On June 12, 2019, Jacobs completed the acquisition of The KeyW Holding Corporation (“KeyW”), a U.S. based national security solutions provider to the intelligence, cyber, and counterterrorism communities by acquiring 100% of the outstanding shares of KeyW common stock. The acquisition allows Jacobs to further expand its government services business. The Company paid total consideration of $902.6 million which is comprised of approximately $604.2 million in cash to the former stockholders and certain equity award holders of KeyW and the assumption of KeyW’s convertible debt of $22.6 million and first and second lien notes which totaled approximately $275.8 million. Immediately following the effective time of the acquisition, the Company repaid KeyW’s first and second lien notes. In July, the Company repaid KeyW's outstanding convertible debt of $22.6 million.



Assets
Cash and cash equivalents	$	29.1
Receivables	81.5
Inventories, net	25.2
Prepaid expenses and other	2.5
Property, equipment and improvements, net	24.0
Deferred tax asset and other	25.8
Goodwill	602.4
Identifiable intangible assets	188.3
Total Assets	$	978.8

Liabilities
Accounts payable	$	8.3
Accrued expenses	62.7
Convertible senior notes - current portion	22.6
Other current liabilities	3.9
Long-term debt	275.8
Other non-current liabilities	1.4
Total Liabilities	374.7
Net assets acquired	$	604.1

Identified intangibles include customer relationships, contracts and backlog, developed technology and non-compete agreements. The customer relationships, contracts and backlog intangibles represent the fair value of existing contracts, the life of the underlying customer relationships and backlog is 12 years. The developed technology intangible has a life of 12 years and non-compete agreement intangibles have a life of 1 year.

Fair value measurements relating to the KeyW acquisition are made primarily using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily for 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 reflects the level of risk associated with receiving future cash flows. 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.

The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. The Company has not completed its final assessment of the fair values of purchased receivables, intangible assets, property and equipment, tax balances, contingent liabilities or acquired contracts. The final purchase price allocation will result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill.

From the acquisition date of June 12, 2019 through June 28, 2019, KeyW contributed approximately $23.9 million in revenue and $15.5 million in pre-tax loss included in the accompanying Consolidated Statement of Earnings. Included in these results were approximately $12.7 million in pre-tax transaction costs which related primarily to professional services and other.

The following presents summarized unaudited pro forma operating results of Jacobs assuming that the Company had acquired KeyW at October 1, 2017. 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, except per share data):



	Nine Months Ended June 28, 2019		Nine Months Ended June 29, 2018
Revenues	$	9,562.0	$	7,969.0
Net earnings of the Group	$	290.8	$	68.9
Net earnings (loss) attributable to Jacobs	$	275.3	$	63.3
Net earnings (loss) attributable to Jacobs per share:
Basic earnings (loss) per share	$	1.98	$	0.47
Diluted earnings (loss) per share	$	1.96	$	0.46

Included in the table above are the unaudited pro forma operating results of continuing operations. Additionally, charges relating to transaction expenses, severance expense and other items are removed from the nine months ended June 28, 2019 and are reflected in the prior fiscal year due to the assumed timing of the transaction. Also, income tax expense (benefit) for the nine-month pro forma period ended June 28, 2019 and June 29, 2018 was $14.9 million and $88.1 million, respectively.

On December 15, 2017, the Company completed the acquisition of CH2M HILL Companies, Ltd., 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.



Assets
Cash and cash equivalents	$	315.2
Receivables	1,120.6
Prepaid expenses and other	72.7
Property, equipment and improvements, net	175.1
Goodwill	3,101.0
Identifiable intangible assets:
Customer relationships, contracts and backlog	412.3
Lease intangible assets	4.4
Total identifiable intangible assets	416.7
Miscellaneous	543.6
Total Assets	$	5,744.9

Liabilities
Notes payable	$	2.2
Accounts payable	309.6
Accrued liabilities	735.7
Billings in excess of costs	260.8
Identifiable intangible liabilities:
Lease intangible liabilities	9.6
Long-term debt	706.0
Other deferred liabilities	659.0
Total Liabilities	2,682.9
Noncontrolling interests	(37.3		)
Net assets acquired	$	3,024.7

Goodwill recognized 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. During the first quarter of fiscal 2019, the Company completed its final assessment of the fair values of the acquired assets and liabilities of CH2M. Accrued liabilities and other deferred liabilities include approximately $404.7 million for estimates related to various legal and other pre-acquisition contingent liabilities accounted for under ASC 450. See Note 18- Commitments and Contingencies relating to CH2M contingencies.

Since the preliminary estimates reported in the fiscal 2018 Form 10-K, the Company updated certain amounts reflected in the final purchase price allocation due to additional information that became available during such period, including results of preliminary mediation discussions, recommendations from external advisors and claims for damages filed against Jacobs related to pre-acquisition contingencies, as summarized in the fair values of CH2M assets acquired and liabilities assumed as set forth above. Specifically, receivables decreased $4.0 million and accrued liabilities and other deferred liabilities decreased $11.5 million, respectively, primarily related to provisional estimates related to various legal and other pre-acquisition contingent liabilities. Further, miscellaneous long-term assets increased $20.7 million largely due to the deferred tax impact of these valuation adjustments. As a result of these adjustments to the preliminary purchase price allocation reported in the fiscal 2018 Form 10-K, goodwill decreased $28.1 million. 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.

Customer relationships, contracts, and backlog intangibles represent the fair value of existing contracts, the underlying customer relationships and backlog of consolidated subsidiaries and have lives ranging from 9 to 11 years (weighted average life of approximately 10 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.

Fair value measurements relating to the CH2M acquisition are made primarily using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily for 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 reflects 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. 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.

From the acquisition date of December 15, 2017 through June 29, 2018, CH2M consolidated, including both continuing and discontinued operations, contributed approximately $2.5 billion in revenue and $87.9 million in pretax income included in the accompanying Consolidated Statement of Earnings. Included in these results were approximately $93.3 million in pre-tax restructuring and transaction costs.

The following presents summarized unaudited pro forma operating results of Jacobs 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, except per share data):



	Nine Months Ended June 29, 2018
Revenues	$	11,869.8
Net earnings of the Group	$	226.1
Net earnings (loss) attributable to Jacobs	$	222.1
Net earnings (loss) attributable to Jacobs per share:
Basic earnings (loss) per share	$	1.56
Diluted earnings (loss) per share	$	1.55

Included in the table above are the unaudited pro forma operating results of the entire Company, including both continuing and discontinued operations. Additionally, charges relating to transaction expenses, severance expense and other items are removed from the nine months ended June 29, 2018 and are reflected in the prior fiscal year due to the assumed timing of the transaction. Also, income tax expense (benefit) for both continuing and discontinued operations for the nine-month pro forma period ended June 29, 2018 was $180.4 million.