BUSINESS ACQUISITIONS

Fiscal 2013

Rosemont Pharmaceuticals Ltd. – On February 11, 2013, the Company acquired 100% of the shares of privately-held Rosemont Pharmaceuticals Ltd. ("Rosemont") for approximately $283,000 in cash. Based in Leeds, U.K., Rosemont is a specialty and generic prescription pharmaceutical company focused on the manufacturing and marketing of oral liquid formulations. The acquisition expanded the global presence of the Company's Rx product offering into the U.K. and Europe. At the end of the third quarter of fiscal 2013, the Company had incurred approximately $2,000 of acquisition costs, all of which were expensed in operations in the third quarter of fiscal 2013.

The acquisition was accounted for under the acquisition method of accounting, and the related assets acquired and liabilities assumed were recorded at fair value. The operating results for Rosemont are included in the Rx Pharmaceuticals segment of the Company's consolidated results of operations from the acquisition date to March 30, 2013. Since the acquisition date, Rosemont contributed $8,200 in revenue and operating income of $300, which included a charge of approximately $1,900 to cost of sales related to the step-up in value of inventory acquired and sold during the third quarter of fiscal 2013.

The preliminary allocation of the purchase price through March 30, 2013 was:



Cash	$	2,135
Accounts receivable	10,875
Inventory	9,508
Property and equipment	13,059
Deferred income tax assets	218
Goodwill	145,690
Other intangible assets	148,663
Other assets	769
Total assets acquired	330,917

Accounts payable	2,553
Accrued expenses	7,083
Deferred tax liabilities	35,801
Other long-term liabilities	2,513
Total liabilities assumed	47,950
Net assets acquired	$	282,967

The allocation of the purchase price above is considered preliminary and was based on valuation information, estimates and assumptions available at March 30, 2013. Management is still in the process of verifying data and finalizing information related to the valuation and recording of inventory, property and equipment, identifiable intangible assets, deferred income taxes and the resulting effects on the value of goodwill. As the values of certain assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained. Any changes to the preliminary valuation of assets acquired or liabilities assumed may result in material adjustments. Any measurement period adjustments will be applied retrospectively to the acquisition date. The Company expects to finalize these matters within the measurement period, which is expected to end in the fourth quarter of fiscal 2013, as final asset and liability valuations are completed.

The $145,690 of goodwill was assigned to the Rx Pharmaceuticals segment at the time of acquisition. The purchase price in excess of the value of Rosemont's net assets reflects the strategic value the Company placed on the business. The Company believes it will benefit from the development of Rosemont's Rx product offering in the U.K. and Europe. Goodwill is not amortized for financial reporting or tax purposes. See Note 6 regarding the timing of the Company’s annual goodwill impairment testing.

Other intangible assets acquired in the acquisition were preliminarily valued as follows:



Developed product technology	$	114,610
In-process research and development ("IPR&D")	11,618
Trade name and trademarks	17,270
Distribution and license agreements	3,611
Non-compete agreements	1,554
Total intangible assets acquired	$	148,663

Management assigned fair values to the identifiable intangible assets through a combination of the excess earnings method, the relief from royalty method and the lost income method. The developed product technology assets are based on a 7-year useful life and amortized on a straight-line basis. IPR&D assets initially recognized at fair value will be classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. An IPR&D asset is tested for impairment during the period it is considered an indefinite-lived asset. For the trade name and trademarks, the Company concluded that there is no foreseeable limit to the period over which they would be expected to contribute to the entity's cash flows; therefore, they are considered to have an indefinite life. The distribution and license agreements are based on a 14-year useful life and amortized on a proportionate basis consistent with the economic benefits derived therefrom. There is one non-compete agreement based on a 3-year useful life, which is amortized on a straight-line basis.

At the time of the acquisition, a step-up in the value of inventory of $3,200 was recorded in the opening balance sheet as assets acquired and was based on valuation estimates, of which $1,900 was charged to cost of sales in the third quarter of fiscal 2013 as the acquired inventory was sold. In addition, fixed assets were written up by $4,900 to their estimated fair market value based on a valuation method that included both the cost and market approaches. This additional step-up in value is being depreciated over the estimated remaining useful lives of the assets.

