| Accounting Policies | ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and majority-owned subsidiaries in which the Company is deemed to be the primary beneficiary. All significant intercompany transactions and balances have been eliminated. Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenues Revenues include construction, engineering and installation revenues that are recognized using the percentage-of-completion method of accounting in the ratio of costs incurred to estimated final costs. Revenues from change orders, extra work and variations in the scope of work are recognized when it is probable that they will result in additional contract revenue and when the amount can be reliably estimated. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and equipment costs. The Company expenses all pre-contract costs in the period these costs are incurred. Since the financial reporting of these contracts depends on estimates, which are assessed continually during the term of these contracts, recognized revenues and profit are subject to revisions as the contract progresses to completion. A revision in profit estimates are reflected in the period in which the facts that give rise to the revision become known. If material, the effects of any changes in estimates are disclosed in the notes to the consolidated financial statements. When estimates indicate that a loss will be incurred on a contract, a provision for the expected loss is recorded in the period in which the loss becomes evident. Any revenue recognized is only to the extent costs have been recognized in the period. Additionally, the Company expenses all costs for unpriced change orders in the period in which they are incurred. Revenues from the Company’s Energy Services segment are derived mainly from multiple maintenance contracts under multi-year, long-term Master Service Agreements and alliance contracts, as well as engineering and construction type contracts. Businesses within Energy Services enter into customer contracts that contain three principal types of pricing provisions: time and materials, cost plus fixed fee and fixed price. Although the terms of these contracts vary, most are made pursuant to cost reimbursable contracts on a time and materials basis under which revenues are recorded based on costs incurred at agreed upon contractual rates. Energy Services also performs services on a cost plus fixed fee basis under which revenues are recorded based upon costs incurred at agreed upon rates and a proportionate amount of the fixed fee or percentage stipulated in the contract. Foreign Currency For the Company’s international subsidiaries, the local currency is generally the functional currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while revenues and expenses are translated into U.S. dollars using average exchange rates. The cumulative translation adjustment resulting from changes in exchange rates are included in the Consolidated Balance Sheets as a component of accumulated other comprehensive loss in total stockholders’ equity. The Company’s accumulated other comprehensive loss is comprised of three main components: (i) currency translation; (ii) derivatives; and (iii) gains and losses associated with the Company’s defined benefit plan in the United Kingdom (in thousands): December 31, 2017 2016 Currency translation adjustments (1) $ (35,928 ) $ (54,145 ) Derivative hedging activity 3,336 1,004 Pension activity (244 ) (359 ) Total accumulated other comprehensive loss $ (32,836 ) $ (53,500 ) __________________________ (1) Due to the weakening of the U.S. dollar, there was a substantial increase during 2017 with respect to certain functional currencies and their relation to the U.S. dollar, most notably the Canadian dollar, Australian dollar, British pound and euro. Net foreign exchange transaction losses of $3.3 million , $0.9 million and $0.1 million for 2017, 2016 and 2015, respectively, are included in “Other expense” in the Consolidated Statements of Operations. Research and Development The Company expenses research and development costs as incurred. Research and development costs of $4.2 million , $4.7 million and $2.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively, are included in “Operating expenses” in the consolidated statements of operations. Taxation The Company provides for estimated income taxes payable or refundable on current year income tax returns as well as the estimated future tax effects attributable to temporary differences and carryforwards, based upon enacted tax laws and tax rates, and in accordance with FASB ASC 740, Income Taxes (“FASB ASC 740”). FASB ASC 740 also requires that a valuation allowance be recorded against any deferred tax assets that are not likely to be realized in the future. The determination is based on the Company’s ability to generate future taxable income and, at times, is dependent on its ability to implement strategic tax initiatives to ensure full utilization of recorded deferred tax assets. Should the Company not be able to implement the necessary tax strategies, it may need to record valuation allowances for certain deferred tax assets, including those related to foreign income tax benefits. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowances recorded against net deferred tax assets. As a result of the reduction in the U.S. corporation income tax rate from 35% to 21% under the Tax Cuts and Jobs Act (“TCJA”), FASB ASC 740 required the Company to remeasure its deferred tax assets and liabilities based on tax rates at which the balances are expected to reverse in the future. The provisional amount recorded for the remeasurement of the Company’s deferred tax balances resulted in no adjustment to tax expense. The remeasurement of the deferred tax assets gave rise to an additional income tax expense of $5.1 million , which was offset by an equal reduction in the valuation allowance of $5.1 million . The Company continues to analyze certain aspects of the TCJA, including consideration of additional forthcoming technical guidance, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. In accordance with FASB ASC 740, tax benefits from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. In addition, this recognition model includes a measurement attribute that measures the position as the largest amount of tax that is greater than 50% likely of being realized upon ultimate settlement in accordance with FASB ASC 740. