FAIR VALUE

12 Months Ended

Dec. 25, 2021

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	December 25, 2021
	Level 1		Level 2		Level 3		Total
Current assets measured at fair value:	(in thousands)
Cash equivalents	$	—	$	893	$	—	$	893
Other assets:
Life insurance policies	—		42,918		—		42,918
Total assets measured at fair value	$	—	$	43,811	$	—	$	43,811

Other liabilities measured at fair value:
Contingent consideration	—		—		11,794		11,794
Other long-term liabilities measured at fair value:
Contingent consideration	—		—		25,450		25,450
Total liabilities measured at fair value	$	—	$	—	$	37,244	$	37,244


	December 26, 2020
	Level 1		Level 2		Level 3		Total
Current assets measured at fair value:	(in thousands)
Cash equivalents	$	—	$	2,273	$	—	$	2,273
Other assets:
Life insurance policies	—		35,770		—		35,770
Total assets measured at fair value	$	—	$	38,043	$	—	$	38,043

Other current liabilities measured at fair value:
Contingent consideration	—		—		2,328		2,328
Total liabilities measured at fair value	$	—	$	—	$	2,328	$	2,328

During fiscal years 2021 and 2020, there were no transfers between fair value levels.

Contingent Consideration

The following table provides a rollforward of the contingent consideration related to the Company’s acquisitions.


	Fiscal Year
	2021		2020
	(in thousands)
Beginning balance	$	2,328	$	712
Additions	71,559		2,131
Payments	(2,889)		(230)
Total gains or losses (realized/unrealized):
Foreign currency translation	(368)		183
Adjustment of previously recorded contingent liability	(33,386)		(468)
Ending balance	$	37,244	$	2,328

During fiscal year 2021, the majority of the contingent consideration liabilities recognized were in connection with the Company’s recent acquisitions of Distributed Bio, Retrogenix, Vigene, and assets of a distributor. The Company estimates the fair value of contingent consideration obligations through valuation models, such as probability-weighted and option pricing models, that incorporate probability adjusted assumptions and simulations related to the achievement of the milestones and the likelihood of making related payments. The unobservable inputs used in the fair value measurements include the probabilities of successful achievement of certain financial targets, forecasted results or targets, volatility, and discount rates. The total maximum payments due is approximately $110 million, of which the fair value as of December 25, 2021 is approximately $37.2 million. The weighted average probability of achieving the maximum target is approximately 34%. The average volatility

and weighted average cost of capital are approximately 36% and 14%, respectively. Increases or decreases in these assumptions may result in a higher or lower fair value measurement, respectively. In the later part of fiscal year 2021, certain financial targets stipulated in the contingent consideration agreements were not achieved, which resulted in a decrease of the contingent consideration, primarily related to the Vigene and Distributed Bio acquisitions.

Debt Instruments

The book value of the Company’s term and revolving loans, which are variable rate loans carried at amortized cost, approximates the fair value based on current market pricing of similar debt. As the fair value is based on significant other observable inputs, including current interest and foreign currency exchange rates, it is deemed to be Level 2 within the fair value hierarchy.

The book value of the Company’s Senior Notes are fixed rate obligations carried at amortized cost. Fair value is based on quoted market prices as well as borrowing rates available to the Company. As the fair value is based on significant other observable outputs, it is deemed to be Level 2 within the fair value hierarchy. The book value and fair value of the Company’s Senior Notes is summarized below:


	December 25, 2021				December 26, 2020
	Book Value		Fair Value		Book Value		Fair Value
5.5% Senior Notes due 2026	$	—	$	—	$	500,000	$	523,100
4.25% Senior Notes due 2028	500,000		521,250		500,000		523,750
3.75% Senior Notes due 2029	500,000		506,700		—		—
4.0% Senior Notes due 2031	500,000		507,500		—		—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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