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Acquisition
 3 Months Ended
Jun. 30, 2012
Acquisition  
Acquisition

2.  Acquisition

 

On May 15, 2012, we completed a business combination (“Bios Acquisition”) by acquiring specific assets and assuming certain liabilities of Bios International Corporation (“Bios”), a New Jersey corporation.  The Asset Acquisition Agreement (the “Bios Agreement”) includes a provision for contingent consideration based on revenue growth over a three year earn-out period.  The Bios Acquisition further diversifies and grows our Instruments segment, while maintaining our historic profitability measures.

 

The contingent consideration arrangement requires us to pay Bios if cumulative revenues from the acquisition for the three years subsequent to the acquisition exceed approximately $22,127,000.  The potential undiscounted future payments that we could be required to make is between $0 and $6,710,000.  The preliminary fair value of the contingent consideration arrangement included in the purchase price below was estimated based on Bios’ historic revenue growth.

 

We expect to achieve significant savings and income growth as we integrate the Bios operations and marketing functions.  These factors, among others, contributed to a purchase price in excess of the estimated fair value of Bios’ net identifiable assets and, as a result, we have recorded goodwill in connection with this transaction.  The goodwill is expected to be deductible for tax purposes.  All of the goodwill is assigned to our Instruments segment.

 

The Bios Acquisition was accounted for under the purchase method of accounting.  Our acquisition constitutes the acquisition of a business and was recognized at fair value.  Due to the recency of the transaction, the purchase price allocation was based on preliminary estimated fair value of the assets and liabilities acquired, including the preliminary contingent purchase price liability.  We determined the preliminary estimated fair values using discounted cash flow analyses and estimates made by management.  Upon completing our valuation analysis, the preliminary contingent purchase price liability, and the allocation between intangibles and goodwill may change.  The following reflects our preliminary allocation of the consideration, subject to customary purchase price adjustments in accordance with the Bios Agreement (dollars in thousands):

 

Cash consideration

 

$

16,660

 

Preliminary contingent purchase price liability

 

2,240

 

Aggregate consideration

 

$

18,900

 

 

 

 

 

The purchase price was allocated as follows:

 

 

 

Accounts receivable, net

 

$

541

 

Inventory

 

910

 

Other current assets

 

28

 

Property, plant and equipment

 

63

 

Intangibles

 

8,228

 

Goodwill

 

9,200

 

Current liabilities

 

(70

)

Total purchase price allocation

 

$

18,900

 

 

Our condensed statement of income includes the results of the Bios Acquisition from the acquisition date of May 15, 2012.  The pro forma effects of the acquisition on the results of operations as if the acquisition had been completed April 1, 2012 and 2011, are as follows:

 

 

 

Three months ended June 30,

 

(Dollars in thousands, except earnings per share)

 

2012
(Unaudited)

 

2011
(Unaudited)

 

Total net revenue

 

$

11,340

 

$

11,080

 

Net income

 

2,120

 

1,726

 

Net income per common share:

 

 

 

 

 

Basic

 

$

0.64

 

$

0.53

 

Diluted

 

0.60

 

0.51

 

 

The above pro forma results include adjustments for amortization of acquired intangibles, interest expense, and income tax expense.  The pro forma information as presented above is for informational purposes only and is not indicative of results of operations that would have been achieved if the acquisition had taken place at the dates identified.