Goodwill and Other Intangible Assets

The Company performed its most recent annual goodwill impairment test as of April 29, 2016, and noted the fair value of each of the Company's reporting units with goodwill exceeded its carrying value, and therefore, no further analysis was required.

As of June 30, 2016, the Company had $75,337 of goodwill. The Company does not believe there were any events or changes in circumstances since its April 2016 annual assessment that would indicate the fair value of goodwill was more likely than not reduced to below its carrying value. In making this assessment, the Company relied on a number of factors including operating results, business plans, anticipated future cash flows, transactions and market data.

In performing the fiscal year 2016 and 2015 goodwill assessments, the Company utilized valuation methods, including the discounted cash flow method, the guideline company approach, and the guideline transaction approach as the best evidence of fair value. The weighting of the valuation methods used by the Company in both fiscal 2016 and 2015 was 50% discounted cash flows, 40% guideline company approach and 10% guideline transaction approach.

The key estimates and factors used in the income approach include, but are not limited to, revenue growth rates and profit margins based on internal forecasts, terminal value and the weighted-average cost of capital used to discount future cash flows. The key uncertainty in the revenue growth assumption used in the estimation of the fair value of the Energy operating segment reporting units is the level of investment electric utilities will make to modernize, expand, and enhance the electric transmission grid over the next several years. The key uncertainty in the revenue growth assumption used in the estimation of the fair value of the Environmental operating segment reporting units is the projected increase in capital spending on oil and gas pipelines, energy exploration and distribution projects, new power and generation sources, and increased environmental management strategies to comply with recent regulatory rule-making. The key uncertainty in the revenue growth assumption used in the estimation of the fair value of the Pipeline Services operating segment reporting units is the projected increase in capital spending tied to commodity pricing on oil and gas pipelines and related facilities, and timing of regulatory rule-making impacting the oil and gas market.

Virtually all of the assumptions used in the Company's models are susceptible to change due to national and regional economic conditions as well as competitive factors in the industry in which the Company operates. The forecasted cash flows the Company uses are derived from the annual long-range planning process that it performs and presents to its Board of Directors. In this process, each reporting unit is required to develop reasonable revenue, earnings and cash flow forecasts for the next five years based on current and forecasted economic conditions. For purposes of testing for impairment, the cash flow forecasts are adjusted as needed to reflect information that becomes available concerning changes in business levels and general economic trends. The discount rates used for determining discounted future cash flows are generally based on our weighted-average cost of capital and are then adjusted for "plan risk" (the risk that a business will fail to achieve its forecasted results). Finally, a growth factor beyond the five year period for which cash flows are planned is selected based on expectations of future economic conditions. While the Company believes the estimates and assumptions it uses are reasonable, various economic factors could cause the results of its goodwill testing to vary significantly.

As further discussed below, due to the economic conditions in the oil and gas commodity markets, current actual operating performance, and revised projected financial performance, we assessed the recoverability of goodwill within the two reporting units within the Pipeline Services operating segment during the three months ended March 25, 2016.

The impairment test for goodwill is a two-step process involving the comparison of the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. The Company estimates the fair value of reporting units based on a comparison and weighting of the income approach, specifically the discounted cash flow method, and the guideline company approach. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired; therefore, the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure the amount of impairment loss to be recorded. If goodwill is impaired, the Company is required to record a non-cash charge to reduce the carrying value of goodwill to its implied fair value.

The Company performed the first step of the impairment test for the two reporting units within the Pipeline Services operating segment, and in each case determined that the carrying value of the reporting unit exceeded its fair value indicating potential goodwill impairment. The significant change to the assumptions used in the interim impairment test during the three months ended March 25, 2016 compared to the assumptions utilized in the Pipeline Services operating segments initial November 2015 valuation were the projected net service revenue, operating income, and cash flows for each reporting unit tested, which were impacted by the continued market uncertainty in the oil and gas markets and current actual operating performance compared to the originally projected results.

