4. ACQUISITIONS

2013 Acquisitions

Air Serv Acquisition

On November 1, 2012, we acquired all of the outstanding stock of Air Serv for an aggregate purchase price of $162.9 million in cash, including a $4.1 million working capital adjustment paid in the second quarter of 2013 (the “Air Serv Acquisition”). Approximately $11.9 million of the cash consideration was placed in an escrow account to satisfy any applicable indemnification claims, pursuant to the terms of the purchase agreement.

Air Serv provides facility solutions services for airlines, airports, and freight companies at airports primarily in the United States. The operations of Air Serv are included in the Other segment as of November 1, 2012, the acquisition date. Revenues and operating profit associated with Air Serv were $336.2 million and $12.4 million, respectively, since the acquisition date and are included in our consolidated statement of income.

HHA Acquisition

On November 1, 2012, we acquired all of the outstanding stock of HHA for an aggregate purchase price of $33.7 million in cash, including a $0.6 million working capital adjustment received in the third quarter of 2013 (the “HHA Acquisition”). Approximately $1.4 million of the cash consideration remains in an escrow account to satisfy any applicable indemnification claims pursuant to the terms of the purchase agreement.

HHA provides facility solutions, including housekeeping, laundry, patient assist, plant maintenance, and food services, to hospitals, healthcare systems, long-term care facilities, and retirement communities. The operations of HHA are included in the Building & Energy Solutions segment as of November 1, 2012, the acquisition date. Revenues and operating profit associated with HHA were $53.5 million and $1.4 million, respectively, since the acquisition date and are included in our consolidated statement of income.

Calvert-Jones Acquisition

On November 1, 2012, we acquired substantially all of the assets and assumed certain liabilities of Calvert-Jones for a cash purchase price of $6.1 million (the “Calvert-Jones Acquisition”), including a $0.2 million working capital adjustment received subsequent to October 31, 2013.

Calvert-Jones provides mechanical and energy efficient products and solutions in the Washington, D.C. area. The operations of Calvert-Jones are included in the Building & Energy Solutions segment as of November 1, 2012, the acquisition date. Revenues and operating profit associated with Calvert-Jones were $18.4 million and $1.0 million, respectively, since the acquisition date and are included in our consolidated statement of income.

Blackjack Acquisition

On August 1, 2013, we acquired certain assets and assumed certain liabilities of Blackjack for a cash purchase price of $5.3 million, subject to certain post-closing adjustments (the “Blackjack Acquisition”). Blackjack provides specialized staffing and marketing services to airport operators, retailers, and other clients in the United Kingdom and Europe. The operations of Blackjack are included in the Other segment as of August 1, 2013, the acquisition date. Revenues and operating profit associated with Blackjack were $5.3 million and $0.2 million, respectively, since the acquisition date and are included in our consolidated statement of income.

BEST Acquisition

On September 1, 2013, we acquired certain assets and assumed certain liabilities of BEST for an aggregate purchase price of $4.6 million, consisting of $2.6 million of cash consideration, $1.6 million of contingent consideration liability, and $0.4 million in holdback liability (the “BEST Acquisition”). The purchase price is subject to certain post-closing adjustments, including a working capital true-up adjustment. The final contingent consideration liability amount will be determined at the end of the third year following the consummation date of the acquisition. This amount will be based on a pre-defined adjusted income from operations for BEST for the trailing twelve months ended August 31, 2016. The contingent consideration liability will be in the form of a cash payment and could be as high as $2.0 million upon final settlement. See Note 5, “Fair Value of Financial Instruments,” regarding the valuation of the contingent consideration liability.

BEST is an electrical testing and maintenance firm that provides a broad range of specialized commercial and industrial electrical solutions, such as inspections, system testing, power quality monitoring, hazard detection services, repairs, and ongoing predictive maintenance in commercial and industrial buildings, primarily in the southwest region of the United States. The operations of BEST are included in the Building & Energy Solutions segment as of September 1, 2013, the acquisition date. Revenues and operating profit associated with BEST were $1.1 million and zero, respectively, since the acquisition date and are included in our consolidated statement of income.

