BUSINESS ACQUISITIONS | BUSINESS ACQUISITIONS Agilux On September 28, 2016 , the Company acquired Agilux Laboratories, Inc. (Agilux), a CRO that provides a suite of integrated discovery small and large molecule bioanalytical services, drug metabolism and pharmacokinetic services, and pharmacology services. The acquisition supports the Company’s strategy to offer clients a broader, integrated portfolio that provides services continuously from the earliest stages of drug research through the non-clinical development process. The purchase price for Agilux was $64.9 million in cash and was funded by borrowings on the Company’s revolving credit facility. The business is reported as part of the Company’s DSA reportable segment. The purchase price allocation of $62.0 million , net of $2.9 million of cash acquired, was as follows: September 28, 2016 (in thousands) Trade receivables (contractual amount of $4,799) $ 4,799 Other current assets (excluding cash) 1,509 Property, plant and equipment 3,907 Other long-term assets 11 Definite-lived intangible assets 21,900 Goodwill 43,899 Current liabilities (3,987 ) Long-term liabilities (10,013 ) Total purchase price allocation $ 62,025 The purchase price allocations are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition. The breakout of definite-lived intangible assets acquired was as follows: Definite-Lived Intangible Assets Weighted Average Amortization Life (in thousands) (in years) Client relationships $ 16,700 17 Other intangible assets 5,200 4 Total definite-lived intangible assets $ 21,900 14 The goodwill resulting from the transaction is primarily attributable to the potential growth of the Company’s DSA businesses from customers and technology introduced through Agilux, and the assembled workforce of the acquired business. The goodwill attributable to Agilux is not deductible for tax purposes. The Company incurred transaction and integration costs of $1.7 million in connection with the acquisition during fiscal year 2016 , which were included in selling, general and administrative expenses. Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Agilux’s financial results are non-significant when compared with the Company’s consolidated financial results. Blue Stream On June 27, 2016 , the Company acquired Blue Stream Laboratories, Inc. (Blue Stream), an analytical CRO supporting the development of complex biologics and biosimilars. Combining Blue Stream with the Company’s existing discovery, safety assessment, and biologics capabilities creates a leading CRO that has the ability to support biologic and biosimilar development from characterization through clinical testing and commercialization. The purchase price for Blue Stream was $11.7 million , including $3.0 million in contingent consideration, and was subject to certain customary adjustments. The acquisition was funded by borrowings on the Company’s revolving credit facility. The business is reported in the Company’s Manufacturing reportable segment. The contingent consideration is a one-time payment that could become payable based on the achievement of a revenue target. If achieved, the payment will become due in the third quarter of fiscal year 2017. The aggregate, undiscounted amount of contingent consideration that the Company may pay is $3.0 million . The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The purchase price allocation of $11.7 million , net of a non-significant amount of cash acquired, was as follows: June 27, 2016 (in thousands) Trade receivables (contractual amount of $1,104) $ 1,104 Other current assets (excluding cash) 15 Property, plant and equipment 912 Other long-term assets 187 Definite-lived intangible assets 1,230 Goodwill 10,477 Current liabilities (1,132 ) Long-term liabilities (1,044 ) Total purchase price allocation $ 11,749 The purchase price allocations are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. From the date of the acquisition through December 31, 2016 , the Company recorded a measurement-period adjustment related to the acquisition that resulted in an immaterial change to the purchase price allocation. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition. The breakout of definite-lived intangible assets acquired was as follows: Definite-Lived Intangible Assets Weighted Average Amortization Life (in thousands) (in years) Client relationships $ 650 10 Other intangible assets 580 5 Total definite-lived intangible assets $ 1,230 7 The goodwill resulting from the transaction is primarily attributable to the potential growth of the Company’s Manufacturing business from customers and technology introduced through Blue Stream, the assembled workforce of the acquired business, expected synergies, and the development of future proprietary processes. The goodwill attributable to Blue Stream is not deductible for tax purposes. The Company incurred $0.6 million of transaction and integration costs in connection with the acquisition during fiscal year 2016 , which were included in selling, general and administrative expenses. Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Blue Stream’s financial results are non-significant when compared with the Company’s consolidated financial results. WIL Research On April 4, 2016 , the Company acquired WIL Research, a provider of safety assessment and CDMO services to biopharmaceutical and agricultural and industrial chemical companies worldwide. The acquisition enhanced the Company’s position as a leading global early-stage CRO by strengthening its ability to partner with clients across the drug discovery and development continuum. The purchase price for WIL Research was $604.8 million , including assumed liabilities of $0.4 million . The purchase price includes payment for estimated working capital, which was subject to final adjustment based on the actual working capital of the acquired business. The acquisition was funded by cash on hand and borrowings on the Company’s amended credit facility. See Note 7, “Long-Term Debt and Capital Lease Obligations.” WIL Research’s safety assessment and CDMO businesses are reported in the Company’s DSA and Manufacturing reportable segments, respectively. The purchase price allocation of $577.4 million , net of $27.4 million of cash acquired, was as follows: April 4, 2016 (in thousands) Trade receivables (contractual amount of $48,625) $ 48,157 Inventories 2,296 Other current assets (excluding cash) 3,814 Property, plant and equipment 129,066 Other long-term assets 1,060 Definite-lived intangible assets 164,800 Goodwill 330,602 Deferred revenue (39,103 ) Other current liabilities (27,386 ) Long-term liabilities (35,915 ) Total purchase price allocation $ 577,391 The purchase price allocations are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. From the date of the acquisition through December 31, 2016 , the Company recorded measurement-period adjustments related to the acquisition that resulted in an immaterial change to the purchase price allocation on a consolidated basis. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition. The breakout of definite-lived intangible assets acquired was as follows: Definite-Lived Intangible Assets Weighted Average Amortization Life (in thousands) (in years) Client relationships $ 137,500 15 Developed technology 20,700 3 Backlog 6,600 1 Total definite-lived intangible assets $ 164,800 13 The goodwill resulting from the transaction, $19.0 million of which is deductible for tax purposes due to a prior asset acquisition, is primarily attributed to the potential growth of the Company’s DSA and Manufacturing businesses from clients introduced through WIL Research, the assembled workforce of the acquired business, and expected cost synergies. The Company incurred transaction and integration costs in connection with the acquisition of $15.5 million and $3.2 million during fiscal years 2016 and 2015 , respectively, which were included in selling, general and administrative expenses. WIL Research revenue and operating income from April 4, 2016 through December 31, 2016 was $176.1 million and $12.5 million , respectively. Beginning on April 4, 2016 , WIL Research has been included in the operating results of the Company. The following selected unaudited pro forma consolidated results of operations are presented as if the WIL Research acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain adjustments. For fiscal year 2016 , these adjustments included additional amortization of intangible assets and depreciation of fixed assets of $0.4 million , reversal of interest expense on borrowings of $2.6 million , elimination of intercompany activity and other one-time costs, and the tax impacts of these adjustments. For fiscal year 2015 , these adjustments included additional amortization of intangible assets and depreciation of fixed assets of $13.6 million , reversal of interest expense on borrowings of $10.5 million , inclusion of acquisition-related transaction costs of $11.5 million , elimination of intercompany activity and other one-time costs, and the tax impacts of these adjustments. Fiscal Year 2016 2015 (in thousands, except per share amounts) (unaudited) Revenue $ 1,741,964 $ 1,578,133 Net income attributable to common shareholders 175,779 153,974 Earnings per common share: Basic $ 3.74 $ 3.31 Diluted $ 3.67 $ 3.23 These unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future. No effect has been given for synergies, if any, that may have been realized through the acquisition. Oncotest On November 18, 2015 , the Company acquired Oncotest GmbH (Oncotest) , a German CRO providing discovery services for oncology, one of the largest therapeutic areas for biopharmaceutical research and development spending. With this acquisition, the Company has expanded its oncology services capabilities, enabling it to provide clients with access to a more comprehensive portfolio of technologies, including patient-derived xenograft (PDX) and syngeneic models. The purchase price for Oncotest was $36.0 million , including $0.3 million in contingent consideration. The acquisition was funded by borrowings on the Company's revolving credit facility. The business is reported in the Company’s DSA reportable segment. The contingent consideration earn-out period ended in the fourth