Business Acquisitions

6 Months Ended

Jun. 30, 2019

Note 12 – Business Acquisitions

In November 2018, the Company, through its subsidiaries, led principally by Centuri, completed the acquisition of an 80% interest in a privately held infrastructure services business, Linetec, with the remaining 20% retained by the seller. See the Company’s 2018 Form 10-K for additional information about this acquisition.

Assets acquired and liabilities assumed in the transaction were recorded, generally, at their acquisition date fair values. Transaction costs associated with the acquisition were expensed as incurred. The Company’s allocation of the purchase price was based on an evaluation of the appropriate fair values and represented management’s best estimate based on available data (including market data, data regarding customers of the acquired business, terms of acquisition-related agreements, analysis of historical and projected results, and other types of data). The analysis included consideration of types of intangibles that were acquired, including customer relationships, trade names, and customer contracts. Certain payments were estimated as of the acquisition date and will be adjusted when paid or as estimates change based on available data; the final purchase accounting has not yet been completed. Further refinement is expected to occur, including potential changes to income taxes and intangibles, as well as additional consideration payments held back. Subsequent to the acquisition date and through June 30, 2019, Centuri recorded a net reduction to the overall purchase price of $20.1 million related to the combined effects of a mutual tax election under Internal Revenue Code Section 338(h)(10), working capital adjustments, and other refinements to the valuation, which impacted the remaining unremitted consideration. In addition, approximately $19.5 million of previously unremitted consideration was paid during the three months ending June 30, 2019. As of that date, remaining unpaid consideration was $31.3 million.

The preliminary estimated fair values of assets acquired and liabilities assumed as of November 30, 2018, are as follows (millions of dollars):



	Acquisition Date		Measurement Period Adjustments			Revised Acquisition Date
Cash and cash equivalents	$	3.9	$	—		$	3.9
Accounts receivable	32.8		(0.5		)	32.3
Revenue earned on contracts in progress in excess of billings	21.6		(0.2		)	21.4
Prepaid expenses and other current assets	1.1		0.2			1.3
Property and equipment	89.4		(0.5		)	88.9
Intangible assets	89.3		—			89.3
Goodwill	188.5		(17.5		)	171.0
Total assets acquired	426.6		(18.5		)	408.1

Accounts payable	8.0		—			8.0
Accrued liabilities	6.9		1.6			8.5
Deferred compensation and related accrued taxes	3.4		—			3.4
Redeemable noncontrolling interest	81.7		—			81.7
Total liabilities assumed and noncontrolling interest	100.0		1.6			101.6
Net assets acquired	$	326.6	$	(20.1	)	$	306.5

The Company incurred and expensed acquisition costs of $6.9 million for the twelve months ended June 30, 2019 which are included in Utility infrastructure services expenses on the Company’s Condensed Consolidated Statement of Income. No acquisition-related costs were incurred during the three and six months ended June 30, 2019, and no significant impacts to earnings resulted from the measurement-period adjustments reflected above.

The preliminary allocation of the purchase price of Linetec was accounted for in accordance with applicable accounting guidance. Goodwill consists of the value associated with the assembled workforce, consolidation of operations, and the estimated economic value attributable to future opportunities related to the transaction. As the business of Linetec was deemed an asset purchase for tax purposes, the tax-basis goodwill is expected to be deductible for tax purposes. During 2019, values at the acquisition date were adjusted, as reflected in the table above, on the Company’s Condensed Consolidated Balance Sheets.