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Item 2. Management’s Discussion and Analysis

2020-08-03 compared with 2020-04-30 · 315 added, 218 removed, 261 unchanged (67% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Business Description

We are one of the largest electrical and mechanical construction and facilities services firms in the United States.

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Our offices are located in the United States and the United Kingdom.

Operating Segments

We have the following reportable segments:

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on-site repairs, maintenance and service of heat exchangers, towers, vessels, and piping;

design, manufacturing, repair, and hydro blast cleaning of shell and tube heat exchangers and related equipment;

and other support services for customers within the upstream and midstream sectors.

The following table presents selected financial data for the three months ended March 31, 2020 and 2019 (in thousands, except percentages and per share data):

and design, manufacturing, repair, and hydro blast cleaning of shell and tube heat exchangers and related equipment.

COVID-19 and Market Update

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has spread around the world.

On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide.

In response, government authorities in the U.S.

imposed various social distancing, quarantine, and isolation measures on large portions of the population.

As a result of the pandemic, as well as the related containment and mitigation measures, we experienced disruptions that impacted our ability to execute on our remaining performance obligations in many of the markets in which we operate.

Such impacts included, but were not limited to, access restrictions and temporary job site shutdowns, reduced labor efficiency resulting from the adherence to physical distancing protocols mandated at the majority of our worksite locations, and the deferral of maintenance and service projects by our customers.

Although we have not experienced significant project cancellations, and we continue to actively quote new work for our customers as evidenced by the nearly 14% increase in our remaining performance obligations since December 31, 2019, we are experiencing delays in certain projects and a reduction in the number of call-out service and repair opportunities.

Additionally, the demand for oil has significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus, including various local, state, and national jurisdictional “shelter-in-place” orders.

Further, other macroeconomic events, such as geopolitical tensions between the Organization of Petroleum Exporting Countries (“OPEC”) and Russia, resulted in a significant drop in the price of crude oil.

These negative factors have created significant volatility and uncertainty in the markets in which our United States industrial services segment operates.

As a result, many customers have responded by reducing capital spending, implementing various cost cutting measures, and closing certain of their facilities.

Such customer actions have resulted in a significant decrease in the demand for our service offerings within such segment.

While we have begun to see indications of stabilization within our United States construction segments and our United States and United Kingdom building services segments as many shelter-in-place orders are lifted, various other containment and mitigation measures are eased, and our teams and customers are adapting to this new work environment, this positive trend may not continue.

The extent to which the COVID-19 pandemic will impact our business and results of operations in future

periods remains highly uncertain and will be affected by a number of factors.

These include the duration and extent of the pandemic;

the duration and extent of imposed or recommended quarantines, containment and other mitigation measures, and whether there is a significant resumption of shelter-in-place orders;

the near-term impact of the pandemic on broader economic activity, including on construction projects and the oil and gas and related industrial markets;

our customers’ demand for our services;

our ability to effectively operate in this environment;

the ability of our customers to pay us for services rendered;

and any prolonged delays or shutdowns of active projects or closures of our and our customers’ offices and facilities.

To date, we have been able to source the supplies and materials needed to operate our business with minimal disruptions.

However, the impact of the COVID-19 pandemic on our vendors is evolving and may make it difficult to obtain such materials in future periods.

While we believe our remaining performance obligations are firm, customers may also slow down decision-making, delay planned work or seek to terminate existing agreements.

Any of these events could have a material adverse effect on our business, financial condition, and/or results of operations.

The following table presents selected financial data for the three months ended June 30, 2020 and 2019 (in thousands, except percentages and per share data):

For the three months ended

Revenues increase from prior year

Operating income

Operating income as a percentage of revenues

Diluted earnings per common share

The results for the three months ended March 31, 2020 set new company records for a first quarter in terms of revenues, operating income, net income, and diluted earnings per common share.

Revenues for the first quarter of 2020 increased by 6.5% from $2.16 billion for the three months ended March 31, 2019 to $2.30 billion for the three months ended March 31, 2020.

Such increase in revenues was attributable to revenue growth within all of our reportable segments, except for our United States electrical construction and facilities services segment, which experienced a slight decrease in revenues period over period.

Operating income for the three months ended March 31, 2020 of $106.0 million increased by $3.7 million compared to operating income of $102.3 million for the three months ended March 31, 2019.

Operating margin (operating income as a percentage of revenues) for the first quarter of 2020 was 4.6% compared to 4.7% for the first quarter of 2019.

The overall increase in operating income was a result of improved operating performance from all of our reportable segments, except for our United States building services segment, which experienced both a decline in operating income and operating margin when compared to the prior year.

Revenues $ 2,014,021 $ 2,324,202

Revenues (decrease) increase from prior year (13.3) % 19.0 %

Gross profit 315,286 346,380

Gross profit as a percentage of revenues 15.7 % 14.9 %

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets 232,750 —

Operating (loss) income $ (122,638) $ 119,959

Operating (loss) income as a percentage of revenues (6.1) % 5.2 %

Net (loss) income $ (83,689) $ 83,972

Diluted (loss) earnings per common share $ (1.52) $ 1.49

Revenues for the second quarter of 2020 decreased by 13.3% from $2.32 billion for the three months ended June 30, 2019 to $2.01 billion for the three months ended June 30, 2020.

As discussed in further detail below, such decrease in revenues was attributable to revenue declines within each of our reportable segments, primarily as a result of negative macroeconomic conditions brought upon by the COVID-19 pandemic, which resulted in:

(a) project delays or access restrictions for certain of the construction contracts in process within our United States construction segments, (b) a reduction in the number of call-out service and repair project activities within our United States and United Kingdom building services segments, and (c) a decline in the demand for our service offerings within our United States industrial services segment.

For the three months ended June 30, 2020, we incurred an operating loss of $122.6 million, resulting from $232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the period, as discussed in further detail below and in Note 7 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements included in Item 1.

Financial Statements.

These charges were recognized as a result of interim impairment tests that were triggered by certain indicators of impairment that were present during the quarter, including lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets.

Excluding the impact of such impairments, operating income decreased by $9.8 million for the three months ended June 30, 2020, primarily as a result of a decrease in gross profit from the majority of our reportable segments due to the negative macroeconomic conditions referenced above.

Impact of Acquisitions

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This company provides building automation and controls solutions within the Northeastern region of the United States, and its results of operations have been included within our United States building services segment.

During calendar year 2019, we completed the acquisition of Batchelor & Kimball, Inc.

On November 1, 2019, we completed the acquisition of Batchelor & Kimball, Inc.

(“BKI”), a leading full service provider of mechanical construction and maintenance services.

This acquisition strengthens our position and broadens our capabilities in the Southern and Southeastern regions of the United States, and the results of its operations have been included within our United States mechanical construction and facilities services segment.

In addition to BKI, during 2019, we acquired:

In addition to BKI, during calendar year 2019, we acquired:

(a) a company which provides electrical contracting services in central Iowa, the results of operations of which have been included within our United States electrical construction and facilities services segment, (b) a company which provides mechanical contracting services in south-central and eastern Texas, the results of operations of which have been included within our United States mechanical construction and facilities services segment, and (c) four companies included within our United States building services segment, consisting of:

(i) a company which provides mobile mechanical services in the Southern region of the United States and (ii) three companies, the results of operations of which were de minimis, which bolster our presence in geographies where we have existing operations and provide either mobile mechanical services or building automation and controls solutions.

Companies acquired in 2020 and 2019 generated incremental revenues of $82.5 million and incremental operating income of $3.6 million, inclusive of $4.1 million of amortization expense associated with identifiable intangible assets, for the three months ended March 31, 2020.

Companies acquired in 2020 and 2019 generated incremental revenues of $50.2 million and incremental operating income of $1.7 million, inclusive of $4.0 million of amortization expense associated with identifiable intangible assets, for the three months ended June 30, 2020.

Results of Operations

The following table presents our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):

For the three months ended March 31,

The following tables present our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):

For the three months ended June 30,

Total 2019 % of

United States electrical construction and facilities services $ 445,881 22 % $ 569,402 24 %

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Total worldwide operations $ 2,014,021 100 % $ 2,324,202 100 %

As described below in more detail, our revenues for the three months ended March 31, 2020 increased to $2.30 billion compared to $2.16 billion for the three months ended March 31, 2019.

The increase in revenues for the three months ended March 31, 2020 was attributable to increased revenues from all of our reportable segments, except for our United States electrical construction and facilities services segment.

Companies acquired in 2020 and 2019, which are reported in our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment, generated incremental revenues of $82.5 million for the three months ended March 31, 2020.

Revenues of our United States electrical construction and facilities services segment were $525.2 million for the three months ended March 31, 2020 compared to revenues of $528.1 million for the three months ended March 31, 2019.

The slight decrease in revenues for the three months ended March 31, 2020 was attributable to:

(a) a decrease in revenues from construction projects within the commercial and transportation market sectors, partially as a result of the completion or substantial completion of certain projects in the Northeastern and Western regions of the United States, and (b) a decrease in short duration project activities within this segment.

These decreases were partially offset by increased project activity within the manufacturing and institutional market sectors.

The results for the three months ended March 31, 2020 additionally included $25.4 million of incremental revenues generated by a company acquired in 2019.

Our United States mechanical construction and facilities services segment revenues for the three months ended March 31, 2020 were $834.1 million, an $81.7 million increase compared to revenues of $752.4 million for the three months ended March 31, 2019.

