Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

Bio-Techne Corporation and Subsidiaries (in thousands, except per share data)

		Year Ended June 30,
		2017				2016				2015
Net sales		$	563,003			$	499,023			$	452,246
Cost of sales			188,462				162,364				144,969
Gross margin			374,541				336,659				307,277
Operating expenses:
Selling, general and administrative			200,443				140,879				119,401
Research and development			53,514				45,187				40,853
Total operating expenses			253,957				186,066				160,254
Operating income			120,584				150,593				147,023
Other income (expense):
Interest expense			(7,361	)			(1,748	)			(1,544	)
Interest income			304				249				634
Other non-operating income (expense), net			(1,566	)			(1,613	)			8,049
Total other income (expense)			(8,623	)			(3,112	)			7,139
Earnings before income taxes			111,961				147,481				154,162
Income taxes			35,875				43,005				46,427
Net earnings			76,086				104,476				107,735
Other comprehensive income (loss):
Foreign currency translation adjustments			(3,061	)			(19,888	)			(36,513	)
Unrealized gains (losses) on available-for-sale investments, net of tax of $(6,501), $3,794, and $(3,895), respectively			24,531				(19,924	)			11,308
Other comprehensive income (loss)			21,470				(39,812	)			(25,205	)
Comprehensive income		$	97,556			$	64,664			$	82,530
Earnings per share:
Basic		$	2.04			$	2.81			$	2.90
Diluted		$	2.03			$	2.80			$	2.89
Cash dividends per common share:		$	1.28			$	1.28			$	1.27
Weighted average common shares outstanding:
Basic			37,313				37,194				37,096
Diluted			37,500				37,326				37,231

See Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS

Bio-Techne Corporation and Subsidiaries (in thousands, except share and per share data)

		June 30,
		2017				2016
ASSETS
Current assets:
Cash and cash equivalents		$	91,612			$	64,237
Short-term available-for-sale investments			66,102				31,598
Accounts receivable, less allowance for doubtful accounts of $696 and $555, respectively			116,830				93,393
Inventories			60,151				57,102
Other current assets			13,330				7,561
Total current assets			348,025				253,891
Property and equipment, net			135,124				132,362
Goodwill			579,026				430,882
Intangible assets, net			452,042				310,524
Other assets			44,002				1,922
Total assets		$	1,558,219			$	1,129,581
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable		$	16,856			$	20,653
Salaries, wages and related accruals			26,602				14,868
Accrued expenses			18,518				8,371
Deferred revenue, current			5,968				4,717
Income taxes payable			2,478				1,779
Contingent consideration payable			65,100				-
Related party note payable, current			-				3,759
Total current liabilities			135,522				54,147
Deferred income taxes			120,596				62,837
Long-term debt obligations			343,771				91,500
Contingent consideration payable			3,300				38,500
Other long-term liabilities			5,403				3,317
Shareholders' equity:
Undesignated capital stock, no par; authorized 5,000,000 shares; none issued or outstanding			-				-
Common stock, par value $.01 a share; authorized 100,000,000 shares; issued and outstanding 37,356,041 and 37,253,771 shares, respectively			374				372
Additional paid-in capital			199,161				178,760
Retained earnings			799,027				770,553
Accumulated other comprehensive loss			(48,935	)			(70,405	)
Total shareholders' equity			949,627				879,280
Total liabilities and shareholders’ equity		$	1,558,219			$	1,129,581

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYBio-Techne Corporation and Subsidiaries (in thousands)

		Common Stock								Additional Paid-in				Retained				Accumulated Other Comprehensive
		Shares				Amount				Capital				Earnings				Income(Loss)				Total
Balances at June 30, 2014			37,002			$	370			$	147,004			$	653,279			$	(5,388	)		$	795,265
Net earnings															107,735								107,735
Other comprehensive loss																			(25,205	)			(25,205	)
Surrender and retirement of stock to exercise options			-				-				(31	)											(31	)
Common stock issued for exercise of options			141				1				9,761												9,762
Common stock issued for restricted stock awards			10				-				-				(57	)							(57	)
Cash dividends															(47,106	)							(47,106	)
Stock-based compensation expense											5,918												5,918
Tax benefit from exercise of stock options											615												615
Employee stock purchase plan expense											39												39
Balances at June 30, 2015			37,153			$	371			$	163,306			$	713,851			$	(30,593	)		$	846,935
Net earnings															104,476								104,476
Other comprehensive loss																			(39,812	)			(39,812	)
Surrender and retirement of stock to exercise options			-				-				(31	)											(31	)
Common stock issued for exercise of options			69				1				4,796												4,797
Common stock issued for restricted stock awards			23				-				-				(167	)							(167	)
Cash dividends															(47,607	)							(47,607	)
Stock-based compensation expense											9,287												9,287
Tax benefit from exercise of stock options											566												566
Common stock issued to employee stock purchase plan			9								692												692
Employee stock purchase plan expense											144												144
Balances at June 30, 2016			37,254			$	372			$	178,760			$	770,553			$	(70,405	)		$	879,280
Net earnings															76,086								76,086
Other comprehensive loss																			21,470				21,470
Surrender and retirement of stock to exercise options			(3	)			-				(275	)											(275	)
Common stock issued for exercise of options			63				2				4,509												4,511
Common stock issued for restricted stock awards			31				-				-				(287	)							-
Cash dividends															(47,325	)							(47,612	)
Stock-based compensation expense											14,418												14,418
Tax benefit from exercise of stock options											514												514
Common stock issued to employee stock purchase plan			11								1,022												1,022
Employee stock purchase plan expense											213												213
Balances at June 30, 2017			37,356			$	374			$	199,161			$	799,027			$	(48,935	)		$	949,627

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Bio-Techne Corporation and Subsidiaries (in thousands)

		Year Ended June 30,
		2017				2016				2015
Cash flows from operating activities:
Net earnings		$	76,086			$	104,476			$	107,735
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			60,036				42,764				37,226
Costs recognized on sale of acquired inventory			3,037				5,431				6,961
Deferred income taxes			(3,433	)			(2,624	)			1,304
Stock-based compensation expense			14,631				9,430				5,957
Gain on sale of CyVek			-				-				(8,300	)
Fair value adjustment to contingent consideration payable			18,400				-				-
Contingent consideration and ACD compensation, operating			(13,322	)
Other operating activity			1,942				(566	)			(157	)
Change in operating assets and liabilities, net of acquisitions:
Trade accounts and other receivables			(19,686	)			(22,981	)			(11,747	)
Inventories			(732	)			(6,626	)			(4,714	)
Prepaid expenses			(2,088	)			(381	)			(620	)
Trade accounts payable and accrued expenses			5,695				8,924				2,154
Salaries, wages and related accruals			2,183				5,725				1,679
Income taxes payable			699				298				1,881
Net cash provided by operating activities			143,448				143,870				139,359
Cash flows from investing activities:
Purchase of available-for-sale investments			(3,069	)			-				-
Proceeds from sale and maturities of available-for-sale investments			6,079				776				13,466
Additions to property and equipment			(15,179	)			(16,898	)			(19,905	)
Acquisitions, net of cash acquired			(253,785	)			(91,423	)			(420,102	)
Investment in unconsolidated entity			(40,000	)			-				-
Other investing activities			-				(25	)			49
Net cash used in investing activities			(305,954	)			(107,570	)			(426,492	)
Cash flows from financing activities:
Cash dividends			(47,325	)			(47,607	)			(47,107	)
Proceeds from stock option exercises			5,257				5,458				9,731
Excess tax benefit from stock option exercises			514				566				615
Borrowings under line-of-credit agreement			368,500				77,000				163,000
Payments on line-of-credit			(116,500	)			(58,500	)			(94,964	)
Contingent consideration and ACD compensation, financing			(21,060	)			-				-
Net cash provided by (used in) financing activities			189,386				(23,083	)			31,275
Effect of exchange rate changes on cash and cash equivalents			495				(3,512	)			(8,178	)
Net change in cash and cash equivalents			27,375				9,705				(264,036	)
Cash and cash equivalents at beginning of year			64,237				54,532				318,568
Cash and cash equivalents at end of year		$	91,612			$	64,237			$	54,532