quarter of 2016. As a result, the related contingent consideration liability was reversed and a gain of $0.3 million was recorded in selling, general and administrative expenses, as no payments were expected to be made. The contingent consideration was a one-time payment that could have become payable based on the achievement of a revenue target for fiscal year 2016. If achieved, the payment would have become due in the first quarter of fiscal year 2017. The aggregate, undiscounted amount of contingent consideration that the Company could have paid was €2.0 million ( $2.1 million as of December 31, 2016 ). The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The purchase price allocation of $35.4 million , net of $0.6 million of cash acquired, was as follows: November 18, 2015 (in thousands) Trade receivables (contractual amount of $3,546) $ 3,520 Inventories 129 Other current assets (excluding cash) 706 Property, plant and equipment 2,528 Definite-lived intangible assets 13,330 Goodwill 22,894 Other long-term assets 250 Current liabilities (3,456 ) Long-term liabilities (4,470 ) Total purchase price allocation $ 35,431 The breakout of definite-lived intangible assets acquired was as follows: Definite-Lived Intangible Assets Weighted Average Amortization Life (in thousands) (in years) Client relationships $ 7,146 19 Developed technology 5,960 19 Other intangible assets 224 3 Total definite-lived intangible assets $ 13,330 19 The goodwill resulting from the transaction is primarily attributed to the potential growth in the Company's DSA businesses from customers and technology introduced through Oncotest, the assembled workforce of the acquired business and expected cost synergies. The goodwill attributable to Oncotest is not deductible for tax purposes. The Company incurred non-significant transaction and integration costs in connection with the acquisition during fiscal year 2016 and costs of $2.1 million during fiscal year 2015 , which were included in selling, general and administrative expenses. Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Oncotest’s financial results are non-significant when compared with the Company’s consolidated financial results. Celsis On July 24, 2015 , the Company acquired Celsis Group Limited (Celsis), a leading provider of rapid testing systems for non-sterile bacterial contamination for the biopharmaceutical and consumer products industries. The purpose of this acquisition was to enhance the Company’s portfolio of rapid microbial detection products and services with the addition of a rapid bioburden testing product. The purchase price for Celsis was $214.5 million , including assumed debt and certain liabilities of $ 10.3 million . The acquisition was funded by cash on hand and borrowings on the Company’s revolving credit facility. The business is reported in the Company’s Manufacturing reportable segment. The purchase price allocation of $212.2 million , net of $2.3 million of cash acquired, was as follows: July 24, 2015 (in thousands) Trade receivables (contractual amount of $5,410) $ 5,288 Inventories 10,103 Other current assets (excluding cash) 13,269 Property, plant and equipment 4,639 Definite-lived intangible assets 118,140 Goodwill 105,550 Other long-term assets 537 Current debt (9,766 ) Other current liabilities (7,136 ) Long-term liabilities (28,388 ) Total purchase price allocation $ 212,236 The breakout of definite-lived intangible assets acquired was as follows: Definite-Lived Intangible Assets Weighted Average Amortization Life (in thousands) (in years) Client relationships $ 71,000 16 Developed technology 39,140 14 Trademark and trade names 5,200 14 Non-compete 2,800 5 Total definite-lived intangible assets $ 118,140 15 The goodwill resulting from the transaction is primarily attributed to the potential growth of the Company’s Manufacturing business from clients introduced through Celsis, the assembled workforce of the acquired business and expected cost synergies. The goodwill attributable to Celsis is not deductible for tax purposes. The Company incurred transaction and integration costs in connection with the acquisition of $1.0 million and $8.8 million during fiscal years 2016 and 2015 , which were included in selling, general and administrative expenses. Celsis revenue and operating loss from July 24, 2015 through December 26, 2015 was $11.1 million and $6.1 million , respectively. Beginning on July 24, 2015 , Celsis has been included in the operating results of the Company. The following selected unaudited pro forma consolidated results of operations are presented as if the Celsis acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain nonrecurring costs and other adjustments, resulting in a reversal of $0.6 million and additional expenses of $13.1 million for fiscal years 2015 and 2014 , respectively, related to depreciation and amortization of property, plant and equipment, inventory fair value adjustments and intangible assets. Fiscal Year 2015 2014 (in thousands, except per share amounts) (unaudited) Revenue $ 1,380,493 $ 1,329,025 Net income attributable to common shareholders 162,672 110,387 