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Business Combinations | 6 Months Ended
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Mar. 30, 2018
Business Combinations [Abstract] |
Business Combinations | 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 was 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 (excluding $315.2 million of cash acquired) 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 $20.0 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 | 1,184.1 |
Prepaid expenses and other | 72.7 |
Property, equipment and improvements, net | 175.1 |
Goodwill | 2,874.9 |
Identifiable intangible assets: |
Customer relationships, contracts and backlog | 450.0 |
Lease intangible assets | 4.4 |
Total identifiable intangible assets | 454.4 |
Miscellaneous | 354.2 |
Total Assets | $ | 5,430.6 |
Liabilities |
Notes payable | $ | 2.2 |
Accounts payable | 309.6 |
Accrued liabilities | 696.6 |
Billings in excess of costs | 265.8 |
Identifiable intangible liabilities: |
Lease intangible liabilities | 9.6 |
Long-term debt | 702.3 |
Other deferred liabilities | 381.6 |
Total Liabilities | 2,367.7 |
Noncontrolling interests | (38.2 | )
Net assets acquired | $ | 3,024.7 |
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, equipment and improvements, 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. During the three months ended March 30, 2018, the Company updated certain provisional amounts reflected in the preliminary purchase price allocation, as summarized in the estimated fair values of CH2M assets acquired and liabilities assumed above. Specifically, the carrying amount of the intangible assets discussed above were decreased by $148.5 million and the carrying amount of property, equipment and improvements decreased by $50.5 million. These measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed at the acquisition date. As a result, the Company recognized measurement period adjustments decreasing expense by $1.5 million during the three months ended March 30, 2018. 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 10 to 12 years (weighted average life of approximately 11 years). Other intangible assets and liabilities primarily consist of the fair value of office leases and have a weighted average life of approximately 10 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 primarily of pensions and other long-term employee related liabilities totaling approximately $291.0 million. From the acquisition date of December 15, 2017 through the end of the second fiscal quarter of 2018, CH2M contributed approximately $1.3 billion in revenue and $6.5 million in pretax loss included in the accompanying consolidated statement of earnings. Included in these results were approximately $78.0 million in pre-tax restructuring and transaction costs. Transaction costs associated with the CH2M acquisition in the accompanying consolidated statements of earnings for the three and six months ended March 30, 2018 are comprised of the following (in millions):
| Three Months Ended March 30, 2018 |  | Six Months Ended March 30, 2018
Personnel costs | $ | 4.7 |  |  | $ | 45.9 |
Professional services and other expenses | 0.2 |  |  | 26.9 |
Total | $ | 4.9 |  |  | $ | 72.8 |
Personnel costs above include change of control payments and related severance costs. 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):
|  | Six Months Ended
|  | March 30, 2018 |  | March 31, 2017
Revenues |  | $ | 7,713.1 |  |  | $ | 7,043.4 |
Net earnings |  | 77.7 |  |  | 10.6 |
Net earnings (loss) attributable to Jacobs |  | 71.8 |  |  | (2.8 | )
Net earnings (loss) attributable to Jacobs per share: |  |  |  |
Basic earnings (loss) per share |  | $ | 0.50 |  |  | $ | (0.02 | )
Diluted earnings (loss) per share |  | $ | 0.50 |  |  | $ | (0.02 | )
Included in the unaudited pro forma operating results are charges relating to transaction expenses, severance expense and other items that are removed from the six months ended March 30, 2018 and are reflected in the six months ended March 31, 2017 due to the assumed timing of the transaction. Also, income tax expense (benefit) for the six month pro forma periods ended March 30, 2018 and March 31, 2017 was $137.7 million and ($61.9) million, respectively.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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