XML 25 R9.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Note 2 - Acquisitions | 12 Months Ended
--- | ---
Jun. 30, 2018
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | Note 2. Acquisitions: We periodically complete business combinations that align with our business strategy. Acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and that the results of operations of each acquired business be included in our consolidated statements of comprehensive income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred. 2018 Acquisitions Trevigen On September 5, 2017 the Company acquired the stock of Trevigen Inc. for approximately $10.6 million, net of cash received. The Company has had a long-standing business relationship with Trevigen as a distributor of its product line. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Biotechnology reportable segment in the first quarter of fiscal 2018. Purchase accounting was finalized during the fourth quarter. The preliminary and final fair values of the assets acquired and liabilities assumed are as follows (in thousands):
|  | Preliminary Allocation at Acquisition Date |  |  | Adjustments to Fair Value |  |  | Final Opening Balance Sheet Allocation |
Current assets, net of cash |  | $ | 1,662 |  |  |  |  |  |  | $ | 1,662 |
Equipment and other long-term assets |  |  | 154 |  |  |  | (101 | ) |  |  | 53 |
Intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  |  | 3,800 |  |  |  | 1,300 |  |  |  | 5,100 |
Trade name |  |  | 1,400 |  |  |  | (1,240 | ) |  |  | 160 |
Customer relationships |  |  | 1,900 |  |  |  | (1,640 | ) |  |  | 260 |
Goodwill |  |  | 4,595 |  |  |  | 1,396 |  |  |  | 5,991 |
Total assets acquired |  |  | 13,511 |  |  |  | (285 | ) |  |  | 13,226 |
Liabilities |  |  | 92 |  |  |  | 295 |  |  |  | 387 |
Deferred income taxes, net |  |  | 2,785 |  |  |  | (590 | ) |  |  | 2,195 |
Net assets acquired |  | $ | 10,634 |  |  | $ | 10 |  |  | $ | 10,644 |
Cash paid, net of cash acquired |  | $ | 10,634 |  |  | $ | 10 |  |  | $ | 10,644 |
As summarized in the table, there were adjustments totaling $1.4 million to goodwill during the measurement period. These adjustments primarily relate to refinements made to acquired intangible asset cash flow models, and updates to opening balance sheet deferred tax assets and liabilities upon completion of the December 31, 2017 income tax return. Tangible assets acquired, net of liabilities assumed, were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology, trade names, and customer relationships was based on management's forecasted cash inflows and outflows and using a relief-from-royalty and a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology is being amortized with the expense reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. Amortization expense related to trade names, and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2018 are 13 years for developed technology, 11 years for customer relationships, and 1.5 years for trade names. The deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized upon the sale of acquired inventory that was written up to fair value and intangible asset amortization, both of which are not deductible for income tax purposes. Atlanta Biologicals On January 2, 2018 the Company acquired the stock of Atlanta Biologicals, Inc. and its affiliated company, Scientific Ventures, Inc., for approximately $51.3 million, net of cash acquired. The transaction was financed through available cash on hand and an additional draw from the Company’s line-of-credit. Atlanta Biologicals fetal bovine serum (FBS) product line strengthens and complements our current tissue culture reagents offering and furthers our efforts to provide more complete solutions to our research customers. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Biotechnology reportable segment in the third quarter of fiscal 2018. Purchase accounting was finalized during the fourth quarter. The preliminary and final fair values of the assets acquired and liabilities assumed are as follows (in thousands):
|  | Preliminary Allocation at Acquisition Date |  |  | Adjustments to Fair Value |  |  | Final Opening Balance Sheet Allocation |
Current assets, net of cash |  | $ | 18,678 |  |  | $ | (2,956 | ) |  | $ | 15,722 |
Equipment and other long-term assets |  |  | 4,348 |  |  |  | 553 |  |  |  | 4,901 |
Intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  |  | 9,000 |  |  |  | 14,700 |  |  |  | 23,000 |
Trade name |  |  | 1,000 |  |  |  | 1,300 |  |  |  | 2,300 |
Customer relationships |  |  | 1,500 |  |  |  | 1,400 |  |  |  | 3,600 |
