Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Acquisitions

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Note 4 - Acquisitions
6 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Business Combination Disclosure [Text Block]

Note 4. Acquisitions:

 

We periodically complete business combinations that align with our business strategy. Acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and that the results of operations of each acquired business be included in our consolidated statements of comprehensive income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred.

 

2021 Acquisitions

 

Asuragen, Inc.

 

On April 6, 2021, the Company acquired all of the ownership interests of Asuragen, Inc. (Asuragen) for approximately $216 million, net of cash acquired, plus contingent consideration of up to $105.0 million, subject to certain revenue thresholds. The Asuragen acquisition adds a leading portfolio of best in-class molecular diagnostic and research products, including genetic screening, oncology testing kits, molecular controls, a GMP compliant manufacturing facility, and a CLIA-certified laboratory. The transaction was accounted for in accordance with ASC 805, Business Combinations. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’ product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Diagnostics and Genomics operating segment in the fourth quarter of fiscal 2021. 

 

Purchase accounting remained open as of December 31, 2021 for our income tax assessment of acquired net operating losses with the completion of the stub period tax returns and the corresponding goodwill impact. The Company expects to finalize the allocation of purchase price in the third quarter of fiscal 2022. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations for the quarter ended December 31, 2021 were approximately $8.8 million and $0.4 million, respectively. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations for the six months ended December 31, 2021 were approximately $16.4 million and $3.6 million, respectively. The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date and at December 31, 2021 are as follows (in thousands):

 

   

Preliminary allocation at

acquisition date and at

December 31, 2021

 

Current assets, net of cash

  $ 10,422  

Equipment and other long-term assets

    3,762  

Intangible assets:

       

Developed technology

    107,000  

In-process research and development

    22,700  

Customer relationships

    11,700  

Trade names

    2,000  

Non-competition agreement

    1,000  

Goodwill

    94,970  

Total assets acquired

    253,554  
         

Liabilities

    4,003  

Deferred income taxes, net

    15,664  

Net assets acquired

  $ 233,887  
         

Cash paid, net of cash acquired

    215,587  

Contingent consideration payable

    18,300  

Net assets acquired

  $ 233,887  

 

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology, in-process research and development, and customer relationships was based on management's preliminary forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed technology is estimated to be 14 years. Amortization expense related to customer relationships is reflected in selling, general and administrative expenses in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be 16 years. The amount recorded for trade names and the non-competition agreement is being amortized with the expense reflected in selling, general and administrative expenses in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for trade names and the non-competition agreement is estimated to be 5 years and 3 years, respectively. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes, offset by the deferred tax asset for the preliminary calculation of acquired net operating losses.