Cobrek Pharmaceuticals, Inc. – On December 28, 2012, the Company acquired the remaining 81.5% interest of Cobrek Pharmaceuticals, Inc. ("Cobrek"), a privately-held, Chicago, Illinois-based drug development company, for $41,967 in cash. In May 2008, the Company acquired an 18.5% minority stake in Cobrek for $12,575 in conjunction with entering into a product development collaborative partnership agreement focused on generic pharmaceutical foam dosage form products. As of the acquisition date, the partnership had successfully yielded two commercialized foam-based products and had an additional two U.S. Food and Drug Administration ("FDA") approved foam-based products, both of which were launched in the Company's third quarter of fiscal 2013. Cobrek derives its earnings stream primarily from exclusive technology agreements. The acquisition of Cobrek further strengthens the Company's position in foam-based technologies for existing and future U.S. Rx products.

In conjunction with the acquisition, the Company adjusted the fair value of its 18.5% noncontrolling interest, which was valued at $9,526, and recognized a loss of $3,049 in other expense during the second quarter of fiscal 2013. Also in conjunction with the acquisition, the Company incurred $1,500 of severance costs in the second quarter of fiscal 2013. Since the acquisition date, Cobrek has contributed operating income of approximately $1,500.

During the measurement period, which ended March 30, 2013, the Company finalized deferred income taxes, which resulted in an adjustment between goodwill and deferred tax assets. The following table summarizes the final fair values of the assets acquired and liabilities assumed related to the Cobrek acquisition:



	Initial Valuation			Measurement Period Adjustments			Final Valuation
Other assets	$	371		$	—		$	371
Deferred income tax assets	—			3,554			3,554
Goodwill	18,823			(3,554		)	15,269
Other intangible assets - Exclusive technology agreements	51,122			—			51,122
Deferred tax liabilities	(18,823		)	—			(18,823		)
Total purchase price	$	51,493		$	—		$	51,493

The total purchase price above consists of the $41,967 cash purchase price and the $9,526 adjusted basis of the Company's existing investment in Cobrek. The $15,269 of goodwill was assigned to the Rx Pharmaceuticals segment at the time of acquisition. Goodwill is not amortized for financial reporting or tax purposes.

Management assigned fair values to the identifiable intangible assets by estimating the discounted forecasted cash flows related to the technology agreements. The estimated useful lives of the agreements are twelve years, and they are amortized on a proportionate basis consistent with the economic benefits derived therefrom.

Sergeant's Pet Care Products, Inc. – On October 1, 2012, the Company completed the acquisition of substantially all of the assets of privately-held Sergeant's for $285,000 in cash. Headquartered in Omaha, Nebraska, Sergeant's is a leading supplier of pet healthcare products, including flea and tick remedies, health and well-being products, natural and formulated treats, and consumable products. The acquisition expanded the Company's Consumer Healthcare product portfolio into the pet healthcare category. At the end of the third quarter of fiscal 2013, the Company had incurred approximately $2,000 of acquisition costs, the majority of which were expensed in the first quarter of fiscal 2013.

The acquisition was accounted for under the acquisition method of accounting, and the related assets acquired and liabilities assumed were recorded at fair value. The operating results for Sergeant's are included in the Consumer Healthcare segment of the Company's consolidated results of operations from the acquisition date to March 30, 2013. Since the acquisition date, Sergeant's contributed $56,100 in revenue and an operating loss of $11,200, which included a non-recurring charge of $7,700 to cost of sales related to the step-up in value of inventory acquired and sold during the second quarter of fiscal 2013.