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bio-Techne Corporation and Subsidiaries

Years ended June 30, 2017, 2016 and 2015

Note 1. Description of Business and Summary of Significant Accounting Policies:

Description of business: Bio-Techne Corporation and subsidiaries, collectively doing business as Bio-Techne (the Company), develop, manufacture and sell biotechnology and clinical diagnostic products worldwide. With its deep product portfolio and application expertise, Bio-Techne is a leader in providing specialized proteins, including cytokines and growth factors, and related immunoassays, small molecules and other reagents to the research and diagnostics markets.

Use of estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates include the valuation of accounts receivable, available-for-sale investments, inventory, intangible assets, contingent consideration, stock based compensation and income taxes. Actual results could differ from these estimates.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Translation of foreign financial statements: Assets and liabilities of the Company's foreign operations are translated at year-end rates of exchange and the resulting gains and losses arising from the translation of net assets located outside the U.S. are recorded as other comprehensive income (loss) on the consolidated statements of earnings and comprehensive income. The cumulative translation adjustment is a component of accumulated other comprehensive loss on the consolidated balance sheets. Foreign statements of earnings are translated at the average rate of exchange for the year. Foreign currency transaction gains and losses are included in other non-operating expense in the consolidated statements of earnings and comprehensive income.

Revenue recognition: The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Payment terms for shipments to end-users are generally net 30 days. Payment terms for distributor shipments may range from 30 to 90 days. Freight charges billed to end-users are included in net sales and freight costs are included in cost of sales. Freight charges on shipments to distributors are paid directly by the distributor. Any claims for credit or return of goods must be made within 10 days of receipt. Revenues are reduced to reflect estimated credits and returns. Sales, use, value-added and other excise taxes are not included in revenue.

Research and development: Research and development expenditures are expensed as incurred. Development activities generally relate to creating new products, improving or creating variations of existing products, or modifying existing products to meet new applications.

Advertising costs: Advertising expenses (including production and communication costs) were $4.5 million $5.2 million, and $4.1 million for fiscal 2017, 2016, and 2015 respectively. The Company expenses advertising expenses as incurred.

Income taxes: The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized to record the income tax effect of temporary differences between the tax basis and financial reporting basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Tax positions taken or expected to be taken in a tax return are recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.

See Note 10 for additional information regarding income taxes.

Comprehensive income: Comprehensive income includes charges and credits to shareholders' equity that are not the result of transactions with shareholders. Our total comprehensive income consists of net income, unrealized gains and losses on available-for-sale marketable securities, and foreign currency translation adjustments. The items of comprehensive income, with the exception of net income, are included in accumulated other comprehensive loss in the consolidated balance sheets and statements of shareholders' equity.

Cash and cash equivalents: Cash and cash equivalents include cash on hand and highly-liquid investments with original maturities of three months or less.

Available-for-sale investments: Available-for-sale investments consist of debt instruments with original maturities of generally three months to three years and equity securities. Available-for-sale investments are recorded based on trade-date. The Company considers all of its marketable securities available-for-sale and reports them at fair value. Unrealized gains and losses on available-for-sale securities are excluded from income, but are included, net of taxes, in other comprehensive income. If an "other-than-temporary" impairment is determined to exist, the difference between the value of the investment security recorded in the financial statements and the Company's current estimate of the fair value is recognized as a charge to earnings in the period in which the impairment is determined.

Trade accounts receivable: Trade accounts receivable are initially recorded at the invoiced amount upon the sale of goods or services to customers, and they do not bear interest. They are stated net of allowances for doubtful accounts, which represent estimated losses resulting from the inability of customers to make the required payments. When determining the allowances for doubtful accounts, we take several factors into consideration, including the overall composition of accounts receivable aging, our prior history of accounts receivable write-offs, the type of customer and our day-to-day knowledge of specific customers. Changes in the allowances for doubtful accounts are included in selling, general and administrative (SG&A) expense in our consolidated statements of earnings and comprehensive income. The point at which uncollected accounts are written off varies by type of customer.

Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market. The Company regularly reviews inventory on hand for slow-moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration. To meet strict customer quality standards, the Company has established a highly controlled manufacturing process for proteins, antibodies and its chemically-based products. These products require the initial manufacture of multiple batches to determine if quality standards can be consistently met. In addition, the Company will produce larger batches of established products than current sales requirements due to economies of scale. The manufacturing process for these products, therefore, has and will continue to produce quantities in excess of forecasted usage. The Company values its manufactured protein and antibody inventory based on a two-year forecast and its chemically-based products on a five-year forecast. Inventory quantities in excess of the forecast are not valued due to uncertainty over salability.

The company records a lower of cost or market adjustment to cost of sales for those quantities that are in excess of the manufactured protein and antibody two-year forecast and the chemically-based products five year forecast. For the years ended June 30, 2017, 2016, and 2015 the amount recognized in net sales of inventory sold that was not valued is not material.

Property and equipment: Property and equipment are recorded at cost. Equipment is depreciated using the straight-line method over an estimated useful life of five years. Buildings, building improvements and leasehold improvements are amortized over estimated useful lives of 5 to 40 years. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In the current year, the Company has identified no such events.

Intangibles assets: Intangible assets are stated at historical cost less accumulated amortization. Amortization expense is generally determined on the straight-line basis over periods ranging from 1 year to 20 years. Each reporting period, we evaluate the remaining useful lives of our amortizable intangibles to determine whether events or circumstances warrant a revision to the remaining period of amortization. If our estimate of an asset's remaining useful life is revised, the remaining carrying amount of the asset is amortized prospectively over the revised remaining useful life. In the current year, the Company has identified no such events.

Impairment of long-lived assets and amortizable intangibles: We evaluate the recoverability of property, plant, equipment and amortizable intangibles whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable. Such circumstances could include, but are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used or in its physical condition, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset. We compare the carrying amount of the asset to the estimated undiscounted future cash flows associated with it. If the sum of the expected future net cash flows is less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds the fair value of the asset. As quoted market prices are not available for the majority of our assets, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows.

The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. No triggering events were identified and no impairments were recorded for property, plant, and equipment or amortizable intangibles were recorded during fiscal year 2017.

Impairment of goodwill: We evaluate the carrying value goodwill during the fourth quarter each year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. Such circumstances could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, (3) an adverse action or assessment by a regulator, or (4) an adverse change in market conditions that are indicative of a decline in the fair value of the assets.

To analyze goodwill for impairment, we must assign our goodwill to individual reporting units. Identification of reporting units includes an analysis of the components that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and the availability of discrete financial information. Components of an operating segment are aggregated to form one reporting unit if the components have similar economic characteristics. We periodically review our reporting units to ensure that they continue to reflect the manner in which we operate our business.