Allocation of consideration transferred to acquire Air Serv, HHA, Calvert-Jones, Blackjack, and BEST

The following table summarizes the allocation of consideration transferred to acquire Air Serv, HHA, Calvert-Jones, Blackjack, and BEST and the amounts of identified assets acquired and liabilities assumed at the acquisition dates. The purchase price allocations have been finalized for Air Serv, HHA, and Calvert-Jones. For the Blackjack and BEST acquisitions, initial purchase price allocations are preliminary and subject to adjustment within the measurement period, generally not to exceed one year from the acquisition date. For these acquisitions, consideration and purchase price allocations are subject to, among other items: an additional working capital adjustment; further analysis of tax accounts; and final valuation of identifiable intangible assets.


(in thousands)	Air Serv		HHA		Calvert-Jones		Blackjack		BEST		Total
Purchase price:
Cash consideration	$	162,881	$	33,680	$	6,055	$	5,286	$	2,600	$	210,502
Fair value of contingent consideration liability		—		—		—		—		1,642		1,642
Holdback liability		—		—		—		—		400		400

Total consideration	$	162,881	$	33,680	$	6,055	$	5,286	$	4,642	$	212,544


Allocated to:
Other current and noncurrent assets	$	68,915	$	5,403	$	1,750	$	4,635	$	1,565	$	82,268
Property, plant and equipment		16,658		123		49		261		490		17,581
Other intangible assets		44,610		15,000		2,600		870		1,430		64,510
Goodwill ⁽¹⁾		89,271		23,796		4,021		1,968		1,607		120,663

Total assets acquired		219,454		44,322		8,420		7,734		5,092		285,022
Liabilities assumed		(56,573)		(10,642)		(2,365)		(2,448)		(450)		(72,478)

Net assets acquired	$	162,881	$	33,680	$	6,055	$	5,286	$	4,642	$	212,544

(1) The total amount of goodwill that is deductible for tax purposes is $18.4 million.

The amount allocated to goodwill for Air Serv, HHA, and Blackjack is reflective of our identification of buyer-specific synergies that we anticipate will be realized by, among other things, reducing duplicative positions and back office functions and by reducing professional fees and other services. Goodwill is also attributable to expected long-term business growth through the expansion of our vertical market expertise in servicing the end-to-end needs of airlines, airport authorities, and healthcare service markets. Goodwill for the Calvert-Jones and BEST acquisitions are attributable to projected long-term business growth through our expansion of existing vertical and geographic market offerings in building and energy solutions.

The following table summarizes the weighted-average useful lives in years of the acquired other intangible assets, consisting primarily of customer contracts and relationships for each respective acquisition:


Air Serv	HHA	Calvert-Jones	Blackjack	BEST
14	13	12	11	9

The fair value of trade accounts receivable acquired in the Air Serv Acquisition reflects gross contractual amounts of $53.1 million, of which $0.4 million is expected to be uncollectible. The fair value of trade accounts receivable acquired in the HHA and Calvert-Jones acquisitions were $3.2 million and $1.4 million, respectively and approximate their respective contractual amounts. The preliminary estimated fair value of trade accounts receivable acquired in the Blackjack and BEST acquisitions were $4.4 million and $1.5 million, respectively and approximate their respective contractual amounts.

We have incurred combined acquisition-related costs of $1.5 million, of which $0.5 million have been incurred during the year ended October 31, 2013. These expenses are included in selling, general and administrative expenses in our accompanying consolidated statements of income.

Assuming these acquisitions were made at November 1, 2011, the consolidated pro forma results would not be materially different from reported results.