During the measurement period, which ended March 30, 2013, the Company finalized the valuation of identified intangible assets, which resulted in an adjustment between goodwill and other intangible assets. The following table summarizes the final fair values of the assets acquired and liabilities assumed related to the Sergeant's acquisition:



	Initial Valuation		Measurement Period Adjustments			Final Valuation
Cash	$	23	$	—		$	23
Accounts receivable	19,696		—			19,696
Inventory	37,689		—			37,689
Property and equipment	25,396		—			25,396
Deferred income tax assets	1,508		—			1,508
Goodwill	68,229		12,000			80,229
Other intangible assets	147,450		(12,000		)	135,450
Other assets	2,966		—			2,966
Total assets acquired	302,957		—			302,957

Accounts payable	13,733		—			13,733
Accrued expenses	4,224		—			4,224
Total liabilities assumed	17,957		—			17,957
Net assets acquired	$	285,000	$	—		$	285,000

The $80,229 of goodwill was assigned to the Consumer Healthcare segment at the time of acquisition. The purchase price in excess of the value of Sergeant's net assets reflects the strategic value the Company placed on the business. The Company believes it will benefit from the development of the pet healthcare store brand category, an adjacent category to the Company's retail customers of its existing store brand products. Goodwill is not amortized for financial reporting purposes, but is amortized for tax purposes. See Note 6 regarding the timing of the Company’s annual goodwill impairment testing.

Other intangible assets acquired in the acquisition were valued as follows:



Developed product technology	$	66,140
Trade name and trademarks	33,000
Favorable supply agreement	25,000
Customer relationships	10,000
Non-compete agreements	1,310
Total intangible assets acquired	$	135,450

Management assigned fair values to the identifiable intangible assets through a combination of the relief from royalty method, the excess earnings method, the with or without approach and the lost income method. The developed product technology assets are based on a 10-year useful life and amortized on a straight-line basis. For the trade name and trademarks, the Company concluded that there is no foreseeable limit to the period over which they would be expected to contribute to the entity's cash flows; therefore, they are considered to have an indefinite life. The favorable supply agreement and customer relationships are based on a 7- and 20-year useful life, respectively, and amortized on a proportionate basis consistent with the economic benefits derived therefrom. There are nine non-compete agreements, eight based on a 12-month useful life and one based on a 3-year useful life, and all are amortized on a straight-line basis.

At the time of the acquisition, a step-up in the value of inventory of $7,700 was recorded in the opening balance sheet as assets acquired and was based on valuation estimates, all of which was charged to cost of sales in the second quarter of fiscal 2013 as the acquired inventory was sold. In addition, fixed assets were written up by $6,100 to their estimated fair market value based on a valuation method that included both the cost and market approaches. This additional step-up in value is being depreciated over the estimated remaining useful lives of the assets.

Fiscal 2012

CanAm Care, LLC – On January 6, 2012, the Company acquired substantially all of the assets of CanAm Care, LLC ("CanAm"), a distributor of diabetes care products, located in Alpharetta, Georgia, for $39,014. The purchase price included an up-front cash payment of $36,114 and contingent consideration totaling $2,900 based primarily on the estimated fair value of contingent payments to the seller pending the Company's future execution of a promotion agreement with a third-party related to a certain diabetes care product. In the first quarter of fiscal 2013, the Company executed the promotion agreement with the third-party and paid the seller the initial consideration of $2,000. See Note 4 regarding the valuation of the remaining $900 of contingent consideration. The acquisition expanded the Company's diabetic product offering within the Consumer Healthcare segment.

The final allocation of the $39,014 purchase price was:



Accounts receivable	$	3,568
Inventory	6,391
Property and equipment	91
Other assets	126
Deferred income tax assets	625
Goodwill	15,040
Other intangible assets	15,830
Total assets acquired	41,671

Accounts payable	2,237
Other current liabilities	420
Total liabilities assumed	2,657
Net assets acquired	$	39,014

The excess of the purchase price over the fair value of net assets acquired, amounting to $15,040, was recorded as goodwill in the condensed consolidated balance sheet and was assigned to the Company’s Consumer Healthcare segment. Goodwill is not amortized for financial reporting purposes, but is amortized for tax purposes. See Note 6 regarding the timing of the Company’s annual goodwill impairment testing.

