Quarterly report pursuant to Section 13 or 15(d)

Note 2 - Acquisitions

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Note 2 - Acquisitions
 9 Months Ended
Mar. 31, 2015
Notes to Financial Statements  
Business Combination Disclosure [Text Block]
Note 2. Acquisitions:
 
The Company’s acquisitions have historically been made at prices above the fair value of the acquired identifiable assets, resulting in goodwill. The goodwill is due to strategic benefits of growing the Company’s product portfolio, expected revenue growth from the increased market penetration from future products and customers, and expectations of synergies that will be realized by combining the businesses. Acquisitions have been accounted for using the purchase method of accounting and the acquired companies’ results have been included in the accompanying financial statements from their respective dates of acquisition. Acquisition costs are recorded in selling, general and administrative expenses as incurred.
 
On July 2, 2014, the Company acquired all of the issued and outstanding equity interests of Novus Holdings LLC (Novus). The acquisition was funded entirely by cash on-hand. Novus broadens the Company’s antibody offerings by being a supplier of a large portfolio of both outsourced and in-house developed antibodies and other reagents for life science research. Novus is included in the Company’s Biotechnology segment. The purchase price of Novus exceeded the fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill, the majority of which is tax deductible.
 
On July 31, 2014, the Company acquired ProteinSimple. ProteinSimple expands the Company’s solutions that it can offer its customers by developing and commercializing proprietary systems and consumables for protein analysis. The Company opened a line-of-credit (Note 3) to partially fund the acquisition. The purchase price of ProteinSimple exceeded the fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill, substantially all of which is not tax deductible. ProteinSimple is included in the Company’s Protein Platforms segment.    
 
On November 3, 2014, the Company acquired CyVek, Inc. (CyVek) through a merger. CyVek has developed a transformative immunoassay technology which integrates an innovatively designed microfluidic cartridge with a state-of-the-art analyzer to deliver the most advanced and efficient bench top immunoassay system. In fiscal 2014, the Company entered into an Agreement of Investment and Merger (the Agreement) with CyVek. Pursuant to the terms of the Agreement, the Company invested $10.0 million in CyVek and received shares of Common Stock representing approximately 19.9% of the outstanding voting stock of CyVek. Between the time of the Company’s initial investment and November 3, 2014, CyVek met certain commercial milestones related to the sale of its products, which obligated the Company to acquire CyVek through a merger, with CyVek surviving as a wholly-owned subsidiary of the Company.
 
The Company made an initial payment of approximately $62.0 million to the other stockholders of CyVek on November 3, 2014. Such purchase price was adjusted after closing based on the final levels of cash, indebtedness and transaction expenses of CyVek as of the closing. The Company will also pay CyVek’s previous stockholders up to $35.0 million based on the revenue generated by CyVek’s products before May 3, 2017 (30 months from the closing of the Merger). The Company will also pay CyVek’s previous stockholders 50% of the amount, if any, by which the revenue from CyVek’s products and related products exceeds $100 million in calendar year 2020. The Company has recorded the present value of these contingent payments as a long-term liability of $35.0 million at March 31, 2015. In addition, at November 3, 2014, the Company re-measured its previous investment in CyVek to acquisition-date fair value, resulting in a gain on the investment of $8.3 million which is included in Other income on the Condensed Consolidated Statements of Earnings and Comprehensive Income. The purchase price of CyVek exceeded the fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill, substantially all of which is not tax deductible. CyVek is included in the Company’s Protein Platforms segment.    
 
The preliminary estimated fair value of the assets acquired and liabilities assumed in each acquisition, pending final valuation of intangible assets, was as follows (in thousands):
 
 
Novus
 
 
ProteinSimple
 
 
CyVek
 
                         
Current assets
   $ 10,739     $ 20,273     $ 945  
Equipment
     1,266       1,983       971  
Other long-term assets
     40       554       19  
Intangible Assets:
                        
Developed technology
     5,010       40,500       20,200  
Trade name
     5,300       35,800       100  
Customer relationships
     14,400       100,600       900  
Non-compete agreements
     -       200       -  
Goodwill
     26,692       134,265       91,584  
Total assets acquired
     63,447       334,175       114,719  
                         
Liabilities
     2,166       11,304       1,930  
Deferred income taxes, net
     1,159       22,818       (438 )
Net assets
  $ 60,122     $ 300,053     $ 113,227  
Less fair-value of previous investment
     -       -       18,300  
Net assets acquired
     60,122       300,053       94,927  
                         
Cash paid, net of cash acquired
   $ 60,122     $ 300,053       59,927  
Contingent consideration payable
     -       -       35,000  
Net purchase price
   $ 60,122     $ 300,053     $ 94,927  
 
Tangible assets acquired, net of liabilities assumed, were stated at fair value at the date of acquisition based on management’s assessment. The purchase price allocated to developed technology, trade names, non-compete agreements and customer relationships was based on management’s forecasted cash inflows and outflows and using a relief-from-royalty and a multi-period excess earnings method to calculate the fair value of assets purchased. The developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. Amortization expense related to trade names, the non-compete agreements and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The weighted-average amortization periods for intangible assets acquired in fiscal 2015 are 11.3 years for developed technology, 19.5 years for trade names and 14.8 years for customer relationships. The non-compete agreements are being amortized over three years. The deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized upon the sale of acquired inventory that was written up to fair value and intangible asset amortization which are not deductible for income tax purposes and the future tax benefit of net operating loss and tax credit carry forwards which will be deductible by the Company in future periods.
 
The Company’s Condensed Consolidated Financial Statements include the following from the above acquisitions:
 
 
 
Novus
 
 
ProteinSimple
 
 
CyVek
 
 
 
Quarter
Ended
 
 
Nine Months
Ended
 
 
Quarter
Ended
 
 
Nine Months
Ended
 
 
Quarter
Ended
 
 
Nine Months
Ended
 
 
 
March 31, 2015
 
 
March 31, 2015
 
 
March 31, 2015
 
 
March 31, 2015
 
 
March 31, 2015
 
 
March 31, 2015
 
                                                 
Net sales
   $ 4,845     $ 15,438     $ 20,414     $ 53,427     $ 192     $ 392  
Net (loss) income
     (76
)
     (430
)
     (4,545
)
     (5,753
)
     (2,601
)
     (3,624
)
Amortization expense
     474       1,423       2,951       8,325       374       625  
Cost recognized on sale
of acquired inventory
     406       1,465       -       1,444       -       64  
 
The unaudited pro forma financial information below summarizes the combined results of operations for Bio-Techne and the above acquisitions as though the companies were combined as of the beginning fiscal 2014. The pro forma financial information for all periods presented includes the purchase accounting effects resulting from these acquisitions. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2014.
 
 
 
Quarter Ended
 
 
Nine
Months Ended
 
 
 
March
31,
 
 
March
31,
 
 
 
201
5
 
 
201
4
 
 
201
5
 
 
201
4
 
                                 
Net sales
   $ 114,158     $ 114,018     $ 339,587     $ 321,441  
Net income
   $ 24,290     $ 27,460     $ 77,991     $ 69,985