INVESTMENTS IN UNCONSOLIDATED AFFILIATES

12 Months Ended

Mar. 31, 2017

INVESTMENTS IN UNCONSOLIDATED AFFILIATES [Abstract]

INVESTMENT IN UNCONSOLIDATED AFFILIATE

NOTE 7. INVESTMENTS IN UNCONSOLIDATED AFFILIATES

In February 2011, we purchased a 15% equity ownership interest in Scandinavian Micro Biodevices APS (“SMB”), a developer and manufacturer of point-of-care diagnostic products for veterinary use, for $2.8 million in cash. SMB, based in Farum, Denmark, has been the original equipment manufacturer of the Abaxis VetScan VSpro point-of-care specialty analyzer since 2008. We accounted for our investment in SMB using the equity method due to our significant influence over SMB’s operations.

In August 2016, we sold our 15% equity ownership interest in SMB in connection with Zoetis Inc.’s acquisition of SMB. The total purchase price for our equity method investment in SMB was approximately $9.7 million in cash, subject to a holdback for certain adjustments that may occur. The holdback payment is expected to be released 18 months following the closing date. In connection with the sale, we received a cash payment of $8.5 million and recorded a pre-tax gain of $6.1 million ($3.8 million after tax) on the sale of our equity method investment during fiscal 2017.

As of March 31, 2017 and 2016, the carrying value of our equity method investment in SMB was $0 and $2.7 million, respectively. Our allocated portions of SMB’s net income (loss) during fiscal 2017, 2016 and 2015, were $(34,000), $22,000 and $37,000, respectively. Our proportionate share of SMB’s net income or loss is recorded in “Interest and other income (expense), net” on the consolidated statements of income.

In June 2016, we invested a total of $3.0 million in a privately-held company. Our investment was initially recorded under the cost method as we did not exercise significant influence over the investee’s operating or financial activities. The carrying value of our cost method investment was reviewed quarterly for changes in circumstances or the occurrence of events that suggest our investment may not be recoverable. The fair value of cost method investments was not adjusted if there were no identified events or changes in circumstances that may have a material adverse effect on the fair value of the investment. In January 2017, we entered into a letter agreement with our investee. Under the terms of the letter agreement, the privately-held company will, pending negotiation and execution of a definitive agreement, commence chemistry development activities for us using its intellectual product and technology. As consideration for these development efforts, we will pay a total of up to $1.5 million to the investee, in the form of an upfront payment of $0.3 million in January 2017, and any remaining obligation to the investee is contingent upon the achievement of certain development milestones. As a result of our ability to exercise significant influence over operating and financial policies in our investment, which we do not control, we accounted for our investment using the equity method on a prospective basis beginning in January 2017 based on our early adoption of ASU 2016-07. In the fourth quarter of fiscal 2017, we recorded our allocated portion of net loss in an equity method investment in a privately-held company of $0.2 million during fiscal 2017. As of March 31, 2017 and 2016, the carrying value of our equity method investment in a privately-held company was $2.9 million and $0, respectively.