Excluding the impact of acquisitions, the increase in revenues for the three months ended March 31, 2020 was primarily attributable to revenue growth within the majority of the market sectors in which we operate, including:

(a) the manufacturing market sector, inclusive of certain large food processing construction projects, and (b) the healthcare, institutional, and transportation market sectors, primarily as a result of increased project activity.

In addition, the results for the three months ended March 31, 2020 included $55.5 million of incremental revenues generated by companies acquired in 2019.

These increases were partially offset by decreased revenues within the commercial and hospitality market sectors as a result of the completion or substantial completion of certain large projects.

For the first quarter of 2020, revenues of our United States building services segment were $518.1 million, compared to revenues of $512.1 million for the first quarter of 2019.

The increased revenues period over period were primarily a result of greater project, service, and controls activities within our mobile mechanical services operations.

Increased revenues from such operations were partially offset by decreased revenues from:

(a) our commercial site-based services operations, partially as a result of a decrease in snow removal activity, (b) our energy services operations due to a reduction in large project activity, and (c) our government services business due to the loss of certain contracts not renewed pursuant to rebid, which resulted in a reduction to both base maintenance and indefinite-delivery, indefinite-quantity project revenues.

The results of this segment for the three months ended March 31, 2020 included $1.6 million of incremental revenues generated by a company acquired in 2020 within our mobile mechanical services operations.

Revenues of our United States industrial services segment for the three months ended March 31, 2020 were $310.0 million, a $51.4 million increase compared to revenues of $258.6 million for the three months ended March 31, 2019.

The increase in revenues period over period was due to greater maintenance and capital project activity within our field services operations, partially offset by a slight decline in revenues from our shop services operations due to a reduction in new build heat exchanger sales.

Our United Kingdom building services segment revenues for the three months ended March 31, 2020 were $112.4 million compared to revenues for the three months ended March 31, 2019 of $107.5 million.

The increase in revenues within this segment was attributable to:

(a) new maintenance contract awards within the commercial market sector, and (b) increased project activity with existing customers within the commercial and water and wastewater market sectors.

Unfavorable exchange rates for the British pound versus the United States dollar negatively impacted this segment’s revenues for the quarter ended March 31, 2020 by $2.2 million.

For the six months ended June 30,

Total 2019 % of

United States electrical construction and facilities services $ 971,110 22 % $ 1,097,472 25 %

United States mechanical construction and facilities services 1,624,553 38 % 1,575,495 35 %

United States building services 990,499 23 % 1,035,777 23 %

United States industrial services 522,197 12 % 554,105 12 %

Total United States operations 4,108,359 95 % 4,262,849 95 %

United Kingdom building services 205,494 5 % 220,081 5 %

Total worldwide operations $ 4,313,853 100 % $ 4,482,930 100 %

As described below in more detail, our revenues for the three months ended June 30, 2020 decreased to $2.01 billion compared to $2.32 billion for the three months ended June 30, 2019, and our revenues for the six months ended June 30, 2020 decreased to $4.31 billion compared to $4.48 billion for the six months ended June 30, 2019.

The decrease in revenues for both the three and six month periods was attributable to decreased revenues from all of our reportable segments except, in the case of the six months ended June 30, 2020, our United States mechanical construction and facilities services segment.

Companies acquired in 2020 and 2019, which are reported in our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment, generated incremental revenues of $50.2 million and $132.7 million for the three and six months ended June 30, 2020, respectively.

Revenues of our United States electrical construction and facilities services segment were $445.9 million and $971.1 million for the three and six months ended June 30, 2020, respectively, compared to revenues of $569.4 million and $1,097.5 million for the three and six months ended June 30, 2019, respectively.

The decrease in revenues for the three and six months ended June 30, 2020 was predominantly attributable to:

(a) a reduction in revenues from construction projects within the commercial market sector, primarily as a result of:

(i) project delays or access restrictions caused by various containment and mitigation measures mandated by certain of our customers and/or governmental authorities in response to the COVID-19 pandemic and (ii) the completion or substantial completion of certain projects within the Northeastern and Western regions of the United States and (b) a reduction in industrial project activities within the manufacturing market sector due to the adverse market conditions within the oil and gas industry.

The results for the six months ended June 30, 2020 included $25.4 million of incremental revenues generated by a company acquired in 2019.

Our United States mechanical construction and facilities services segment revenues for the three months ended June 30, 2020 were $790.4 million, a $32.6 million decrease compared to revenues of $823.1 million for the three months ended June 30, 2019.

Revenues of this segment for the six months ended June 30, 2020 were $1,624.6 million, a $49.1 million increase compared to revenues of $1,575.5 million for the six months ended June 30, 2019.

For the three and six months ended June 30, 2020, the results of this segment included $47.9 million and $103.5 million, respectively, of incremental revenues generated by companies acquired in 2019.

The decrease in revenues for the three months ended June 30, 2020 was primarily attributable to a decline in revenues from:

(a) the manufacturing market sector, inclusive of certain large food processing construction projects, and (b) the commercial market sector, inclusive of certain telecommunication construction projects.

Similar to our United States electrical construction and facilities services segment, revenues of this segment for the three months ended June 30, 2020 were negatively impacted by the effects of the COVID-19 pandemic, which resulted in project delays due to access restrictions and temporary job site shutdowns.

These revenue reductions were partially offset by increased project activities within the institutional and transportation market sectors during the quarter.

For the six months ended June 30, 2020, excluding the impact of acquisitions, our United States mechanical construction and facilities services segment revenues decreased by $54.4 million, primarily as a result of a reduction in project activities within the commercial market sector.

Revenues of our United States building services segment were $472.4 million and $990.5 million for the three and six months ended June 30, 2020, respectively, compared to revenues of $523.7 million and $1,035.8 million for the three and six months ended June 30, 2019, respectively.

The reduction in revenues for both the three and six month periods was primarily a result of:

(a) decreased project and controls activities within our mobile mechanical services operations, largely as a result of the impact of the COVID-19 pandemic, which resulted in fewer project opportunities given the temporary closure of certain customer facilities, (b) decreased large project activity within our energy services operations, primarily as a result of the completion of certain projects which were active in the prior year, and (c) the loss of certain contracts not renewed pursuant to rebid, which resulted in a reduction to both base maintenance and indefinite-delivery, indefinite-quantity project revenues within our government services business.

In addition, the decrease in revenues for the six months ended June 30, 2020 was partially attributable to a decrease in snow removal activities within our commercial site-based services operations during the first quarter of the year.

The results of this segment for the three and six months ended June 30, 2020 included $2.3 million and $3.8 million, respectively, of incremental revenues generated by a company acquired in 2020 within our mobile mechanical services operations.

Revenues of our United States industrial services segment for the three months ended June 30, 2020 were $212.2 million, an $83.3 million decrease compared to revenues of $295.5 million for the three months ended June 30, 2019.

Revenues for the six months ended June 30, 2020 were $522.2 million, a $31.9 million decrease compared to revenues of $554.1 million for the six months ended June 30, 2019.

Revenues of this segment were negatively impacted by adverse market conditions including unprecedented declines in the price of crude oil, initially as a result of a decline in demand caused by the COVID-19 pandemic and further driven by the dislocation between supply and demand resulting from a breakup in dialogue between OPEC and Russia over a proposed curtailment in the production of oil.

Such macroeconomic conditions led to a decrease in demand for our services, which resulted in:

(a) a decrease in maintenance and capital project activity within our field services operations and (b) a reduction in new build heat exchanger sales and a decrease in maintenance, repair, and hydro blast cleaning services within our shop services operations.

Revenues of our United Kingdom building services segment were $93.1 million and $205.5 million for the three and six months ended June 30, 2020, respectively, compared to revenues of $112.6 million and $220.1 million for the three and six months ended June 30, 2019, respectively.

The decrease in revenues within this segment for both periods was attributable to:

(a) a decrease in project activity, partially as a result of the COVID-19 pandemic, which resulted in reduced opportunities for project work due to the temporary closure of certain customer facilities, and (b) a reduction in revenue due to the loss of certain maintenance contracts that were not renewed pursuant to rebid.

These revenue declines were partially offset by increased revenues from new maintenance contract awards within the commercial market sector.

Unfavorable exchange rates for the British pound versus the United States dollar negatively impacted this segment’s revenues for the three and six months ended June 30, 2020 by $3.4 million and $5.6 million, respectively.

Cost of sales and Gross profit

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For the three months ended

June 30, For the six months ended

2020 2019 2020 2019

Cost of sales $ 1,698,735 $ 1,977,822 $ 3,665,506 $ 3,827,796

Gross profit $ 315,286 $ 346,380 $ 648,347 $ 655,134

Gross profit, as a percentage of revenues 15.7 % 14.9 % 15.0 % 14.6 %

Our gross profit increased by $24.3 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, and our gross profit margin increased to 14.5% from 14.3%.

The increase in gross profit was the result of an increase in gross profit from all of our reportable segments, except for our United States building services segment.

The increase in gross profit margin was primarily attributable to improved operating performance within our United States construction segments.

Our gross profit decreased by $31.1 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Gross profit decreased by $6.8 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Our gross profit margin was 15.7% and 15.0% for the three and six months ended June 30, 2020, respectively, compared to gross profit margin of 14.9% and 14.6% for the three and six months ended June 30, 2019, respectively.