2017 Goodwill Impairment Analysis

In completing our 2017 annual goodwill impairment analysis, we elected to perform a quantitative assessment for all of our reporting units. A quantitative assessment involves comparing the carrying value of the reporting unit, including goodwill, to its estimated fair value. Carrying value is based on the assets and liabilities associated with the operations of the reporting unit, which often requires the allocation of shared or corporate items among reporting units. In accordance with ASU 2017-04, a goodwill impairment charge is recorded for the amount by which the carrying value of a reporting unit exceeds the fair value of the reporting unit. In determining the fair values of our reporting units, we utilized the income approach. The income approach is a valuation technique under which we estimated future cash flows using the reporting unit's financial forecast from the perspective of an unrelated market participant. Using historical trending and internal forecasting techniques, we projected revenue and applied our fixed and variable cost experience rates to the projected revenue to arrive at the future cash flows. A terminal value was then applied to the projected cash flow stream. Future estimated cash flows were discounted to their present value to calculate the estimated fair value. The discount rate used was the value-weighted average of our estimated cost of capital derived using both known and estimated customary market metrics. In determining the estimated fair value of a reporting unit, we were required to estimate a number of factors, including projected operating results, terminal growth rates, economic conditions, anticipated future cash flows, the discount rate and the allocation of shared or corporate items.

Because our 2017 quantitative analysis included all of our reporting units, the summation of our reporting units' fair values was compared to our consolidated fair value, as indicated by our market capitalization, to evaluate the reasonableness of our calculations.

The quantitative assessment completed as of June 30, 2017 indicated that all of the reporting units had a substantial amount of headroom. This impairment assessment is sensitive to changes in forecasted cash flows, as well as our selected discount rate. Changes in the reporting unit's results, forecast assumptions and estimates could materially affect the estimation of the fair value of the reporting units.

2016 and 2015 Goodwill Impairment Analysis

The Company used a qualitative test for all reporting units during the fourth quarter for fiscal year 2016 and fiscal year 2015 with one exception. The company elected to utilize a quantitative test for the Protein Platforms reporting unit for fiscal year 2016 using the previously described income approach given that this is a newer reporting unit created primarily through acquisitions. The qualitative analyses for our other reporting units completed during 2016 and 2015 evaluated factors including, but not limited to, economic, market and industry conditions, cost factors and the overall financial performance of the reporting units. In completing these assessments, we noted no changes in events or circumstances which indicated that it was more likely than not that the fair value of any reporting unit was less than its carrying amount. Based on the testing performed for the Protein Platforms reporting unit, fair value exceeded carrying value by a substantial amount and no adjustment to the carrying value of goodwill was necessary.

There has been no impairment of goodwill since the adoption of Financial Accounting Standards Board (“FASB”) ASC 350 guidance for goodwill and other intangibles on July 1, 2002.

Investments in unconsolidated entities: The Company periodically invests in the equity of start-up and early development stage companies. The accounting treatment of each investment (cost method or equity method) is dependent upon a number of factors, including, but not limited to, the Company's share in the equity of the investee and the Company's ability to exercise significant influence over the operating and financial policies of the investee.

Other Significant Accounting Policies

The following table includes a reference to additional significant accounting policies that are described in other notes to the financial statements, including the note number:

Policy		Note
Fair value measurements			4
Earnings per share			8
Share-based compensation			9
Reportable segments			11

Recently Adopted Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If the arrangement does include a software license, the software license element of the arrangement should be accounted for in the same manner as the acquisition of other software licenses. We adopted this standard on July 1, 2016, applying it prospectively to all arrangements entered into or materially modified on or after July 1, 2016. Adoption of this standard did not have a significant impact on our results of operations or financial position.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. When recording the purchase price allocation for a business combination in the financial statements, an acquirer may record preliminary amounts when measurements are incomplete as of the end of a reporting period. When the required information is received to finalize the purchase price allocation, the preliminary amounts are adjusted. These adjustments are referred to as measurement-period adjustments. This standard eliminates the requirement to restate prior period financial statements for measurement-period adjustments. Instead, it requires that the cumulative impact of a measurement-period adjustment be recognized in the reporting period in which the adjustment is identified. We adopted this standard on July 1, 2016, applying it prospectively. Application of this standard did not have a significant impact on our results of operations or financial position.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The standard is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. We elected to early adopt this standard as of July 1, 2016. As our consolidated statement of cash flows presentation was in compliance with the new guidance, adoption of this standard had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The standard removes Step 2 of the goodwill impairment test, which requires a company to perform procedures to determine the fair value of a reporting unit's assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, a goodwill impairment charge will now be measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We elected to early adopt this standard on January 1, 2017. As we have not been required to complete Step 2 of the goodwill impairment test, this standard did not have an impact on our consolidated financial statements.

Pronouncements Issued but Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard provides revenue recognition guidance for any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets, unless those contracts are within the scope of other accounting standards. The standard also expands the required financial statement disclosures regarding revenue recognition. The new guidance is effective for us on July 1, 2018. In addition, in March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), in April 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing, and in May 2016, the FASB issued ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients. These standards are intended to clarify aspects of ASU No. 2014-09 and are effective for us upon adoption of ASU No. 2014-09. The Company’s approach to implementing the new standard includes performing a detailed review of key contracts representative of its different businesses, and comparing historical accounting policies and practices to the new standard. In addition to expanded disclosures associated with the new standard, the Company is continuing to assess the impact on the Company’s consolidated financial statements. The guidance permits two methods of adoption, retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate that we will adopt the standards using cumulative catch-up transition method.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. This provision would require inventory that was previously recorded using first-in, first-out (“FIFO”) to be recorded at lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years, which for us will be July 1, 2017. The amendments in this guidance should be applied prospectively with earlier application permitted as of the beginning of an interim or annual period. The Company does not expect the updated guidance to have a significant impact on future financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The standard is intended to improve the recognition, measurement, presentation and disclosure of financial instruments. This ASU is effective using the modified retrospective approach for annual periods and interim periods within those annual periods beginning after December 15, 2017, which for us is July 1, 2018. Early adoption is permitted. We do not expect the application of this standard to have a significant impact on our result of operations or financial position.

In February, 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the existing guidance to require lessees to recognize lease assets and lease liabilities from operating leases on the balance sheet. This ASU is effective using the modified retrospective approach for annual periods and interim periods within those annual periods beginning after December 15, 2018, which for us is July 1, 2019. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This update includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016, which for us is July 1, 2017. Early adoption is permitted. Upon adoption, among other impacts, the Company expects its reported provision for income taxes to become more volatile, dependent upon market prices and volume of share-based compensation exercises and vesting of options.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, which for us is July 1, 2020. Entities may early adopt beginning after December 15, 2018. We are currently evaluating the impact of the adoption of ASU 2016-13 on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business. The standard revises the definition of a business, which affects many areas of accounting such as business combinations and disposals and goodwill impairment. The revised definition of a business will likely result in more acquisitions being accounted for as asset acquisitions, as opposed to business combinations. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, which for us is July 1, 2019 required to be applied prospectively to transactions occurring on or after the effective date.

Note 2. Acquisitions:

2017 Acquisitions

Advanced Cell Diagnostics (ACD)

On August 1, 2016, the Company acquired ACD for approximately $258 million, net of cash acquired, plus contingent consideration of up to $75.0 million as follows:

●	$25.0 million if calendar year 2016 revenues equal or exceed $30.0 million.

●	an additional $50.0 million if calendar year 2017 revenues equal or exceed $45.0 million.

