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Business Combinations | 12 Months Ended
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Oct. 02, 2020
Business Combinations [Abstract] |
Business Combinations | Business Combinations John Wood Group's Nuclear Business On March 6, 2020, a subsidiary of Jacobs completed the acquisition of the nuclear consulting, remediation and program management business of John Wood Group, a U.K.-based energy services company, for an enterprise value of £246 million, or approximately $317.9 million, less cash acquired of $24.3 million, as updated for additional working capital adjustments. The John Wood Group nuclear business allows Jacobs to further expand its lifecycle nuclear services business. The following summarizes the fair values of John Wood Group's assets acquired and liabilities assumed as of the acquisition date (in millions):
Assets |
Cash and cash equivalents | $ | 24.3 |
Receivables | 75.9 |
Other current assets | 5.2 |
Property, equipment and improvements, net | 8.3 |
Goodwill | 205.8 |
Identifiable intangible assets | 80.0 |
Miscellaneous | 19.4 |
Total Assets | $ | 418.9 |
Liabilities |
Accounts payable, accrued expenses and other current liabilities | $ | 71.8 |
Long term liabilities | 29.2 |
Total Liabilities | 101.0
Net assets acquired | $ | 317.9 |
The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. 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. The Company has not completed its final assessment of the fair values of John Wood Group's assets acquired and liabilities assumed. The final purchase price allocation could result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill. Identified intangibles include customer relationships, contracts and backlog and developed technology. The customer relationships, contracts and backlog intangible represents the fair value of existing contracts, underlying customer relationships and backlog. The customer relationships, contracts and backlog intangible and the developed technology intangible have lives of 12 and 15 years, respectively. Fair value measurements relating to the John Wood Group nuclear business 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. No summarized unaudited pro forma results are provided for the John Wood Group nuclear business due to the immateriality of this acquisition relative to the Company's consolidated financial position and results of operations. KeyW 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 "KeyW acquisition"). The KeyW acquisition allows Jacobs to further expand its government services business. The Company paid total consideration of $902.6 million which was 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 debt of $298.4 million. The Company repaid all of KeyW's debt by the end of the fourth fiscal quarter of 2019. The following summarizes the fair values of KeyW assets and acquired liabilities assumed as of the acquisition date (in millions):
Assets |
Cash and cash equivalents | $ | 29.1 |
Receivables | 79.1 |
Inventories, net | 19.3 |
Prepaid expenses and other | 2.4 |
Property, equipment and improvements, net | 24.5 |
Deferred tax asset and other | 37.8 |
Goodwill | 615.6 |
Identifiable intangible assets | 179.0 |
Total Assets | $ | 986.8 |
Liabilities |
Accounts payable | $ | 8.3 |
Accrued expenses | 69.1 |
Short term debt | 298.4 |
Other current liabilities | 3.9 |
Other non-current liabilities | 2.9 |
Total Liabilities | 382.6 |
Net assets acquired | $ | 604.2 |
Goodwill recognized results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. Goodwill of $136.3 million is expected to be deductible for tax purposes. The Company has completed its final assessment of the fair values of the acquired assets and liabilities of KeyW. Since the initial preliminary estimates reported in the third quarter of fiscal 2019, the Company has updated certain amounts reflected in the final purchase price allocation, as summarized in the fair values of KeyW assets acquired and liabilities assumed as of the acquisition date as set forth above. Identified intangibles include customer relationships, contracts and backlog and developed technology. The customer relationships, contracts and backlog intangible represents the fair value of existing contracts, underlying customer relationships and backlog. The customer relationships, contracts and backlog intangible, and the developed technology intangible have lives of 10 and 12 years, respectively. Other intangible liabilities consist of the fair value of office leases and have a weighted average life of approximately 9 years. 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. For purposes of our comparative fiscal 2020 and 2019 reporting requirements in this Form 10-K, the following presents summarized unaudited pro forma operating results of the Company for the year ended September 27, 2019 assuming that the June 12, 2019 acquisition of KeyW had occurred at the beginning of fiscal 2018 for pro forma purposes. 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 on such date (in millions, except per share data):
|  | For the Year Ended
|  | September 27, 2019
Revenues |  | $ | 13,068.7 |
Net earnings of the Group from Continuing Operations |  | $ | 326.0 |
Net earnings (loss) attributable to Jacobs from continuing operations |  | $ | 303.0 |
Net earnings (loss) attributable to Jacobs from continuing operations per share: |  |
Basic earnings (loss) from continuing operations per share |  | $ | 2.19 |
Diluted earnings (loss) from continuing operations per share |  | $ | 2.17 |
Included in the table above are the unaudited pro forma operating results of continuing operations. Also, income tax expense (benefit) for the fiscal year pro forma period ended September 27, 2019 was $41.3 million. CH2M 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 "CH2M acquisition"). The purpose of the CH2M 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 CH2M 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 CH2M 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 | 1,120.6 |
Prepaid expenses and other | 72.7 |
Property, equipment and improvements, net | 175.1 |
Goodwill | 3,165.5 |
Identifiable intangible assets: |
Customer relationships, contracts and backlog | 412.3 |
Lease intangible assets | 4.4 |
Total identifiable intangible assets | 416.7 |
Miscellaneous | 530.8 |
Total Assets | $ | 5,796.6 |
Liabilities |
Notes payable | $ | 2.2 |
Accounts payable | 309.6 |
Accrued liabilities | 787.4 |
Contract liabilities | 260.8 |
Identifiable intangible liabilities: |
Lease intangible liabilities | 9.6 |
Long-term debt | 706.0 |
Other deferred liabilities | 659.0 |
Total Liabilities | $ | 2,734.6 |
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 related to estimates for various legal and other pre-acquisition contingent liabilities accounted for under ASC 450. See Note 18- Contractual Guarantees, Litigation, Investigations and Insurance relating to CH2M contingencies. 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 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 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. From the acquisition date of December 15, 2017 through September 28, 2018, CH2M consolidated, including both continuing and discontinued operations, contributed approximately $3.8 billion in revenue and $185.9 million in pretax income included in the accompanying consolidated statement of earnings. Included in these results were approximately $99.3 million in pre-tax restructuring and transaction costs. Transaction costs associated with the CH2M acquisition in the accompanying consolidated statements of earnings for the year ended September 28, 2018 are comprised of the following (in millions):
| For the Year Ended
| September 28, 2018
Personnel costs | $ | 50.2 |
Professional services and other expenses | 27.5 |
Total | $ | 77.7 |
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). Additionally, these pro forma operating results have not been recast for the sale of our ECR business.
| For the Year Ended
| September 28, 2018
Revenues | $ | 16,012.4 |
Net earnings | $ | 196.3 |
Net earnings (loss) attributable to Jacobs | $ | 184.5 |
Net earnings (loss) attributable to Jacobs per share: |
Basic earnings (loss) per share | $ | 1.28 |
Diluted earnings (loss) per share | $ | 1.27 |
Included in the unaudited pro forma operating results are charges relating to transaction expenses, severance expense and other items that are removed from the year ended September 28, 2018 and are reflected in the year ended September 29, 2017 due to the assumed timing of the transaction. Also, income tax expense (benefit) for the twelve- month pro forma period ended September 28, 2018 was $409.7 million.

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