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Acquisitions
 9 Months Ended
Mar. 31, 2016
Business Combinations [Abstract]  
Acquisitions

3.

Acquisitions

NSS Acquisition

On February 1, 2016, the Company acquired 100 percent of the outstanding shares of L-3 National Security Solutions, Inc. and L-3 Data Tactics Corporation (together, “NSS”).  NSS is a prime mission partner to the U.S. Department of Defense (DoD), U.S. government intelligence agencies, and U.S. federal civilian agencies.  The acquisition will expand CACI’s opportunities in many of our key market areas and expand our current customer base.  CACI financed the acquisition by borrowing $250.0 million under its existing revolving facility and by entering into an eighth amendment and first incremental facility amendment to its credit facility to allow for the incurrence of $300.0 million in additional term loans.

The initial purchase consideration paid at closing to acquire NSS was $550.0 million plus $11.2 million representing a preliminary net working capital adjustment.  Subsequent to closing, CACI estimated that a refund of $13.3 million is due from the sellers for the final net working capital adjustment, which is recorded within prepaid expenses and other current assets on the consolidated balance sheet.

 

CACI is in the process of finalizing its valuation of all the assets acquired and liabilities assumed. As the amounts recorded for certain assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the acquisition date.  The final determination of fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date as permitted under GAAP. The NSS acquisition could necessitate the need to use the full one year measurement period to adequately analyze and assess a number of factors used in establishing the asset and liability fair values as of the acquisition date, including receivables and deferred revenue, property and equipment, contractual obligations, income tax obligations, and certain reserves. Any potential adjustments made could be material in relation to the preliminary values presented in the table below. Based on the Company’s preliminary valuation, the total estimated consideration of$547.9 million has been allocated to assets acquired and liabilities assumed as follows (in thousands):

 

Cash and cash equivalents

 

$

2,596

 

Accounts receivable

 

 

210,441

 

Prepaid expenses and other current assets

 

 

11,574

 

Property and equipment

 

 

21,938

 

Intangible assets

 

 

110,500

 

Goodwill

 

 

385,755

 

Other long-term assets

 

 

437

 

Accounts payable

 

 

(57,616

)

Accrued compensation and benefits

 

 

(38,953

)

Other accrued expenses and current liabilities

 

 

(37,855

)

Deferred income taxes

 

 

(55,641

)

Other long-term liabilities

 

 

(5,280

)

Total estimated consideration

 

$

547,896

 

The goodwill of $385.8 million is largely attributable to the assembled workforce of NSS and expected synergies between the Company and NSS.  The estimated fair value attributed to intangible assets, which consists of customer contracts and related customer relationships, is being amortized on an accelerated basis over approximately 15 years.  The fair value attributed to the intangible assets acquired was based on preliminary estimates, assumptions, and other information compiled by management, including independent valuations that utilized established valuation techniques.  Of the value attributed to goodwill and intangible assets, $47.7 million is deductible for income tax purposes.

From the February 1, 2016 acquisition date through March 31, 2016, NSS generated $171.9 million of revenue and $5.6 million of net income. NSS’ net income includes the impact of $1.7 million of amortization of customer contracts and customer relationships. NSS’ net income does not include the impact of acquisition-related expenses incurred by CACI.

CACI incurred $7.3 million of acquisition-related expenses during the nine months ended March 31, 2016, which are included in indirect costs and selling expenses.  Additionally, CACI incurred $3.2 million of integration and restructuring costs from the acquisition date through March 31, 2016.

The following pro forma results are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the years presented or the results which may occur in the future. The following unaudited pro forma results of operations assume the NSS acquisition had occurred on July 1, 2014 (in thousands except per share amounts):

 

 

 

Nine Months Ended March 31,

 

 

 

2016

 

 

2015

 

Revenue

 

$

3,305,097

 

 

$

3,270,509

 

Net loss attributable to CACI

 

 

(343,467

)

 

 

(58,454

)

Basic EPS

 

 

(14.17

)

 

 

(2.45

)

Diluted EPS

 

 

(14.17

)

 

 

(2.45

)

Pro forma net losses shown above include NSS’ historical goodwill impairment expense of $476.2 million and $158.7 million for the nine months ended March 31, 2016 and 2015, respectively.  Significant pro forma adjustments incorporated into the pro forma results above include the recognition of additional amortization expense related to acquired intangible assets and additional interest expense related to debt incurred to finance the acquisition. In addition, significant nonrecurring adjustments include the elimination of non-recurring acquisition-related expenses incurred during the nine months ended March 31, 2016.

 

Other Acquisitions

The Company also completed the following acquisitions during the nine months ended March 31, 2016:

 

·

On July 1, 2015, CACI Limited acquired 100 percent of the outstanding shares of Rockshore Group Ltd (Rockshore) and was integrated into the international operating segment.  Rockshore uses its expertise in data aggregation, event processing, and business logic integration to provide real-time event processing and situational awareness to the telecom, aviation, and rail sectors.

 

·

On December 4, 2015, the Company acquired 100 percent of the outstanding shares of a business in the United States which provides security technology services and was integrated into the domestic operating segment.

 

·

On March 1, 2016, CACI Limited acquired 100 percent of the outstanding shares of Purple Secure Systems Limited and was integrated into the international operating segment. Purple Secure Systems Limited is a provider of agile systems and software for national security, defense and government organizations.

 

·

On March 2, 2016, CACI Limited acquired 100 percent of the outstanding shares of Stream:20 Limited and was integrated into the international operating segment. Stream:20 Limited provides digital marketing and digital transformation consultancy services to commercial companies working in a variety of sectors.

The combined purchase consideration for these acquisitions was $55.4 million, which includes $31.8 million of initial cash payments, $8.2 million of deferred consideration and $15.4 estimated fair value of contingent consideration to be paid upon achieving certain metrics.  The Company recognized fair values of the assets acquired and liabilities assumed and preliminarily allocated $40.3 million to goodwill and $8.1 million to intangible assets.  The intangible assets primarily consist of customer relationships and acquired technology.