The decrease in gross profit for both periods was a result of a decrease in gross profit from all of our reportable segments except, in the case of the three months ended June 30, 2020, our United States mechanical construction and facilities services segment, and in the case of the six months ended June 30, 2020, our United States mechanical construction and facilities services segment and our United Kingdom building services segment.

The increase in gross profit margin for both periods was primarily attributable to improved operating performance within our United States mechanical construction and facilities services segment.

Selling, general and administrative expenses

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For the three months ended

June 30, For the six months ended

2020 2019 2020 2019

Selling, general and administrative expenses $ 205,174 $ 226,248 $ 432,171 $ 432,417

Selling, general and administrative expenses, as a percentage of revenues 10.2 % 9.7 % 10.0 % 9.6 %

Our selling, general and administrative expenses for the three months ended March 31, 2020 increased by $20.8 million to $227.0 million compared to $206.2 million for the three months ended March 31, 2019.

Selling, general and administrative expenses as a percentage of revenues were 9.9% and 9.6% for the three months ended March 31, 2020 and 2019, respectively.

For the first quarter of 2020, selling, general and administrative expenses included $9.0 million of incremental expenses directly related to companies acquired in 2020 and 2019, including amortization expense attributable to identifiable intangible assets of $2.7 million.

In addition to the impact of acquisitions, the increase in selling, general and administrative expenses, and SG&A margin, for the three months ended March 31, 2020 was a result of:

(a) an increase in the provision for credit losses and (b) the favorable impact of a legal settlement within our United States industrial services segment during the prior year, that resulted in the recovery of $3.6 million, which was recorded as a reduction to selling, general, and administrative expenses for the three months ended March 31, 2019.

Our selling, general and administrative expenses for the three months ended June 30, 2020 was $205.2 million, representing a decrease of $21.1 million compared to selling, general and administrative expenses of $226.2 million for the three months ended June 30, 2019.

Selling, general and administrative expenses for the six months ended June 30, 2020 of $432.2 million represented a nominal decrease compared to selling general and administrative expenses of $432.4 million for the six months ended June 30, 2019.

The decrease in selling, general and administrative expenses for the three months ended June 30, 2020 was primarily attributable to certain cost reductions resulting from, or actions taken in response to, the COVID-19 pandemic, including:

(a) a decrease in salaries expense due to:

(i) a reduction in headcount, resulting from lower revenues than in the same prior year period, and (ii) certain short-term cost cutting measures, including temporary furloughs and salary reductions, (b) a decrease in incentive compensation expense due to lower projected annual operating results, relative to incentive targets, than in the same prior year period, (c) a decrease in employee benefit costs, partially due to a decline in medical claims, and (d) a reduction in certain discretionary spending, such as travel and entertainment costs.

For the three and six months ended June 30, 2020, selling, general and administrative expenses included $7.2 million and $16.3 million, respectively, of incremental expenses directly related to companies acquired in 2020 and 2019, including amortization expense attributable to identifiable intangible assets of $2.6 million and $5.3 million, respectively.

Selling, general and administrative expenses as a percentage of revenues were 10.2% and 10.0% for the three and six months ended June 30, 2020, respectively, compared to 9.7% and 9.6% for the three and six months ended June 30, 2019, respectively.

The increase in SG&A margin for both the three and six month periods was a result of:

(a) a reduction in revenues without a commensurate decrease in certain of our fixed overhead costs and (b) an increase in the provision for credit losses.

In addition, SG&A margin for the six months ended June 30, 2019 benefited from the favorable impact of a legal settlement within our United States industrial services segment, that resulted in the recovery of $3.6 million, which was recorded as a reduction to selling, general and administrative expenses.

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

During the second quarter of 2020, we identified certain indicators of impairment resulting from the aforementioned uncertainties caused by the COVID-19 pandemic and the significant decline in the price of crude oil.

These uncertainties have resulted in lower forecasted revenue and operating margin expectations for those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets, resulting in the recognition of a $232.8 million impairment charge.

Of this amount, $230.3 million related to our United States industrial services segment and was comprised of:

(a) $225.5 million related to goodwill, (b) $4.2 million associated with a subsidiary trade name, and (c) $0.6 million related to certain long-lived assets.

The remaining $2.5 million represented a subsidiary trade name impairment within our United States electrical construction and facilities services segment.

Operating income (loss)

The following tables present our operating income (loss) and operating margin (operating income (loss) as a percentage of segment revenues) from unrelated entities (in thousands, except for percentages):

For the three months ended June 30,

Revenues 2019 % of

Operating income (loss):

United States electrical construction and facilities services $ 32,184 7.2 % $ 43,799 7.7 %

United States mechanical construction and facilities services 66,937 8.5 % 53,954 6.6 %

United States building services 26,378 5.6 % 28,001 5.3 %

United States industrial services 2,961 1.4 % 16,012 5.4 %

Total United States operations 128,460 6.7 % 141,766 6.4 %

United Kingdom building services 5,351 5.7 % 5,476 4.9 %

Corporate administration (23,699) — (27,110) —

Restructuring expenses — — (173) —

Restructuring expenses, relating to employee severance obligations, were $0.1 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, the balance of restructuring obligations yet to be paid was $1.1 million.

Such remaining amounts will be paid pursuant to our contractual obligations throughout 2020 and 2021.

Based on current plans in place, no material expenses in connection with restructuring are expected to be incurred during the remainder of 2020.

Operating income

The following table presents our operating income (loss) and operating income (loss) as a percentage of segment revenues from unrelated entities (in thousands, except for percentages):

For the three months ended March 31,

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets (232,750) — — —

Total worldwide operations (122,638) (6.1) % 119,959 5.2 %

Other corporate items:

Net periodic pension (cost) income 718 400

Interest expense, net (2,110) (3,231)

(Loss) income before income taxes $ (124,030) $ 117,128

For the six months ended June 30,

Revenues 2019 % of

Operating income (loss):

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Restructuring expenses (69) — (448) —

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets (232,750) — — —

Total worldwide operations (16,643) (0.4) % 222,269 5.0 %

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Interest expense, net (4,598) (6,054)

Income before income taxes

As described below in more detail, operating income was $106.0 million and $102.3 million for the three months ended March 31, 2020 and 2019, respectively.

The increase in operating income for the three months ended March 31, 2020 was the result of an increase in gross profit from all of our reportable segments, except for our United States building services segment, partially offset by an increase in selling, general, and administrative expenses as discussed above.

Operating margin was 4.6% and 4.7% for the three months ended March 31, 2020 and 2019, respectively.

Operating income of our United States electrical construction and facilities services segment for the three months ended March 31, 2020 was $43.9 million, or 8.4% of revenues, compared to operating income of $43.0 million, or 8.1% of revenues, for the three months ended March 31, 2019.

A company acquired in 2019 contributed incremental operating income of $1.6 million, inclusive of $0.1 million of amortization expense associated with identifiable intangible assets, during the first quarter of 2020.

Excluding such incremental contribution, operating income within this segment remained relatively consistent with that of the prior year.

The increase in operating margin for the three months ended March 31, 2020 was attributable to an increase in gross profit margin resulting from favorable project execution, including the successful close out of certain large projects.

Increased gross profit margin was partially offset by an increase in the ratio of selling, general and administrative expenses to revenues.

Our United States mechanical construction and facilities services segment operating income for the quarter ended March 31, 2020 was $45.2 million compared to operating income of $41.0 million for the quarter ended March 31, 2019.

Companies acquired in 2019 contributed incremental operating income of $2.0 million, inclusive of $3.9 million of amortization expense associated with identifiable intangible assets, for the three months ended March 31, 2020.

Excluding the impact of acquired businesses, operating income of this segment increased by approximately $2.2 million, primarily due to increased gross profit within the manufacturing market sector, inclusive of certain large food processing contracts.

Operating margin within this segment was 5.4% for each of the three months ended March 31, 2020 and 2019.

Operating income of our United States building services segment for the three months ended March 31, 2020 was $20.8 million, or 4.0% of revenues, compared to operating income for the three months ended March 31, 2019 of $27.5 million, or 5.4% of revenues.

The decrease in operating income for the three months ended March 31, 2020 was primarily attributable to decreased gross profit from:

(a) our commercial site-based services operations, primarily as a result of a reduction in revenues from snow removal activities, and (b) our energy services operations, as a result of a decrease in large project activity.

The decline in operating margin for the three months ended March 31, 2020 was attributable to:

(a) an increase in the ratio of selling, general, and administrative expenses to revenues, partially as a result of (i) under-absorption of certain overhead costs within our commercial site-based services operations due to the reduction in revenue previously referenced, as well as (ii) an increase in the provision for credit losses, primarily within our mobile mechanical services operations, and (b) a reduction in gross profit margin, as a result of a change in the mix of work.

Our United States industrial services segment operating income for the three months ended March 31, 2020 increased by approximately $2.6 million to $12.3 million, or 4.0% of revenues, compared to operating income of $9.6 million, or 3.7% of revenues, for the three months ended March 31, 2019.

The increase in operating income for the quarter ended March 31, 2020 was primarily attributable to improved operating performance within our field services operations as we experienced stronger demand for our service offerings when compared to the prior year.

