Quarterly report pursuant to Section 13 or 15(d)

Note 2 - Acquisitions

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Note 2 - Acquisitions
 6 Months Ended
Dec. 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 8, 2015, the Company acquired all of the issued and outstanding equity interests of Cliniqa Corporation (Cliniqa). Cliniqa specializes in the manufacturing and commercialization of quality controls and calibrators as well as bulk reagents used in the clinical diagnostic market. The acquisition was mostly funded through our line-of-credit facility. The purchase price of Cliniqa 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. Cliniqa is included in the Company's Clinical Controls segment.
 
The preliminary estimated fair value of the assets acquired and liabilities assumed, pending final valuation of intangible assets, are as follows (in thousands):
 
 
 
Cliniqa
 
Current assets
   $ 11,926  
Equipment
     1,436  
Other long-term assets
     58  
Intangible Assets:
        
Developed technology
     18,000  
Trade name
     27,000  
Customer relationships
     1,100  
Goodwill
     42,919  
Total assets acquired
     102,439  
Liabilities
     1,884  
Deferred income taxes, net
     17,667  
Net assets acquired
   $ 82,888  
Cash paid, net of cash acquired
   $ 82,888  
 
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, 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, and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2016 are estimated to be 18 years for developed technology, 20 years for trade names and 4 years for customer relationships. 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, both of which are not deductible for income tax purposes.
 
The Company's Condensed Consolidated Financial Statements for the quarter ended December 31, 2015, include Cliniqa net sales of $6.6 million and income before tax of $0.9 million. Included in these results were amortization of intangibles of $0.7 million and costs recognized on the sales of acquired inventory of $0.5 million. For the six months ended December 31, 2015, Cliniqa contributed net sales of $10.1 million and income before tax of $0.4 million. Included in these results were amortization of intangibles of $1.3 million and costs recognized on the sales of acquired inventory of $0.8 million.