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Business Acquisitions, Goodwill and Intangible Assets | 3 Months Ended
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Dec. 31, 2016
Business Acquisitions, Goodwill and Intangible Assets |
Business Acquisitions, Goodwill and Intangible Assets | 3.Business Acquisitions, Goodwill and Intangible Assets The Company completed one acquisition during the year ended September 30, 2016 for total consideration of $5.5 million. The business combination did not meet the quantitative thresholds to require separate disclosures based on the Company’s consolidated net assets, investments and net income. The acquisition was accounted for under the purchase method of accounting. As such, the purchase consideration was allocated to acquired tangible and intangible assets and liabilities based upon their fair values. The determination of fair values of assets and liabilities acquired requires the Company to make estimates and use valuation techniques when market value is not readily available. Transaction costs associated with business acquisitions are expensed as they are incurred. On October 17, 2014, the Company completed the acquisition of the U.S. headquartered URS Corporation (URS), an international provider of engineering, construction, and technical services, by purchasing 100% of the outstanding shares of URS common stock. The Company paid total consideration of approximately $2.3 billion in cash and issued approximately $1.6 billion of AECOM common stock to the former stockholders and certain equity award holders of URS. In connection with the acquisition, the Company also assumed URS’s senior notes totaling $0.4 billion, net of Company repayments. The Company repaid in full URS’s $0.6 billion 2011 term loan and $0.1 billion of URS’s revolving line of credit. The Company acquired backlog and customer relationship intangible assets valued at $973.8 million representing the fair value of existing contracts and the underlying customer relationships, and have lives ranging from 1 to 11 years (weighted average lives of approximately 3 years) in connection with the URS acquisition. Acquired accrued expenses and other current liabilities include URS project liabilities and approximately $240 million related to estimated URS legal settlements and uninsured legal damages; see Note 14, Commitments and Contingencies, including legal matters related to former URS affiliates. Amortization of intangible assets relating to URS, included in cost of revenue, was $20.9 million and $59.0 million during the three months ended December 31, 2016 and 2015, respectively. Additionally, included in equity in earnings of joint ventures and noncontrolling interests was intangible amortization expense of $2.0 million and ($2.1) million, respectively, during the three months ended December 31, 2016 and $9.7 million and ($5.7) million, respectively, during the three months ended December 31, 2015 related to joint venture fair value adjustments. Billings in excess of costs on uncompleted contracts includes a margin fair value liability associated with long-term contracts acquired in connection with the acquisition of URS. This margin fair value liability was $149.1 million at the acquisition date and its carrying value was $13.3 million at December 31, 2016, and is recognized as revenue on a percentage-of-completion basis as the applicable projects progress. The majority of this liability was recognized over the first two years from the acquisition date. Revenue and the related income from operations related to the margin fair value liability recognized during the three months ended December 31, 2016 and 2015 was $1.6 million and $15.1 million, respectively. Acquisition and integration expenses, relating to the acquisition of URS, in the accompanying consolidated statements of operations comprised of the following (in millions):
|  | Three months ended Dec 31, |
|  | 2016 |  | 2015 |
Severance and personnel costs |  | $ | 11.5 |  | $ | 6.6 |
Professional service, real estate-related, and other expenses |  | 3.9 |  | 34.4 |
Total |  | $ | 15.4 |  | $ | 41.0 |
Included in severance and personnel costs for the three months ended December 31, 2016 and 2015 was $8.7 million and $6.6 million of severance expenses, respectively, of which $0 and $4.3 million was paid as of December 31, 2016 and 2015, respectively. All acquisition and integration expenses are classified within the Corporate segment, as presented in Note 15. Interest expense in the consolidated statements of operations for the three months ended December 31, 2016 and 2015 included acquisition related financing expenses of $2.8 million and $4.1 million, respectively. Loss on disposal activities of $41.0 million in the accompanying Statements of Operations for the three months ended December 31, 2015 included losses on the disposition of non-core energy related businesses, equipment and other assets acquired with URS and reported within the Construction Services segment. Net assets related to the loss on disposal activities were $99.6 million. Income from operations included losses incurred by non-core businesses of $7.1 million during the three months ended December 31, 2015. The changes in the carrying value of goodwill by reportable segment for the three months ended December 31, 2016 were as follows:
|  | September 30, 2016 |  | Post- Acquisition Adjustments |  | Foreign Exchange Impact |  | Disposed |  | December 31, 2016 |
|  | (in millions) |
Design and Consulting Services |  | $ | 3,198.2 |  | $ | — |  | $ | (22.1 | ) | $ | — |  | $ | 3,176.1 |
Construction Services |  | 915.2 |  | — |  | (4.9 | ) | — |  | 910.3 |
Management Services |  | 1,710.4 |  | — |  | (12.4 | ) | — |  | 1,698.0 |
Total |  | $ | 5,823.8 |  | $ | — |  | $ | (39.4 | ) | $ | — |  | $ | 5,784.4 |
The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of December 31 and September 30, 2016, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:
|  | December 31, 2016 |  | September 30, 2016 |  |  |
|  | Gross Amount |  | Accumulated Amortization |  | Intangible Assets, Net |  | Gross Amount |  | Accumulated Amortization |  | Intangible Assets, Net |  | Amortization Period |
|  | (in millions) |  | (years) |
Backlog and customer relationships |  | $ | 1,242.9 |  | $ | (793.1 | ) | $ | 449.8 |  | $ | 1,247.1 |  | $ | (767.7 | ) | $ | 479.4 |  | 1 – 11 |
Trademark / tradename |  | 16.4 |  | (16.4 | ) | — |  | 16.4 |  | (16.4 | ) | — |  | 0.3 - 2 |
Total |  | $ | 1,259.3 |  | $ | (809.5 | ) | $ | 449.8 |  | $ | 1,263.5 |  | $ | (784.1 | ) | $ | 479.4 |  |  |
Amortization expense of acquired intangible assets included within cost of revenue was $25.4 million and $65.1 million for the three months ended December 31, 2016 and 2015, respectively. The following table presents estimated amortization expense of existing intangible assets for the remainder of fiscal 2017 and for the succeeding years:
Fiscal Year |  | (in millions) |
2017 (nine months remaining) |  | $ | 72.1 |
2018 |  | 81.5 |
2019 |  | 76.3 |
2020 |  | 64.4 |
2021 |  | 54.6 |
Thereafter |  | 100.9 |
Total |  | $ | 449.8 |

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- Definition Description of a business combination completed during the period, including background, timing, and recognized assets and liabilities and includes disclosure of goodwill and intangible assets of the entire business. + References No definition available. + Details
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