The increase in operating margin for the three months ended March 31, 2020 was attributable to:

(a) a decrease in the ratio of selling, general, and administrative expenses to revenues, as a result of revenue growth without a commensurate increase in this segment’s overhead cost structure, and (b) an increase in gross profit margin, partially as a result of a more favorable mix of work within our field services operations.

For the quarter ended March 31, 2020, operating income of our United Kingdom building services segment was $5.8 million compared to operating income of $4.1 million for the quarter ended March 31, 2019.

Operating margins within this segment for the three months ended March 31, 2020 and 2019 were 5.1% and 3.9%, respectively.

Operating income increased primarily as a result of increased gross profit within the commercial market sector due to:

(Loss) income before income taxes $ (19,781) $ 217,021

As described below in more detail, for the three months ended June 30, 2020, we recognized an operating loss of $122.6 million compared to operating income of $120.0 million for the three months ended June 30, 2019.

For the six months ended June 30, 2020, we recognized an operating loss of $16.6 million compared to operating income for the six months ended June 30, 2019 of $222.3 million.

Operating margin was (6.1)% and (0.4)% for the three and six months ended June 30, 2020, respectively, compared to 5.2% and 5.0% for the corresponding 2019 periods.

Our operating results for the second quarter of 2020 included $232.8 million of non-cash impairment charges, which negatively impacted the Company’s operating margin by approximately 1,160 basis points for the three months ended June 30, 2020 and approximately 540 basis points for the six months ended June 30, 2020.

Excluding the impact of such impairments, operating income decreased by $9.8 million and $6.2 million for the three and six months ended June 30, 2020, respectively, as a result of a decrease in gross profit from the majority of our reportable segments.

Operating income of our United States electrical construction and facilities services segment for the three months ended June 30, 2020 was $32.2 million, or 7.2% of revenues, compared to operating income of $43.8 million, or 7.7% of revenues, for the three months ended June 30, 2019.

Operating income of this segment for the six months ended June 30, 2020 was $76.1 million, or 7.8% of revenues, compared to operating income of $86.8 million, or 7.9% of revenues, for the six months ended June 30, 2019.

The decrease in operating income for both periods was due to a decline in gross profit from construction projects, largely attributable to reduced revenues resulting from project delays or access restrictions caused by the previously referenced containment and mitigation measures mandated in response to the COVID-19 pandemic.

For the three months ended June 30, 2020, this segment experienced a decrease in gross profit from project activities within the commercial, institutional, and manufacturing market sectors.

For the six months ended June 30, 2020, gross profit declines within the commercial, hospitality, and water and wastewater market sectors were partially offset by increased gross profit generated from construction projects within the manufacturing and transportation market sectors.

The overall decrease in gross profit of this segment during both the three and six month periods was partially offset by a decrease in selling, general and administrative expenses, primarily as a result of a decrease in incentive compensation and salaries expense, as well as certain employee benefit costs.

The decrease in operating margin for the three months ended June 30, 2020 was attributable to a decrease in gross profit margin as the results for the second quarter of the prior year benefited from favorable project execution.

Our United States mechanical construction and facilities services segment’s operating income for the three and six months ended June 30, 2020 was $66.9 million and $112.1 million, respectively, compared to operating income of $54.0 million and $94.9 million for the three and six months ended June 30, 2019, respectively.

Companies acquired in 2019 contributed incremental operating income of $1.6 million and $3.6 million, inclusive of $3.8 million and $7.8 million of amortization expense associated with identifiable intangible assets, for the three and six months ended June 30, 2020, respectively.

Excluding the impact of acquired businesses, operating income of this segment increased by approximately $11.4 million and $13.6 million for the three and six month periods, respectively.

Despite the disruption caused by the COVID-19 pandemic, our United States mechanical construction and facilities services segment experienced an increase in gross profit for the three and six months ended June 30, 2020 driven by project activities within the institutional, commercial, healthcare, and transportation market sectors.

In addition, operating income of this segment for the six months ended June 30, 2020 benefited from increased gross profit within the manufacturing market sector, resulting from favorable progression on certain large food processing projects.

Operating margin within this segment was 8.5% and 6.9% for the three and six months ended June 30, 2020 compared to operating margin of 6.6% and 6.0% for the three and six months ended June 30, 2019.

The increase in operating margin for both periods was attributable to an increase in gross profit margin, primarily driven by a favorable mix of work within the manufacturing and healthcare market sectors.

Such increase in gross profit margin was partially offset by an increase in the ratio of selling, general and administrative expenses to revenues partially as a result of an increase in amortization expense associated with identifiable intangible assets resulting from companies acquired in 2019 and an increase in the provision for credit losses.

Operating income of our United States building services segment for the three months ended June 30, 2020 was $26.4 million compared to operating income for the three months ended June 30, 2019 of $28.0 million, and operating income for the six months ended June 30, 2020 was $47.2 million compared to operating income of $55.5 million for the six months ended June 30, 2019.

The decrease in operating income for both periods was primarily due to:

(a) our energy services operations, as a result of a decrease in gross profit given a reduction in large project activity, and (b) our mobile mechanical services operations due to:

(i) a decrease in gross profit from project and controls activities, largely as a result of the temporary closure of certain customer facilities resulting from the COVID-19 pandemic, and (ii) an increase in certain expenses such as the provision for credit losses and legal fees.

In addition, the decrease in operating income for the six months ended June 30, 2020 was partially attributable to our commercial site-based services operations due to a reduction in gross profit resulting from a decrease in snow removal activities during the first three months of this year.

Lower gross profit within this segment was partially offset by an overall decrease in selling, general and administrative expenses due to certain cost reduction measures enacted during the quarter.

Operating margin of this segment for the three and six months ended June 30, 2020 was 5.6% and 4.8%, respectively,

compared to operating margin for the three and six months ended June 30, 2019 of 5.3% ad 5.4%, respectively.

The increase in operating margin for the three months ended June 30, 2020 was primarily a result of an increase in gross profit margin within our mobile mechanical services operations.

The decrease in operating margin for the six months ended June 30, 2020 was primarily a result of an increase in the ratio of selling, general and administrative expenses to revenues due to:

(a) the under-absorption of certain overhead costs due to the reduction in revenue previously referenced and (b) an increase in certain expenses, such as the provision for credit losses and legal fees, without a commensurate increase in revenues.

Operating income of our United States industrial services segment for the three months ended June 30, 2020 decreased by approximately $13.1 million to $3.0 million compared to operating income of $16.0 million for the three months ended June 30, 2019.

Operating income for the six months ended June 30, 2020 decreased by approximately $10.4 million to $15.2 million compared to operating income of $25.6 million for the six months ended June 30, 2019.

As previously referenced, this segment’s results were severely impacted by adverse macroeconomic factors impacting the oil and gas industry.

As a result of such conditions, this segment experienced a reduction in gross profit from both our field services and shop services operations due to:

(a) a decrease in demand for our service offerings, (b) the deferral or cancellation of previously scheduled projects with certain customers, and (c) an unfavorable mix of work, which included a greater number of projects with lower than typical gross profit margins.

Such decrease in gross profit was partially offset by a reduction in selling, general and administrative expenses, including:

(a) incentive compensation and salaries expense, (b) employee benefit costs, and (c) certain discretionary spending, such as travel and entertainment costs.

Operating margin of this segment for the three and six months ended June 30, 2020 was 1.4% and 2.9%, respectively, compared to operating margin of 5.4% and 4.6% for the three and six months ended June 30, 2019, respectively.

The decrease in operating margin for both periods was attributable to a decrease in gross profit margin resulting from the above noted factors, as well as an increase in the ratio of selling, general and administrative expenses to revenues due to a decrease in revenue without a commensurate decrease in certain of this segment’s fixed overhead costs.

For the three months ended June 30, 2020, our United Kingdom building services segment’s operating income of $5.4 million decreased nominally as compared to operating income of $5.5 million for the three months ended June 30, 2019.

Operating income of this segment was $11.1 million for the six months ended June 30, 2020 compared to operating income of $9.6 million for the six months ended June 30, 2019.

The increase in operating income for the six month period was primarily a result of:

(a) greater project activity with existing customers and (b) incremental gross profit from new maintenance contract awards.

This segment’s operating income for the first quarter of 2020 was negatively impacted by approximately $0.1 million related to the effect of unfavorable exchange rates for the British pound versus the United States dollar.

The increase in operating margin for the three months ended March 31, 2020 was attributable to an increase in gross profit margin and a decrease in the ratio of selling, general, and administrative expenses to revenues.

Our corporate administration operating loss for the three months ended March 31, 2020 was $21.9 million compared to $22.6 million for the three months ended March 31, 2019.

The decrease in corporate administration expenses for the three months ended March 31, 2020 was primarily due to a decrease in employment costs, such as incentive compensation.

Net interest expense for the three months ended March 31, 2020 and 2019 was $2.5 million and $2.8 million, respectively.

The decrease in net interest expense for the quarter ended March 31, 2020 resulted from lower interest rates, partially offset by higher average outstanding borrowings.

For the three months ended March 31, 2020 and 2019 , our income tax provision was $28.6 million and $27.5 million , respectively, based on an effective income tax rate, before discrete items, of 27.6% and 28.0% , respectively.

The actual income tax rate for the three months ended March 31, 2020 and 2019 , inclusive of discrete items, was 27.4% and 27.5% , respectively.

The actual income tax rates differed from the statutory tax rate due to state and local income taxes and other permanent book to tax differences.

