Impairment of Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Impairment of Goodwill and Intangible Assets

4. Impairment of Goodwill and Intangible Assets

The annual goodwill and indefinite-lived intangibles impairment test was performed using the qualitative assessment option as of October 1, 2019 for the Southern, Southwest and Vertex reporting units, resulting in a conclusion that it was more-likely-than-not that the fair value of the reporting units exceeded their respective carrying values except for certain tradenames of the Southwest reporting unit for which a quantitative test was necessary and an impairment charge of $0.1 million was recorded in 2019. 

In 2018, a quantitative assessment was performed in which the fair values of the reporting units were estimated using a discounted cash flow model (income approach) and a guideline public company method (market approach), giving 50% weight to each. The material assumptions used included cash flows based on future expected performance for the reporting units, weighted average costs of capital ranging from 11.5% to 15.0%, a long-term growth rate of 3% for the income approach and a control premium of 25.0% for the guideline public company method. The results of the test indicated that certain of the tradenames at Southwest were impaired. Accordingly, a charge of less than $0.1 million was recorded for 2018.

The Company is still anticipating significant growth in the businesses acquired in 2010 and in 2016. If this projected growth is not achieved and or there are future reductions in our market capitalization or market multiples, further goodwill and intangible assets impairments may result.