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Business Combinations | 12 Months Ended
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May 31, 2019
Business Combination Disclosure [Text Block] |
3. | Business Combinations
The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for using the acquisition method. Goodwill recognized in the acquisitions described below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings. Fiscal 2017 On December 1, 2016, the Company acquired the stock of Quat-Chem Ltd., a chemical company that manufactures biosecurity products, based in Rochdale, England. Consideration for the purchase was $ 21,606 ,000 in cash and up to $ 3,778 ,000 of contingent consideration, due at the end of each of the first two years, based on an excess net sales formula. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 4,684 ,000, inventory of $ 1,243,000 , land, property and equipment of $ 2,526 ,000, accounts payable of $ 2,197 ,000, deferred tax liability of $ 1,758 ,000, contingent consideration accrual of $ 1,058 ,000, other current liabilities of $ 604 ,000, non-amortizable intangible assets of $ 1,889 ,000, intangible assets of $ 6,900 ,000 (with an estimated life of 5-15 years) and the remainder to goodwill (non-deductible for tax purposes). These values are Level 3 fair value measurements. In January 2018, Neogen paid the former owners $ 249 ,000 in contingent consideration based on the achievement of sales targets in the first year, and recorded a credit of $ 255 ,000 to Other Income, reducing the contingent consideration accrual by a corresponding amount; $ 554 ,000 remained accrued for contingent consideration payable at the end of the second year. In January 2019, Neogen paid the former owners $184,000 in contingent consideration based on the achievement of sales targets in the second year; the remaining accrual balance was adjusted to Other Income. This business continues to operate in its current location and is managed by Neogen Europe, reporting within the Food Safety segment. On December 27, 2016, the Company acquired the stock of Rogama Industria e Comercio, Ltda., a company that develops and manufactures rodenticides and insecticides, based near São Paulo, Brazil. Consideration for the purchase was $ 12,423 ,000 in cash and up to $ 2,069 ,000 of contingent consideration, due at the end of each of the first two years, based on an excess net sales formula. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 1,866 ,000, other non-current assets of $ 26 ,000, inventory of $ 960 ,000, land, property and equipment of $ 4,734 ,000, current liabilities of $ 2,562 ,000, contingent consideration accrual of $ 213 ,000, deferred tax liability of $ 2,034 ,000, non-amortizable intangible assets of $ 870 ,000, intangible assets of $ 5,112 ,000 (with an estimated life of 5-15 years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. In April 2018, Neogen paid the former owners $ 130 ,000 in contingent consideration based on the achievement of sales targets in the first year. The contingent consideration accrual was reduced by the same amount; $ 83 ,000 remained accrued for contingent consideration payable at the end of the second year. In April 2019, the Company paid the former owners $23,000 in contingent consideration based on the achievement of sales targets in the second year; the remaining accrual balance was adjusted to Other Income. This business continues to operate in its current location and is managed by Neogen do Brasil, reporting within the Food Safety segment. Fiscal 2018 On September 1, 2017, the Company acquired the assets of The University of Queensland Animal Genetics Laboratory, an animal genomics laboratory located near Brisbane, Australia. This acquisition is intended to accelerate the growth of Neogen’s animal genomics business in Australia and New Zealand. Consideration for the purchase was $ 2,063 ,000; $ 468 ,000 was initially paid in cash with the remainder due in annual installments over the next five years. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $ 19 ,000, equipment of $ 419 ,000, non-current liabilities of $ 1,629 ,000, intangible assets of $ 902 ,000 (with an estimated life of 5-15 years) and the remainder to goodwill (non-deductible for tax purposes). These values are Level 3 fair value measurements. The business, renamed Neogen Australasia, continues to operate in its current location, reporting within the Animal Safety segment. Fiscal 2019 On August 1, 2018, the Company acquired the stock of Clarus Labs, Inc., a manufacturer of water testing products. Neogen has distributed Clarus’ Colitag water test to the food and beverage industries since 2004 and this acquisition gives the Company access to sell this product to new markets. Consideration for the purchase was $4,204,000 in cash and approximately $1.3 million of contingent consideration, due semiannually for the first five years, based on an excess net sales formula. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $32,000, machinery and equipment of $120,000, accounts payable of $53,000, contingent consideration accrual of $1,256,000, non-current deferred tax liability of $544,000, non-amortizable intangible assets of $878,000, intangible assets of $1,487,000 (with an estimated life of 5-15 years) and the remainder to goodwill (non-deductible for tax purposes). These values are Level 3 fair value measurements. In February 2019, $90,000 was paid to the former owners as contingent consideration from the accrual. Manufacturing of these products was moved to the Company’s Lansing, Michigan location in October 2018, reporting within the Food Safety segment. On September 4, 2018, the Company acquired the assets of Livestock Genetic Services, LLC, a Virginia-based company that specializes in genetic evaluations and data management for cattle breeding organizations. Livestock Genetic Services has been a long-time strategic partner of Neogen and the acquisition enhances the Company’s in-house genetic evaluation capabilities. Consideration for the purchase was $1,100,000 in cash, with $700,000 paid at closing and $400,000 payable to the former owner on September 1, 2019, and approximately $385,000 of contingent consideration, payable over the next three years. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included office equipment of $15,000, contingent consideration accrual of $385,000, intangible assets of $942,000 (with an estimated life of 5-15 years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. Services provided by this operation are now performed at the Company’s Lincoln, Nebraska location, reporting within the Animal Safety segment. On January 1, 2019, the Company acquired the assets of Edmonton, Alberta-based Delta Genomics Centre, an animal genomics laboratory in Canada. Delta’s laboratory operations were renamed Neogen Canada and the acquisition is intended to accelerate growth of the Company’s animal genomics business in Canada. Consideration for the purchase was $1,485,000 in cash. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $38,000, machinery and equipment of $371,000, unearned revenue liability of $125,000, intangible assets of $532,000 (with an estimated life of 5 to 10 years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. Services provided by this operation continue to be performed in Edmonton, reporting within the Animal Safety segment.

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- 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
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