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2. Acquisition
On April 30, 2012 (the acquisition date), the Company acquired 100% of the share capital of PSI Services Holding, Inc. and its wholly-owned subsidiary, Policy Studies, Inc. (PSI). The final cash consideration will be based upon a mutually-agreed assessment of the balance sheet at the acquisition date and is currently estimated to be $64.2 million.
PSI supports clients in the administration of a number of health and human services programs exclusively within the United States. MAXIMUS acquired PSI, among other reasons, to strengthen its leadership in the administration of public health and human services programs. The acquired assets and business have been integrated into the Company’s Health Services and Human Services segments.
The estimated acquisition date fair value of consideration transferred, assets acquired and liabilities are presented below and represent management’s best estimates (in thousands). Management is still in the process of completing certain assessments of fair value of these assets and liabilities including the intangible assets, deferred revenue and income tax assets and liabilities.
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Purchase consideration, net of cash acquired
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$
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64,228
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Accounts receivable and unbilled receivables
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$
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22,875
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Other current assets
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12,156
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Property and equipment
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6,411
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Other assets
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1,332
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Intangible assets
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22,883
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Total identifiable assets acquired
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65,657
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Accounts payable and other liabilities
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20,845
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Deferred revenue
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5,752
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Deferred taxes
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7,537
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Total liabilities assumed
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34,134
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Net identifiable assets acquired
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31,523
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Goodwill
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32,705
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Net assets acquired
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$
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64,228
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The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based upon their estimated fair values. The excess of the acquisition date fair value of consideration over the estimated fair value of the net assets acquired was recorded as goodwill and allocated to the Company’s two segments, Health Services and Human Services, based upon the respective valuations of the businesses. The Company considers the goodwill to represent a number of potential strategic and financial benefits that are expected to be realized as a result of the acquisition, including, but not limited to bringing new capabilities to MAXIMUS and the assembled workforce. Goodwill is not expected to be deductible for tax purposes.
Included in the preliminary purchase price allocation are deferred taxes related to a net operating loss carryforward.
The preliminary valuation of the intangible assets acquired is summarized below (in thousands).
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Useful life
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Fair value
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Customer relationships
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7-8 years
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$
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17,200
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Tradename
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5 years
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3,900
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Technology-based intangible assets
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1-5 years
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1,783
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Total intangible assets
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$
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22,883
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The total weighted average amortization period is 6.8 years.
Our consolidated statement of operations includes $23.3 million of revenue and $1.8 million of operating income for the three month and nine month periods ended June 30, 2012 generated by the acquired PSI business.
The following table presents the results for the Company for the three months and nine months ended June 30, 2012 and 2011 as though the acquisition of PSI had occurred on October 1, 2010. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of the Company if the acquisition had taken place at this time. The pro forma results presented include acquisition related costs, amortization charges for acquired intangible assets, adjustments to lease expenses, elimination of intercompany transactions, adjustments to interest and other expenses and related tax effects. The pro forma results in 2011 include costs directly related to the acquisition, including severance costs, which were incurred by the Company after the acquisition date.
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Three Months
Ended June 30,
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Nine Months
Ended June 30,
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2012
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2011
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2012
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2011
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Revenue
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$
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278,158
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$
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272,696
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$
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831,440
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$
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780,833
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Income from continuing operations
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21,589
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21,204
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55,157
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57,620
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