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Description of business and summary of significant accounting policies (Policies)
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12 Months Ended |
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Jun. 30, 2011
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| Estimates |
Estimates: The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosures of contingent assets and
liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues and expenses during the
reporting period. These estimates include the valuation of accounts
receivable, available-for-sale investments, inventory, intangible
assets, stock based compensation and income taxes. Actual results
could differ from these estimates.
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| Principles of consolidation |
Principles of consolidation: The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been
eliminated.
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| Translation of foreign financial statements |
Translation of foreign financial statements: Assets and
liabilities of the Company’s foreign operations are
translated at year-end rates of exchange and the resulting gains
and losses arising from the translation of net assets located
outside the U.S. are recorded as a cumulative translation
adjustment, a component of accumulated other comprehensive income
(loss) on the consolidated balance sheets. Foreign statements of
earnings are translated at the average rate of exchange for the
year. Foreign currency transaction gains and losses are included in
other non-operating expense in the consolidated statements of
earnings.
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| Revenue recognition |
Revenue recognition: The Company recognizes revenue
when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the price is fixed or
determinable and collectability is reasonably assured. Payment
terms for shipments to end-users are generally net 30 days. Payment
terms for distributor shipments may range from 30 to 90 days.
Products are shipped FOB shipping point. Freight charges billed to
end-users are included in net sales and freight costs are included
in cost of sales. Freight charges on shipments to distributors are
paid directly by the distributor. Any claims for credit or return
of goods must be made within 10 days of receipt. Revenues are
reduced to reflect estimated credits and returns. Sales, use,
value-added and other excise taxes are not included in
revenue.
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| Research and development |
Research and development: Research and development
expenditures are expensed as incurred. Development activities
generally relate to creating new products, improving or creating
variations of existing products, or modifying existing products to
meet new applications.
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| Advertising costs |
Advertising costs: Advertising expenses (including
production and communication costs) were $2.9 million, $3.0 million
and $3.0 million for fiscal 2011, 2010 and 2009. The Company
expenses advertising expenses as incurred.
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| Share-based compensation |
Share-based compensation: The cost of employee services
received in exchange for the award of equity instruments is based
on the fair value of the award at the date of grant. Separate
groups of employees that have similar historical exercise behavior
with regard to option exercise timing and forfeiture rates are
considered separately in determining option fair value.
Compensation cost is recognized using a straight-line method over
the vesting period and is net of estimated forfeitures. Stock
option exercises are satisfied through the issuance of new
shares.
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| Income taxes |
Income taxes: The Company uses the asset and liability
method of accounting for income taxes. Deferred tax assets and
liabilities are recognized to record the income tax effect of
temporary differences between the tax basis and financial reporting
basis of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Tax
positions taken or expected to be taken in a tax return are
recognized in the financial statements when it is more likely than
not that the position would be sustained upon examination by tax
authorities. A recognized tax position is then measured at the
largest amount of benefit that is greater than fifty percent likely
of being realized upon ultimate settlement. The Company recognizes
interest and penalties related to unrecognized tax benefits in
income tax expense.
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| Financial instruments not measured at fair value |
Financial instruments not measured at fair value:
Certain of the Company’s financial instruments are not
measured at fair value but nevertheless are recorded at carrying
amounts approximating fair value, based on their short-term nature.
These financial instruments include cash and cash equivalents,
accounts receivable, accounts payable and other current
liabilities.
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| Cash and equivalents |
Cash and equivalents: Cash and cash equivalents include
cash on hand and highly-liquid investments with original maturities
of three months or less.
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| Available-for-sale investments |
Available-for-sale investments: Available-for-sale
investments consist mainly of debt instruments with original
maturities of generally three months to three years and are
recorded based on trade-date. The Company considers all of its
marketable securities available-for-sale and reports them at fair
market value. Fair market values are based on quoted market prices
in active markets for identical assets and liabilities (Level 1
inputs). Unrealized gains and losses on available-for-sale
securities are excluded from income, but are included in other
comprehensive income. If an “other-than-temporary”
impairment is determined to exist, the difference between the value
of the investment security recorded in the financial statements and
the Company’s current estimate of the fair value is
recognized as a charge to earnings in the period in which the
impairment is determined.