Earnings per common share: Basic $ 3.50 $ 2.37 Diluted $ 3.42 $ 2.32 These unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future. No effect has been given for synergies, if any, that may have been realized through the acquisition. Sunrise On May 5, 2015 , the Company acquired Sunrise Farms, Inc. (Sunrise), a producer of specific-pathogen-free fertile chicken eggs and chickens used in the manufacture of live viruses. The purpose of this business acquisition was to expand the capabilities of the Company’s existing Avian Vaccine Services business. The purchase price of the acquisition was $9.6 million and was funded by cash on hand and borrowings on the Company’s revolving credit facility. The business is reported in the Company’s Manufacturing reportable segment. The Company recorded a bargain purchase gain of $9.8 million , which represents the excess of the estimated fair value of the net assets acquired over the purchase price. The bargain purchase gain was recorded in other income (expense), net in the Company’s consolidated statement of income and was not recognized for tax purposes. The Company believes there were several factors that contributed to this transaction resulting in a bargain purchase gain, including the highly specialized nature of Sunrise’s business falling outside of the seller’s core activities and a limited pool of potential buyers. Before recognizing the gain from the bargain purchase, the Company reassessed its initial identification and valuation of assets acquired and liabilities assumed to validate that all assets and liabilities that the Company was able to identify at the acquisition date were properly recognized. The purchase price allocation of $9.6 million , net of less than $0.1 million of cash acquired, was as follows: May 5, 2015 (in thousands) Trade receivables (contractual amount of $995) $ 965 Inventories 1,518 Other current assets (excluding cash) 973 Property, plant and equipment 13,698 Definite-lived intangible assets 3,400 Current liabilities (925 ) Long-term liabilities (250 ) Fair value of net assets acquired 19,379 Bargain purchase gain (9,821 ) Total purchase price allocation $ 9,558 The identifiable definite-lived intangible assets acquired represent the client relationships intangible, which is being amortized over the weighted average estimated useful life of approximately 15 years . The Company incurred non-significant transaction and integration costs in connection with the acquisition during fiscal year 2016 and costs of $1.5 million during fiscal year 2015 , which were included in selling, general and administrative expenses. Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Sunrise’s financial results are non-significant when compared with the Company’s consolidated financial results. ChanTest On October 29, 2014 , the Company acquired ChanTest Corporation (ChanTest), a leading provider of ion channel testing services to the biopharmaceutical industry. The acquisition augments the Company’s early discovery capabilities and enhances the Company’s ability to support clients’ target discovery and lead optimization efforts. The purchase price of the acquisition was $59.2 million , including $0.3 million in contingent consideration, and was funded by borrowings on the Company’s revolving credit facility and cash on hand. The business is reported in the Company’s DSA reportable segment. The contingent consideration earn-out period ended in the fourth quarter of 2015. As a result, the related contingent consideration liability was reversed and a gain of $0.3 million was recorded in selling, general and administrative expenses, as no payments were expected to be made. The aggregate, undiscounted amount of contingent consideration that could have become payable was $ 2.0 million . The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The purchase price allocation of $52.0 million , net of $7.2 million in cash acquired, is as follows: October 29, 2014 (in thousands) Current assets (excluding cash) $ 4,669 Property, plant and equipment 1,637 Definite-lived intangible assets 23,920 Goodwill 34,775 Current liabilities (3,486 ) Long-term liabilities (9,486 ) Total purchase price allocation $ 52,029 The breakout of definite-lived intangible assets acquired is as follows: Definite-Lived Intangible Assets Weighted Average Amortization Life (in thousands) (in years) Client relationships $ 19,000 13 Other intangible assets 4,920 9 Total definite-lived intangible assets $ 23,920 12 The definite-lived intangibles are largely attributed to the expected cash flows related to client relationships existing at the acquisition closing date. The goodwill resulting from the transaction is primarily attributed to the potential growth of the business and is not deductible for tax purposes. The Company incurred non-significant transaction and integration costs in connection with the acquisition during both fiscal years 2016 and 2015 , and costs of $1.1 million during fiscal year 2014 , which were included in selling, general and administrative expenses. Pro forma financial information as well as actual revenue and operating income (loss) have not been included because ChanTest’s financial results are non-significant when compared with the Company’s consolidated financial results. VivoPath On June 16, 2014, the Company acquired substantially all of the assets of VivoPath LLC (VivoPath), a discovery services company specializing in the rapid, in vivo compound evaluation of molecules in the therapeutic areas of metabolism, inflammation and oncology. The purchase price was $2.3 million , including $1.6 million in contingent consideration, and was allocated primarily to the intangible assets acquired. