NOTE 4. ACQUISITIONS

Year Ended June 30, 2016

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 was integrated into the domestic operating segment and 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 $13.9 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, 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.

During the quarter ended June 30, 2016 we continued to obtain information to refine estimated fair values. As a result of the additional information, the Company recorded measurement period adjustments that reduced deferred income tax liabilities and goodwill by approximately $18.0 million.

Based on the Company’s preliminary valuation, the total estimated consideration of $547.3 million has been allocated to assets acquired and liabilities assumed as follows (in thousands):

Cash	$	2,596
Accounts receivable		209,833
Prepaid expenses and other current assets		12,075
Property and equipment		21,320
Intangible assets, other than goodwill		110,500
Goodwill		367,722
Other assets		437
Accounts payable		(57,616	)
Accrued compensation and benefits		(38,953	)
Accrued expenses and other current liabilities		(37,496	)
Deferred income taxes		(37,796	)
Other long-term liabilities		(5,280	)
Total consideration	$	547,342

The goodwill of $367.7 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 June 30, 2016, NSS generated $427.2 million of revenue and $18.8 million of net income. NSS’ net income includes the impact of $4.2 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 year ended June 30, 2016, which are included in indirect costs and selling expenses. Additionally, CACI incurred $3.9 million of integration and restructuring costs from the acquisition date through June 30, 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):

	(Unaudited)
	Year ended June 30,
	2016			2015
Revenue	$	4,418,997		$	4,401,345
Net loss		(300,363	)		(15,480	)
Basic loss per share		(12.38	)		(0.65	)
Diluted loss per share		(12.38	)		(0.65	)

Pro forma net losses shown above include NSS’ historical goodwill impairment expense of $476.2 million and $158.7 million for the year ended June 30, 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 year ended June 30, 2016.

Other Acquisitions

The Company also completed the following acquisitions during the year ended June 30, 2016:

On July 1, 2015, CACI Limited acquired 100 percent of the outstanding shares of Rockshore Group Ltd (Rockshore) which 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 which 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 1, 2016, CACI Limited acquired 100 percent of the outstanding shares of Stream:20 Limited which 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 $55.6 million, which includes $31.8 million of initial cash payments, $8.4 million of deferred consideration and $15.4 million 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 $40.6 million to goodwill and $8.2 million to intangible assets. The intangible assets primarily consist of customer relationships and acquired technology.

Year Ended June 30, 2015

On April 1, 2015, CACI acquired 100 percent of the outstanding shares of LTC Engineering Associates, Inc. (LTC) for a purchase price of $16.0 million.

Headquartered in Florida, LTC employs approximately 50 associates. LTC is a highly specialized provider of technical engineering solutions and services to the intelligence and DoD communities in the areas of software engineering, cybersecurity, signals intelligence, communications intelligence, and digital signals processing. This acquisition expands our capabilities in our C4ISR, intelligence, and cyber market areas and complements our 2013 acquisition of Six3 Systems, Inc. CACI recorded $8.9 million of goodwill and $4.8 million of intangible assets related to customer relationships associated with this acquisition.

Year Ended June 30, 2014

On November 15, 2013, CACI acquired 100 percent of the outstanding shares of Six3 Systems. Six3 Systems provides highly specialized support to the national security community in the areas of cyber and signals intelligence; intelligence, surveillance, and reconnaissance; and intelligence operations. The acquisition expanded CACI’s high-growth Cyberspace market, as well as built on CACI’s capabilities in its high-volume C4ISR and Intelligence markets. In connection with the acquisition, on November 15, 2013, CACI entered into a fifth amendment (the Amendment) to its credit agreement dated as of October 21, 2010 (the Credit Agreement). The Amendment modified the Credit Agreement to allow for the incurrence of $700 million in additional term loans and a $100 million increase in the revolving facility to finance the acquisition of Six3 Systems.

The initial purchase consideration paid at closing in cash to acquire Six3 Systems was $820.0 million plus $25.8 million representing the estimated cash and net working capital adjustment, as defined in the agreement. Of the payment made at closing, $5.0 million was deposited into an escrow account pending final determination of the cash and net working capital acquired and $35.0 million was deposited into an escrow account to secure the sellers’ indemnification obligations (the Indemnification Amount). During the three months ended March 31, 2014, the parties agreed on the final cash and net working capital acquired and the $5.0 million in escrow was distributed in full to the sellers.

From the date of acquisition through June 30, 2014, Six3 Systems generated $268.4 million of revenue and $8.9 million of net income. Six3 Systems’ net income includes the impact of $12.9 million of amortization of customer contracts and customer relationships, as well as $4.2 million in expense associated with retention bonuses associated with retention agreements with certain Six3 Systems executives.

CACI incurred $11.7 million of acquisition-related expenses during the year ended June 30, 2014, including expenses associated with retention bonuses. In addition, CACI incurred a $4.1 million indirect loss on extinguishment of debt.

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 Six3 Systems acquisition had occurred on July 1, 2012 (in thousands except per share amounts):

	(Unaudited)
	Year ended June 30,
	2014
Revenue	$	3,742,394
Net income		150,881
Basic earnings per share		6.44
Diluted earnings per share		6.00