Acquisitions

During our first fiscal quarter of 2016, we completed the acquisition of Animal Health International, Inc., a leading production animal health distribution company in the U.S. This acquisition more than doubled the revenue previously attributable to our animal health business, which was previously focused on the companion animal health market. Our animal health business now offers an expanded range of products and services to a broader base of customers in North America and the U.K. Under terms of the merger agreement, we acquired all of Animal Health International, Inc.’s stock for $1,106,583 in cash, net of cash assumed.

In connection with the acquisition, we entered into a credit agreement consisting of a $1,000,000 unsecured term loan and a $500,000 unsecured cash flow revolving line of credit, described further in Note 8 to the Consolidated Financial Statements.

The acquisition has been accounted for in accordance with ASC 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the acquisition date. A valuation of the assets and liabilities from the business acquisition was performed utilizing cost, income and market approaches resulting in $588,618 allocated to identifiable net assets.

The following table summarizes the total purchase price consideration and the fair value amounts recognized for the assets acquired and liabilities assumed related to the acquisition, as of the acquisition date:



Total purchase price consideration	$	1,106,583
Receivables	$	161,427
Inventory	195,367
Prepaid expenses and other current assets	35,320
Property and equipment	47,405
Identifiable intangibles	434,300
Other long-term assets	38,300
Total assets acquired	912,119
Accounts payable	122,129
Accrued liabilities and other current liabilities	21,227
Deferred tax liability	180,145
Total liabilities assumed	323,501
Identifiable net assets acquired	588,618
Goodwill	517,965
Net assets acquired	$	1,106,583

As a result of recording the stepped up fair market basis for GAAP purposes, but receiving primarily carryover basis for tax purposes in the acquisition, we recorded a deferred tax liability of $180,145.

The goodwill of $517,965 resulting from the acquisition reflects the excess of our purchase price over the fair value of the net assets acquired. The goodwill recorded as part of the acquisition primarily reflects the value of the assembled workforce, cost synergies, and the potential to integrate and expand existing product lines. We allocated all of the goodwill to our Animal Health reporting segment. None of the goodwill recognized is deductible for income tax purposes, and as such, no deferred taxes have been recorded related to goodwill.

Revenues of $1,396,118 and operating income of $37,230 attributable to the acquisition are included in our consolidated statement of income for the fiscal year ended April 30, 2016. Included in operating income for the fiscal year ended April 30, 2016 is amortization expense of $28,112 related to the identifiable intangible assets acquired in the transaction.

The following summarizes the intangible assets acquired, excluding goodwill. Intangible assets are amortized using methods that approximate the pattern of economic benefit provided by the utilization of the assets.



	Gross Carrying Value		Weighted Average Life (years)
Unamortized – indefinite lived:
Trade names	$	12,300	indefinite
Amortized:
Customer relationships	291,900		15.0
Trade names	111,400		10.0
Developed technology and other	18,700		12.2
Total amortized intangible assets	422,000		13.6
Total identifiable intangible assets	$	434,300

The following unaudited pro forma financial results for the combined results of Patterson and Animal Health International, Inc. for the fiscal years ended April 30, 2016 and April 25, 2015 assume the acquisition occurred on April 27, 2014. The unaudited pro forma financial results may not be indicative of the results that would have occurred had the acquisition been completed as of April 27, 2014, nor are they indicative of future results of operations.



	Fiscal Years Ended
	April 30, 2016		April 25, 2015
Pro forma net sales	$	5,579,739	$	5,452,056
Pro forma net income from continuing operations	193,794		176,744

Pro forma net income from continuing operations for the fiscal year ended April 30, 2016 includes $12,300 of income tax expense related to the repatriation of foreign earnings, described further in Note 13 to the Consolidated Financial Statements.

In August 2013, we completed the acquisition of all the outstanding stock of National Veterinary Services Limited (“NVS”) from Dechra Pharmaceuticals, PLC. NVS is the largest veterinary products distributor in the U.K. Total cash consideration paid for NVS was $142,693. Operating results for this acquisition are included in the Animal Health reporting segment. The acquisition contributed net sales of $419,340 to the segment during fiscal year 2014.

A listing of acquisitions completed during the periods covered by these financial statements is presented below. We acquired 100% of all companies listed.



Entity	Segment
Fiscal 2016:
Animal Health International, Inc.	Animal Health
Fiscal 2015:
Holt Dental Supply	Dental
C.A.P.L. Limited and Abbey Veterinary Services	Animal Health
Fiscal 2014:
Mercer Mastery	Dental
National Veterinary Services Limited	Animal Health