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| Inventories |
Inventories: Inventories are stated at the lower of
cost (first-in, first-out method) or market. The Company regularly
reviews inventory on hand for slow-moving and obsolete inventory,
inventory not meeting quality control standards and inventory
subject to expiration. To meet strict customer quality
standards, the Company has established a highly controlled
manufacturing process for proteins and antibodies. New protein and
antibody products require the initial manufacture of multiple
batches to determine if quality standards can be consistently met.
In addition, the Company will produce larger batches of established
products than current sales requirements due to economies of scale.
The manufacturing process for proteins and antibodies, therefore,
has and will continue to produce quantities in excess of forecasted
usage. The Company values its manufactured protein and antibody
inventory based on a two-year usage forecast. Protein and antibody
quantities in excess of the two-year usage forecast are not valued
due to uncertainty over salability. Sales of previously unvalued
protein and antibody inventory for fiscal years 2011, 2010 and 2009
were not material. Manufacturing costs for proteins and antibodies
charged directly to cost of sales were $13.7 million, $12.3 million
and $11.9 million for fiscal 2011, 2010 and 2009
respectively.
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| Depreciation and amortization |
Depreciation and amortization: Equipment is depreciated
using the straight-line method over an estimated useful life of
five years. Buildings, building improvements and leasehold
improvements are amortized over estimated useful lives of 5 to 40
years.
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| Goodwill |
Goodwill: At June 30, 2011 and 2010, the Company
had recorded goodwill of $86.6 million and $25.1 million,
respectively. The increase from fiscal 2010 was the result of
goodwill related to acquisitions in fiscal 2011 which are described
in Note B. The Company tests goodwill at least annually for
impairment. All of the goodwill recorded is within the
Company’s biotechnology segment. The Company’s annual
assessment included comparison of the carrying amount of each
reporting unit, including goodwill, to the fair value of the
reporting unit. The Company completed its annual impairment testing
of goodwill and concluded that no impairment existed as of
June 30, 2011, as the fair values of the Company’s
reporting units substantially exceeded their carrying values, with
the exception of the Tocris and Boston Biochem reporting units
which were acquired in the fourth quarter of fiscal 2011. The
carrying values of Tocris and Boston Biochem approximate fair
values at June 30, 2011.
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| Impairment of intangible and other long-lived assets |
Impairment of intangible and other long-lived assets:
Intangible assets are being amortized over their estimated useful
lives. The Company reviews the carrying amount of intangible and
other long-lived assets for impairment whenever events or changes
in circumstances indicate the carrying amount of an asset may not
be recoverable. Recoverability of asset groups subject to
impairment analysis requires the Company to make assumptions and
judgments regarding the fair value of these asset groups. Asset
groups are considered to be impaired if their carrying amount
exceeds the groups’ ability to continue to generate income
from operations and positive cash flow in future periods. If asset
groups are considered impaired, the amount by which the carrying
amount exceeds its fair value would be expensed as an impairment
loss. As of June 30, 2011, the Company has determined that no
impairment exists.
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| Investments in unconsolidated entities |
Investments in unconsolidated entities: The Company has
equity investments in several start-up and early development stage
companies, among them ChemoCentryx, Inc, (CCX), Hemerus Medical,
LLC (Hemerus), Nephromics, LLC (Nephromics) and ACTGen, Inc.
(ACTGen). The accounting treatment of each investment (cost method
or equity method) is dependent upon a number of factors, including,
but not limited to, the Company’s share in the equity of the
investee and the Company’s ability to exercise significant
influence over the operating and financial policies of the
investee.
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| Unremitted Earnings in Foreign Investment, Policy |
Deferred taxes have not been provided on such undistributed
earnings, as the Company has either paid U.S. taxes on the
undistributed earnings or intends to indefinitely reinvest the
undistributed earnings in the foreign operations.
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