Acquisitions

Fiscal 2016 Acquisition

On November 30, 2015, the Company acquired the Professional Services business ("Pipeline Services") of Willbros Group ("Willbros") in an all cash transaction. The $124,498 purchase price consisted of (i) an initial cash payment of $119,955 paid at closing, and, (ii) a second cash payment due of $7,500 payable at the earlier of certain Willbros contract novations (or written approval of a subcontract) and Willbros obtaining certain consents, or March 15, 2016, net of an estimate working capital adjustment due from Willbros of $2,957. The second cash payment was made in two tranches, with $2,354 paid in March 2016 and the remaining balance paid in July 2016 in conjunction with the net working capital settlement. Goodwill of $60,294, all of which is expected to be tax deductible, and other intangible assets of $44,500 were recorded as a result of this acquisition.

The following summarizes the estimated fair values of the Pipeline Services assets acquired and liabilities assumed at the acquisition date, as well as measurement period adjustments:



			November 30, 2015 (As Initially Reported)			Measurement Period Adjustments			November 30, 2015 (As Adjusted)
Cash and cash equivalents			$	355		$	—		$	355
Accounts receivable			26,406			1,857			28,263
Prepaid expenses and other current assets			7,276			(48		)	7,228
Property and equipment			3,552			—			3,552
Identifiable intangible assets:
	Customer relationships and backlog		43,500			—			43,500
	Internally developed software		1,000			—			1,000
		Total identifiable intangible assets	44,500			—			44,500
Goodwill			64,673			(4,379		)	60,294
Other non-current assets			20,683			—			20,683
Accounts payable			(2,587		)	43			(2,544		)
Accrued compensation and benefits			(7,199		)	(2		)	(7,201		)
Other accrued liabilities			(5,210		)	100			(5,110		)
Current portion of long-term debt			(6,447		)	(38		)	(6,485		)
Long-term debt, net of current portion			(18,547		)	—			(18,547		)
Non-controlling interest			—			(490		)	(490		)
	Net assets acquired		$	127,455		$	(2,957	)	$	124,498

Customer relationships and backlog represent the fair value of existing contracts and the underlying customer relationships. The backlog has a 1 year life and customer relationships have lives ranging from 12 to 15 years (weighted average lives of 6 years). The internally developed software has a life of approximately 5 years (weighted average life of 5 years).

The purchase price allocation is based upon preliminary information and is subject to change when additional information becomes available. The goodwill recognized is attributable to the future strategic growth opportunities arising from the acquisition, Pipeline Service's highly skilled assembled workforce, which does not qualify for separate recognition, and the expected cost synergies of the combined operations. The Company has not completed its final assessment of the fair values of purchased receivables, contingent liabilities, or acquired contracts. The final fair value of the net assets acquired may result in adjustments to certain assets and liabilities, including goodwill.

The unaudited pro forma financial information summarized in the following table gives effect to the Pipeline Services acquisition assuming it occurred on July 1, 2014. These unaudited pro forma operating results do not assume any impact from revenue, cost or other operating synergies that are expected as a result of the acquisition. Pro forma adjustments have been made to reflect amortization of the identified intangible assets for the related periods, as well as the amortization of deferred debt issuance costs incurred. Identifiable intangible assets are being amortized on a basis approximating the economic value derived from those assets. These unaudited pro forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the acquisition occurred on July 1, 2014, nor does the information project results for any future period.



	Twelve Months Ended
	June 30, 2016			June 30, 2015
Gross revenue	$	695,916		$	772,628
Net service revenue	515,705			562,441
Net (loss) income applicable to TRC Companies, Inc.	(2,378		)	12,890

Basic (loss) earnings per common share	$	(0.08	)	$	0.43
Diluted (loss) earnings per common share	$	(0.08	)	$	0.42

Since the acquisition date, the Pipeline Services operating segment has contributed $60,712 in gross revenue, $48,379 in net service revenue, and an operating loss of $(7,476) for the period from November 30, 2015 through June 30, 2016, which includes a portion of the acquisition and integration expenses described below.