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes tax liabilities in accordance with FASB ASC 740 and adjusts these liabilities when judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. While the Company believes the resulting tax balances as of December 31, 2017 and 2016 were appropriately accounted for in accordance with FASB ASC 740, the ultimate outcome of such matters could result in favorable or unfavorable adjustments to the consolidated financial statements and such adjustments could be material. In connection with the Company’s initial analysis of the impact of the TCJA, it recorded a provisional estimated net tax expense of $2.4 million , which consisted of a charge of $10.4 million for the deemed mandatory repatriation, and reduced by a $7.1 million release of a deferred tax liability on unremitted foreign earnings and $0.9 million of other TCJA related impacts. On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, (“SAB 118”), directing a taxpayer to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for income tax effects of the TCJA. In accordance with SAB 118, the additional estimated income tax of $2.4 million represents the Company’s best estimate understanding that the provisional amount is subject to further adjustments under SAB 118. The Company continues to refine provisional balances, and adjustments may be made under SAB 118 during the measurement period as a result of future changes in interpretation, issuance of additional regulatory guidance from the U.S. federal and state tax authorities, or its own assumption changes. All accounting will be completed within the one-year measurement period allowed under SAB 118. The ultimate impact of the TCJA may differ from the current provisional amounts and the adjustments could be material. Refer to Note 10 for additional information regarding taxes on income. Earnings per Share Earnings per share have been calculated using the following share information: Years Ended December 31, 2017 2016 2015 Weighted average number of common shares used for basic EPS 33,150,949 34,713,937 36,554,437 Effect of dilutive stock options and restricted and deferred stock unit awards — 496,493 — Weighted average number of common shares and dilutive potential common stock used in dilutive EPS 33,150,949 35,210,430 36,554,437 The Company excluded 735,577 and 324,804 stock options and restricted and deferred stock units in 2017 and 2015, respectively, from the diluted earnings per share calculation for the Company’s common stock because of the reported net loss for each period. The Company excluded 73,897 , 77,807 and 164,014 stock options in 2017 , 2016 and 2015 , respectively, from the diluted earnings per share calculations for the Company’s common stock because they were anti-dilutive as their exercise prices were greater than the average market price of common shares for each period. Purchase Price Accounting The Company accounts for its acquisitions in accordance with FASB ASC 805, Business Combinations . The base cash purchase price plus the estimated fair value of any non-cash or contingent consideration given for an acquired business is allocated to the assets acquired (including identified intangible assets) and liabilities assumed based on the estimated fair values of such assets and liabilities. The excess of the total consideration over the aggregate net fair values assigned is recorded as goodwill. Contingent consideration, if any, is recognized as a liability as of the acquisition date with subsequent adjustments recorded in the consolidated statements of operations. Indirect and general expenses related to business combinations are expensed as incurred. The Company typically determines the fair value of tangible and intangible assets acquired in a business combination using independent valuations that rely on management’s estimates of inputs and assumptions that a market participant would use. Key assumptions include cash flow projections, growth rates, asset lives, and discount rates based on an analysis of weighted average cost of capital. Classification of Current Assets and Current Liabilities The Company includes in current assets and current liabilities certain amounts realizable and payable under construction contracts that may extend beyond one year. The construction periods on projects undertaken by the Company generally range from less than one month to 24 months. At December 31, 2017 , the Company’s balance in billings in excess of costs and estimated earnings was $51.6 million , which decrease d $11.1 million from $62.7 million at December 31, 2016 primarily due to the timing of billing and advance deposits received on certain pipe coating and insulation projects at our Bayou facility in Louisiana. Correspondingly, the Company’s balance in prepaid expenses and other current assets was $35.3 million at December 31, 2017 , a decrease of $16.6 million from $51.8 million at December 31, 2016 due primarily to the timing of advance deposits paid to suppliers on those same projects. Cash, Cash Equivalents and Restricted Cash The Company classifies highly liquid investments with original maturities of 90 days or less as cash equivalents. Recorded book values are reasonable estimates of fair value for cash and cash equivalents. Restricted cash primarily consists of funds reserved for legal requirements, payments from certain customers placed in escrow in lieu of retention in case of potential issues regarding future job performance by the Company, or advance customer payments and compensating balances for bank undertakings in Europe. Restricted cash related to operations is similar to retainage, and is, therefore, classified as a current asset, consistent with the Company’s policy on retainage. Changes in restricted cash flows are reported in the consolidated statements of cash flows based on the nature of the restriction. