5.	Business Combinations

On December 15, 2017, the Company completed the acquisition of CH2M HILL Companies, Ltd. (CH2M), an international provider of engineering, construction, and technical services, by acquiring 100% of the outstanding shares of CH2M common stock and preferred stock. The purpose of the acquisition is to further diversify the Company’s presence in the water, nuclear and environmental remediation sectors and to further the Company’s profitable growth strategy. The Company paid total consideration of approximately $1.8 billion in cash and issued approximately $1.4 billion of Jacobs’ common stock, or 20.7 million shares, to the former stockholders and certain equity award holders of CH2M. In connection with the acquisition, the Company also assumed CH2M’s revolving credit facility and second lien notes, including a $20 million prepayment penalty, which totaled approximately $700 million of long-term debt. Immediately following the effective time of the acquisition, the Company repaid CH2M’s revolving credit facility and second lien notes including the related prepayment penalty.

The following summarizes the estimated fair values of CH2M assets acquired and liabilities assumed as of the acquisition date (in millions):

Assets
Cash and cash equivalents	$	315.2
Receivables	1,201.9
Prepaid expenses and other	72.7
Property, equipment and improvements, net	225.6
Goodwill	2,698.8
Identifiable intangible assets:
Customer relationships, contracts and backlog	557.0
Trade name	40.0
Lease intangible assets	5.9
Total identifiable intangible assets	602.9
Miscellaneous	277.4
Total Assets	$ 5,394.5
Liabilities
Notes payable	2.2
Accounts payable	309.6
Accrued liabilities	659.0
Billings in excess of costs	263.5
Identifiable intangible liabilities:
Lease intangible liabilities	9.6
Long-term debt	702.3
Other deferred liabilities	382.7
Total Liabilities	2,328.9
Noncontrolling interests	(40.9)
Net assets acquired	$	3,024.7

Customer relationships, contracts and backlog represent the fair value of existing contracts, the underlying customer relationships and backlog of consolidated subsidiaries and have lives ranging from 5 to 13 years (weighted average life of approximately 8 years). The fair value of the acquired trade name has an estimated life of three years. Other intangible assets and liabilities primarily consist of the fair value of office leases and have a weighted average life of approximately 12 years.

Estimated fair value measurements relating to the CH2M acquisition are made using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily from the income approach, which include the use of both the multiple period excess earnings method and the relief from royalties method. The significant assumptions used in estimating fair value include (i) the estimated life the asset will contribute to cash flows, such as attrition rate of customers or remaining contractual terms, (ii) profitability and (iii) the estimated discount rate that reflect the level of risk associated with receiving future cash flows. The estimated fair value of land has been determined using the market approach, which arrives at an indication of value by comparing the site being valued to sites that have been recently acquired in arm’s-length transactions. Personal property assets with an active and identifiable secondary market are valued using the market approach. Buildings and land improvements are valued using the cost approach using a direct cost model built on estimates of replacement cost. Other personal property assets such as furniture, fixtures and equipment are valued using the cost approach which is based on replacement or reproduction costs of the asset less depreciation.

Other deferred liabilities were comprised of pensions and other long-term employee related liabilities totaling approximately $291.0 million.

The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. Goodwill recognized largely results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. None of the goodwill recognized is expected to be deductible for tax purposes. The Company has not completed its final assessment of the fair values of purchased receivables, intangible assets and liabilities, property and equipment, tax balances, contingent liabilities, long-term leases or acquired contracts. The final purchase price allocation will result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill. See Note 18, Commitments and Contingencies, relating to CH2M contingencies.

From the acquisition date of December 15, 2017 through the end of the first fiscal quarter of 2018, CH2M contributed approximately $131 million in revenue and $15.7 million in net earnings included in the accompanying consolidated statement of earnings. Included in these results were approximately $30 million in pre-tax restructuring and transaction costs.

Transaction costs associated with the CH2M acquisition in the accompanying consolidated statements of operations for the three months ended December 29, 2017 are comprised of the following (in millions):

Personnel costs	$	41,222
Professional service, real estate-related, and other expenses	26,675
Total	$	67,897

The following presents summarized unaudited pro forma operating results assuming that the Company had acquired CH2M at October 1, 2016. These pro forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the related events occurred (in millions):

	Three Months Ended
See note 1	December 29, 2017		December 30, 2016

Revenues	$	3,778	$	3,652
Net earnings (loss)	$ 25.8		$	(47.0)
Net earnings (loss) attributable to Jacobs	$	23.2	$	(56.6)
Net earnings (loss) attributable to Jacobs per share:
Basic earnings (loss) per share	$	0.16	$	(0.40)
Diluted earnings (loss) per share	$	0.16	$	(0.40)

Included in the unaudited pro forma operating results are charges relating to transaction expenses, severance expense and other items that are removed from the three months ended December 29, 2017 and are reflected in the three months ended December 30, 2016 due to the assumed timing of the transaction. Also, income tax expense (benefit) for the three month pro forma periods ended December 29, 2017 and December 30, 2016 were $67.4 million and ($78.6) million, respectively.