2. BUSINESS ACQUISITIONS

ChanTest

In October 2014, the Company acquired ChanTest, a leading provider of ion channel testing services to the pharmaceutical and biotech 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 preliminary purchase price of the acquisition was $59.3 million, including $0.3 million in contingent consideration. The aggregate, undiscounted amount of contingent consideration that could become payable is a maximum of $2.0 million. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The purchase price is subject to an adjustment based on the final determined net working capital as of the closing date. The business is reported in the Company's DSA reportable segment as part of the Company's Early Discovery business.

The preliminary purchase price allocation of $52.1 million, net of $7.2 million in cash acquired, is as follows:



	October 29, 2014
	(in thousands)
Current assets (excluding cash)	4,648
Property, plant and equipment	1,579
Definite-lived intangible assets	23,920
Goodwill	34,927
Current liabilities	(3,515		)
Long-term liabilities	(9,486		)
Total purchase price allocation	$	52,073

The breakout of definite-lived intangible assets acquired is as follows:



	October 29, 2014		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

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 transaction and integration costs in connection with the acquisition of $1.1 million during the fiscal year 2014, which are included in selling, general and administrative expenses.

VivoPath

In June 2014, the Company acquired substantially all of the assets of VivoPath LLC (VivoPath), a discovery service company specializing in the rapid, in vivo compound evaluation of molecules in the therapeutic areas of metabolism, inflammation and oncology. The preliminary purchase price was $2.3 million, including $1.6 million in contingent consideration, and was allocated primarily to the intangible assets acquired. The aggregate, undiscounted amount of contingent consideration that could become payable is a maximum of $2.4 million, payable over the next three years based on the achievement of revenue growth targets. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The business is reported in the Company's DSA reportable segment as part of the Company's In Vivo Discovery business.

Argenta and BioFocus

On April 1, 2014, the Company acquired (1) 100% of the shares of the United Kingdom (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 preclinical development. The preliminary purchase price of the acquisition was $191.3 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 purchase price includes payment for estimated working capital, which is subject to final adjustment based on the actual working capital of the acquired business. The businesses are reported in the Company's DSA reportable segment as part of the Company's Early Discovery business.

The contingent consideration is a one-time payment that could become payable based on the achievement of a revenue target for the twelve-month period following the acquisition. If achieved, the payment would become due in the second quarter of 2015. The aggregate, undiscounted amount of contingent consideration that the Company would pay is €5.0 million ($6.1 million as of December 27, 2014). The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes.

The preliminary purchase price allocation of $183.1 million, net of $8.2 million of cash acquired, was as follows:



	April 1, 2014
	(in thousands)
Current assets (excluding cash)	$	31,257
Property, plant and equipment	21,008
Other long-term assets	11,549
Definite-lived intangible assets	104,270
Goodwill	66,330
Current liabilities	(14,299		)
Long-term liabilities	(36,973		)
Total purchase price allocation	$	183,142

The purchase price allocations were prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. During the fiscal year 2014, the Company recorded measurement period adjustments related to the Argenta and BioFocus 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:



	April 1, 2014		Weighted average amortization life
	(in thousands)		(in years)
Client relationships	$	94,000	18
Backlog	5,700		1
Trademark and trade names	1,170		3
Leasehold interests	1,000		13
Other intangible assets	2,400		19
Total definite-lived intangible assets	$	104,270

The goodwill resulting from the transaction is primarily attributed to the potential growth in the Company's DSA businesses from customers 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 transaction and integration costs in connection with the acquisition of $5.3 million during the fiscal year 2014 , which are included in selling, general and administrative expenses.

The following selected 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 one-time costs. These pro forma consolidated results of operations are for informational purposes only and do not necessarily reflect the results of operations had the companies operated as one entity during the periods reported. No effect has been given for synergies, if any, that may have been realized through the acquisition.



	Fiscal Year Ended
	December 27, 2014		December 28, 2013		December 29, 2012
	(in thousands, except per share amounts)
Revenue	$	1,322,771	$	1,249,649	$	1,215,263
Net income	$	128,195	98,508		85,902
Earnings per common share:
Basic	$	2.75	$	2.06	$	1.79
Diluted	$	2.70	$	2.03	$	1.77

These 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. Argenta and BioFocus revenue and operating income for the fiscal year 2014 are $71.4 million and $1.8 million, respectively.

EMD Singapore

In October 2013, the Company acquired 100% of an EMD products and service provider located in Singapore for $4.9 million in cash. The financial results of the acquired entity are included in the Manufacturing reportable segment as part of the Company's EMD business.

