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Acquisition of Net Assets of a Business
 6 Months Ended
Sep. 30, 2012
Acquisition of Net Assets of a Business  
Acquisition of Net Assets of a Business

Note 2 — Acquisition of Net Assets of a Business

 

On May 15, 2012, we completed a business combination (the “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, and we believe that it will maintain our historic profitability measures.

 

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

 

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 recorded goodwill in connection with this transaction.  The goodwill is expected to be deductible for tax purposes.  All of the goodwill was 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.  We determined the estimated fair values using discounted cash flow analyses and estimates made by management.  The following reflects our allocation of the consideration, subject to customary purchase price adjustments in accordance with the Bios Agreement (in thousands):

 

Cash consideration

 

$

16,660

 

Contingent purchase price liability

 

2,140

 

Aggregate consideration

 

$

18,800

 

 

 

 

 

The purchase price was allocated as follows:

 

 

 

Accounts receivable, net

 

$

478

 

Inventory

 

910

 

Other current assets

 

28

 

Property, plant and equipment

 

63

 

Intangibles

 

8,200

 

Goodwill

 

9,190

 

Current liabilities

 

(69

)

Total purchase price allocation

 

$

18,800

 

 

The accompanying condensed statements of income include 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 on April 1, 2012 and 2011, are as follows (in thousands, except per share data):

 

 

 

Three months ended September 30,

 

 

 

2012

 

2011

 

Total net revenues

 

$

12,487

 

$

11,614

 

Net income

 

2,269

 

2,104

 

Net income per common share:

 

 

 

 

 

Basic

 

$

0.68

 

$

0.64

 

Diluted

 

0.64

 

0.61

 

 

 

 

Six months ended September 30,

 

 

 

2012

 

2011

 

Total net revenues

 

$

23,047

 

$

22,694

 

Net income

 

4,369

 

3,831

 

Net income per common share:

 

 

 

 

 

Basic

 

$

1.31

 

$

1.17

 

Diluted

 

1.24

 

1.12

 

 

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 necessarily indicative of results of operations that would have been achieved if the acquisition had taken place at the dates identified.