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Actual cost is used to value raw materials and supplies. Standard cost, which approximates actual cost, is used to value work-in-process, finished goods and construction materials. Standard cost includes direct labor, raw materials and manufacturing overhead based on normal capacity. For certain businesses within our Corrosion Protection segment, the Company uses actual costs or average costs for all classes of inventory. Retainage Many of the contracts under which the Company performs work contain retainage provisions. Retainage refers to that portion of revenue earned by the Company but held for payment by the customer pending satisfactory completion of the project. The Company generally invoices its customers periodically as work is completed. Under ordinary circumstances, collection from municipalities is made within 60 to 90 days of billing. In most cases, 5% to 15% of the contract value is withheld by the municipal owner pending satisfactory completion of the project. Collections from other customers are generally made within 30 to 45 days of billing. Unless reserved, the Company believes that all amounts retained by customers under such provisions are fully collectible. Retainage on active contracts is classified as a current asset regardless of the term of the contract. Retainage is generally collected within one year of the completion of a contract, although collection can extend beyond one year from time to time. As of December 31, 2017 , retainage receivables aged greater than 365 days approximated 10% of the total retainage balance and collectibility was assessed as described in the allowance for doubtful accounts section below. Allowance for Doubtful Accounts Management makes estimates of the uncollectibility of accounts receivable and retainage. The Company records an allowance based on specific accounts to reduce receivables, including retainage, to the amount that is expected to be collected. The specific allowances are reevaluated and adjusted as additional information is received. After all reasonable attempts to collect the receivable or retainage have been explored, the account is written off against the allowance. The Company also includes reserves related to certain accounts receivable that may be in litigation or dispute. Long-Lived Assets Property, plant and equipment and other identified intangibles (primarily customer relationships, patents and acquired technologies, trademarks, licenses and non-compete agreements) are recorded at cost, net of accumulated depreciation and impairment, and, except for goodwill and certain trademarks, are depreciated or amortized on a straight-line basis over their estimated useful lives. Changes in circumstances such as technological advances, changes to the Company’s business model or changes in the Company’s capital strategy can result in the actual useful lives differing from the Company’s estimates. If the Company determines that the useful life of its property, plant and equipment or its identified intangible assets should be changed, the Company would depreciate or amortize the net book value in excess of the salvage value over its revised remaining useful life, thereby increasing or decreasing depreciation or amortization expense. Long-lived assets, including property, plant and equipment and other intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such impairment tests are based on a comparison of undiscounted cash flows to the recorded value of the asset. The estimate of cash flow is based upon, among other things, assumptions about expected future operating performance. The Company’s estimates of undiscounted cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions, changes to its business model or changes in its operating performance. If the sum of the undiscounted cash flows is less than the carrying value, the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset. Impairment Review – 2017 As part of the 2017 Restructuring, which was approved by the Company’s board of directors on July 28, 2017, the Company exited all non-pipe related contract applications for the Tyfo ® system in North America. As a result of this action, the Company evaluated the long-lived assets of its Fyfe reporting unit, which caused the Company to review the financial performance of at-risk asset groups within the Fyfe reporting unit in accordance with FASB ASC 360, Property, Plant and Equipment (“FASB ASC 360”). The results of the Fyfe reporting unit and its related asset groups are reported within the Infrastructure Solutions reportable segment. The assets of an asset group represent the lowest level for which identifiable cash flows can be determined independent of other groups of assets and liabilities. The Fyfe North America asset group was the only at-risk asset group reviewed for impairment. The Company developed internal forward business plans under the guidance of local and regional leadership to determine the undiscounted expected future cash flows derived from Fyfe North America’s long-lived assets. Such were based on management’s best estimates considering the likelihood of various outcomes. Based on the internal projections, the Company determined that the sum of the undiscounted expected future cash flows for the Fyfe North America asset group was less than the carrying value of the assets, and as a result, engaged a third-party valuation firm to assist management in determining the fair value of long-lived assets for the Fyfe North America asset group. In order to determine the impairment amount of long-lived assets, the Company first determined the fair value of each key component of its long-lived assets for the Fyfe North America asset group. The fair values were derived using various income-based approaches, which utilize discounted cash flows to evaluate the net earnings attributable