average

 

 

 

 

 

Accumulated

 

Impairment

 

Carrying

 

Amortization

 

 

 

Cost

 

Amortization

 

Charge

 

Value

 

Period

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names (non-amortizable)

 

$

117,600

 

$

 

$

(67,190

)

$

50,410

 

Indefinite

 

Trade names (amortizable)

 

74,350

 

(3,854

)

(23,232

)

47,264

 

20 years

 

Contractor license

 

6,000

 

 

(6,000

)

 

Indefinite

 

Customer relationships

 

39,800

 

(13,029

)

(16,645

)

10,126

 

11.4 years

 

Construction contract backlog

 

73,706

 

(54,685

)

 

19,021

 

3.6 years

 

Total

 

$

311,456

 

$

(71,568

)

$

(113,067

)

$

126,821

 

 

 

 

Amortization expense for the three and nine months ended September 30, 2013 totaled $3.3 million and $9.8 million, respectively.  Amortization expense for the three and nine months ended September 30, 2012 totaled $3.6 million and $15.0 million, respectively.  As of September 30, 2013, amortization expense is estimated to be $3.3 million for the remainder of 2013, $11.9 million in 2014, $5.3 million in 2015, $3.5 million in 2016, $3.5 million in 2017 and $39.1 million thereafter.