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Discontinued Operations, Goodwill, and Intangible Assets

3 Months Ended

Dec. 31, 2020

Discontinued Operations, Goodwill and Intangible Assets

Discontinued Operations, Goodwill, and Intangible Assets

3. Discontinued Operations, Goodwill and Intangible Assets

During the second quarter of fiscal 2020, the Company completed the sale of its Management Services business to Maverick Purchaser Sub, LLC (Purchaser), an affiliate of American Securities LLC and Lindsay Goldberg LLC. 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 Statement 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 first quarter of fiscal 2021, the Company completed the sale of its power construction business to CriticalPoint Capital, LLC. The Company recorded a pre-tax loss on the sale of $11.3 million related to working capital calculations, which is expected to finalize in the next quarter.

The Company also completed the sale of its civil infrastructure construction business to affiliates of Oroco Capital in the second quarter of fiscal 2021. During the first quarter of fiscal 2021, the Company recorded a $58.3 million loss related to the remeasurement of its civil infrastructure construction businesses to fair value less cost to sell, net of tax. Fair value was estimated using Level 3 inputs, such as forecasted cash flows and earnings performance, and Level 2 inputs, including the expected sales price.

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


	December 31,		September 30,
	2020		2020

Cash and cash equivalents	$	176.8	$	109.9
Receivables and contract assets		463.8		544.3
Other		26.1		62.5
Current assets held for sale	$	666.7	$	716.7

Property and equipment, net	$	122.4	$	119.8
Other		287.5		254.4
Write-down of assets to fair value less cost to sell		(268.7)		(247.2)
Non-current assets held for sale	$	141.2	$	127.0

Accounts payable and accrued expenses	$	249.5	$	394.5
Contract liabilities		93.7		73.6
Other		4.3		1.6
Current liabilities held for sale	$	347.5	$	469.7

Long-term liabilities held for sale	$	89.0	$	98.8

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


	Three months ended
	December 31,		December 31,
	2020		2019

Revenue	$	330.7	$	1,502.8
Cost of revenue		322.9		1,473.5
Gross profit		7.8		29.3
Equity in earnings of joint ventures		7.7		4.9
Loss on disposal activities		(11.3)		—
Transaction costs		(10.9)		—
Impairment of long-lived assets		(95.8)		—
(Loss) income from operations		(102.5)		34.2
Other income		—		1.2
Interest expense		(0.2)		(12.8)
(Loss) income before taxes		(102.7)		22.6
Income tax (benefit) expense		(46.9)		4.4
Net (loss) income from discontinuing operations	$	(55.8)	$	18.2

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,
	2020		2019

Depreciation and amortization:
Property and equipment	$	—	$	4.6
Intangible assets and capitalized debt issuance costs	$	—	$	12.8
Payments for capital expenditures	$	(3.0)	$	(8.2)

The changes in the carrying value of goodwill by reportable segment for the three months ended December 31, 2020 were as follows:


			Foreign
	September 30,		Exchange		December 31,
	2020		Impact		2020

	(in millions)
Americas	$	2,617.1	$	8.2	$	2,625.3
International		867.1		22.1		889.2
Total	$	3,484.2	$	30.3	$	3,514.5

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, 2020, included in intangible assets—net, in the accompanying consolidated balance sheets, were as follows:


	December 31, 2020						September 30, 2020
	Gross		Accumulated		Intangible		Gross		Accumulated		Intangible		Amortization
	Amount		Amortization		Assets, Net		Amount		Amortization		Assets, Net		Period

	(in millions)												(years)
Backlog and customer relationships	$	663.3	$	(591.3)	$	72.0	$	662.8	$	(585.9)	$	76.9	1	-	11

Amortization expense of acquired intangible assets included within cost of revenue was $5.4 million and $6.1 million for the three months ended December 31, 2020 and 2019, 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)
2021 (nine months remaining)	$	15.4
2022		19.7
2023		18.8
2024		17.4
2025		0.7
Total	$	72.0