The increase in the 2020 income tax provision was primarily due to increased income before income taxes.

This segment’s operating income for the three and six months ended June 30, 2020 was negatively impacted by approximately $0.2 million and $0.3 million, respectively, related to the effect of unfavorable exchange rates for the British pound versus the United States dollar.

Operating margin for the three and six months ended June 30, 2020 was 5.7% and 5.4%, respectively, compared to 4.9% and 4.4% for the three and six months ended June 30, 2019, respectively.

The increase in operating margin for both periods was attributable to an increase in gross profit margin, primarily as a result of a more favorable mix of work, and a decrease in the ratio of selling, general and administrative expenses to revenues.

Our corporate administration operating loss for the three and six months ended June 30, 2020 was $23.7 million and $45.6 million, respectively, compared to $27.1 million and $49.7 million for the three and six months ended June 30, 2019, respectively.

The decrease in corporate administration expenses for both periods was primarily due to:

(a) a decrease in incentive compensation expense due to lower projected annual operating results, relative to incentive targets, than in the same prior year period, and (b) a decrease in salaries expense due to certain short-term cost cutting measures, including temporary furloughs and salary reductions.

Net interest expense for the three months ended June 30, 2020 and 2019 was $2.1 million and $3.2 million, respectively.

Net interest expense for the six months ended June 30, 2020 and 2019 was $4.6 million and $6.1 million, respectively.

The decrease in net interest expense for the three and six months ended June 30, 2020 resulted from lower interest rates, partially offset by higher average outstanding borrowings.

For the three and six months ended June 30, 2020, our income tax benefit was $40.3 million and $11.8 million, respectively, compared to an income tax provision of $33.2 million and $60.6 million for the three and six months ended June 30, 2019, respectively.

Our effective income tax rate for the three and six months ended June 30, 2020 was (32.5)% and (59.4)% respectively, and our effective income tax rate for the three and six months ended June 30, 2019 was 28.3% and 27.9%, respectively.

Our income tax benefit for the three and six months ended June 30, 2020 was impacted by the tax-effect of the $232.8 million of non-cash goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded during the quarter, the majority of which were non-deductible for tax purposes.

The difference between the U.S.

statutory tax rate of 21% and our effective income tax rates for the three and six months ended June 30, 2020 was primarily related to:

(a) the impact of the non-deductible impairment charges previously referenced, (b) state and local income taxes, and (c) other permanent book to tax differences.

Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentage of total remaining performance obligations (in thousands, except for percentages):

March 31, 2020

December 31, 2019

March 31, 2019

June 30, 2020 % of Total December 31, 2019 % of Total June 30, 2019 % of Total

Remaining performance obligations:

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Although many of our construction contracts are subject to cancellation at the election of our customers, in accordance with industry practice, we do not limit the amount of unrecognized revenue included within remaining performance obligations for these contracts due to the inherent substantial economic penalty that would be incurred by our customers upon cancellation.

We believe our reported remaining performance obligations for our construction contracts are firm and contract cancellations have not had a material adverse effect on us.

Remaining performance obligations also include unrecognized revenues expected to be realized over the remaining term of service contracts.

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Such claim and other variable consideration amounts were immaterial for all periods presented.

Our remaining performance obligations at March 31, 2020 were $4.42 billion compared to $4.04 billion at December 31, 2019 and $4.16 billion at March 31, 2019.

The increase in remaining performance obligations at March 31, 2020 compared to December 31, 2019 was attributable to an increase in remaining performance obligations within all of our reportable segments, except for our United States electrical construction and facilities services segment, which experienced a slight decline in remaining performance obligations.

Novel Coronavirus

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has spread around the world.

On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide.

On March 13, 2020, U.S.

President Trump announced a National Emergency relating to the pandemic.

Government authorities in the U.S.

have recommended or imposed various social distancing, quarantine, and isolation measures on large portions of the population, which include limitations on travel and mandatory cessation of certain business activities.

Both the outbreak and the containment and mitigation measures could have a serious adverse impact on the economy, the severity and duration of which are uncertain.

It is likely that government stabilization efforts will only partially mitigate the consequences to the economy.

The extent to which the COVID-19 pandemic will impact our business and results of operations is highly uncertain and will be affected by a number of factors.

These include the duration and extent of the pandemic;

and extent of imposed or recommended containment and mitigation measures;

the extent, duration, and effective execution of government stabilization and recovery efforts;

the impact of the pandemic on economic activity, including on construction projects, our customers’ demand for our services and our vendors’ ability to supply us with raw materials;

our ability to effectively operate, including as a result of travel restrictions and mandatory business and facility closures;

the ability of our customers to pay us for services rendered;

any further closures of our and our customers’ offices and facilities;

and any additional project delays or shutdowns.

While we believe our remaining performance obligations are firm, customers may also slow down decision-making, delay planned work or seek to terminate existing agreements.

Any of these events could have a material adverse effect on our business, financial condition, and/or results of operations.

Although the ongoing COVID-19 pandemic did not have a material adverse impact on our result of operations for the first quarter of 2020, we began to experience disruptions caused by the pandemic, as well as the related containment and mitigation measures mandated by governmental authorities.

As a result, we have enacted our business continuity plans and have implemented certain short-term cost reductions, including reducing executive and director compensation.

We continue to bid on projects despite the challenging environment;

however, our ability to execute on such work is impacted by closures, work stoppages, job site delays, access restrictions to certain facilities, and reduced capital spending by our customers across the geographies in which we operate.

While we believe these disruptions will be temporary, it is difficult to predict how long they will last and the impact they will have on us in future periods.

We will continue to evaluate the effect of COVID-19 on our business.

Our remaining performance obligations at June 30, 2020 were $4.59 billion compared to $4.04 billion at December 31, 2019 and $4.23 billion at June 30, 2019.

The increase in remaining performance obligations at June 30, 2020 compared to December 31, 2019 was attributable to an increase in remaining performance obligations within our United States mechanical construction and facilities services segment and our United Kingdom building services segment.

Computer System Attack

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This attack temporarily disrupted our use of the impacted systems.

As part of our investigation into this incident, we have engaged outside security experts.

Although our investigation is still ongoing, the procedures performed to date have not identified any exfiltration of customer or employee data or any inappropriate access to our accounting or finance systems.

As part of our investigation into this incident, we engaged outside security experts, who did not identify any exfiltration of customer or employee data or any inappropriate access to our accounting or finance systems.

The Company maintains insurance coverage for these types of incidents;

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Short-term liquidity is also impacted by:

(a) the type and length of construction contracts in place as performance of long duration contracts typically requires greater amounts of working capital, (b) the level of turnaround activities within our United States industrial services segment as such projects are billed in arrears pursuant to contractual terms that are standard within the industry, and (c) the billing terms of our maintenance contracts, including those within our United States building services segment.

While we strive to negotiate favorable billing terms which allow us to invoice in advance of costs incurred on certain of our contracts, there can be no assurance that such terms will be agreed to by our customers.

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Based upon our current credit ratings and financial position, we can also reasonably expect to be able to secure long-term debt financing if required to achieve our strategic objectives.

Over the long term, our primary revenue risk factor continues to be the level of demand for non-residential construction and building and industrial services, which are influenced by macroeconomic trends including interest rates and governmental economic policy.

Over the long term, our primary revenue risk factor continues to be the level of demand for non-residential construction as well as building and industrial services, all of which are influenced by macroeconomic trends including interest rates and governmental economic policy.

In addition, our ability to perform work is critical to meeting our long-term liquidity requirements.

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The following table presents our net cash provided by (used in) operating activities, investing activities and financing activities (in thousands):

For the three months ended

Net cash used in operating activities

For the six months ended

Net cash provided by (used in) operating activities $ 276,743 $ (42,198)

Net cash used in investing activities $ (28,321) $ (85,830)

Net cash provided by (used in) financing activities

Net cash used in financing activities $ (121,301) $ (22,243)

Effect of exchange rate changes on cash, cash equivalents and restricted cash $ (4,701) $ (175)

Our consolidated cash balance, including cash equivalents and restricted cash, decreased by approximately $11.8 million from $359.9 million at December 31, 2019 to $348.1 million at March 31, 2020.

Net cash used in operating activities for the three months ended March 31, 2020 was $78.8 million compared to $57.4 million of cash used in operating activities for the three months ended March 31, 2019.

The increase in cash used in operating activities was primarily due to the timing of cash receipts from our customers, partially offset by a decrease in payments to our vendors.

Net cash used in investing activities for the three months ended March 31, 2020 decreased by approximately $29.6 million compared to the three months ended March 31, 2019.

The decrease in net cash used in investing activities was primarily due to a decrease in payments for the acquisitions of businesses.

Net cash provided by financing activities for the three months ended March 31, 2020 was $86.1 million compared to net cash used in financing activities for the three months ended March 31, 2019 of $11.8 million.

The increase in net cash provided by financing activities was primarily due to net borrowings of $192.5 million under our credit facility during the first quarter of 2020, partially offset by a $99.0 million increase in funds used for the repurchase of our common stock.

Our consolidated cash balance, including cash equivalents and restricted cash, increased by approximately $122.4 million from $359.9 million at December 31, 2019 to $482.3 million at June 30, 2020.

Net cash provided by operating activities for the six months ended June 30, 2020 was $276.7 million compared to $42.2 million of cash used in operating activities for the six months ended June 30, 2019.

