BUSINESS ACQUISITIONS

12 Months Ended

Dec. 31, 2019

BUSINESS ACQUISITIONS AND DISPOSITIONS

On June 3, 2019, the Company's CDD segment acquired Envigo's nonclinical contract research services business, expanding CDD's global nonclinical drug development capabilities with additional locations and resources. Additionally, the Company divested the CRP business, which was a part of the CDD segment, to Envigo. As part of this sale, CDD entered into a multi-year, renewable supply agreement with Envigo. The Company paid cash consideration of $601.0, received a floating rate secured note of $110.0, and recorded a loss on the sale of CRP of $12.2. The Company funded the transaction through a new term loan facility.

The preliminary valuation of acquired assets and assumed liabilities as of June 3, 2019, include the following:



Consideration Transferred
Cash consideration	$	601.0
Fair value of CRP	110.0
Total	$	711.0

	Initial		Measurement Period Adjustments			Preliminary December 31, 2019
Net Assets Acquired
Cash and cash equivalents	$	15.1	$	(3.7	)	$	11.4
Accounts receivable	16.5		(4.5		)	12.0
Unbilled services	26.5		(0.3		)	26.2
Inventories	4.5		—			4.5
Prepaid expenses and other	3.5		5.9			9.4
Property, plant and equipment (including ROU operating lease assets)	99.1		28.1			127.2
Deferred income taxes	25.5		(12.0		)	13.5
Goodwill	432.2		(52.9		)	379.3
Customer relationships	125.8		15.0			140.8
Trade name and trademarks	0.6		—			0.6
Other assets	9.9		—			9.9
Total assets acquired	759.2		(24.4		)	734.8
Accounts payable	15.4		(0.2		)	15.2
Accrued expenses and other	11.6		(1.5		)	10.1
Unearned revenue	49.9		—			49.9
Operating lease liabilities	15.0		(15.0		)	—
Other liabilities	66.3		(7.7		)	58.6
Total liabilities acquired	158.2		(24.4		)	133.8
Net Envigo assets acquired	601.0		—			$	601.0
Floating rate secured note receivable due 2022	110.0
Total	$	711.0

The preliminary purchase consideration for Envigo has been allocated to the estimated fair market value of the net assets acquired, including approximately $141.4 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $379.3. The amortization period for intangible assets acquired is 11 years for customer relationships.

The Envigo transaction contributed $124.2 and $17.9 of revenues and operating income, respectively, during the year ended December 31, 2019. The divested CRP business contributed operating income of $5.5 and $13.2 for the years ended December 31, 2019 and 2018, respectively.

The purchase price allocation for the Envigo transaction is still preliminary and subject to change. The areas of the purchase price allocation that are not yet finalized relate primarily to goodwill, and the impact of finalizing deferred taxes. Accordingly, adjustments may be made as additional information is obtained about the facts and circumstances that existed as of the valuation date. The Company expects these purchase price allocations to be finalized by the second quarter of 2020. Any adjustments will be recorded in the period in which they are identified.

During the year ended December 31, 2019, the Company also acquired various businesses and related assets for approximately $286.4 in cash (net of cash acquired). The purchase consideration for all acquisitions year to date has been allocated to the estimated fair market value of the net assets acquired, including approximately $184.3 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $115.1. The amortization periods for intangible assets acquired from these businesses range from 12 to 15 years for customer relationships. These acquisitions were made primarily to extend the Company's geographic reach in important market areas, enhance the Company's scientific differentiation and to expand the breadth and scope of the Company's CRO services. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired was recorded as goodwill. The goodwill reflects the Company's expectations to utilize the acquired businesses’ workforce and established relationships and the benefits of being able to leverage operational efficiencies with favorable growth opportunities in these markets. A summary of the net assets acquired in 2019 for these businesses is included below:



	Amounts Acquired During Year Ended December 31, 2019 (excluding Envigo)
Accounts receivable	$	2.2
Unbilled services	0.8
Inventories	4.4
Prepaid expenses and other	1.1
Property, plant and equipment (including ROU operating lease assets)	8.5
Goodwill	115.1
Intangible assets	184.3
Other assets	0.1
Total assets acquired	316.5
Accounts payable	1.5
Accrued expenses and other	14.1
Unearned revenue	3.6
Other liabilities	10.9
Total liabilies acquired	30.1
Net assets acquired	$	286.4

Unaudited Pro Forma Information

The Company completed the Envigo acquisition on June 3, 2019. Had the Envigo acquisition as well as the aggregate of the Company's other 2019 acquisitions been completed as of January 1, 2017, the Company's pro forma results would have been as follows:

During the year ended December 31, 2018, the Company acquired various businesses and related assets for approximately $117.8 in cash (net of cash acquired). The purchase consideration for all acquisitions year to date has been allocated to the estimated fair market value of the net assets acquired, including approximately $67.8 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $70.5. These acquisitions were made primarily to extend the Company's geographic reach in important market areas, enhance the Company's scientific differentiation and to expand the breadth and scope of the Company's CRO services. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired was recorded as goodwill. The goodwill reflects the Company's expectations to utilize the acquired businesses’ workforce and established relationships and the benefits of being able to leverage operational efficiencies with favorable growth opportunities in these markets.

On April 30, 2018, the Company entered into a definitive agreement to sell the CFS business, a global provider of innovative product design and product integrity services for end-user segments that span the global food supply chain, for an all-cash purchase price of $670.0. The transaction closed on August 1, 2018, and a net gain of $258.3 was recorded in Other, net in the consolidated statement of operations.

The Company also divested its forensic testing services business in the U.K. and the U.S. on August 7, 2018, and December 31, 2018, respectively, resulting in losses of $48.9 and $24.5, respectively, recorded in Other, net in the consolidated statement of operations.

Operating income for the Company's businesses divested in 2018 was $7.6 and $12.9, for the years ended December 31, 2018, (which includes divested operations through their respective disposal dates) and December 31, 2017, respectively.

Years Ended December 31,

Net earnings attributable to Laboratory Corporation of America Holdings