to the asset being measured. Key assumptions used in assessment include the discount rate (based on weighted-average cost of capital), revenue growth rates, contributory asset charges, customer attrition, income tax rates and working capital needs, which were based on current market conditions and were consistent with internal management projections. Based on the results of the valuation, the carrying amount of certain long-lived assets for the Fyfe North America asset group exceeded the fair value. Accordingly, the Company recorded impairment charges of $3.4 million to trademarks, $20.8 million to customer relationships and $16.8 million to patents and acquired technology in the third quarter of 2017. The impairment charges were recorded to “Definite-lived intangible asset impairment” in the Consolidated Statement of Operations. Property, plant and equipment were determined to have a carrying value that exceeded fair value; thus, no impairment was recorded. Impairment Reviews – 2015 As a result of the annual impairment assessment in accordance with FASB ASC 350, Intangibles - Goodwill and Other (“FASB ASC 350”) as of October 1, 2015, the CRTS reporting unit had a fair value below its carrying value, which caused the Company to review the financial performance of at risk asset groups within that reporting unit in accordance with FASB ASC 360. The results of CRTS are reported within the Corrosion Protection reportable segment. In response to contract losses in the Central California upstream energy market during the fourth quarter of 2015 and the Company’s subsequent decision to reduce our Energy Service segment’s exposure to the upstream market, the Company performed a market assessment and concluded that sustained low oil prices would continue to create market challenges for the foreseeable future, including a continued reduction in spending by certain of its customers in 2016. The loss of the contracts, coupled with the decision to downsize, caused the Company to review the financial performance of at risk asset groups within the reporting unit. The results of Energy Services are reported within the Energy Services reportable segment. The assets of each asset group represent the lowest level for which identifiable cash flows can be determined independent of other groups of assets and liabilities. The Company developed internal forward business plans under the guidance of local and regional leadership to determine the undiscounted expected future cash flows derived from each of the at risk asset groups’ long-lived assets. Such were based on management’s best estimates considering the likelihood of various outcomes. Based on the internal projections, the Company determined that the undiscounted expected future cash flows for all of the identified at risk asset groups exceeded the carrying value of the assets, and as such, no impairment to recorded long-lived assets was required. The fair value estimates described above were determined using observable inputs and significant unobservable inputs, which are based on level 3 inputs as defined in Note 12. Goodwill Under FASB ASC 350, the Company assesses recoverability of goodwill on an annual basis or when events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. An impairment charge will be recognized to the extent that the fair value of a reporting unit is less than its carrying value. Factors that could potentially trigger an impairment review include (but are not limited to): • significant underperformance of a segment relative to expected, historical or forecasted operating results; • significant negative industry or economic trends; • significant changes in the strategy for a segment including extended slowdowns in the segment’s market; • a decrease in market capitalization below the Company’s book value; and • a significant change in regulations. Whether during the annual impairment assessment or during a trigger-based impairment review, the Company determines the fair value of its reporting units and compares such fair value to the carrying value of those reporting units to determine if there are any indications of goodwill impairment. Fair value of reporting units is determined using a combination of two valuation methods: a market approach and an income approach with each method given equal weight in determining the fair value assigned to each reporting unit. Absent an indication of fair value from a potential buyer or similar specific transaction, the Company believes the use of these two methods provides a reasonable estimate of a reporting unit’s fair value. Assumptions common to both methods are operating plans and economic outlooks, which are used to forecast future revenues, earnings and after-tax cash flows for each reporting unit. These assumptions are applied consistently for both methods. The market approach estimates fair value by first determining earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples for comparable publicly-traded companies with similar characteristics of the reporting unit. The EBITDA multiples for comparable companies are based upon current enterprise value. The enterprise value is based upon current market capitalization and includes a control premium. The Company believes this approach is appropriate because it provides a fair value estimate using multiples from entities with operations and economic characteristics comparable to its reporting units. The income approach is based on forecasted future (debt-free) cash flows that are discounted to present value using factors that consider timing and risk of future cash flows. The Company believes this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating cash flow performance. Discounted cash flow projections are based on financial forecasts developed from operating plans and economic outlooks, growth rates, estimates of future expected changes in operating margins, terminal value growth rates, future capital expenditures and changes in working capital requirements. Estimates of discounted cash flows may differ from actual cash flows