Note 3 - Acquisition and Investment

12 Months Ended

Jun. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

3. ACQUISITION AND INVESTMENT

On November 22, 2011, a wholly-owned subsidiary of the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Bytewise Development Corporation (“Bytewise”) pursuant to which a wholly-owned subsidiary of the Company purchased all of the assets of Bytewise for $15.4 million in cash plus the assumption of certain liabilities.  The asset purchase was financed through a term loan under the Company’s existing security agreement.  

Under the Purchase Agreement, the former owners of Bytewise are entitled to a 40% share of any profits from Bytewise’s operations over the first three years after the purchase date so long as they remain employed by the Company.  The Company has accrued for such profit sharing as an expense based on the results of operations since the date of acquisition.

Bytewise designs, develops and manufactures non-contact, industrial measurement systems and software that capture the external geometric profile of a product and analyze that data to meet measurement and/or quality control requirements.

The acquisition was accounted for under the acquisition method of accounting.  The total purchase price was allocated to the net tangible assets and identifiable intangible assets based on their estimated fair value as of November 22, 2011.  The allocation of the purchase price is based upon management’s valuation and was finalized in the fourth quarter of fiscal 2012.

The table below presents the allocation of the purchase price to the acquired net assets of Bytewise (in thousands):

Cash	$	298
Accounts receivable		1,897
Inventories		1,674
Other current assets		74
Intangibles		9,300
Goodwill		3,034
Other long-term assets		69
Accounts payable		(379	)
Accrued compensation costs		(270	)
Accrued expenses		(329	)
Cash paid to sellers	$	15,368

Acquisition costs were expensed as incurred and totaled approximately $0.1 million in fiscal year 2012, which are included in selling, general and administrative expenses.

The estimates for identifiable intangible assets acquired include approximately $4.95 million for customer relationships, $1.48 million for trademarks and trade names, $2.0 million for completed technology, $0.6 million for non-compete agreements and $0.26 million for order backlog.  Such intangible assets are being amortized on a straight-line basis over their respective useful lives. The weighted-average amortization period is 9.3 years.

The following table reflects the Bytewise acquisition as if the transaction had occurred as of the beginning of the Company’s fiscal year 2011.  The unaudited pro forma information does not necessarily reflect the actual results that would have occurred had the Company and Bytewise been combined during all of fiscal year 2012 (in thousands except per share amounts):

	Year Ended 6/30/2012
Unaudited consolidated pro forma net sales	$	264,036
Unaudited consolidated pro forma net earnings	$	951
Unaudited consolidated pro forma diluted earnings per share	$	0.14

In fiscal 2010, the Company entered into an agreement with a private software development company to invest $1.5 million over the subsequent twelve to eighteen months in exchange for a 36% equity interest therein.  The Company recorded other income of $0.3 million in fiscal 2014, $0.5 million in fiscal 2013 and other loss of $0.2 million in fiscal 2012 based on the earnings of this entity as allocated under the equity method of accounting. The net carrying value of the investment included in other long-term assets in the Consolidated Balance Sheet as of June 30, 2014 and June 30, 2013 is $1.9 million and $1.6 million, respectively.  In August 2011, the Company guaranteed a loan of $0.5 million, which remains outstanding, between the private software development company and a lender. The cost method is used by the Company to account for investments in companies that the Company does not control and for which it does not have the ability to exercise significant influence over operating and financial policies. These investments are recorded at cost.