The increase in cash provided by operating activities was primarily attributable to:

(a) a decline in organic revenues during the period, which resulted in a net reduction in outstanding accounts receivables, (b) a reduction in federal, state, and local tax payments of approximately $54.8 million compared to the prior year, primarily due to extended deadlines for making estimated federal tax payments, and (c) a $32.7 million reduction in the payment of certain payroll taxes given the enactment of the Coronavirus Aid, Relief, and Economic Security Act, which provides that employers may defer payment of the employer’s portion of Social Security taxes.

Net cash used in investing activities for the six months ended June 30, 2020 decreased by approximately $57.5 million compared to the six months ended June 30, 2019 due to a decrease in payments for business acquisitions.

Net cash used in financing activities for the six months ended June 30, 2020 was $121.3 million compared to net cash used in financing activities for the six months ended June 30, 2019 of $22.2 million.

The increase in net cash used in financing activities was primarily due to a $99.0 million increase in funds used for the repurchase of our common stock.

Until March 2, 2020, we had a credit agreement dated as of August 3, 2016, which provided for a $900.0 million revolving credit facility (the “2016 Revolving Credit Facility”) and a $400.0 million term loan (the “2016 Term Loan”) (collectively referred to as the “2016 Credit Agreement”).

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The 2020 Credit Agreement contains various covenants providing for, among other things, maintenance of certain financial ratios and certain limitations on payment of dividends, common stock repurchases, investments, acquisitions, indebtedness, and capital expenditures.

We were in compliance with all such covenants as of March 31, 2020 with respect to the 2020 Credit Agreement and, as of December 31, 2019 , with respect to the 2016 Credit Agreement.

We were in compliance with all such covenants as of June 30, 2020 with respect to the 2020 Credit Agreement and, as of December 31, 2019, with respect to the 2016 Credit Agreement.

A commitment fee is payable on the average daily unused amount of the 2020 Revolving Credit Facility, which ranges from 0.10% to 0.25%, based on certain financial tests.

The fee was 0.10% of the unused amount as of March 31, 2020 .

Borrowings under the 2020 Credit Agreement bear interest at (1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR ( 0.87% and 0.99% at March 31, 2020 for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively) plus 1.00% to 1.75%, based on certain financial tests.

The base rate is determined by the greater of (a) the prime commercial lending rate announced by Bank of Montreal from time to time ( 3.25% at March 31, 2020 ), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00%, or (d) 0.00%.

The interest rates in effect at March 31, 2020 were 1.87% and 1.99% for our 2020 Revolving Credit Facility and our 2020 Term Loan, respectively.

The fee was 0.10% of the unused amount as of June 30, 2020.

At the Company’s election, borrowings under the 2020 Credit Agreement bear interest at either:

(1) a base rate plus a margin of 0.00% to 0.75%, based on certain financial tests, or (2) United States dollar LIBOR (0.18% at June 30, 2020) plus 1.00% to 1.75%, based on certain financial tests.

The base rate is determined by the greater of (a) the prime commercial lending rate announced by Bank of Montreal from time to time (3.25% at June 30, 2020), (b) the federal funds effective rate, plus ½ of 1.00%, (c) the daily one month LIBOR rate, plus 1.00%, or (d) 0.00%.

The interest rate in effect at June 30, 2020 was 1.18%.

Fees for letters of credit issued under the 2020 Revolving Credit Facility range from 0.75% to 1.75% of the respective face amounts of outstanding letters of credit, depending on the nature of the letter of credit, and are computed based on certain financial tests.

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All unpaid principal and interest is due on March 2, 2025.

As of March 31, 2020 and December 31, 2019 , the balance of the 2020 Term Loan and the 2016 Term Loan was $300.0 million and $254.4 million, respectively.

As of March 31, 2020 and December 31, 2019 , we had approximately $79.0 million and $109.0 million of letters of credit outstanding, respectively.

There were $200.0 million in borrowings outstanding under the 2020 Revolving Credit Facility as of March 31, 2020, and there were $50.0 million in borrowings outstanding under the 2016 Revolving Credit Facility as of December 31, 2019 .

As of June 30, 2020 and December 31, 2019, the balance of the 2020 Term Loan and the 2016 Term Loan was $300.0 million and $254.4 million, respectively.

As of June 30, 2020, there were no direct borrowings outstanding under the 2020 Revolving Credit Facility, however, we had $79.0 million of letters of credit outstanding which reduce the available capacity under such facility.

As of December 31, 2019, we had $50.0 million in direct borrowings outstanding and $109.0 million of letters of credit outstanding under the 2016 Revolving Credit Facility.

Share Repurchase Program and Dividends

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Since the inception of the repurchase program, the Board has authorized us to repurchase up to $1.15 billion of our outstanding common stock.

During the first quarter of 2020, we repurchased approximately 1.5 million shares of our common stock for approximately $99.0 million .

Since the inception of the repurchase program through March 31, 2020 , we have repurchased approximately 17.4 million shares of our common stock for approximately $890.5 million .

As of March 31, 2020 , there remained authorization for us to repurchase approximately $259.5 million of our shares.

During the six months ended June 30, 2020, we repurchased approximately 1.5 million shares of our common stock for approximately $99.0 million.

Since the inception of the repurchase program through June 30, 2020, we have repurchased approximately 17.4 million shares of our common stock for approximately $890.5 million.

As of June 30, 2020, there remained authorization for us to repurchase approximately $259.5 million of our shares.

The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice.

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We have agreed to indemnify the Surety Companies for amounts, if any, paid by them in respect of Surety Bonds issued on our behalf.

Public sector contracts require Surety Bonds more frequently than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases.

Public sector contracts require Surety Bonds more frequently

than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases.

In addition, at the request of labor unions representing certain of our employees, Surety Bonds are sometimes provided to secure obligations for wages and benefits payable to or for such employees.

As of March 31, 2020, based on the percentage-of-completion of our projects covered by Surety Bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.3 billion, which represents approximately 30% of our total remaining performance obligations.

As of June 30, 2020, based on the percentage-of-completion of our projects covered by Surety Bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $1.4 billion, which represents approximately 30% of our total remaining performance obligations.

We are not aware of any losses in connection with Surety Bonds, which have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.

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Payments Due by Period

Contractual Obligations

Revolving credit facility (including interest at 1.87%) (1)

Contractual Obligations Total Less

years More than

Term loan (including interest at 1.18%) (1)

$ 315.2 $ 11.1 $ 36.6 $ 267.5 $ —

Finance leases 9.5 4.1 4.3 1.0 0.1

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Open purchase obligations (2)

1,345.6 1,110.0 203.5 32.1 —

Other long-term obligations, including current portion (3)

410.8 68.0 333.6 9.2 —

Total Contractual Obligations $ 2,374.0 $ 1,254.8 $ 670.4 $ 369.5 $ 79.3

Amount of Commitment Expiration by Period

Other Commercial Commitments

Other Commercial Commitments Total

Committed Less

years More than

Letters of credit $ 79.0 $ 79.0 $ — $ — $ —

On March 2, 2020, we entered into a $1.3 billion revolving credit facility (the “2020 Revolving Credit Facility”) and a $300.0 million term loan (the “2020 Term Loan”) (collectively referred to as the “2020 Credit Agreement”).

As of March 31, 2020, the amount outstanding under the 2020 Term Loan was $300.0 million, and there were borrowings outstanding of $200.0 million under the 2020 Revolving Credit Facility.

(1) As of June 30, 2020, the amount outstanding under the 2020 Term Loan was $300.0 million.

There were no direct borrowings outstanding under the 2020 Revolving Credit Facility.

(2) Represents open purchase orders for material and subcontracting costs related to construction and services contracts.

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(3) Primarily represents insurance related liabilities, and liabilities for deferred income taxes, incentive compensation and deferred compensation, classified as other long-term liabilities in the Consolidated Balance Sheets.

Cash payments for insurance and deferred compensation related liabilities may be payable beyond three years, however, it is not practical to estimate these payments;

therefore, these liabilities are reflected in the 1-3 years payment period.

Cash payments for insurance and deferred compensation related liabilities may be payable beyond three years;

however, because it is not practical to estimate these payments, these liabilities are reflected in the 1-3 years payment period.

We provide funding to our post retirement plans based on at least the minimum funding required by applicable regulations.

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Certain Insurance Matters

As of March 31, 2020 and December 31, 2019 , we utilized approximately $78.9 million of letters of credit obtained under our 2020 Revolving Credit Facility and $108.9 million of letters of credit obtained under our 2016 Revolving Credit Facility, respectively, as collateral for our insurance obligations.

As of June 30, 2020 and December 31, 2019, we utilized approximately $78.9 million of letters of credit obtained under our 2020 Revolving Credit Facility and $108.9 million of letters of credit obtained under our 2016 Revolving Credit Facility, respectively, as collateral for our insurance obligations.

New Accounting Pronouncements

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(d) income taxes;

and (e) goodwill and identifiable intangible assets.

and (e) goodwill, identifiable intangible assets, and other long-lived assets.

Revenue Recognition from Contracts with Customers

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When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

For the three months ended March 31, 2020 and 2019, there were no changes in total estimated costs that had a significant impact on our operating results.

In addition, there were no significant losses recognized during the three months ended March 31, 2020 and 2019.