2012 Acquisition

TEGG and CurrentSAFE Acquisition

On May 1, 2012, we acquired substantially all of the assets and assumed certain liabilities of TEGG Corporation (“TEGG”) and CurrentSAFE Corporation (“CurrentSAFE”) and also acquired certain software technology from TEGG’s shareholder, for an aggregate purchase price of $5.5 million in cash, net of cash acquired (the “TEGG Acquisition”). The purchase price reflects a $0.1 million working capital adjustment received in the fourth quarter of 2012. The assets acquired represent the franchise operations of TEGG and CurrentSAFE, and through this acquisition we expanded our electrical services to include electrical preventive and predictive maintenance solutions. The acquired net assets and results from operations have been included in the Building & Energy Solutions segment since May 1, 2012, the acquisition date. The final purchase price and related allocations are summarized as follows:


(in thousands)
Purchase price:

Total consideration	$	5,667

Allocated to:
Other current and noncurrent assets	$	3,408
Other intangible assets		2,200
Goodwill		1,988

Total assets acquired		7,596
Liabilities assumed		(1,929)

Net assets acquired	$	5,667

Costs of $0.2 million related to the TEGG Acquisition were expensed as incurred and were recorded in selling, general and administrative expenses. Other identifiable intangible assets primarily consist of customer contracts and relationships with a weighted average life of 14 years.

Goodwill represents the excess cost over the fair value of the net tangible and intangible assets acquired. Factors that contributed to a purchase price resulting in the recognition of goodwill include our strategic initiative to expand the scope and product range of our facility solutions franchise offerings into the electrical services solutions business, which will provide for further expansion of this business and enhance comprehensive service offerings. The amount of goodwill for tax purposes that is expected to be deductible is $2.0 million.

Revenues from the TEGG Acquisition were approximately $3.9 million for the year ending October 31, 2012. Assuming these acquisitions were made at November 1, 2011, the consolidated pro forma results would not be materially different from reported results.

2011 Acquisition

The Linc Group, LLC Acquisition

On December 1, 2010, we acquired all of the outstanding limited liability company interests of The Linc Group, LLC (“Linc”) for an aggregate purchase price of $298.7 million (the “Linc Acquisition”). Linc provides end-to-end integrated facility services, military base operation services, and translation and other services in support of U.S. military operations. Linc’s clients include state and federal governments, commercial entities, and residential customers throughout the United States and in select international locations. The operations of Linc are included in the Building & Energy Solutions and Facility Services segments as of the acquisition date.

In connection with the acquisition, we incurred $5.2 million in direct acquisition costs, which were expensed as incurred and classified as selling, general and administrative expenses. Revenues and operating profit associated with Linc and included in our consolidated statements of income were $512.9 million and $11.1 million, respectively, for the year ending October 31, 2011.

The final purchase price and related allocations are summarized as follows:


(in thousands)
Purchase price:

Total consideration	$	298,720

Allocated to:
Other current and noncurrent assets	$	139,720
Property, plant and equipment		9,462
Other intangible assets		87,000
Goodwill		154,487

Total assets acquired		390,669
Liabilities assumed		(91,949)

Net assets acquired	$	298,720

The acquired intangible assets are being amortized using the sum-of-the-years’-digits method or, where appropriate, the straight-line method. The weighted-average amortization periods for the acquired intangible assets are 14 years for customer contracts and relationships and 4 years for trademarks and trade names, which is consistent with the estimated useful life considerations used in the determination of their fair values. The amount allocated to goodwill is reflective of our identification of buyer-specific synergies realized by, among other things, reducing duplicative positions and back office functions, consolidating facilities, and reducing professional fees and other services.

The transaction was a taxable asset acquisition of the Linc organization for U.S. income tax purposes, and no deferred taxes have been recorded on a significant portion of the acquired assets and liabilities. However, deferred taxes have been recorded for certain assets and liabilities where we receive a carryover basis for tax purposes. At the date of acquisition, the goodwill balance was assigned to our former Facility Solutions segment. The amount of goodwill for tax purposes that is expected to be deductible is $144.1 million.

The following unaudited pro forma financial information shows our combined results of continuing operations, including Linc, as if the acquisition occurred at the beginning of the periods presented. The unaudited pro forma financial information is not intended to present or be indicative of our consolidated financial results of continuing operations that would have been reported had the business combination been completed as of the beginning of the period presented and should not be taken as indicative of our future consolidated results of continuing operations. The unaudited pro forma financial information for the year ended October 31, 2011 has not been provided since the amounts are not significantly different from actual results.


(in thousands, except per share data)	Year Ended October 31, 2010
Revenues	$	4,062,610
Operating profit		111,788
Net income	$	62,109
Net income per common share
Basic	$	1.19
Diluted	$	1.17