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Acquisitions | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisitions |
4. | Acquisitions
OGSystems On January 7, 2019, the Company acquired a 100% ownership interest in OGSystems, a privately-owned company, for $292.4 million paid in cash. OGSystems provides geospatial intelligence, big data analytics and threat mitigation for defense and intelligence customers. The Company borrowed $110 million under the Credit Agreement and $150 million on a short-term loan, as described in “Note 10—Debt and Credit Facilities,” to partially fund the acquisition. In connection with this acquisition, the Company recognized $5.4 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the year ended December 31, 2019, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. OGSystems enhances the Company’s artificial intelligence and data analytics expertise with new technologies and solutions. Customers of both companies will benefit from existing, complementary technologies and increased scale, enabling end-to-end solutions under the shared vision of rapid prototyping and agile development. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the purchase price allocation as of the date of acquisition (in thousands):
|  | Amount |
Cash and cash equivalents |  | $ | 5,772 |
Accounts receivable |  |  | 9,904 |
Contract assets |  |  | 9,747 |
Prepaid expenses and other current assets |  |  | 4,307 |
Property and equipment |  |  | 4,085 |
Right of use assets, operating leases |  |  | 8,826 |
Goodwill |  |  | 183,540 |
Intangible assets |  |  | 92,300 |
Other noncurrent assets |  |  | 10 |
Accounts payable |  |  | (5,450 | )
Accrued expenses and other current liabilities |  |  | (7,147 | )
Contract liabilities |  |  | (1,300 | )
Short-term lease liabilities, operating leases |  |  | (805 | )
Income tax payable |  |  | (1,178 | )
Deferred tax liabilities |  |  | (1,195 | )
Long-term lease liabilities, operating leases |  |  | (8,021 | )
Other long-term liabilities |  |  | (1,015 | )
Net assets acquired |  | $ | 292,380 |
Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):
|  | Gross Carrying Amount |  |  | Amortization Period |
|  |  |  |  |  | (in years) |
Customer relationships |  | $ | 57,100 |  |  |  | 5 |
Backlog |  |  | 27,700 |  |  |  | 3 |
Trade name |  |  | 3,800 |  |  |  | 2 |
Non-compete agreements |  |  | 2,400 |  |  |  | 3 |
Developed technologies |  | $ | 1,300 |  |  |  | 3 |
Amortization expense of $5.9 million related to these intangible assets was recorded for the three months ended September 30, 2020 and September 30, 2019, respectively, and $17.8 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. The entire value of goodwill of $183.5 million was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this business combination. Goodwill of $16 million is deductible for tax purposes. The amount of revenue generated by OGSystems and included within consolidated revenues is $46.2 million and $33.7 million for the three months September 30, 2020 and September 30, 2019, respectively, and $117.0 million and $108.7 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition. Supplemental Pro Forma Information (Unaudited) Supplemental information of unaudited pro forma operating results assuming the OGSystems acquisition had been consummated as of the beginning of fiscal year 2018 (December 30, 2017) (in thousands) is as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, 2020 |  |  | September 30, 2019 |  |  | September 30, 2020 |  |  | September 30, 2019 |
Pro forma revenue |  | $ | 1,004,236 |  |  | $ | 1,023,277 |  |  | $ | 2,954,688 |  |  | $ | 2,919,379 |
Pro forma net income including noncontrolling interests |  | $ | 47,561 |  |  | $ | 61,293 |  |  | $ | 95,189 |  |  | $ | 118,896 |
QRC Technologies On July 31, 2019 the Company acquired a 100% ownership interest in QRC Technologies (“QRC”), a privately-owned company, for $214.1 million in cash. QRC provides design and development of open-architecture radio-frequency products. The Company borrowed $140.0 million under the Revolving Credit Facility to partially fund the transaction. In connection with this acquisition, the Company recognized $4.9 million of acquisition-related expenses in “Indirect, general and administrative expense” in the consolidated statements of income for the fiscal year ended December 31, 2019, including legal fees, consulting fees, and other miscellaneous direct expenses associated with the acquisition. QRC is an agile, disruptive product company that specializes in radio frequency spectrum survey, record and playback; signals intelligence; and electronic warfare missions. QRC complements our existing portfolio, increases our presence in the high-growth markets of spectrum awareness and surveillance, and adds critical intellectual property that complements and expands the Company’s available capabilities for the Special Operations and Intelligence Communities. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed based on the purchase price allocation as of the date of acquisition (in thousands):
|  | Amount |
Cash and cash equivalents |  | $ | 5,925 |
Accounts receivable |  |  | 5,587 |
Prepaid expenses and other current assets |  |  | 5,727 |
Property and equipment |  |  | 1,205 |
Right of use assets, operating leases |  |  | 5,228 |
Goodwill |  |  | 125,091 |
Intangible assets |  |  | 76,200 |
Accounts payable |  |  | (1,567 | )
Accrued expenses and other current liabilities |  |  | (4,025 | )
Short-term lease liabilities, operating leases |  |  | (545 | )
Long-term lease liabilities, operating leases |  |  | (4,683 | )
Net assets acquired |  | $ | 214,143 |
Of the total purchase price, the following values were assigned to intangible assets (in thousands, except for years):
|  | Gross Carrying Amount |  |  | Amortization Period
|  |  |  |  |  | (in years)
Customer relationships |  | $ | 49,800 |  |  | 12
Developed technologies |  |  | 21,800 |  |  | 3 to 5
In-process research and development |  |  | 1,800 |  |  | 3 to 5
Non-compete agreements |  |  | 1,200 |  |  | 4
Trade name |  |  | 800 |  |  | 2
Backlog |  |  | 800 |  |  | 1
Amortization expense of $3.5 million and $1.9 million related to these intangible assets was recorded for the three months ended September 30, 2020 and September 30, 2019, respectively, and $10.6 million and $1.9 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. The entire value of goodwill of $125.1 million was assigned to the Federal Solutions reporting unit and represents synergies expected to be realized from this business combination. Goodwill in its entirety is deductible for tax purposes. The amount of revenue generated by QRC and included within consolidated revenues is $12.6 million and $5.6 million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $25.2 million and $5.6 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of general corporate functions upon acquisition. Supplemental Pro Forma Information Supplemental information on an unaudited pro forma basis, assuming the QRC Technologies acquisition had been consummated as of the beginning of fiscal year 2018 (December 30, 2017) (in thousands) is as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, 2020 |  |  | September 30, 2019 |  |  | September 30, 2020 |  |  | September 30, 2019 |
Pro forma revenue |  | $ | 1,004,236 |  |  | $ | 1,026,831 |  |  | $ | 2,954,688 |  |  | $ | 2,938,973 |
Pro forma net income including noncontrolling interests |  | $ | 47,618 |  |  | $ | 65,782 |  |  | $ | 95,994 |  |  | $ | 117,399 |

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