due to, among other things, changes in economic conditions, changes to business models, changes in the Company’s weighted average cost of capital, or changes in operating performance. The discount rate applied to the estimated future cash flows is one of the most significant assumptions utilized under the income approach. The Company determines the appropriate discount rate for each of its reporting units based on the weighted average cost of capital (“WACC”) for each individual reporting unit. The WACC takes into account both the pre-tax cost of debt and cost of equity (including the risk-free rate on twenty year U.S. Treasury bonds), and certain other company-specific and market-based factors. As each reporting unit has a different risk profile based on the nature of its operations, the WACC for each reporting unit is adjusted, as appropriate, to account for company-specific risks. Accordingly, the WACC for each reporting unit may differ. Impairment Review – Third Quarter 2017 As part of the 2017 Restructuring, which was approved by the Company’s board of directors on July 28, 2017, the Company exited all non-pipe related contract applications for the Tyfo ® system in North America. As a result of this action, the Company evaluated the goodwill of its Fyfe reporting unit and determined that a triggering event occurred. As such, the Company engaged a third-party valuation to assist management in performing a goodwill impairment review for its Fyfe reporting unit during the third quarter of 2017. In accordance with the provisions of FASB ASC 350, the Company determined the fair value of the reporting unit and compared such fair value to the carrying value of the reporting unit. For the Fyfe reporting unit, carrying value, as adjusted for the long-lived asset impairments discussed previously, exceeded fair value by approximately 45% . Despite the Company’s recent investments in sales resources to drive growth in North America, FRP technology has become more widely accepted and more contractors have become proficient with installation, which has begun to commoditize the application of the Tyfo ® system during construction in the North American civil structure market. As a result of this and other factors, the Company decided to exit all non-pipe related contract applications for the Tyfo ® system in North America. The Company is now focused on using its expertise in FRP technologies to promote third-party product sales, continuing pipe-related FRP installations and providing technical engineering support in the civil structural market in North America. The FRP operation in Asia remains largely unchanged as market conditions remain favorable. The Company’s decision, as noted above, permanently lowered the expected future cash flows of the reporting unit. As a result, the values derived from both the income approach and the market approach decreased from the October 1, 2016 annual goodwill impairment analysis. The fair value for the Fyfe reporting unit decreased $105.2 million , or 65.3% , from the previous analysis. The impairment analysis assumed a weighted average cost of capital of 17.0% , which is higher than the 16.0% utilized in the October 1, 2016 review, primarily due to rising risk-free rates on twenty-year U.S. Treasury bonds. The company-specific factors influencing discount rates remained consistent in both analyses. The impairment analysis also assumed a long-term growth rate of 2.5% , which was reduced from 3.5% used in the October 1, 2016 review. This change reflects the Company’s expectations for future annual revenue growth, which were lowered from 10.8% in the previous analysis to 4.0% , primarily due to the downsizing of the North American operations. Expected gross margins were consistent between both analyses. As of January 1, 2017, the Company adopted FASB Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment , which states that an impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. Based on the impairment analysis, the Company determined that recorded goodwill at the Fyfe reporting unit was impaired by $45.4 million , which was recorded to “Goodwill impairment” in the Consolidated Statement of Operations during the third quarter of 2017. As of December 31, 2017, the Company had remaining Fyfe goodwill of $9.6 million . Projected cash flows were based, in part, on the ability to grow third-party product sales and pressure pipe contracting in North America, and maintaining a presence in other international markets. If these assumptions do not materialize in a manner consistent with Company’s expectations, there is risk of additional impairment to recorded goodwill. Annual Impairment Assessment – October 1, 2017 The Company had seven reporting units for purposes of assessing goodwill at October 1, 2017 as follows: Municipal Pipe Rehabilitation, Fyfe, Corrpro, United Pipeline Systems, Bayou, Coating Services and Energy Services. During 2017, the Company acquired Environmental Techniques (see Note 1) and integrated it into the Municipal Pipe Rehabilitation reporting unit. Significant assumptions used in the Company’s October 2017 goodwill review included: (i) discount rates ranging from 12.0% to 17.0% ; (ii) compound annual growth rates for revenues generally ranging from 1.4% to 5.8% ; (iii) gross margin stability or slight improvement in the short term related to certain reporting units affected by the 2017 Restructuring, but sustained or slightly increased gross margins long term; (iv) peer group EBITDA multiples; and (v) terminal values for each reporting unit using a long-term growth rate of 1.0% to 3.0% . During the Company’s assessment of its reporting units’ fair values in relation to their respective carrying values, no reporting units had a fair value below carrying value and only one reporting unit had a fair value within 10% percent of its carrying value. The reporting unit with a fair value within 10% of its carrying value was the Fyfe reporting unit, which recorded goodwill impairment and adjusted its carrying value to fair value during the thi |