The Company paid approximately $247.0 million, net of cash acquired and the working capital adjustments, as of the acquisition date. The remaining $11.0 million will be paid to current employees who held ACD unvested stock as of the acquisition date. In order to receive payment for unvested shares, the individuals must remain employees of ACD over the 18-month vesting period which extends from the acquisition date through March 31, 2018. Any amounts that would have been owed to individuals who leave the company during the vesting period, will be pooled together and distributed amongst the other former ACD shareholders at the end of the vesting period. Management determined that $3.6 million of the $11.0 million represents purchase price consideration paid for pre-acquisition services. However, the remaining $7.4 million represents compensation expense as the amount the individual employees receives is tied to future service. This current value of this liability recorded on the Consolidated Balance Sheets under the caption “Salaries, wages and related accruals”.

During the third quarter of fiscal 2017, management determined that the calendar year 2016 revenue milestone was met. Refer to Note 4 for discussion of this item as well as discussion of the changes to the fair value estimate for the calendar year 2017 revenue milestone as of June 30, 2017.

The goodwill recorded as a result of the ACD acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes. The business became part of the Company’s Biotechnology reportable segment in the first quarter of 2017.

Purchase accounting was finalized during the fourth quarter of 2017. The following table (in thousands) summarizes the value of ACD assets acquired and liabilities assumed as of the acquisition date.

		Preliminary Allocation at Acquisition Date				Adjustments to F__air Value				Updated Opening Balance Sheet Allocation at June 30, 2017
Current assets, net of cash		$	25,196			$	(9,372	)		$	15,824
Equipment			2,757								2,757
Other long-term assets			3,812								3,812
Intangible assets:
Developed technology			107,000				43,000				150,000
Trade name			17,000				4,900				21,900
Customer relationships			77,000				(70,700	)			6,300
Non-compete agreement			200				(200	)			-
Goodwill			133,780				10,187				143,967
Total assets acquired			366,745				(22,185	)			344,560
Liabilities			3,591				588				4,179
Deferred income taxes, net			78,761				(26,018	)			52,743
Net assets acquired		$	284,393				3,245			$	287,638
Cash paid, net of cash acquired		$	246,193				845			$	247,038
Consideration payable			-				3,600				3,600
Fair value contingent consideration			38,200				(1,200	)			37,000
Net purchase price		$	284,393				3,245			$	287,638

As summarized in the table, there have been adjustments totaling $10.2 million to goodwill during the measurement period. These adjustments primarily relate to the finalization of acquired intangible asset cash flow models, and finalization of opening balance sheet deferred tax assets and liabilities. However, the adjustments also include a $9.4 million decrease in the fair value of the inventory required related to an error in the preliminary valuation identified by management during the fourth quarter. See Note 12 for additional information regarding the impact of this error to the first, second, and third quarter fiscal year 2017 financial statements.

Tangible assets acquired, net of liabilities assumed, were stated at fair value at the date of acquisitions 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 Statements 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 Statements of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2017 are estimated to be 12 years for developed technology, 15 years for trade names, 10 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.

As previously disclosed, ACD was acquired on August 1, 2016. The unaudited pro forma financial information below summarizes the combined results of operations for Bio-Techne and ACD as though the companies were combined as of the beginning fiscal 2016. The pro forma financial information for all periods presented includes the purchase accounting effects resulting from these acquisitions except for the increase in inventory to fair value and the fair value adjustments to contingent consideration as these are not expected to have a continuing impact on cost of goods sold or selling, general and administrative expense, respectively. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2016.

		Year Ended
		June 30,
		2017				2016
Net sales		$	564,220			$	523,840
Net income			99,380				110,536

Space Import-Export, Srl

On July 1, 2016, the Company acquired Space Import-Export, Srl (Space) of Milan, Italy for approximately $9.0 million. $6.7 million was paid on the acquisition date and the remaining $2.3 million will be paid during the first quarter of fiscal year 2018. Space was a long-time distribution partner of the Company in the Italian market. The acquisition resulted in goodwill as we expect strategic benefits of revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Company’s Biotechnology reportable segment in the first quarter of 2017. Purchase accounting was finalized during the fourth quarter. There were no material changes from the preliminary opening balance sheet. The final fair values of the assets acquired and liabilities assumed in each acquisition, are as follows (in thousands):

		Final Opening Balance Sheet Allocation
Current assets, net of cash		$	2,128
Equipment			159
Intangible assets:
Customer relationships			6,769
Goodwill			3,517
Total assets acquired			12,573
Liabilities			1,444
Deferred income taxes, net			2,125
Net assets acquired		$	9,003
Cash paid, net of cash acquired		$	6,747
Consideration payable			2,256
Net purchase price		$	9,003

2016 Acquisitions

Zephyrus Biosciences, Inc.

On March 14, 2016, the Company acquired Zephyrus Biosciences, Inc. (Zephyrus) for $8.0 million in cash and up to $7.0 million in contingent consideration. Zephyrus provides research tools to enable protein analysis at the single cell level. Addressing the burgeoning single cell analysis market, Zephyrus's first product, Milo™, enables western blotting on individual cells for the first time. The acquisition was funded with cash on hand. The purchase price of Zephyrus exceeded the preliminary estimated fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill, substantially all of which is not tax deductible. Zephryus is included in the Company's Protein Platforms segment.

In connection with the Zephyrus acquisition, the Company recorded $7.4 million of in process research and development which is not amortized until it is converted to developed technology which occurs once a sale of its product is completed. In the first quarter of fiscal 2017, the Company transferred the balance of in process research and development to developed technology and began amortizing the intangible asset after Zephyrus made its first sale. The intangible asset amortization for the developed technology is not deductible for income tax purposes.

The Company will pay Zephyrus former shareholders an additional $3.5 million if and when 10 instruments are sold prior to the 3-year anniversary of the closing date (March 14, 2019). In addition, the Company will pay Zephyrus former shareholders an additional $3.5 million if and when $3.0 million in cumulative sales are generated within 4.5 years of the closing date (September 14, 2020). The Company made a $3.5 million payment in the third quarter of fiscal 2017 after Zephyrus sold its tenth instrument. We estimate the remaining fair value of these contingent consideration payments to be $3.3 million. Refer to Note 4 for further discussion of this item.

The goodwill recorded as a result of the Zephyrus acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes.

We made certain purchase accounting adjustments for the acquisition of Zephyrus, which was acquired in March 2016 prior to the finalization of purchase accounting during the third quarter of fiscal year 2017. The adjustments recorded during nine months ended March 31, 2017 included a $3.0 million increase to the contingent consideration liability resulting from the finalization of the valuation model, a $0.9 million increase to intangible assets resulting from valuation model adjustments, and a $0.3 million increase to net deferred tax assets. A corresponding $1.8 million increase was recorded to goodwill from the preliminary amount recorded as of June 30, 2016.

Cliniqa Corporation

On July 8, 2015, the Company acquired Cliniqa Corporation (Cliniqa) for approximately $82.9 million. Cliniqa specializes in the manufacturing and commercialization of blood chemistry quality controls and calibrators as well as bulk reagents used for the clinical diagnostic market to further expand and complement our Diagnostics solutions. The acquisition was funded with cash on hand and funds obtained from our revolving credit facility. The purchase price of Cliniqa exceeded the fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill. Cliniqa is included in the Company's Diagnostics segment.

