| Business and Product Line Acquisitions | 7. BUSINESS AND PRODUCT LINE ACQUISITIONS
The Consolidated Statements of Income reflect the results of
operations for business acquisitions since the respective dates of
purchase. All are accounted for using the acquisition method.
Goodwill recognized in the acquisitions discussed below relates
primarily to enhancing the Company’s strategic platform for
the expansion of available product offerings.
On July 1, 2013, the Company acquired the assets of SyrVet Inc., a
veterinary business based in Waukee, Iowa. SyrVet offered a product
line similar to Neogen’s Ideal Instruments line of veterinary
instruments with a strong presence in Mexico and Latin America.
Consideration for the purchase was $10,012,000 in cash and up to
$1,500,000 of a contingent consideration liability, due at the end
of the first year, based on an excess net sales formula. The
Company estimated the contingent consideration liability to be
$930,000, based on forecasted sales. The final purchase price
allocation, based upon the fair value of these assets determined
using the income approach, included accounts receivable of
$747,000, net inventory of $2,195,000, property and equipment of
$556,000, current liabilities of $226,000, contingent consideration
liabilities of $930,000, non-amortizable trademarks of $790,000,
intangible assets of $4,810,000 (with an estimated life of 15
years) and the remainder to goodwill (deductible for tax purposes).
These values are Level 3 fair value measurements. This business has
been relocated to Lexington, Kentucky and integrated with the
Company’s current operations there, reporting within the
Animal Safety segment. In August 2014, the Company paid $689,000 to
the former owner for contingent consideration based upon the level
of achievement of sales targets; the remaining $241,000 of the
accrual was reversed to other income.
On November 1, 2013, the Company acquired the assets of Prima Tech
Incorporated, a veterinary instrument company based in Kenansville,
North Carolina. Prima Tech manufactures devices used by farmers,
ranchers, and veterinarians to inject animals, provide topical
applications, and to use for oral administration. Prima Tech is
also a supplier of products used in artificial insemination in the
swine industry. Consideration for the purchase was $12,068,000 in
cash and up to $600,000 of contingent consideration, due at the end
of the first year, based on an excess net sales formula. The
Company estimated the contingent consideration liability to be
$146,000 based on forecasted sales. The final purchase price
allocation, based upon the fair value of these assets determined
using the income approach, included accounts receivable of
$963,000, net inventory of $2,796,000, property and equipment of
$1,653,000, prepaid assets of $8,000, current liabilities of
$1,840,000, contingent consideration liabilities of $146,000,
non-amortizable trademarks of $1,500,000, intangible assets of
$4,400,000 (with an estimated life of 5-15 years) and the remainder
to goodwill (deductible for tax purposes). These values are Level 3
fair value measurements. This business continues to operate in its
current location and reports within the Animal Safety segment. In
October 2014, the Company paid the former owners $600,000 for
contingent consideration based on achievement of defined sales
targets, recording an additional $454,000 charge to other
expense.
On January 2, 2014, the Company acquired all of the stock of
Chem-Tech Ltd., a pest control manufacturing and distribution
business located in Pleasantville, Iowa. Consideration for the
purchase was $17,185,000 in cash and up to $1,000,000 of a
contingent consideration liability, due at the end of the first
year, based on an excess net sales formula. The Company estimated
the contingent consideration liability to be $390,000, based on
forecasted sales. The final purchase price allocation included
accounts receivable of $380,000, net inventory of $4,184,000,
prepaid assets of $100,000, property and equipment of $807,000,
current liabilities of $184,000, contingent consideration
liabilities of $390,000, intangible assets of $8,327,000 (with an
estimated life of 5-25 years) and the remainder to goodwill
(deductible for tax purposes). These values are Level 3 fair value
measurements. This business continues to operate in its current
location and reports within the Animal Safety segment. In
February 2015, the Company paid the former owners $474,000 for
contingent consideration based upon achievement of sales targets,
recording an additional $84,000 charge to other expense.
On October 1, 2014, the Company acquired all of the stock of
BioLumix, Inc., a manufacturer and marketer of automated systems
for the detection of microbial contaminants located in Ann Arbor,
Michigan. Consideration for the purchase was $4,514,000 in cash.
The final purchase price allocation included accounts receivable of
$499,000, other receivable of $178,000, net inventory of $421,000
prepaid assets of $48,000, property and equipment of $159,000,
current liabilities of $155,000, long-term liabilities of $780,000,
intangible assets of $2,090,000 (with an estimated life of 5-15
years) and the remainder to goodwill (non-deductible for tax
purposes). These values are Level 3 fair value measurements. This
business has been relocated to Lansing, Michigan and integrated
with the Company’s operations there, reporting within the
Food Safety segment.
On December 8, 2014, the Company acquired the food safety and
veterinary genomic assets of its Chinese distributor Beijing
Anapure BioScientific Co., Ltd. Consideration for the purchase was
$2,040,000 in cash. The final purchase price allocation included
inventory of $525,000, property and equipment of $64,000,
intangible assets of $422,000 (with an estimated life of 5-15
years) and the remainder to goodwill. These values are Level 3 fair
value measurements. This business has been integrated into the
Company’s subsidiary in China and reports within the Food
Safety segment.
On June 1, 2015, Neogen acquired the assets of Sterling Test House,
a commercial food testing laboratory based in
India. Consideration for the purchase was $1,118,000 in cash
and approximately $150,000 of a contingent consideration liability,
due in installments on the first two anniversary dates, based on an
excess sales formula. The preliminary purchase price allocation
included accounts receivable of $43,000, net inventory of $14,000,
property and equipment of $141,000 and the remainder to goodwill
and other intangible assets. These values are Level 3 fair value
measurements. This business continues to operate in its current
location and reports within the Animal Safety segment.
On August 26, 2015, the Company acquired all of the stock of Lab M
Holdings, a developer, manufacturer and supplier of microbiological
culture media and diagnostic systems located in the United Kingdom.
Consideration for the purchase was $12,436,000 in cash. The
preliminary purchase price allocation included cash of $285,000,
accounts receivable of $975,000, net inventory of $1,169,000,
property and equipment of $3,337,000, other current assets of
$596,000, current liabilities of $1,350,000, long-term deferred tax
liability of $784,000, intangible assets of $3,918,000 (with an
estimated life of 3-15 years) and the remainder to goodwill. These
values are Level 3 fair value measurements. This business will
continue to operate in its current location and reports within the
Food Safety segment.
On December 22, 2015, the Company acquired the rodenticide assets
of Virbac Corporation, the North American affiliate of the
France-based Virbac group, a global animal health company. The
acquired assets include a rodenticide active ingredient that
complements Neogen’s existing active ingredients, and more
than 40 regulatory approvals for a variety of formulations in the
United States, Canada and Mexico. The acquired assets also include
a large retail and OEM customer base. Consideration for the
purchase was $3,525,000 in cash and up to $300,000 of contingent
consideration. The preliminary purchase price allocation included
inventory of $317,000, property and equipment of $60,000,
intangible assets of $2,545,000 (with an estimated life of 5-15
years) and the remainder to goodwill (deductible for tax purposes).
These values are Level 3 fair value measurements. The products will
be manufactured at the Company’s current production facility
in Randolph, Wisconsin and will report through Animal Safety. |
