Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

The Company’s goodwill and intangible assets consist of the following:


	September 30, 2020				December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Definite-lived intangibles:
Customer relationships	$	78,942	$	(28,859)	$	78,942	$	(22,938)
Technology	2,003		(501)		2,003		(351)
Non-compete and other agreements	289		(289)		289		(253)
SCB trade name	694		(503)		694		(243)
Rail easement	110		(110)		110		(110)
Total	$	82,038	$	(30,262)	$	82,038	$	(23,895)

Indefinite-lived intangibles:
Charah trade name	$	34,330			$	34,330
Goodwill	74,213				74,213
Total	$	108,543			$	108,543

Definite-Lived Intangible Assets

As of September 30, 2020 and December 31, 2019, definite-lived intangible assets included customer relationships, technology, non-compete and other agreements, the SCB trade name and a rail easement. These assets are amortized on a straight-line basis over their estimated useful lives as shown in the table below. Amortization expense of definite-lived intangibles was $2,215 and $2,094 during the three months ended September 30, 2020 and 2019, respectively, and $6,367 and $6,305 during the nine months ended September 30, 2020 and 2019, respectively.


Definite-Lived Intangible Asset						Useful Life
Customer relationships						10 years
Technology						10 years
Non-compete and other agreements						2 years
SCB trade name						3 years
Rail easement						2 years

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess purchase price over the fair value of the net assets acquired in a business combination. Our goodwill included in the unaudited condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 was $74,213. Our intangible assets, net as of September 30, 2020 and December 31, 2019 include a trade name valued at $34,330 that is considered to have an indefinite life.

Goodwill and indefinite-lived intangible assets are not amortized, but instead are tested for impairment annually or more often if events or changes in circumstances indicate that the fair value of the asset may have decreased below its carrying value. We perform our impairment test effective October 1st of each year and evaluate for impairment indicators between annual impairment tests. The Company identified a triggering event during the quarter ended June 30, 2020 for the Environmental Solutions reporting unit that was primarily attributable to the declining macroeconomic environment resulting from the COVID-19 pandemic and its potential impact on the Company and its industry. The Company performed the impairment analysis for the Environmental Solutions reporting unit and determined that no impairment of goodwill occurred as a result of this triggering event. The Environmental Solutions reporting unit’s fair value, as calculated, was approximately 6.0% greater than its book value as of June 1, 2020, the date of our impairment analysis. We determined that there were no additional indicators of impairment at September 30, 2020 in the Environmental Solutions or Maintenance and Technical Services reporting units.

The valuation used to test goodwill for impairment is dependent upon a number of significant estimates and assumptions, including macroeconomic conditions, growth rates, competitive activities, cost containment, margin expansion and the Company's business plans. We believe these estimates and assumptions are reasonable. However, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill, including discount and tax rates or future cash flow projections, could result in significantly different estimates of the fair values. As a result of these factors and the related cushion as of the date of the previous annual impairment test, goodwill for the Environmental Solutions reporting unit is more susceptible to impairment risk.

The most significant assumptions utilized in the determination of the estimated fair value of the Environmental Solutions reporting unit are the net sales and earnings growth rates (including residual growth rates) and the discount rate. The residual growth rate represents the rate at which the reporting unit is expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimate is consistent with the reporting unit operating plans and approximates expected long-term category market growth rates and inflation. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other factors.

While management can and has implemented strategies to address these events, changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the reporting unit's goodwill balance. The table below provides a sensitivity analysis for the Environmental Solutions reporting unit, utilizing reasonably possible changes in the assumptions for the shorter-term revenue and residual growth rates and the discount rate, to demonstrate the potential impacts to the estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to (i) a 50-basis point increase to the discount rate assumption and (ii) a 75-basis point decrease to our shorter-term revenue and residual growth rates assumptions, both of which would result in impairment charges.


	Approximate Percent Decrease in Estimated Fair Value
	+50 bps Discount Rate		-75 bps Growth Rate
Environmental Solutions reporting unit	6.3	%	7.9	%