Other intangible assets acquired in the acquisition were valued as follows:



Customer relationships	$	12,000
Developed product technology	1,600
Non-compete agreements	1,540
Trade name and trademarks	690
Total intangible assets acquired	$	15,830

Management assigned fair values to the identifiable intangible assets through a combination of the relief from royalty method and the excess earnings method. Customer relationships are based on a 15-year useful life and amortized on a proportionate basis consistent with the economic benefits derived therefrom. Developed product technology and non-compete agreements are based on a 20- and 5-year useful life, respectively, and are amortized on a straight-line basis. Trade name and trademarks are considered to have an indefinite life.

Paddock Laboratories, Inc. – On July 26, 2011, the Company completed the acquisition of substantially all of the assets of Paddock Laboratories, Inc. ("Paddock"). After final working capital and other adjustments of $837, the ultimate cash paid for Paddock was $546,215. Headquartered in Minneapolis, Minnesota, Paddock was a manufacturer and marketer of generic Rx pharmaceutical products. The acquisition expanded the Company’s generic Rx product offering, pipeline and scale.

The Company funded the transaction using $250,000 of term loan debt, $211,215 of cash on hand and $85,000 from its accounts receivable securitization program. The Company incurred $2,560 of acquisition costs in fiscal 2011, and incurred an additional $5,600 of acquisition costs in the first quarter of fiscal 2012, along with severance costs of $3,800, of which approximately $3,200 and $600 were expensed in operations in the first and second quarters of fiscal 2012, respectively.

The following table summarizes the final fair values of the assets acquired and liabilities assumed related to the Paddock acquisition:



	Initial Valuation		Measurement Period Adjustments			Final Valuation
Accounts receivable	$	55,467	$	—		$	55,467
Inventory	57,540		—			57,540
Property and equipment	33,200		—			33,200
Other assets	1,743		—			1,743
Deferred income tax assets	20,863		(344		)	20,519
Goodwill	150,035		(1,170		)	148,865
Other intangible assets	272,000		—			272,000
Total assets acquired	590,848		(1,514		)	589,334

Accounts payable	10,685		—			10,685
Other current liabilities	2,386		—			2,386
Accrued customer programs	26,926		(677		)	26,249
Accrued expenses	3,799		—			3,799
Total liabilities assumed	43,796		(677		)	43,119
Net assets acquired	$	547,052	$	(837	)	$	546,215

The excess of the purchase price over the fair value of net assets acquired, amounting to $148,865, was recorded as goodwill in the condensed consolidated balance sheet and was assigned to the Company’s Rx Pharmaceuticals segment. Goodwill is not amortized for financial reporting purposes, but is amortized for tax purposes. See Note 6 regarding the timing of the Company’s annual goodwill impairment testing.

Other intangible assets acquired in the acquisition were valued as follows:



Developed product technology	$	237,000
IPR&D	35,000
Total intangible assets acquired	$	272,000

Management assigned fair values to the identifiable intangible assets through the excess earnings method. The developed product technology assets are based on a 10-year useful life and amortized on a straight-line basis. IPR&D assets initially recognized at fair value will be classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. At March 30, 2013, the IPR&D assets acquired in the acquisition have not progressed to the point of establishing developed technologies.

At the time of the acquisition, a step-up in the value of inventory of $27,179 was recorded in the opening balance sheet as assets acquired and was based on valuation estimates, all of which was charged to cost of sales in the first quarter of fiscal 2012 as the acquired inventory was sold. In addition, fixed assets were written up by $7,400 to their estimated fair market value based on a valuation method that included both the cost and market approaches. This additional step-up in value is being depreciated over the estimated remaining useful lives of the assets.

As a condition to Federal Trade Commission approval of the overall transaction with Paddock, immediately subsequent to the acquisition, the Company sold to Watson Pharmaceuticals four Abbreviated New Drug Application ("ANDA") products acquired as part of the Paddock portfolio along with the rights to two of the Company's pipeline development projects for a total of $10,500. The Company allocated $7,000 of proceeds to the four ANDA products and wrote off the corresponding developed product technology intangible asset, which was recorded at its fair value of $7,000. In addition, the Company recorded a $3,500 gain on the sale of its pipeline development projects.