Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Mar. 31, 2023

Partially-owned consolidated subsidiary: On September 1, 2022, the Company completed the sale of its equity shares of Changzhou Eminence Biotechnology Co., Ltd. (Eminence) for approximately $17.8 million to a third party. Eminence was considered a variable-interest entity that was fully consolidated in our financial statements. Prior to the sale, Eminence had revenue of $2.0 million for the first fiscal quarter of 2023 within our Protein Sciences segment. Fiscal 2022 revenues were $4.6 million. As a result of the sale of the business, the Company recorded a gain of $11.7 million within the Other income (expense) line in the Condensed Consolidated Statement of Earnings. Prior to the sale of Eminence, a triggering event was identified in the second quarter of fiscal 2022 and impairment testing was performed as Eminence was forecasted to not have sufficient cash to execute on their growth plan combined with their inability to secure additional financing. Our impairment testing resulted in a full impairment of the Eminence goodwill and intangibles assets for charges of $8.3 million and $8.6 million, respectively, for the year ended June 30, 2022. The Company also recognized inventory and fixed asset impairment charges of $0.9 million and $0.9 million, respectively. These impairment charges were recorded within the General and Administrative line in the Consolidated Statement of Earnings for fiscal 2022. In the fourth quarter of fiscal 2022, Eminence was able to secure cash deposits on future orders to provide funding for their operations. This delay in liquidation allowed time for securing of additional investor financing which coincided with the sale of the Company's investment.

Investments: In December 2021, the Company paid $25 million to enter into a two-part forward contract which requires the Company to make an initial ownership investment followed by purchase of full equity interest in Wilson Wolf Corporation (Wilson Wolf) if certain annual revenue or annual earnings before interest, taxes, depreciation, and amortization (EBITDA) thresholds are met. Wilson Wolf is a leading manufacturer of cell culture devices, including the G-Rex product line.

The first part of the forward contract is triggered upon Wilson Wolf achieving approximately $92 million in annual revenue or $55 million in EBITDA at any point prior to December 31, 2027. During the quarter ended March 31, 2023, the Company determined that Wilson Wolf had met the EBITDA target. On March 31, 2023, the Company paid an additional $232 million to acquire 19.9% of Wilson Wolf.

Since the first part of the forward contract has been triggered, the second part of the forward contract will automatically trigger, and requires the Company to acquire the remaining equity interest in Wilson Wolf on December 31, 2027 based on a revenue multiple of

approximately 4.4 times trailing twelve month revenue. The second part of the contract would be accelerated in advance of December 31, 2027, if Wilson Wolf meets its second milestone of approximately $226 million in annual revenue or $136 million in annual EBITDA. If the second milestone is achieved, the forward contract requires the Company to pay approximately $1 billion plus potential consideration for revenue in excess of the revenue milestone.

The investment in Wilson Wolf is accounted for as an equity method investment under ASC 323. The Company initially records its equity method investments at the amount of the Company’s investment and adjusts each period for the Company’s share of the investee’s income or loss and dividends paid. There was not material income or loss during the quarter ended March 31, 2023 recorded on the Company’s Consolidated Statement of Earnings and Comprehensive Income related to the investment. The Company’s total investment of $257 million is included within Other long-term assets on the Consolidated Balance Sheet.

Restructuring actions

Restructuring actions: Restructuring actions generally include significant actions involving employee-related severance charges, contract termination costs, and impairments and disposals of assets associated with such actions. Employee-related severance charges are based upon distributed employment policies and substantive severance plans. These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the associated actions. Asset impairment and disposal charges include right of use assets, leasehold improvements, and other asset write-downs associated with combining operations and disposal of assets.

Fiscal Year 2023 Restructuring Actions:

QT Holdings Corporation (Quad)

In August 2022, the Company informed employees of our decision to close our QT Holdings Corporation (Quad) facility as part of a realignment of activities within our Reagent Solutions division. The closure of the site is expected to be substantially completed in the fourth quarter of fiscal 2023. As a result of the restructuring activities, an estimated pre-tax charge of $2.2 million was recorded within our Protein Sciences segment for the nine months ended March 31, 2023. There were no additional charges for the third fiscal quarter ended March 31, 2023. The related nine months ended March 31, 2023 restructuring charges were recorded in the income statement as follows (in thousands):


	Employee		Asset
	severance		impairment and other		Total
Selling, general and administrative	$	1,328	$	842	$	2,170


	Employee		Asset
	severance		impairment and other		Total
Expense incurred in the first quarter of 2023	$	1,328	$	842	$	2,170
Cash payments		(420)		(431)		(851)
Adjustments		—		(72)		(72)
Accrued restructuring actions balances as of September 30, 2022		908		339		1,247
Cash payments		(753)		(262)		(1,015)
Adjustments		(38)		(73)		(111)
Accrued restructuring actions balances as of December 31, 2022		117		4		121
Cash payments		(60)		(70)		(130)
Adjustments		(57)		75		18
Accrued restructuring actions balances as of March 31, 2023	$	—	$	9	$	9

Protein Sciences realignment

In December 2022, the Company informed employees it would undertake certain actions to strategically reallocate resources to high growth areas of the business. The realignment impacted a limited number of employees and was completed in the third fiscal quarter of 2023. As a result of the realignment, a pre-tax charge of $0.8 million related to employee severance was recorded in the Selling, general and administrative line of operating income within our Protein Sciences segment during the nine months ended March 31, 2023.

Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):


	Employee
	severance
Expense incurred in the second quarter of 2023	$	780
Cash payments		(176)
Adjustments		—
Accrued restructuring actions balances as of December 31, 2022		604
Cash payments		(586)
Adjustments		(18)
Accrued restructuring actions balances as of March 31, 2023	$	—

Fiscal Year 2022 Restructuring Actions:

In September 2021, the Company informed employees of our decision to close our Exosome Diagnostics Germany facility, discontinuing lab and research occurring at the site, as part of a realignment of activities within our Exosome Diagnostics business. The restructuring activities were completed as of June 30, 2022. As a result of the restructuring activities, a pre-tax charge of $1.4 million was recorded within our Diagnostics and Genomics segment during the year ended June 30, 2022. Total restructuring charges for the closure of the Exosome Diagnostics Germany facility for the year ended June 30, 2022 were recorded within Operating Income on the Income statement as follows (in thousands):


	Employee		Asset
	severance		impairment and other		Total
Selling, general and administrative	$	649	$	750	$	1,399

Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):


	Employee		Asset
	severance		impairment and other		Total
Expense incurred in the first quarter of 2022	$	639	$	546	$	1,185
Incremental expense incurred during fiscal 2022		—		242		242
Cash payments		(589)		(554)		(1,143)
Adjustments⁽¹⁾		(50)		(234)		(284)
Accrued restructuring actions balances as of June 30, 2022	$	—	$	—	$	—

⁽¹⁾Adjustments include refinements to our estimated close down costs as well as the impacts from foreign currency exchange.

Recently Adopted Accounting Pronouncements

There were no accounting pronouncements adopted in the quarter ended March 31, 2023. Refer to the Form 10-K for accounting pronouncements adopted prior to June 30, 2022.