Goodwill |  |  | 21,695 |  |  |  | (11,500 | ) |  |  | 10,195 |
Total assets acquired |  |  | 56,221 |  |  |  | 3,497 |  |  |  | 59,718 |
Liabilities |  |  | 90 |  |  |  | - |  |  |  | 90 |
Deferred income taxes, net |  |  | 4,845 |  |  |  | 3,509 |  |  |  | 8,354 |
Net assets acquired |  | $ | 51,286 |  |  | $ | (12 | ) |  | $ | 51,274 |
Cash paid, net of cash acquired |  | $ | 51,286 |  |  | $ | (12 | ) |  | $ | 51,274 |
As summarized in the table, there were adjustments totaling $11.5 million to goodwill during the measurement period. These adjustments primarily relate to refinements made to acquired intangible asset cash flow models, and the calculation of the fair value of acquired inventory. Tangible assets acquired, net of liabilities assumed, were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology, trade names, and customer relationships was based on management's forecasted cash inflows and outflows and using a relief-from-royalty and a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology is being amortized with the expense reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. Amortization expense related to trade names, and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2018 are 13 years for developed technology, 12 years for customer relationships, and 15 years for trade names. The deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized upon the sale of acquired inventory that was written up to fair value and intangible asset amortization, both of which are not deductible for income tax purposes. Eurocell Diagnostics On February 1, 2018, the Company acquired Eurocell Diagnostics SAS a company based in Rennes, France for approximately $7.3 million, net of cash acquired. $6.0 million was paid on the acquisition date and the remaining $1.3 million will be paid on February 1, 2019. The Company has had a long-standing business relationship with Eurocell as a distributor of its product line. Eurocell sells directly to the laboratory markets in the French region as well as servicing the EMEA markets via a network of distributors. The transaction was financed through cash on hand. The primary asset in this acquisition is the customer relationships, however, the acquisition resulted in some goodwill as we expect strategic benefits of revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Company’s Diagnostics reportable segment in the third quarter of fiscal 2018. Purchase accounting was finalized during the fourth quarter. The preliminary and final fair values of the assets acquired and liabilities assumed are as follows (in thousands):
|  | Preliminary Allocation at Acquisition Date |  |  | Adjustments to Fair Value |  |  | Final Opening Balance Sheet Allocation |
Current assets, net of cash |  | $ | 512 |  |  | $ | - |  |  | $ | 512 |
Equipment and other long-term assets |  |  | 188 |  |  |  | - |  |  |  | 188 |
Intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  | 6,272 |  |  |  | - |  |  |  | 6,272 |
Goodwill |  |  | 113 |  |  |  | 2,797 |  |  |  | 2,910 |
Total assets acquired |  |  | 7,085 |  |  |  | 2,797 |  |  |  | 9,882 |
Liabilities |  |  | 483 |  |  |  | - |  |  |  | 483 |
Deferred income taxes, net |  |  | 2,070 |  |  |  | - |  |  |  | 2,070 |
Net assets acquired |  | $ | 4,532 |  |  | $ | 2,797 |  |  | $ | 7,329 |
Cash paid, net of cash acquired |  | $ | 3,136 |  |  | $ | 2,797 |  |  | $ | 5,933 |
Consideration payable |  | $ | 1,396 |  |  | $ | - |  |  | $ | 1,396 |
As summarized in the table, there were adjustments totaling $2.8 million to goodwill during the measurement period. These adjustments primarily relate to the finalization of our opening balance sheet audit procedures and identification of acquired assets. Tangible assets acquired, net of liabilities assumed, were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to customer relationships was based on management's forecasted cash inflows and outflows using a multi-period excess earnings method to calculate the fair value of assets purchased. Amortization expense related customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships acquired in fiscal 2018 is 7 years. The deferred income tax liability represents the net amount of the estimated future impact of intangible asset amortization, which is not deductible for income tax purposes. 2017 Acquisitions Advanced Cell Diagnostics (ACD) On August 1, 2016, the Company acquired ACD for approximately $258.0 million, net of cash acquired, plus contingent consideration of up to $75.0 million as follows:
● | $25.0 million if calendar year 2016 revenues equal or exceed $30.0 million.