In connection with the Cliniqa acquisition, the Company recorded $18.0 million of developed technology intangible assets that have an estimated useful life of 14 years, $27.0 million of customer relationship intangible assets that have an estimated useful life of 13 years, and $1.1 million related to trade mark and trade names with a useful life of 4 years. The intangible asset amortization is not deductible for income tax purposes.

The goodwill recorded as a result of the Cliniqa acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes.

2015 Acquisitions

CyVek Inc

On November 3, 2014, the Company acquired CyVek, Inc. (CyVek) through a merger. CyVek has developed a transformative immunoassay technology which integrates an innovatively designed microfluidic cartridge with a state-of-the-art analyzer to deliver the most advanced and efficient bench top immunoassay system. In fiscal 2014, the Company entered into an Agreement of Investment and Merger (the Agreement) with CyVek. Pursuant to the terms of the Agreement, the Company invested $10.0 million in CyVek and received shares of Common Stock representing approximately 19.9% of the outstanding voting stock of CyVek. Between the time of the Company's initial investment and November 3, 2014, CyVek met certain commercial milestones related to the sale of its products, which obligated the Company to acquire CyVek through a merger, with CyVek surviving as a wholly-owned subsidiary of the Company.

The Company made an initial payment of approximately $62.0 million to the other stockholders of CyVek on November 3, 2014. Such purchase price was adjusted after closing based on the final levels of cash, indebtedness and transaction expenses of CyVek as of the closing. The Company will also pay CyVek's previous stockholders up to $35.0 million based on the revenue generated by CyVek's products before December 31, 2017. The Company will also pay CyVek's previous stockholders 50% of the amount, if any, by which the revenue from CyVek's products and related products exceeds $100 million in calendar year 2020. The Company has recorded the present value of these contingent payments as liabilities of $35.0 million at June 30, 2017 and 2016, respectively. In addition, at November 3, 2014, the Company re-measured its previous investment in CyVek to acquisition-date fair value, resulting in a gain on the investment of $8.3 million which is included in other income on the Condensed Consolidated Statements of Earnings and Comprehensive Income. The purchase price of CyVek 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. CyVek is included in the Company's Protein Platforms segment.

In connection with the CyVek acquisition, the Company recorded $20.2 million of developed technology intangible assets that have an estimated useful life of 15 years, $0.1 million of trade name intangible assets that have an estimated useful life of 1.5 years, and $0.6 million related to customer relationships that have an estimated useful life of 10 years. The intangible asset amortization is not deductible for income tax purposes.

The goodwill recorded as a result of the CyVek acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes.

ProteinSimple

On July 31, 2014, the Company acquired ProteinSimple. ProteinSimple expanded the Company's solutions that it can offer its customers by developing and commercializing proprietary systems and consumables for protein analysis. The Company opened a line-of-credit to partially fund the acquisition. The purchase price of ProteinSimple exceeded the fair value of the identifiable net assets and, accordingly, the difference was allocated to goodwill. ProteinSimple is included in the Company's Protein Platform segment.

In connection with the ProteinSimple acquisition, the Company recorded $39.2 million of developed technology intangible assets that have an estimated useful lives of 9-10 years, $36.1 million of trade name intangible assets that have an estimated useful lives of 18-20 years, $101.6 million related to customer relationships that have estimated useful lives of 14-16 years, and $0.2 million related to non-compete agreements that have an estimated useful life of 3 years. The intangible asset amortization is not deductible for income tax purposes.

The goodwill recorded as a result of the ProteinSimple acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The goodwill is not deductible for income tax purposes.

Novus Holdings LLC

On July 2, 2014, the Company acquired all of the issued and outstanding equity interests of Novus Holdings LLC (Novus). Novus broadened the Company's antibody offerings by being a supplier of a large portfolio of both outsourced and in-house developed antibodies and other reagents for life science research. Novus is included in the Company's Biotechnology segment.

In connection with the Novus acquisition, the Company recorded $5.0 million of developed technology intangible assets that have estimated useful lives of 4-12 years, $5.3 million of trade name intangible assets that have an estimated useful life of 20 years, and $14.4 million related to customer relationships that have an estimated useful life of 15 years. The majority of the intangible asset amortization is not deductible for income tax purposes.

The goodwill recorded as a result of the Novus acquisition represents the strategic benefits of growing the Company's product portfolio and the expected revenue growth from increased market penetration from future products and customers. The majority of the goodwill is not deductible for income tax purposes.

The aggregate purchase price of the acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as a result of the fiscal year 2016 and 2015 acquisitions (in thousands):

		Zephyrus				Cliniqa				CyVek				Protein Simple				Novus
Current assets		$	56			$	11,926			$	1,206			$	19,660			$	10,739
Equipment			32				1,436				971				1,983				1,266
Other long-term assets			-				58				19				554				40
Intangible Assets:
Developed technology			8,300				18,000				20,200				39,200				5,010
Trade name			-				1,100				100				36,100				5,300
Customer relationships			-				27,000				600				101,600				14,400
Non-compete agreements			-				-				-				200				-
Goodwill			8,686				42,669				91,658				134,074				28,408
Total assets acquired			17,074				102,189				114,754				333,371				65,163
Liabilities			54				1,508				1,965				11,644				2,166
Deferred income taxes, net			2,521				17,793				(438	)			21,674				2,875
Net assets			14,500				82,888				113,227				300,053				60,122
Less fair-value of previous investment			-				-				18,300				-				-
Net assets acquired		$	14,500			$	82,888			$	94,927			$	300,053			$	60,122
Cash paid, net of cash acquired		$	8,000			$	82,888			$	59,927			$	300,053			$	60,122
Note Payable			-				-				-				-				-
Contingent consideration payable			6,500				-				35,000				-				-
Net purchase price		$	14,500			$	82,888			$	94,927			$	300,053			$	60,122

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, non-compete agreements 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 Consolidated Statements of Earnings and Comprehensive Income. Amortization expense related to trade names, the non-compete agreement and customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statements of Earnings and Comprehensive Income. The deferred income tax liability represents the estimated future impact of adjustments for the cost 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, and the future tax benefit of net operating loss and tax credit carryforwards which will be deductible by the Company in future periods.

Note 3. Supplemental Balance Sheet and Cash Flow Information:

Available-For-Sale Investments:

The fair value of the Company's available-for-sale investments as of June 30, 2017 and June 30, 2016 were $66.1 million and $31.6 million, respectively. The increase was caused by the addition of $2.1 million in corporate bond securities held by Advanced Cell Diagnostics (ACD), and the investment of $1.4 million of available cash in China into certificates of deposit. The remaining increase is due to a $31.0 million change in the fair value of the Company's investment in ChemoCentryx, Inc. (CCXI). The amortized cost basis of the Company's investment in CCXI as of June 30, 2017 and June 30, 2016 was $29.5 million.

The unrealized gain (loss) on available-for-sale investments for fiscal 2017 includes a $30.1 million unrealized gain related to our investment in CCXI. As of June 30, 2017, the stock price of CCXI was $9.36 per share compared to our cost basis of $4.73 per share.