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The undiscounted total amount of contingent consideration was a maximum of $2.4 million , payable over three years based on the achievement of revenue growth targets and other contractual requirements. During fiscal year 2016 , the Company paid the second year tranche of the contingent consideration of $0.2 million . During fiscal year 2015 , the Company paid the first year tranche of the contingent consideration of $0.6 million and recorded a gain of $0.8 million , primarily due to a decrease in the expected future contingent consideration payments. As of December 31, 2016 , the remaining contingent consideration payable is a maximum of $0.2 million . The business is reported in the Company’s DSA reportable segment. Argenta and BioFocus On April 1, 2014, the Company acquired (1) 100% of the shares of the U.K. based entities Argenta and BioFocus, and (2) certain Dutch assets. These businesses have formed the core of the Company’s Early Discovery business. With this acquisition, the Company has enhanced its position as a full service, early-stage CRO, with integrated in vitro and in vivo capabilities from target discovery through non-clinical development. The purchase price of the acquisition was $191.8 million , including $0.9 million in contingent consideration. The acquisition was funded by cash on hand and borrowings on the Company’s revolving credit facility. The businesses are reported in the Company’s DSA reportable segment. The contingent consideration earn-out period ended on April 1, 2015. As a result, the related contingent consideration liability, as adjusted for subsequent changes in fair value, was reversed and a gain of $0.8 million was recorded in selling, general and administrative expenses during fiscal year 2015, as no payments were expected to be made. The contingent consideration was a one-time payment that could have become payable in the second quarter of 2015 based on the achievement of a certain revenue target for the twelve-month period following the acquisition. The aggregate, undiscounted amount of contingent consideration that the Company could have paid was € 5.0 million ( $5.3 million as of December 31, 2016 ). The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The purchase price allocation of $183.6 million , net of $8.2 million of cash acquired, was as follows: April 1, 2014 (in thousands) Current assets (excluding cash) $ 31,682 Property, plant and equipment 21,008 Other long-term assets 11,140 Definite-lived intangible assets 104,470 Goodwill 65,235 Current liabilities (13,139 ) Long-term liabilities (36,802 ) Total purchase price allocation $ 183,594 The breakout of definite-lived intangible assets acquired was as follows: Definite-Lived Intangible Assets Weighted Average Amortization Life (in thousands) (in years) Client relationships $ 94,000 18 Backlog 5,900 1 Trademark and trade names 1,170 3 Leasehold interests 1,000 13 Other intangible assets 2,400 19 Total definite-lived intangible assets $ 104,470 17 The goodwill resulting from the transaction is primarily attributed to the potential growth of the Company’s DSA businesses from clients introduced through Argenta and BioFocus, the assembled workforce of the acquired businesses and expected cost synergies. The goodwill attributable to Argenta and BioFocus is not deductible for tax purposes. The Company incurred non-significant transaction and integration costs in connection with the acquisition during both fiscal years 2016 and 2015 , and costs of $5.3 million during fiscal year 2014 , which were included in selling, general and administrative expenses. Argenta and BioFocus revenue and operating income for fiscal year 2014 were $71.4 million and $1.8 million , respectively. Beginning on April 1, 2014, Argenta and BioFocus have been included in the operating results of the Company. The following selected unaudited pro forma consolidated results of operations are presented as if the Argenta and BioFocus acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain adjustments, including amortization of intangible assets and depreciation of fixed assets of $ 3.7 million and other nonrecurring costs. Fiscal Year 2014 (in thousands, except per share amounts) (unaudited) Revenue $ 1,322,771 Net income attributable to common shareholders 128,195 Earnings per common share: Basic $ 2.75 Diluted $ 2.70 These unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future. No effect has been given for synergies, if any, that may have been realized through the acquisition. |