Acquisition and integration expenses in the accompanying consolidated statements of operations were comprised of the following:



	Twelve Months Ended
	June 30, 2016
Severance and personnel costs	$	1,508
Professional services and other expenses	2,824
Lease abandonments	2,239
Total	$	6,571

Fiscal Year 2015 Acquisition

On September 29, 2014, the Company acquired all of the outstanding stock of NOVA Training Inc. and all of the outstanding membership interests of NOVA Earthworks, LLC (collectively "NOVA") based in Midland, Texas. NOVA provides safety training and environmental services as well as oil spill response, remediation and general oil field construction services to customers in the oil and gas industry. The initial purchase price consisted of (i) a cash payment of $7,198 payable at closing, (ii) a second cash payment of $2,600 placed into escrow, of which $508 was paid in six months and the remaining $2,092 was paid in 18 months, (iii) 50 shares of the Company's common stock valued at $323 on the closing date, and (iv) a $560 net working capital adjustment. The sellers are also entitled to up to $1,500 in contingent cash consideration through an earn-out provision based on the NSR performance of the acquired firm over the 24 month period following closing. The Company estimated the fair value of the remaining contingent earn-out liability to be $287 based on the projections and probabilities of reaching the performance goals through September 2016. Goodwill of $3,683, none of which is expected to be tax deductible, and other intangible assets of $3,622 were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The fair values of assets and liabilities of the NOVA acquisition have been recorded in the Environmental operating segment. The impact of this acquisition was not material to the Company's condensed consolidated balance sheets and results of operations.

Fiscal Year 2014 Acquisitions

On January 2, 2014, the Company acquired all of the outstanding stock of EMCOR Energy Services, Inc. ("EES"), a subsidiary of EMCOR Group, Inc., headquartered in San Francisco, California. EES provides engineering and related consulting services to utilities to support their energy programs in California. Services include engineering, technical review, verification, and administration of utilities’ energy efficiency programs. The purchase price of $1,644 consisted of a cash payment of $1,400, and a $244 net working capital adjustment. Goodwill of $247, none of which is expected to be tax deductible, and other intangible assets of $861 were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The EES acquisition has been recorded in the Energy operating segment. The impact of this acquisition was not material to the Company's consolidated balance sheets and results of operations.

On July 22, 2013, the Company acquired all of the outstanding stock of Utility Support Systems, Inc. ("USS"), headquartered in Douglasville, Georgia. USS provides engineering and related services primarily supporting the power/utility market. The purchase price of $5,027 consisted of: (i) cash of $2,500 payable at closing, (ii) a second cash payment of $1,803 payable on the one-year anniversary of the closing date subject to withholding for various contractual issues, and (iii) 34 shares of the Company's common stock valued at $295 on the closing date. The selling shareholders were also entitled to contingent cash consideration through an earn-out provision based on net service revenue ("NSR") performance of the acquired firm over the twelve month period following closing. The Company estimated the fair value of the contingent earn-out liability to be $504 based on the projections and probabilities of reaching the performance goals through July 2014. The earnout goals were not achieved, and the liability was subsequently reversed in fiscal year 2014. Goodwill of $2,180, none of which is expected to be tax deductible, and other intangible assets of $2,056 were recorded as a result of this acquisition. The goodwill is primarily attributable to the synergies and ancillary growth opportunities expected to arise after the acquisition. The USS acquisition has been recorded in the Energy operating segment. The impact of this acquisition was not material to the Company's consolidated balance sheets and results of operations.

During fiscal years 2016, 2015 and 2014, the Company made additional purchase price cash payments of $1,161, $2,644 and $1,124, respectively, related to acquisitions completed in the current and prior years. The additional purchase price payments were earned as a result of the final determination of working capital adjustments and the acquired entities achieving financial objectives pursuant to contingent consideration arrangements.