For the three and six months ended June 30, 2020 and 2019, there were no changes in total estimated costs that had a significant impact on our operating results.

In addition, there were no significant losses recognized during the three and six months ended June 30, 2020 and 2019.

The timing of revenue recognition may differ from the timing of invoicing to customers.

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Accounts receivable are recognized in the period we deliver goods or provide services to our customers or when our right to consideration is unconditional.

We are required to estimate the collectibility of accounts receivable.

Specific accounts receivable are evaluated when we believe a customer may not be able to meet its financial obligations due to the deterioration of its financial condition or its credit ratings.

We evaluate the collectibility of specific accounts receivable when we believe a customer, or group of customers, may not be able to meet their financial obligations due to deterioration in financial condition or credit rating.

In addition, a considerable amount of judgment is required in assessing the likelihood of realization of receivables.

Relevant assessment factors include the creditworthiness of the customer, our prior collection history with the customer, the related aging of past due balances, projections of credit losses based on historical trends in credit quality indicators or past events, and forecasts of future economic conditions.

At March 31, 2020 and December 31, 2019 , our accounts receivable of $2,055.5 million and $2,030.8 million , respectively, were recorded net of allowances for credit losses of $20.0 million and $14.5 million , respectively.

Our allowance for credit losses increased based on our evaluation of forecasts of future economic conditions and the expected impact on customer collections, in accordance with Accounting Standards Codification Topic 326, “Financial Instruments - Credit Losses,” as described in Note 2 - New Accounting Pronouncements of the notes to consolidated financial statements included in Item 1.

Financial Statements.

Allowances for credit losses are based on the best facts available and are re-evaluated and adjusted on a regular basis as additional information is received.

Negative macroeconomic trends, including the impact of COVID-19, could result in an increase in our credit losses if we experience delays in the payment of outstanding receivables or if future economic conditions differ from our forecasts.

Relevant factors include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends in credit quality indicators or past events, and forecasts of future economic conditions.

Management reviews the credit quality of its receivables by, among other things, obtaining credit ratings of significant customers, assessing economic and market conditions, and evaluating material changes to a customer’s business, cash flows, and financial condition.

At June 30, 2020 and December 31, 2019, our accounts receivable of $1,936.4 million and $2,030.8 million, respectively, were recorded net of allowances for credit losses of $21.0 million and $14.5 million, respectively.

Due to the economic disruption caused by COVID-19, our allowance for credit losses increased based on our evaluation of:

(a) specific outstanding balances and (b) forecasts of future economic conditions and the expected impact on customer collections.

Allowances for credit losses are based on the best facts available and are reassessed and adjusted on a regular basis as additional information is received.

Should anticipated collections fail to materialize, or if future economic conditions differ from our forecasts, we could experience an increase in our allowances for credit losses.

Insurance Liabilities

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However, such obligations are difficult to assess and estimate due to numerous factors, including severity of injury, determination of liability in proportion to other parties, timely reporting of occurrences and effectiveness of safety and risk management programs.

Therefore, if our actual experience differs from the assumptions and estimates used for recording the

liabilities, adjustments may be required and will be recorded in the period that the experience becomes known.

Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $2.7 million at March 31, 2020 compared to December 31, 2019, partially as a result of greater potential exposures, including the impact of acquired companies.

If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $17.2 million of additional expense for the three months ended March 31, 2020.

We had net deferred income tax liabilities at March 31, 2020 and December 31, 2019 of $75.8 million and $71.7 million, respectively, primarily resulting from differences between the carrying value and income tax basis of certain identifiable intangible assets, goodwill, and depreciable fixed assets, which will impact our taxable income in future periods.

Included within these net deferred income tax liabilities are $169.9 million and $176.2 million of deferred income tax assets as of March 31, 2020 and December 31, 2019, respectively.

A valuation allowance is required when it is more likely than not that all or a portion of a deferred income tax asset will not be realized.

As of March 31, 2020 and December 31, 2019 , the total valuation allowance on deferred income tax assets, primarily related to state net operating loss carryforwards, was approximately $3.5 million.

Therefore, if our actual experience differs from the assumptions and estimates used for recording the liabilities, adjustments may be required and will be recorded in the period that the experience becomes known.

Our estimated net insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims increased by $3.3 million at June 30, 2020 compared to December 31, 2019, partially as a result of greater potential exposures, including the impact of acquired companies.

If our estimated insurance liabilities for workers’ compensation, automobile liability, general liability, and property claims were to increase by 10%, it would have resulted in $17.3 million of additional expense for the six months ended June 30, 2020.

Deferred income tax assets and liabilities are recognized for temporary differences between the financial statement and income tax bases of assets and liabilities as well as for net operating loss and tax credit carryforwards.

Deferred income taxes are valued using enacted tax rates expected to be in effect when income taxes are paid or recovered, with the effect of a change in tax laws or rates recognized in the statement of operations in the period in which such change is enacted.

The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Based on our taxable income, which has generally exceeded the amount of our net deferred tax asset balance, as well as current projections of future taxable income, we have determined that it is more likely than not that the net deferred income tax assets will be realized.

Deferred income taxes are recorded net of a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

In making such determination, we consider all available evidence, including projections of future taxable income, tax-planning strategies, and recent results of operations.

At June 30, 2020 and December 31, 2019, we had net deferred income tax liabilities of $51.5 million and $71.7 million, respectively, primarily resulting from differences between the carrying value and income tax basis of certain identifiable intangible assets, goodwill, and depreciable fixed assets.

Included within these net deferred income tax liabilities are $182.8 million and $176.2 million of deferred income tax assets as of June 30, 2020 and December 31, 2019, respectively.

The total valuation allowance on deferred income tax assets, primarily related to state net operating loss carryforwards, was approximately $3.5 million as of both June 30, 2020 and December 31, 2019.

Based on our taxable income, which has generally exceeded the amount of our net deferred tax asset balance, as well as current projections of future taxable income, we have determined that it is more likely than not that our net deferred income tax assets will be realized.

However, revisions to our forecasts or declining macroeconomic conditions could result in changes to our assessment of the realization of these deferred tax assets.

Goodwill and Identifiable Intangible Assets

As of March 31, 2020 , we had $1,064.9 million and $597.9 million , respectively, of goodwill and net identifiable intangible assets (primarily consisting of our contract backlog, developed technology/vendor network, customer relationships, and trade names) arising out of the acquisition of companies.

As of December 31, 2019 , goodwill and net identifiable intangible assets were $1,063.9 million and $611.4 million , respectively.

As of March 31, 2020, approximately 13.4% of our goodwill related to our United States electrical construction and facilities services segment, approximately 28.1% related to our United States mechanical construction and facilities services segment, approximately 27.2% related to our United States building services segment, and approximately 31.3% related to our United States industrial services segment.

The change to goodwill since December 31, 2019 was the result of an acquisition completed in 2020.

Accounting Standards Codification Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”) requires that goodwill and other identifiable intangible assets with indefinite useful lives not be amortized, but instead be tested at least annually for impairment (which we test each October 1, absent any earlier identified impairment indicators), and be written down if impaired.

ASC 350 requires that goodwill be allocated to its respective reporting unit and that identifiable intangible assets with finite lives be amortized over their useful lives.

The determination of related estimated useful lives for identifiable intangible assets and whether those assets are impaired involves significant judgments based upon short and long-term projections of future performance.

These forecasts reflect assumptions regarding the ability to successfully integrate acquired companies, as well as macroeconomic conditions.

We test for impairment of our goodwill at the reporting unit level.

Our reporting units are consistent with the reportable segments identified in Note 14, “Segment Information,” of the notes to consolidated financial statements.

Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets

As of June 30, 2020 and December 31, 2019, we had goodwill of $839.8 million and $1,063.9 million, respectively, arising out of the acquisition of businesses.

Goodwill is not amortized but instead allocated to its respective reporting unit and evaluated for impairment annually, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.

We have determined that our reporting units are consistent with the reportable segments identified in Note 15 - Segment Information of the notes to consolidated financial statements.

As of June 30, 2020, approximately 17.0% of our goodwill related to our United States electrical construction and facilities services segment, approximately 35.7% related to our United States mechanical construction and facilities services segment, approximately 34.5% related to our United States building services segment, and approximately 12.8% related to our United States industrial services segment.

Absent any earlier identified impairment indicators, we perform our annual goodwill impairment assessment on October 1 each fiscal year.

Qualitative indicators that may trigger the need for interim quantitative impairment testing include, among others, deterioration in macroeconomic conditions, declining financial performance, deterioration in the operational environment, or an expectation of selling or disposing of a portion of a reporting unit.

Additionally, an interim impairment test may be triggered by a significant change in business climate, a loss of a significant customer, increased competition, or a sustained decrease in share price.

In assessing whether our goodwill is impaired, we compare the fair value of the reporting unit to its carrying amount, including goodwill.

If the fair value exceeds the carrying amount, no impairment loss is recognized.

If the fair value exceeds the carrying amount, no impairment is recognized.

However, if the carrying amount of the reporting unit exceeds the fair value, the goodwill of the reporting unit is impaired and an impairment loss in the amount of the excess is recognized and charged to operations.

The fair value of each of our reporting units is generally determined using discounted estimated future cash flows;

however, in certain circumstances, consideration is given to a market approach whereby fair value is measured based on a multiple of earnings.