● | an additional $50.0 million if calendar year 2017 revenues equal or exceed $45.0 million.
The Company paid approximately $247.0 million, net of cash acquired and the working capital adjustments, as of the acquisition date. The remaining $11.0 million was paid to current employees who held ACD unvested stock as of the acquisition date. In order to receive payment for unvested shares, the individuals had to remain employees of ACD over an 18 -month vesting period which extended from the acquisition date through March 31, 2018. Any amounts that would have been owed to individuals who left the company during the vesting period was pooled together and distributed amongst the other former ACD shareholders at the end of the vesting period. Management determined that $3.6 million of the $11.0 million represented purchase price consideration paid for pre-acquisition services. However, the remaining $7.4 million represented compensation expense as the amount the individual employees received was tied to future service. This liability recorded on the Consolidated Balance Sheets under the caption “Salaries, wages and related accruals” for the fiscal year ended June 30, 2017. During the third quarter of fiscal 2017, management determined that the calendar year 2016 revenue milestone was met. During the third quarter of fiscal 2018, management determined that the calendar year 2017 revenue milestone was met. Refer to Note 4 for discussion of this item as well as discussion of the changes to the fair value estimate for the calendar year revenue milestones as of June 30, 2018 and 2017. The goodwill recorded as a result of the ACD acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes. The business became part of the Company’s Biotechnology reportable segment in the first quarter of 2017. As previously disclosed, ACD was acquired on August 1, 2016. The unaudited pro forma financial information below summarizes the combined results of operations for Bio-Techne and ACD as though the companies were combined as of the beginning fiscal 2016. The pro forma financial information for all periods presented includes the purchase accounting effects resulting from these acquisitions except for the increase in inventory to fair value and the fair value adjustments to contingent consideration as these are not expected to have a continuing impact on cost of goods sold or selling, general and administrative expense, respectively. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2016.
|  | Year Ended |
|  | June 30, |
|  | 2017 |  |  | 2016 |
Net sales |  | $ | 564,220 |  |  | $ | 523,840 |
Net income |  |  | 99,380 |  |  |  | 110,536 |
Space Import-Export, Srl On July 1, 2016, the Company acquired Space Import-Export, Srl (Space) of Milan, Italy for approximately $9.0 million. $6.7 million was paid on the acquisition date and the remaining $2.3 million was paid during the first quarter of fiscal year 2018. Space was a long-time distribution partner of the Company in the Italian market. The acquisition resulted in goodwill as we expect strategic benefits of revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Company’s Biotechnology reportable segment in the first quarter of 2017. 2016 Acquisitions Zephyrus Biosciences, Inc. On March 14, 2016, the Company acquired Zephyrus Biosciences, Inc. (Zephyrus) for $8.0 million in cash and up to $7.0 million in contingent consideration. Zephyrus provides research tools to enable protein analysis at the single cell level. Addressing the burgeoning single cell analysis market, Zephyrus's first product, Milo™, enables western blotting on individual cells for the first time. The acquisition was funded with cash on hand. The purchase price of Zephyrus exceeded the preliminary estimated fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill, substantially all of which is not tax deductible. Zephryus is included in the Company's Protein Platforms segment. In connection with the Zephyrus acquisition, the Company recorded $7.4 million of in process research and development which is not amortized until it is converted to developed technology which occurs once a sale of its product is completed. In the first quarter of fiscal 2017, the Company transferred the balance of in process research and development to developed technology and began amortizing the intangible asset after Zephyrus made its first sale. The intangible asset amortization