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Discontinued Operations, Goodwill, and Intangible Assets

12 Months Ended

Sep. 30, 2020

Discontinued Operations, Goodwill and Intangible Assets

Discontinued Operations, Goodwill, and Intangible Assets

3. Discontinued Operations, Goodwill, and Intangible Assets

On October 12, 2019, the Company entered into a purchase and sale agreement with Maverick Purchaser Sub, LLC (“Purchaser”), an affiliate of American Securities LLC and Lindsay Goldberg LLC. Per the terms of that agreement, the Company agreed to transfer the assets and liabilities constituting its Management Services business to the Purchaser. The transaction with the Purchaser closed on January 31, 2020. The Company received total cash consideration of $2.28 billion inclusive of the receipt in the third quarter of fiscal 2020 of $122.0 million received in connection with a favorable working capital purchase price adjustment and contingent consideration of approximately $120 million attributable to certain claims related to prior work and engagements. As a result of the sale, the Company recognized a pre-tax gain of $161.9 million. The gain on sale was included in the net loss from discontinued operations in the Consolidated Statements of Operations.

Additionally, in the first quarter of fiscal 2020, management approved a plan to dispose via sale the Company’s self-perform at-risk construction businesses within the next year. These businesses include the Company’s civil infrastructure, power, and oil and gas construction businesses that were previously reported in the Company’s Construction Services segment. After consideration of the relevant facts, the Company concluded the assets and liabilities of its Management Services business and its self-perform at-risk construction businesses met the criteria for classification as held for sale. The Company concluded the actual and proposed disposal activities represented a strategic shift that will have a major effect on the Company’s operations and financial results and qualified for presentation as discontinued operations in accordance with FASB Accounting Standards Codification (ASC) 205-20. Accordingly, the financial results of the Management Services business and the self-perform at-risk construction businesses are presented in the Consolidated Statements of Operations as discontinued operations for all periods presented. Current and non-current assets and liabilities of these businesses not sold as of the balance sheet date are presented in the Consolidated Balance Sheets as assets and liabilities held for sale for both periods presented. Interest expense allocated to discontinued operations represents interest expenses for the discontinued operations’ finance leases and term loans, which were required to be settled upon the sale of the Management Services business.

During the second quarter of fiscal 2020, the Company identified indicators of impairment for the self-perform at-risk construction business. Specifically, the Company's forecast for its Oil and Gas business decreased significantly from the prior period due primarily to the volatility in global oil prices, which negatively impacted forecasts for future revenues and earnings. As a result, the Company assessed the Oil and Gas business for impairment and determined the fair value of the disposal group was lower than its carrying value. Fair value was estimated using Level 3 inputs, such as forecasted cash flows. Accordingly, the Company recorded impairment losses for that business' goodwill of approximately $83.6 million and intangible assets of approximately $5.7 million. These impairment losses were recorded in net loss from discontinued operations on the Consolidated Statements of Operations.

During the fourth quarter of fiscal 2020, the Company recorded a $247.2 million loss related to the remeasurement of its self-perform at-risk construction businesses to fair value less cost to sell. Fair value was estimated using Level 3 inputs, such as forecasted cash flows, and Level 2 inputs, including bid prices from potential buyers.

The following table represents summarized balance sheet information of assets and liabilities held for sale (in millions):


	September 30,		September 30,
	2020		2019

Cash and cash equivalents	$	109.9	$	194.7
Receivables and contract assets		544.3		1,326.6
Other		62.5		112.0
Current assets held for sale	$	716.7	$	1,633.3

Property and equipment, net	$	119.8	$	153.8
Goodwill		—		1,798.5
Other		254.4		364.7
Write-down of assets to fair value less cost to sell		(247.2)		—
Non-current assets held for sale	$	127.0	$	2,317.0

Accounts payable and accrued expenses	$	394.5	$	1,056.0
Contract liabilities		73.6		88.9
Other		1.6		18.8
Current liabilities held for sale	$	469.7	$	1,163.7

Long-term liabilities held for sale	$	98.8	$	314.0

The following table represents summarized income statement information of discontinued operations (in millions):


	Fiscal Year Ended
	September 30,		September 30,
	2020		2019

Revenue	$	3,150.8	$	6,530.9
Cost of revenue		3,179.2		6,329.1
Gross (loss) profit		(28.4)		201.8
Equity in earnings of joint ventures		(25.5)		31.7
Gain (loss) on disposal activities		161.9		(14.0)
Transaction costs		(43.2)		—
Impairment of long-lived assets, including goodwill		(336.5)		(590.5)
Loss from operations		(271.7)		(371.0)
Other income		1.8		2.5
Interest expense		(40.5)		(64.8)
Loss before taxes		(310.4)		(433.3)
Income tax (benefit) expense		30.2		(13.6)
Net loss from discontinued operations	$	(340.6)	$	(419.7)

The significant components included in the Consolidated Statement of Cash Flows for the discontinued operations are as follows (in millions):


	Fiscal Year Ended
	September 30,		September 30,
	2020		2019

Depreciation and amortization:	$		$
Property and equipment		4.6		26.9
Intangible assets and capitalized debt issuance costs		26.0		66.5
Payments for capital expenditures		(19.6)		(20.1)

The changes in the carrying value of goodwill by reportable segment for the year ended September 30, 2020 were as follows:


			Foreign
	September 30,		Exchange		September 30,
	2019		Impact		2020

	(in millions)
Americas	$	2,618.6	$	(1.5)	$	2,617.1
International		858.2		8.9		867.1
Total	$	3,476.8	$	7.4	$	3,484.2

The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of September 30, 2020 and September 30, 2019, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:


	September 30, 2020						September 30, 2019
	Gross		Accumulated		Intangible		Gross		Accumulated		Intangible		Amortization
	Amount		Amortization		Assets, Net		Amount		Amortization		Assets, Net		Period

	(in millions)												(years)
Backlog and customer relationships	$	662.8	$	(585.9)	$	76.9	$	661.4	$	(561.8)	$	99.6	1 - 11

Amortization expense of acquired intangible assets included within cost of revenue was $24.1 million and $25.2 million for the years ended September 30, 2020 and 2019, respectively. The following table presents estimated amortization expense of existing intangible assets for the succeeding years:


Fiscal Year	(in millions)
2021	$	20.3
2022		19.5
2023		18.6
2024		17.3
2025		0.7
Thereafter		0.5
Total	$	76.9