As of the date of our latest impairment test (October 1, 2019), the carrying values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment and our United States industrial services segment were approximately $331.0 million, $369.5 million, $546.8 million, and $705.2 million, respectively.

The fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment and our United States industrial services segment exceeded their carrying values by approximately $1,321.8 million, $2,011.5 million, $922.3 million, and $40.5 million, respectively.

No impairment of our goodwill was recognized during the three months ended March 31, 2020 and 2019.

The weighted average cost of capital used in our annual testing for impairment as of October 1, 2019 was 9.5%, 9.1%, and 10.5% for our domestic construction segments, our United States building services segment and our United States industrial services segment, respectively.

The perpetual growth rate used for our annual testing was 2.7% for all of our domestic segments.

Unfavorable changes in these key assumptions may affect future testing results.

For example, keeping all other assumptions constant, a 50 basis point increase in the weighted average costs of capital would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $108.8 million, $156.7 million, $98.0 million, and $40.3 million, respectively.

In addition, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $61.4 million, $90.5 million, $55.7 million, and $20.5 million, respectively.

Given the amounts by which the fair value exceeds the carrying value for each of our reporting units other than our United States industrial services segment, the decreases in estimated fair values described above would not have significantly impacted our 2019 impairment test.

In the case of our United States industrial services segment, however, such decreases would cause the estimated fair value to approach its carrying value.

We also test for the impairment of trade names that are not subject to amortization by calculating the fair value using the “relief from royalty payments” methodology.

During the second quarter of 2020, our operations were negatively impacted by the COVID-19 pandemic.

In addition, the demand for oil significantly deteriorated as a result of the pandemic and the corresponding preventative measures taken around the world to mitigate the spread of the virus, including various local, state, and national jurisdictional “shelter-in-place” orders.

Further, other macroeconomic events, such as geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia, resulted in a significant drop in the price of crude oil.

These negative factors created significant volatility and uncertainty in the markets in which our United States industrial services segment operates, resulting in a significant decrease in the demand for our service offerings.

Consequently, we revised our near-term revenue and operating margin expectations for our United States industrial services segment.

As a result of such developments, we concluded that a triggering event had occurred which indicated it was more likely than not that the fair value of our United States industrial services segment was less than its carrying amount.

Accordingly, we performed a quantitative impairment test and determined that the carrying amount of our United States industrial services segment exceeded its fair value, which resulted in the recognition of a non-cash goodwill impairment charge during the quarter ended June 30, 2020 of $225.5 million.

We determined the fair value of our United States industrial services segment using an income approach whereby fair value was calculated utilizing discounted estimated future cash flows, assuming a risk-adjusted industry weighted average cost of capital of 12.0%.

Such weighted average cost of capital was developed with the assistance of an independent third-party valuation specialist and reflects the overall level of inherent risk within the business and the rate of return a market participant would expect to earn.

Cash flow projections were derived from internal forecasts of anticipated revenue growth rates and operating margins, updated for recent events, with cash flows beyond the discrete forecast period estimated using a terminal value calculation which incorporated historical and forecasted trends, an estimate of long-term growth rates, and assumptions about the future demand for our services.

The perpetual growth rate utilized in the terminal value calculation was 2.0%.

We did not identify any indicators of impairment with respect to our remaining reporting units.

As such, for these reporting units, no impairment test was required to be performed subsequent to the date of our latest annual impairment test (October 1, 2019).

As of the date of such test, the fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, and our United States building services segment exceeded their carrying values by approximately $1,321.8 million, $2,011.5 million, and $922.3 million, respectively.

The weighted average cost of capital utilized in the determination of fair value was 9.5% and 9.1% for our United States construction segments and our United States building services segment, respectively.

The perpetual growth rate used for our annual testing was 2.7% for each of these segments.

Due to the inherent uncertainties involved in making estimates, our assumptions may change in future periods.

Estimates and assumptions made for purposes of our goodwill impairment testing may prove to be inaccurate predictions of the future, and other factors used in assessing fair value, such as the weighted average cost of capital, are outside the control of management.

Unfavorable changes in certain of these key assumptions may affect future testing results.

For example, as of the date of the most recent impairment test for each of our reporting units, keeping all other assumptions constant, a 50 basis point increase in the weighted average cost of capital would cause the estimated fair value of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $108.8 million, $156.7 million, $98.0 million, and $22.9 million, respectively.

In addition, as of the date of the most recent impairment test for each of our reporting units, keeping all other assumptions constant, a 50 basis point reduction in the perpetual growth rate would cause the estimated fair values of our United States electrical construction and facilities services segment, our United States mechanical construction and facilities services segment, our United States building services segment, and our United States industrial services segment to decrease by approximately $61.4 million, $90.5 million, $55.7 million, and $9.0 million, respectively.

Given the amounts by which the fair value exceeds the carrying value for each of our reporting units, other than our United States industrial services segment, the decreases in estimated fair values described above would not have significantly impacted the results of our impairment tests.

In the case of our United States industrial services segment, however, the carrying value at June 30, 2020 equals its fair value and, therefore, any subsequent declines in fair value would result in a further impairment.

As of June 30, 2020 and December 31, 2019, net identifiable intangible assets (primarily consisting of our contract backlog, developed technology/vendor network, customer relationships, and subsidiary trade names) arising out of the acquisition of businesses were $576.5 million and $611.4 million, respectively.

These forecasts reflect assumptions regarding anticipated macroeconomic conditions as well as our ability to successfully integrate acquired businesses.

Absent earlier indicators of impairment, we test for impairment of subsidiary trade names that are not subject to amortization on an annual basis (October 1).

In performing this test, we calculate the fair value of each trade name using the “relief from royalty payments” methodology.

This approach involves two steps:

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If the carrying amount of the trade name is greater than the implied fair value of the trade name, an impairment in the amount of the excess is recognized and charged to operations.

No impairment of our indefinite-lived trade names was recognized during the three months ended March 31, 2020 and 2019.

In addition, we review for the impairment of other identifiable intangible assets that are being amortized whenever facts and circumstances indicate that their carrying values may not be fully recoverable.

In addition, we review for impairment of identifiable intangible assets that are being amortized as well as other long-lived assets whenever facts and circumstances indicate that their carrying values may not be fully recoverable.

This test compares their carrying values to the undiscounted pre-tax cash flows expected to result from the use of the assets.

If the assets are impaired, the assets are written down to their fair values, generally determined based on their discounted estimated future cash flows.

No impairment of our other identifiable intangible assets was recognized during the three months ended March 31, 2020 and 2019.

We have certain businesses, particularly within our United States industrial services segment, whose results are highly impacted by the demand for some of our offerings within the industrial and oil and gas markets.

Volatility in the price of oil has historically caused some of our refinery customers to curtail or delay maintenance or capital projects.

Prolonged volatility in the price of oil may adversely affect some of our refinery customers causing them to defer maintenance and/or capital projects performed by our companies or delay purchases or repairs of heat exchangers that are manufactured and repaired by some of our companies.

Future performance of this segment, along with a continued evaluation of the conditions of its end user markets, will be important to ongoing impairment assessments.

Should this segment’s actual results suffer a decline or expected future results be revised downward, the risk of goodwill impairment or impairment of other identifiable intangible assets would increase.

Our development of the discounted future cash flow projections used in impairment testing is based upon assumptions and estimates by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations.

In addition, estimates of the weighted average cost of capital for each reporting unit are developed with the assistance of a third-party valuation specialist and certain other factors used in assessing fair value, such as interest rates, are outside the control of management.

These assumptions and estimates can change in future periods, especially in consideration of the uncertainty created by the COVID-19 pandemic and how it will impact the broader economy and our results of operations.

There can be no assurance that estimates and assumptions made for purposes of our goodwill and identifiable intangible asset impairment testing will prove to be accurate predictions of the future.

If our assumptions regarding future business performance including anticipated growth rates and margins are not achieved, or there is a rise in interest rates, we may be required to record goodwill and/or identifiable intangible asset impairment charges in future periods.

It is not possible at this time to determine if any future impairment charge will result or, if it does, whether such a charge would be material.

In connection with the negative market conditions disclosed above, we also evaluated certain of our identifiable intangible assets and other long-lived assets for impairment.

Such assets included those associated with the businesses in our United States industrial services segment and certain businesses within our United States electrical construction and facilities services segment whose results are also highly dependent on the strength of the oil and gas industry.

As a result of these assessments, during the quarter ended June 30, 2020, we recorded non-cash impairment charges of $7.3 million.

Of this amount, $4.8 million related to our United States industrial services segment and was comprised of:

(a) a $4.2 million subsidiary trade name impairment and (b) a $0.6 million impairment on certain other long-lived assets.

The remaining $2.5 million represented a subsidiary trade name impairment within our United States electrical construction and facilities services segment.

As referenced above, impairment testing is based upon assumptions and estimates determined by management from a review of our operating results and business plans as well as forecasts of anticipated growth rates and margins, among other considerations.

In addition, estimates of weighted average costs of capital are developed with the assistance of an independent third-party valuation specialist.

These assumptions and estimates can change in future periods, especially in consideration of the uncertainty created by the COVID-19 pandemic and its continued impact on the broader economy and our results of operations.

Significant adverse changes to external market conditions or our internal forecasts, if any, could result in future impairment charges.

It is not possible at this time to determine if any future impairment charge will result or, if it does, whether such a charge would be material to our results of operations.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis