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Discontinued Operations, Goodwill and Intangible Assets

3 Months Ended

Dec. 31, 2019

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. Upon the terms of that agreement, the Company agreed to transfer the asset and liabilities constituting its Management Services business to the Purchaser for a purchase price of $2.405 billion, subject to customary cash, debt, and working capital adjustments. The purchase price includes contingent consideration of approximately $150 million attributable to certain claims related to prior work and engagements. The transaction with the Purchaser closed on January 31, 2020.

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. Additionally, the Company concluded the 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 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 Statement of Operations as discontinued operations for all periods presented. Current and non-current assets and liabilities of these businesses are presented in the Consolidated Balance Sheet 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 are required to be settled upon the sale of the Management Services business.

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


	December 31,		September 30,
	2019		2019

Cash and cash equivalents	$	161.9	$	194.7
Receivables and contract assets		1,391.1		1,326.6
Other		88.9		112.0
Current assets held for sale	$	1,641.9	$	1,633.3

Property and equipment, net	$	155.5	$	153.8
Goodwill		1,815.1		1,798.5
Other		475.8		386.8
Non-current assets held for sale	$	2,446.4	$	2,339.1

Accounts payable and accrued expenses	$	922.5	$	1,056.0
Contract liabilities		77.5		88.9
Other		22.2		18.8
Current liabilities held for sale	$	1,022.2	$	1,163.7

Long term liabilities held for sale	$	269.6	$	219.6

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


	Three months ended
	December 31,		December 31,
	2019		2018

Revenue	$	1,502.8	$	1,681.2
Cost of revenue		1,473.5		1,634.0
Gross profit		29.3		47.2
Equity in earnings of joint ventures		4.9		5.9
Income from operations		34.2		53.1
Other income		1.2		0.6
Interest expense		(12.8)		(16.7)
Income before taxes		22.6		37.0
Income tax expense		4.4		8.8
Net income from discontinuing operations	$	18.2	$	28.2

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


	Three months ended
	December 31,		December 31,
	2019		2018

Depreciation and amortization:
Property and equipment	$	4.6	$	7.7
Intangible assets and capitalized debt issuance costs	$	12.8	$	16.5
Payments for capital expenditures	$	(8.2)	$	(4.2)

The changes in the carrying value of goodwill by reportable segment for the three months ended December 31, 2019 were as follows:


			Foreign
	September 30,		Exchange		December 31,
	2019		Impact		2019
	(in millions)
Americas	$	2,623.0	$	2.5	$	2,625.5
International		853.8		12.8		866.6
Total	$	3,476.8	$	15.3	$	3,492.1

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, 2019, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:


	December 31, 2019						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	$	662.2	$	(567.9)	$	94.3	$	661.4	$	(561.8)	$	99.6	1	-	11

Amortization expense of acquired intangible assets included within cost of revenue was $6.1 million and $6.3 million for the three months ended December 31, 2019 and 2018, respectively. The following table presents estimated amortization expense of existing intangible assets for the remainder of fiscal 2020 and for the succeeding years:


Fiscal Year	(in millions)
2020 (nine months remaining)	$	17.6
2021		20.4
2022		19.5
2023		18.6
2024		17.5
Thereafter		0.7
Total	$	94.3