Inventories:

Inventories consist of (in thousands):

		June 30,
		2017				2016
Raw materials		$	22,074			$	18,685
Finished goods			38,077				38,417
Inventories, net		$	60,151			$	57,102

Property and Equipment:

Property and equipment consist of (in thousands):

		June 30,
		2017				2016
Cost:
Land		$	6,270			$	6,270
Buildings and improvements			158,495				157,963
Machinery, equipment and other			98,596				82,018
Property and equipment			263,361				246,251
Accumulated depreciation and amortization			(128,237	)			(113,889	)
Property and equipment, net		$	135,124			$	132,362

Intangibles assets were comprised of the following (in thousands):

								June 30,
		Useful Life (years)						2017				2016
Developed technology			9	-	15			$	276,959			$	120,611
Trade names			5	-	20				87,092				63,706
Customer relationships			9	-	16				204,243				191,118
Non-compete agreement			3	-	5				3,264				3,284
Patents				10					633				-
Intangible assets									572,191				378,719
Accumulated amortization									(120,149	)			(75,595	)
Amortizable intangible assets, net								$	452,042			$	303,124
In process research and development									-				7,400
Intangible assets, net								$	452,042			$	310,524

Changes to the carrying amount of net intangible assets consist of (in thousands):

		June 30,
		2017				2016
Beginning balance		$	310,524			$	292,839
Acquisitions			185,869				53,500
Other additions			976				-
Amortization expense			(44,393	)			(29,395	)
Currency translation			(934	)			(6,420	)
Ending balance		$	452,042			$	310,524

Amortization expense related to technologies included in cost of sales was $23.1 million $11.1 million, and $9.5 million in fiscal 2017, 2016, and 2015, respectively. Amortization expense related to trade names, customer relationships, non-compete agreements, and patents included in selling, general and administrative expense was $21.3 million, $18.3 million, and $16.7 million, in fiscal 2017, 2016, and 2015 respectively.

The estimated future amortization expense for intangible assets as of June 30, 2017 is as follows (in thousands):

2018		$	44,825
2019			44,171
2020			43,538
2021			43,180
2022			41,491
Thereafter			234,837
Total		$	452,042

Changes in goodwill by reportable segment and in total consist of (in thousands):

		Biotechnology				Diagnostics				Protein Platforms				Total
June 30, 2015		$	115,198			$	60,601			$	214,839			$	390,638
Acquisitions (Note 2)			-				42,669				6,878				49,547
Prior year acquisitions (Note 2)			-				-				-				-
Currency translation			(6,475	)			-				(2,828	)			(9,303	)
June 30, 2016		$	108,723			$	103,270			$	218,889			$	430,882
Acquisitions (Note 2)			147,484												147,484
Prior year acquisitions (Note 2)			-				-				1,809				1,809
Currency translation			(1,277	)			-				128				(1,149	)
June 30, 2017		$	254,930			$	103,270			$	220,826			$	579,026

Other Assets:

Other assets consist of (in thousands):

		June 30,
		2017				2016
Investments		$	40,385			$	385
Other			3,617				1,537
		$	44,002			$	1,922

As of June 30, 2017, the Company had $44.0 million of other assets compared to $1.9 million as of June 30, 2016. The increase from June 30 is due to a $40.0 million investment in Astute Medical, Inc. during the second quarter of fiscal 2017. This investment is accounted for under the cost-method as we own less than 20% of the outstanding stock and we concluded that we do not have significant influence. Under the cost-method, the fair value is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. No such events or changes in circumstances were identified during fiscal 2017.

Supplemental C__ash F__low I__nformation_:_

Supplemental cash flow information was as follows (in thousands):

		Year Ended June 30,
		2017				2016				2015
Income taxes paid		$	42,900			$	44,900			$	42,600
Interest paid			7,452				1,661				1,544
Non-cash activities:
Acquisition-related liabilities (1)			32,856				42,259				43,048

(1) Consists of holdback payments due at future dates and liabilities for contingent consideration. Further information regarding liabilities for contingent consideration can be found in Note 4.

Note 4. Fair Value Measurements:

The Company’s financial instruments include cash and cash equivalents, available-for-sale investments, accounts receivable, accounts payable, contingent consideration obligations, and long-term debt.

Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. This standard also establishes a hierarchy for inputs used in measuring fair value. This standard maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available in the circumstances.

The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable for the asset or liability and their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 may also include certain investment securities for which there is limited market activity or a decrease in the observability of market pricing for the investments, such that the determination of fair value requires significant judgment or estimation.

The following tables provide information by level for financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

		Total carrying value a__s of				Fair Value Measurements Using Inputs Considered as
		June 30, 2017				Level 1				Level 2				Level 3
Assets
Equity securities (1)		$	59,616			$	59,616			$	-			$	-
Corporate bond securities (1)			2,057				-				2,057				-
Total Assets		$	61,673			$	59,616			$	2,057			$	-
Liabilities
Contingent Consideration		$	68,400			$	-			$	-			$	68,400

		Total carrying value a__s of				Fair Value Measurements Using Inputs Considered as
		June 30, 2016				Level 1				Level 2				Level 3
Assets
Equity securities (1)		$	28,582			$	28,582			$	-			$	-
Corporate bond securities (1)			-				-				-				-
Total Assets		$	28,582			$	28,582			$	-			$	-
Liabilities
Contingent Consideration		$	38,500			$	-			$	-			$	38,500

	(1)	Included in available for sale securities on the balance sheet

Our available for sale securities are measured at fair value using quoted market prices in active markets for identical assets and are therefore classified as Level 1 assets. We value our Level 2 assets using inputs that are based on market indices of similar assets within an active market. All of our Level 2 assets have maturity dates of less than one year. There were no transfers into or out of our Level 2 financial assets during fiscal 2017.

The use of different assumptions, applying different judgment to matters that inherently are subjective and changes in future market conditions could result in different estimates of fair value of our securities or contingent consideration, currently and in the future. If market conditions deteriorate, we may incur impairment charges for securities in our investment portfolio. We may also incur changes to our contingent consideration liability as discussed below.

In connection with the Advanced Cell Diagnostics (ACD) acquisition discussed in Note 2, as well as with the Zephyrus and CyVek acquisitions which occurred in prior years, we are required to make contingent payments, subject to the entities achieving certain sales and revenue thresholds. The contingent consideration payments are up to $35.0 million, $7.0 million and $75.0 million related to the CyVek, Zephyrus, and ACD acquisitions, respectively. The fair value of the liabilities for the contingent payments recognized upon each acquisition as part of the purchase accounting opening balance sheet totaled $78.5 million ($35.0 million for CyVek, $6.5 million for Zephyrus, and $37.0 million for ACD) and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in these calculation units sold, expected revenue, discount rate and various probability factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for these acquisitions is included in general and administrative expense.

In fiscal 2017, the Company determined that certain sales and revenue thresholds were met for CyVek, Zephyrus and ACD. Cash payments totaling $28.5 million ($3.5 million for Zephyrus and $25.0 million for ACD) were made during the third and fourth quarters of fiscal 2017. Of the $28.5 million in total payments, $16.7 million is classified as financing on the statement of cash flows. The financing component represents the portion of the total liability that was recognized at the acquisition date. The remaining $11.8 million is recorded within operating cash flows as it represents the consideration liability that exceed the amount of the contingent consideration liability recognized at the acquisition date.

The following table presents a reconciliation of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

		June 30,
		2017
Fair value at the beginning of period			38,500
Purchase price contingent consideration (Note 2)			40,000
Payments			(28,500	)
Change in fair value of contingent consideration			18,400
Contingent consideration payable		$	68,400

Fair value measurements of other financial instruments – The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate fair value.

Cash and cash equivalents, certificates of deposit, accounts receivable, and accounts payable – The carrying amounts reported in the consolidated balance sheets approximate fair value because of the short-term nature of these items.

Long-term debt – The carrying amounts reported in the consolidated balance sheets for the amount drawn on our line-of-credit facility approximates fair value because our interest rate is variable and reflects current market rates.

