Goodwill and Other Intangible Assets

9 Months Ended

Mar. 28, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

As of March 28, 2014, the Company had $31,679 of goodwill, and the Company does not believe there were any events or changes in circumstances since the last goodwill assessment on April 26, 2013 that would indicate the fair value of goodwill was more-likely-than-not reduced to below its carrying value. Accordingly, goodwill was not tested for impairment during the current fiscal quarter.

On January 2, 2014, the Company acquired all of the outstanding stock of EMCOR Energy Services, Inc. ("EES"), a subsidiary of EMCOR Group, Inc., headquartered in San Francisco, California. EES provides engineering and related consulting services to utilities to support their energy programs in California. Services include engineering, technical review, verification, and administration of utilities’ energy efficiency programs. The initial purchase price of $1,644 consisted of a cash payment of $1,400, and a $244 net working capital adjustment. EES is being integrated into the Company's Energy operating segment. Goodwill of $247, none of which is expected to be tax deductible, and other intangible assets of $861 were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The fair values of assets and liabilities of the EES acquisition have been recorded in the Energy operating segment and are included in the unaudited balance sheet based on a preliminary allocation of the purchase price. These allocations will be finalized as soon as the remaining information becomes available and working capital adjustments are completed, which will be within one year from the acquisition date. The impact of this acquisition was not material to the Company's condensed consolidated balance sheets and results of operations.

On July 22, 2013, the Company acquired all of the outstanding stock of Utility Support Systems, Inc. ("USS"), headquartered in Douglasville, Georgia. USS provides engineering and related services primarily supporting the power/utility market. The initial purchase price of approximately $5,027 consisted of cash of $2,500 payable at closing, a second cash payment of $1,803 payable on the one-year anniversary of the closing date subject to withholding for various contractual issues, and 34 shares of the Company's common stock valued at $295 on the closing date. The selling shareholders are also entitled to contingent cash consideration through an earn-out provision based on net service revenue ("NSR") performance of the acquired firm over the twelve month period following closing. The Company estimated the fair value of the contingent earn-out liability to be $504 based on the projections and probabilities of reaching the performance goals through July 2014. Goodwill of $2,180, none of which is expected to be tax deductible, and other intangible assets of $2,056 were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The fair values of assets and liabilities of the USS acquisition have been recorded in the Energy operating segment and are included in the unaudited balance sheet based on a preliminary allocation of the purchase price. These allocations will be finalized as soon as the remaining information becomes available and working capital adjustments are completed, which will be within one year from the acquisition date. The impact of this acquisition was not material to the Company's condensed consolidated balance sheets and results of operations.

The changes in the carrying amount of goodwill for the nine months ended March 28, 2014 by operating segment are as follows:



	Gross									Gross
	Balance,		Accumulated			Balance,				Balance,		Accumulated			Balance,
	July 1,		Impairment			July 1,		Additions /		March 28,		Impairment			March 28,
Operating Segment	2013		Losses			2013		Adjustments		2014		Losses			2014
Energy	$	24,954	$	(14,506	)	$	10,448	$	2,882	$	27,836	$	(14,506	)	$	13,330
Environmental	36,214		(17,865		)	18,349		$	—	36,214		(17,865		)	18,349
Infrastructure	7,224		(7,224		)	—		$	—	7,224		(7,224		)	—
	$	68,392	$	(39,595	)	$	28,797	$	2,882	$	71,274	$	(39,595	)	$	31,679

Other Intangible Assets

Identifiable intangible assets as of March 28, 2014 and June 30, 2013 are included in other assets on the condensed consolidated balance sheets and were comprised of:



	March 28, 2014							June 30, 2013
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
Identifiable intangible assets	Amount		Amortization			Amount		Amount		Amortization			Amount
With determinable lives:
Customer relationships	$	12,125	$	(3,700	)	$	8,425	$	9,349	$	(1,711	)	$	7,638
Contract backlog	110		(41		)	69		259		(194		)	65
	12,235		(3,741		)	8,494		9,608		(1,905		)	7,703
With indefinite lives:
Engineering licenses	426		—			426		426		—			426
	$	12,661	$	(3,741	)	$	8,920	$	10,034	$	(1,905	)	$	8,129

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.

Identifiable intangible assets with determinable lives are being amortized over a weighted-average period of approximately 6 years. The weighted-average periods of amortization by intangible asset class is approximately 7 years for client relationship assets and 8 months for contract backlog. The amortization of intangible assets for the three and nine months ended March 28, 2014 was $755 and $2,127, respectively. The amortization of intangible assets for the three and nine months ended was March 29, 2013 was $570 and $1,027 respectively.

Estimated amortization expense of intangible assets for the remainder of fiscal year 2014 and succeeding fiscal years is as follows:



Fiscal Year		Amount
2014		$	741
2015		2,483
2016		1,999
2017		1,564
2018		1,112
2019 and thereafter		595
	Total	$	8,494

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. There were no events or changes in circumstances that would indicate the fair value of intangible assets was reduced to below its carrying value during the nine months ended March 28, 2014, and therefore intangible assets were not tested for impairment.

- 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.

+ References+ Details