for the developed technology is not deductible for income tax purposes. The acquisition included contingent payments up to $7.0 million. $3.5 million paid if and when 10 instruments are sold prior to the 3 -year anniversary of the closing date ( March 14, 2019) and an additional $3.5 million if and when $3.0 million in cumulative sales are generated within 4.5 years of the closing date ( September 14, 2020). The Company made a $3.5 million payment in the third quarter of fiscal 2017 after Zephyrus sold its tenth instrument and a $3.5 million payment in the fourth quarter of fiscal 2018 after Zephyrus met the $3.0 million revenue milestone. Refer to Note 4 for discussion of these payments as well as discussion of the changes to the fair value estimate for these milestones as of June 30, 2018 and 2017. The goodwill recorded as a result of the Zephyrus acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes. Cliniqa Corporation On July 8, 2015, the Company acquired Cliniqa Corporation (Cliniqa) for approximately $82.9 million. Cliniqa specializes in the manufacturing and commercialization of blood chemistry quality controls and calibrators as well as bulk reagents used for the clinical diagnostic market to further expand and complement our Diagnostics solutions. The acquisition was funded with cash on hand and funds obtained from our revolving credit facility. The purchase price of Cliniqa exceeded the fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill. Cliniqa is included in the Company's Diagnostics segment. The goodwill recorded as a result of the Cliniqa acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes. The aggregate purchase price of the acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as a result of the fiscal year 2017 and 2016 acquisitions (in thousands):
|  | ACD |  |  | Space |  |  | Zephyrus |  |  | Cliniqa |
Current assets, net of cash |  | $ | 15,824 |  |  | $ | 2,128 |  |  |  | 56 |  |  |  | 11,926 |
Equipment |  |  | 2,757 |  |  |  | 159 |  |  |  | 32 |  |  |  | 1,436 |
Other long-term assets |  |  | 3,812 |  |  |  | - |  |  |  | - |  |  |  | 58 |
Intangible Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  |  | 150,000 |  |  |  | - |  |  |  | 8,300 |  |  |  | 18,000 |
Trade name |  |  | 21,900 |  |  |  | - |  |  |  | - |  |  |  | 1,100 |
Customer relationships |  |  | 6,300 |  |  |  | 6,769 |  |  |  | - |  |  |  | 27,000 |
Goodwill |  |  | 143,967 |  |  |  | 3,517 |  |  |  | 8,686 |  |  |  | 42,669 |
Total assets acquired |  |  | 344,560 |  |  |  | 12,573 |  |  |  | 17,074 |  |  |  | 102,189 |
Liabilities |  |  | 4,179 |  |  |  | 1,445 |  |  |  | 53 |  |  |  | 1,508 |
Deferred income taxes, net |  |  | 52,743 |  |  |  | 2,125 |  |  |  | 2,521 |  |  |  | 17,793 |
Net assets acquired |  | $ | 287,638 |  |  | $ | 9,003 |  |  | $ | 14,500 |  |  | $ | 82,888 |
Cash paid, net of cash acquired |  | $ | 247,038 |  |  | $ | 6,747 |  |  |  | 8,000 |  |  |  | 82,888 |
Consideration payable |  |  | 3,600 |  |  |  | 2,256 |  |  |  | - |  |  |  | - |
Contingent consideration payable |  |  | 37,000 |  |  |  | - |  |  |  | 6,500 |  |  |  | - |
Net assets acquired |  | $ | 287,638 |  |  | $ | 9,003 |  |  | $ | 14,500 |  |  | $ | 82,888 |
Tangible assets acquired, net of liabilities assumed, were stated at fair value at the date of acquisition based on management's assessment. The purchase price allocated to developed technology, trade names, non-compete agreements and customer relationships was based on management's forecasted cash inflows and outflows and using a relief-from-royalty and a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology is being amortized with the expense reflected in cost of goods sold in the Consolidated Statements of Earnings and Comprehensive Income. Amortization expense related to trade names, the non-compete agreement and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statements of Earnings and Comprehensive Income. The deferred income tax liability represents the estimated future impact of adjustments for the cost to be recognized upon the sale of acquired inventory that was written up to fair value and intangible asset amortization, both of which are not deductible for income tax purposes, and the future tax benefit of net operating loss and tax credit carryforwards which will be deductible by the Company in future periods.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration