Ameresco, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangible Assets

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying value of goodwill attributable to each reportable segment are as follows:



	U.S. Regions		U.S. Federal		Canada			Other			Total
Balance, December 31, 2013	$	24,759	$	3,375	$	4,124		$	20,816		$	53,074
Goodwill acquired during the year	—		—					7,590			7,590
Fair value adjustments(1)	—		—		—			641			641
Currency effects	—		—		(343		)	(483		)	(826		)
Balance, December 31, 2014	24,759		3,375		3,781			28,564			60,479
Goodwill acquired during the year	—		—		—			—			—
Fair value adjustments(2)	—		—		—			(403		)	(403		)
Currency effects	—		—		(619		)	(372		)	(991		)
Balance, December 31, 2015	$	24,759	$	3,375	$	3,162		$	27,789		$	59,085
Accumulated Goodwill Impairment Balance, December 31, 2014	$	—	$	—	$	(1,016	)	$	—		$	(1,016	)
Accumulated Goodwill Impairment Balance, December 31, 2015	$	—	$	—	$	(1,016	)	$	—		$	(1,016	)

(1) Fair value adjustment represents a final purchase accounting adjustment to decrease the recorded fair value of certain acquired intangible assets totaling $801, net of a $160 deferred tax liability adjustment, related to the Company’s prior year acquisition of ESP (now known as Ameresco Limited).

(2) Fair value adjustment represents the final net working capital adjustment for purchase accounting related to the Company’s prior year acquisition of Energyexcel LLP (“EEX”).

The measurement periods for purchase price allocations end as soon as information on the facts and circumstances becomes available, but do not exceed 12 months. Adjustments in purchase price allocations may require a recasting of the amounts allocated to goodwill retroactively to the periods in which the acquisitions occurred.

In accordance with ASC 350, goodwill was tested for impairment as of December 31, 2015, 2014 and 2013 at the reporting unit level using a discounted cash flow method under the income approach and with a peer-based, risk-adjusted weighted average cost of capital. No instances of impairment were identified in the December 31, 2015, 2014 or 2013 assessments. Based on the Company’s goodwill impairment assessment, all of the Company’s reporting units with goodwill had estimated fair values as of December 31, 2015 that exceeded their carrying values by at least 13%, with the exception of our Integrated-PV reporting unit which had a fair value that exceeded its carrying value by 5%. This reporting unit had goodwill of $7.6 million at December 31, 2015.

The Company performed a Step 1 test at its December 31, 2015, 2014 and 2013 annual testing dates, and concluded that Step 1 was passed as the fair value of the enterprise value exceeded the carrying value of the enterprise value for all reporting units. However, during the course of the valuation analysis it was determined that although the fair value of the Company’s Canada reporting unit exceeded the carrying amount of this reporting unit, as of December 31, 2015 the carrying value of the Canada reporting unit was negative. This determination, combined with qualitative considerations, prompted the performance of the Step 2 test as prescribed under ASC 350, recognizing and measuring the amount of the impairment loss, if any. Step 2 of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of the goodwill. The fair value of this goodwill can only be measured as a residual after the entity assigns the fair value of the reporting unit to all the assets and liabilities of that reporting unit, including any unrecognized intangible assets as if the reporting unit had been acquired in a business combination. The implied fair value of the goodwill of our Canada reporting unit exceeded the carrying value of that goodwill and as a result, no impairment of goodwill has been identified.

Customer contracts are amortized ratably over the period of the acquired customer contracts ranging in periods from approximately one to five years. All other intangible assets are amortized over periods ranging from approximately four to fifteen years, as defined by the nature of the respective intangible asset.

Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives. The Company annually assesses whether a change in the life over which the Company’s assets are amortized is necessary or more frequently if events or circumstances warrant. No changes to useful lives were made during the years ended December 31, 2015, 2014 and 2013.

The gross carrying amount and accumulated amortization of intangible assets are as follows:



	As of December 31,
	2015		2014
Gross Carrying Amount
Customer contracts	$	7,898	$	8,103
Customer relationships	12,496		12,792
Non-compete agreements	3,324		3,402
Technology	2,701		2,794
Trade names	540		551
	26,959		27,642
Accumulated Amortization
Customer contracts	7,683		6,911
Customer relationships	6,621		4,562
Non-compete agreements	3,149		2,725
Technology	2,241		1,767
Trade names	495		439
	20,189		16,404
Intangible assets, net	$	6,770	$	11,238

Amortization expense related to customer contracts is included in cost of revenues in the consolidated statements of income (loss). Amortization expense related to customer relationships, non-compete agreements, technology and trade names is included in selling, general and administrative expenses in the consolidated statements of income (loss). Amortization expense for the years ended December 31, 2015, 2014 and 2013 is as follows:



	Year Ended December 31,
	2015		2014		2013
Customer contracts	$	932	$	1,673	$	1,550
Customer relationships	2,139		1,688		1,643
Non-compete agreements	494		805		968
Technology	528		490		517
Trade names	57		82		124
Total intangible amortization expense	$	4,150	$	4,738	$	4,802

Estimated amortization expense for existing intangible assets for the next five succeeding fiscal years is as follows:



	Estimated Amortization
	Included in Cost of Revenues		Included in Selling, General and Administrative Expenses
2016	$	192	$	2,273
2017	35		1,617
2018	3		1,101
2019	3		779
2020	2		544

- 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.

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