Note 5. Debt and Other Financing Arrangements:

The Company entered modified our revolving line-of-credit facility governed by a Credit Agreement (the Credit Agreement) on July 28, 2016. The Credit Agreement provides for a revolving credit facility of $400 million, which can be increased by an additional $200 million subject to certain conditions. Borrowings under the Credit Agreement may be used for working capital and expenditures of the Company and its subsidiaries, including financing permitted acquisitions. Borrowings under the Credit Agreement for base rate loans bear interest at a variable rate equal to the greater of (i) the prime commercial rate, (ii) the per annum federal funds rate plus 0.5%, or (iii) LIBOR + 1.00% - 1.75% depending on the existing total leverage ratio of Debt to Earnings Before Interest, Taxes, Depreciation and Amortization (as defined in the Credit Agreement). The annualized fee for any unused portion of the credit facility is currently 25 basis points.

The Credit Agreement matures on July 28, 2021 and contains customary restrictive and financial covenants and customary events of default. As of June 30, 2017, the outstanding balance under the Credit Agreement was $343.5 million.

Note 6. Commitments and Contingencies:

The Company leases office and warehouse space, vehicles and various office equipment under operating leases. At June 30, 2017, aggregate net minimum rental commitments under non-cancelable leases having an initial or remaining term of more than one year are payable as follows (in thousands):

2018		$	9,123
2019			8,431
2020			8,377
2021			8,371
2022			7,625
Thereafter			26,729
Total		$	68,656

Total rent expense was approximately $9.8 million, $8.1 million, and $4.9 million for the years ended June 30, 2017, 2016, and 2015, respectively.

The Company is routinely subject to claims and involved in legal actions which are incidental to the business of the Company. Although it is difficult to predict the ultimate outcome of these matters, management believes that any ultimate liability will not materially affect the consolidated financial position or results of operations of the Company.

Note 7. Accumulated Other Comprehensive Income:

Changes in accumulated other comprehensive income (loss), net of tax, for the year ended June 30, 2017 consists of (in thousands):

		Unrealized Gains (Losses) on Available- for-Sale Investments				Foreign Currency Translation Adjustments				Total
Beginning balance		$	(5,542	)			(64,863	)		$	(70,405	)
Other comprehensive income (loss)			24,531				(3,061	)			21,470
Ending balance		$	18,989				(67,924	)		$	(48,935	)

Note 8. Earnings Per Share:

Basic net income per common share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares of our stock result from dilutive common stock options and restricted stock units. We use the treasury stock method to calculate the weighted-average shares used in the diluted earnings per share computation. Under the treasury stock method, the proceeds from exercise of an option, the amount of compensation cost, if any, for future service that we have not yet recognized, and the amount of estimated tax benefits that would be recorded in paid-in capital, if any, when the option is exercised are assumed to be used to repurchase shares in the current period.

The number of shares used to calculate earnings per share are as follows (in thousands, except per share data):

		Year Ended June 30,
		2017				2016				2015
Net earnings used for basic and diluted earnings per share		$	76,086			$	104,476			$	107,735
Weighted average shares used in basic computation			37,313				37,194				37,096
Dilutive stock options			187				132				135
Weighted average shares used in diluted computation			37,500				37,326				37,231
Basic EPS		$	2.04			$	2.81			$	2.90
Diluted EPS		$	2.03			$	2.80			$	2.89

The dilutive effect of stock options in the above table excludes all options for which the aggregate exercise proceeds exceeded the average market price for the period. The number of potentially dilutive option shares excluded from the calculation was 2.0 million, 1.2 million, and 516,000 at June 30, 2017, 2016 and 2015, respectively.

Note 9. Share-based Compensation and Other Benefit Plans:

The cost of employee services received in exchange for the award of equity instruments is based on the fair value of the award at the date of grant. Compensation cost is recognized using a straight-line method over the vesting period and is net of estimated forfeitures. Stock option exercises and stock awards are satisfied through the issuance of new shares.

Equity incentive plan: The Company's Amended and Restated 2010 Equity Incentive Plan (the A&R 2010 Plan) provides for the granting of incentive and nonqualified stock options, restricted stock, restricted stock units, performance shares, performance units and stock appreciation rights. There are 3.8 million shares of common stock authorized for grant under the A&R 2010 Plan. At June 30, 2017, there were 620,000 shares of common stock available for grant under the A&R 2010 Plan. The maximum term of incentive options granted under the A&R 2010 Plan is ten years. The A&R 2010 amends and restates the Company's 2010 Equity Incentive Plan (the 2010 Plan). The A&R 2010 Plan replaced the Company's 1998 Nonqualified Stock Option Plan (the 1998 Plan). The A&R 2010 Plan and the 1998 Plan (collectively, the Plans) are administered by the Board of Directors and its Executive Compensation Committee, which determine the persons who are to receive awards under the Plans, the number of shares subject to each award and the term and exercise price of each award. The number of shares of common stock subject to outstanding awards as of June 30, 2017 under the A&R 2010 Plan and the 1998 Plan were 2.8 million and 50,000, respectively.

Stock option activity under the Plans for the three years ended June 30, 2017, consists of the following (shares in thousands):

		Shares				Weighted Average Exercise Price				Weighted Avg. Contractual Life (Yrs.)				Aggregate Intrinsic Value (millions)
Outstanding at June 30, 2014			811				72.11
Granted			600				93.98
Forfeited			(133	)			92.85
Exercised			(141	)			69.31
Outstanding at June 30, 2015			1,137			$	81.57
Granted			805				105.16
Forfeited			(54	)			99.68
Exercised			(69	)			69.82
Outstanding at June 30, 2016			1,819			$	91.91
Granted			1,135				107.42
Forfeited			(70	)			99.11
Exercised			(63	)			71.81
Outstanding at June 30, 2017			2,821			$	98.42				5.1			$	53.8
Exercisable at June 30:
2015			547				72.72
2016			596				75.74
2017			843				82.93				4.0			$	29.1

The fair values of options granted under the Plans were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used:

		Year Ended June 30,
		2017					2016					2015
Dividend yield			1.2%					1.2%					1.3%
Expected volatility		21%	-	24%			20%	-	23%			18%	-	21%
Risk-free interest rates		1.0%	-	1.9%			1.2%	-	1.9%			1.3%	-	2.2%
Expected lives (years)			5					5					5

The dividend yield is based on the Company's historical annual cash dividend divided by the market value of the Company's common stock. The expected annualized volatility is based on the Company's historical stock price over a period equivalent to the expected life of the option granted. The risk-free interest rate is based on U.S. Treasury constant maturity interest rates with a term consistent with the expected life of the options granted.

The weighted average fair value of options granted during fiscal 2017, 2016 and 2015 was $18.21, $18.50, and $15.01 respectively. The total intrinsic value of options exercised during fiscal 2017, 2016 and 2015 were $2.3 million, $2.4 million, and $3.5 million respectively. The total fair value of options vested during fiscal 2017, 2016 and 2015 were $5.0 million, $2.0 million, and $2.3 million respectively.

In fiscal 2017, 2016 and 2015, 23,965, 19,994, and 9,000 restricted common stock shares were granted at weighted average grant date fair values of $104.94, $99.53, and $91.78 per share, respectively. Non-vested restricted common stock shares at June 30, 2017, 2016 and 2015 were 31,647, 22,545, and 19,102, respectively.