The purchase price allocation is as follows:



	October 4, 2013
	(in thousands)
Current assets (excluding cash)	$	300
Property, plant and equipment	154
Definite-lived intangible assets	1,885
Goodwill	2,659
Current liabilities	(64		)
Total purchase price allocation	$	4,934

The breakout of definite-lived intangible assets acquired is as follows:



	October 4, 2013		Weighted average amortization life
	(in thousands)		(in years)
Client relationships	$	1,870	8
Other intangible assets	15		2
Total definite-lived intangible assets	$	1,885

Vital River

In January 2013, the Company acquired a 75% ownership interest of Vital River, a commercial provider of research models and related services in China, for $24.2 million, net of $2.7 million of cash acquired. Vital River's financial results are included in the RMS reportable segment.

The purchase price allocation is as follows:



	January 4, 2013
	(in thousands)
Current assets (excluding cash)	$	3,092
Property, plant and equipment	10,468
Other long-term assets	2,242
Definite-lived intangible assets	16,954
Goodwill	16,989
Current liabilities	(11,303		)
Long-term liabilities	(5,260		)
Redeemable noncontrolling interest	(8,963		)
Total purchase price allocation	$	24,219

The breakout of definite-lived intangible assets acquired is as follows:



	January 4, 2013		Weighted average amortization life
	(in thousands)		(in years)
Client relationships	$	14,741	12
Reacquired rights	2,053		1
Other intangible assets	160		3
Total definite-lived intangible assets	$	16,954

The definite-lived intangibles are largely attributed to the expected cash flows related to client relationships existing at the acquisition closing date. In addition, the Company reacquired a right previously granted to the entity related to a royalty agreement for the distribution of products in China. The goodwill resulting from the transaction is primarily attributed to the potential growth of the business in China and is not deductible for tax purposes.

Concurrent with the acquisition, the Company entered into a joint venture agreement with the noncontrolling interest holders that provide the Company with the right to purchase the remaining 25% of the entity for cash at its then appraised value beginning in January 2016. Additionally, the noncontrolling interest holders were granted the right to require the Company to purchase the remaining 25% of the entity at its then appraised value beginning in January 2016 for cash. These rights are accelerated in certain events. As the noncontrolling interest holders can require the Company purchase the remaining 25% interest, the noncontrolling interest is classified in the mezzanine section of the consolidated balance sheet, which is above the equity section and below liabilities. The acquisition-date fair value of the noncontrolling interest was determined based on the fair value of the consideration exchanged for the 75% of Vital River. Subsequent to the acquisition, the noncontrolling interest carrying amount is adjusted to the fair value each quarter using an income approach. The income approach uses estimated future cash flows based on projected financial data discounted by a rate which considers the Company's weighted average cost of capital and the specific risks of achieving these cash flows. Adjustments to fair value are recorded through additional paid-in capital.

Accugenix

In August 2012, the Company acquired 100% of Accugenix Inc. (Accugenix) for $18.4 million in cash. Accugenix is a global provider of cGMP-compliant contract microbial identification testing. The acquisition strengthens the EMD portfolio of products and services by providing state-of-the-art microbial detection services for the biotechnology, pharmaceutical, and medical device manufacturing industries. Accugenix is based in the U.S. and is included in the Manufacturing reportable segment as part of the Company's EMD business.

The purchase price allocation of $16.9 million, net of $1.5 million of cash acquired is as follows:



	August 24, 2012
	(in thousands)
Current assets (excluding cash)	$	2,162
Property, plant and equipment	549
Definite-lived intangible assets	8,400
Goodwill	10,361
Current liabilities	(911		)
Long-term liabilities	(3,700		)
Total purchase price allocation	$	16,861

The definite-lived intangible assets acquired are as follows:



	August 24, 2012		Weighted average amortization life
	(in thousands)		(in years)
Client relationships	$	1,500	13
Propriety database	4,100		11
Standard operating procedures	2,500		4
Trademarks	300		12
Total definite-lived intangible assets	$	8,400

The definite-lived intangibles are largely attributed to a proprietary database of thousands of species of organisms and the methods and technology to provide accurate, timely and cost-effective microbial identification services. The goodwill resulting from the transaction is primarily attributed to the potential for growth of the Company's global EMD products and services business through the increased competitive advantage and market penetration provided by the services offered by Accugenix. The goodwill is not deductible for tax purposes.