The Company performed the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, of the applicable reporting units. The second step of the test requires the allocation of the reporting unit’s fair value to its assets and liabilities, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill is less than the carrying value, the difference is recorded as an impairment loss. Based on the results of the step two analysis, the Company recorded a preliminary goodwill impairment charge of $24,465 during the three months ended March 25, 2016. In the fourth quarter of fiscal 2016 the Company adjusted its preliminary purchase price allocation and the second step of the goodwill impairment test. These adjustments resulted in a $2,484 reduction of the initial impairment charge to an aggregate $21,981 for the fiscal year ended June 30, 2016.

Significant management judgments are necessary to evaluate the impact of operating and macroeconomic changes. Critical assumptions include projected net service revenue growth, profit margins, general and administrative expenses, working capital fluctuations, capital expenditures, discount rates and terminal growth rates. As of June 30, 2016 the second step of the analysis remains open, as the initial Pipeline Services purchase price allocation remains preliminary. Any future adjustments to the Pipeline Services purchase price allocation could materially impact the final charge for goodwill impairment.

The changes in the carrying amount of goodwill for fiscal year 2016 by operating segment are as follows:



	Gross									Gross
	Balance,		Accumulated			Balance,				Balance,		Accumulated			Balance,
	July 1,		Impairment			July 1,				June 30,		Impairment			June 30,
Operating Segment	2015		Losses			2015		Additions		2016		Losses			2016
Energy	$	28,506	$	(14,506	)	$	14,000	$	—	$	28,506	$	(14,506	)	$	14,000
Environmental	40,889		(17,865		)	23,024		—		40,889		(17,865		)	23,024
Infrastructure	7,224		(7,224		)	—		—		7,224		(7,224		)	—
Pipeline Services	—		—			—		60,294		60,294		(21,981		)	38,313
	$	76,619	$	(39,595	)	$	37,024	$	60,294	$	136,913	$	(61,576	)	$	75,337

The changes in the carrying amount of goodwill for fiscal year 2015 by operating segment are as follows:



	Gross									Gross
	Balance,		Accumulated			Balance,				Balance,		Accumulated			Balance,
	July 1,		Impairment			July 1,				June 30,		Impairment			June 30,
Operating Segment	2014		Losses			2014		Additions		2015		Losses			2015
Energy	$	27,836	$	(14,506	)	$	13,330	$	670	$	28,506	$	(14,506	)	$	14,000
Environmental	36,214		(17,865		)	18,349		4,675		40,889		(17,865		)	23,024
Infrastructure	7,224		(7,224		)	—		—		7,224		(7,224		)	—
	$	71,274	$	(39,595	)	$	31,679	$	5,345	$	76,619	$	(39,595	)	$	37,024

Identifiable intangible assets as of June 30, 2016 and 2015 were comprised of:



	June 30, 2016							June 30, 2015
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
Identifiable intangible assets	Amount		Amortization			Amount		Amount		Amortization			Amount
With determinable lives:
Customer relationships	$	59,218	$	(14,933	)	$	44,285	$	16,618	$	(7,740	)	$	8,878
Contract backlog	900		(525		)	375		—		—			—
Technology	1,000		(117		)	883		—		—			—
	61,118		(15,575		)	45,543		16,618		(7,740		)	8,878

With indefinite lives:
Engineering licenses	426		—			426		426		—			426
	$	61,544	$	(15,575	)	$	45,969	$	17,044	$	(7,740	)	$	9,304

Identifiable intangible assets with determinable lives are amortized over their estimated useful lives and are also reviewed for impairment if events or changes in circumstances indicate that their carrying amount may not be realizable.

The weighted-average periods of amortization by intangible asset class for those with determinable lives is approximately 7 years for customer relationship assets, 1 year for contract backlog and 5 years for technology. The amortization of intangible assets for fiscal years 2016, 2015 and 2014 was $7,835, $3,502 and $2,868, respectively.

Estimated amortization expense of intangible assets for future periods is as follows:



Fiscal Year		Amount
2017		$	10,159
2018		9,183
2019		8,367
2020		7,821
2021		7,274
2022 and thereafter		2,739
	Total	$	45,543

On an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired, the fair value of the indefinite-lived intangible assets is evaluated by the Company to determine if an impairment charge is required. The Company performed its most recent annual impairment review as of April 29, 2016. As of the assessment date there was no impairment of the indefinite-lived intangible assets. There were no events or changes in circumstances that would indicate the fair value of indefinite-lived intangible assets was reduced to below its carrying value since the assessment date.