In fiscal 2017, 2016, and 2015, 64,931, 35,083, and 36,192 restricted stock units were granted at a weighted average grant date fair value of $109.36, $105.01, and $94.13, respectively. The restricted stock units vest over a three-year period. In fiscal 2017, 4,333 restricted stock units were forfeited.

Stock-based compensation cost of $14.6 million, $9.4 million, and $5.9 million was included in selling, general and administrative expense in fiscal 2017, 2016 and 2015, respectively. The income tax benefit associated with stock-based compensation costs was $0.5 million, $0.6 million, and $0.6 million in fiscal 2017, 2016, and 2015, respectively. As of June 30, 2017, there was $26.0 million of unrecognized compensation cost related to non-vested stock options, non-vested restricted stock units and non-vested restricted stock which will be expensed in fiscal 2018 through 2021. The weighted average period over which the compensation cost is expected to be recognized is 2.3 years.

Employee stock purchase plan: In fiscal year 2015, the Company established the Bio-Techne Corporation 2014 Employee Stock Purchase Plan (ESPP), which was approved by the Company's shareholders on October 30, 2014, and which is designed to comply with IRS provisions governing employee stock purchase plans. 200,000 shares were allocated to the ESPP. The Company recorded expense of $213,000, $144,000 and $39,000 expense for the ESPP in fiscal 2017, 2016 and 2015, respectively.

Profit sharing and savings plans: The Company has profit sharing and savings plans for its U.S. employees, which conform to IRS provisions for 401(k) plans. The Company makes matching contributions to the Plan. The Company has recorded an expense for contributions to the plans of $2.2 million, $1.2 million, and $1.1 million for the years ended June 30, 2017, 2016, and 2015, respectively. The Company operates defined contribution pension plans for its U.K. employees. The Company has recorded an expense for contributions to the plans of $0.8 million, $0.8, and $0.7 million for the years ended June 30, 2017, 2016 and 2015, respectively.

Performance incentive programs: In fiscal 2017, under certain employment agreements and a Management Incentive Plan available to executive officers and certain management personnel, the Company recorded cash bonuses of $4.7 million, granted options for 896,778 shares of common stock, issued 16,653 restricted common shares and 39,931 restricted stock units. The Company recorded cash bonuses of $4.2 million and $1.9 million, and granted options for 620,917 and 322,000 shares of common stock for the years ended June 30, 2016 and 2015, respectively. In addition, 11,522 restricted common stock shares and 26,583 restricted stock units and were issued in fiscal 2016.

Note 10. Income Taxes:

The provisions for income taxes consist of the following (in thousands):

		Year Ended June 30,
		2017				2016				2015
Earnings before income taxes consist of:
Domestic		$	81,721			$	120,154			$	121,765
Foreign			30,240				27,327				32,397
		$	111,961			$	147,481			$	154,162
Taxes on income consist of:
Currently payable:
Federal		$	28,462			$	34,805			$	28,220
State			4,051				2,958				6,165
Foreign			8,212				7,579				10,704
Net deferred:
Federal			(901	)			1,906				4,401
State			(968	)			(428	)			292
Foreign			(2,981	)			(3,815	)			(3,355	)
Total tax expense		$	35,875			$	43,005			$	46,427

The following is a reconciliation of the federal tax calculated at the statutory rate of 35% to the actual income taxes provided (in thousands):

		Year Ended June 30,
		2017				2016				2015
Income tax expense at federal statutory rate		$	39,186			$	51,618			$	53,957
State income taxes, net of federal benefit			2,158				1,852				4,762
Qualified production activity deduction			(3,820	)			(3,932	)			(3,140	)
Non-taxable gain on investment			-				-				(2,905	)
Research and development tax credit			(1,519	)			(1,550	)			(912	)
Contingent consideration adjustment			4,541				-				-
Foreign tax rate differences			(5,143	)			(4,639	)			(4,059	)
Other, net			472				(344	)			(1,276	)
Income tax expense		$	35,875			$	43,005			$	46,427

The effective rate for the year ended June 30, 2017 increased by 2.8% compared to the prior year. The increase was primarily due to unfavorable discrete events in fiscal 2017 related to the revaluation of contingent consideration which is not a tax deductible expense.

The Company recognized net expense related to discrete tax items of $3.8 million in fiscal 2017, including $4.5 million in expense related to the revaluation of contingent consideration which is not a tax deductible expense. In the year ended June 30, 2015, as a result of the recent acquisitions, the rate reflects an increase for state tax expense as well as a resulting provision to return true-up from fiscal 2014. The increase is offset by the non-taxable gain which was a result of purchasing the remaining interest in CyVek. In addition the Company’s R&D Europe subsidiary declared and paid a dividend of £46.6 million which resulted in a tax benefit of approximately $1.7 million.

The effective rate for the year ended June 30, 2016 decreased by 0.9% compared to the prior year. The rate decrease was primarily driven by additional R&D credit benefit due to the retroactive reinstatement of the credit under the Protecting Americans from Tax Hikes Act of 2015, an increase in the foreign rate benefit due to the reduction in the UK income tax rate and a reduction in state tax related to the prior year. These decreases were partially offset by less of a foreign tax credit benefit than in the prior year and the non-recurrence of a non-taxable gain.

Temporary differences comprising deferred taxes on the Consolidated Balance Sheets are as follows (in thousands):

		June 30
		2017				2016
Inventory		$	9,415			$	9,768
Net operating loss carryovers			24,617				26,556
Tax credit carryovers			6,386				3,197
Excess tax basis in equity investments			4,381				4,544
Deferred compensation			9,052				5,912
Net unrealized loss on available for sale investment			-				329
Other			9,937				7,421
Valuation allowance			(3,341	)			(7,201	)
Net deferred tax assets			60,447				50,526
Net unrealized gain on available-for-sale investments			(11,153	)			-
Intangible asset amortization			(162,460	)			(107,200	)
Depreciation			(5,628	)			(5,132	)
Other			(1,802	)			(1,031	)
Deferred tax liabilities			(181,043	)			(113,363	)
Net deferred tax liabilities		$	(120,596	)		$	(62,837	)

A deferred tax valuation allowance is required when it is more likely than not that all or a portion of deferred tax assets will not be realized. The valuation allowance as of June 30, 2017 was $3.3 million, a decrease of $3.9 million from the prior year. The decrease was driven by a decrease in the valuation allowance for the Company’s equity investments. The valuation allowance as of June 30, 2016 was $7.2 million, an increase of $4.7 million over prior year. This increase included a $5.0 million change related to an equity investment and was recorded through other comprehensive income and was partially offset by a decrease of $0.3 million primarily related to the expiration of state net operating loss carryforwards and research and development credits.

As of June 30, 2017, approximately $2.7 million of the valuation allowance relates to certain foreign and state tax net operating loss and state credit carryforwards that existed at the date the Company acquired ACD, Novus, ProteinSimple and CyVek as well as immaterial amounts generated after the acquisitions. The remainder of the valuation allowance was for certain state tax credit carryovers generated or acquired in the current or prior fiscal years. Approximately $2.0 million of the valuation allowance as of June 30, 2016 was for certain foreign and state tax net operating loss and state credit carryforwards that existed at the date the Company acquired Novus, ProteinSimple, and CyVek or have been generated after the acquisitions. The remainder of the valuation allowance was for certain state tax credit carryovers generated or acquired in current or prior fiscal years. The Company believes it is more likely than not that these tax carryovers will not be realized.

As of June 30, 2017, the Company has federal operating loss carryforwards of approximately $53.4 million and state operating loss carryforwards of $84.0 million from its acquisitions of ACD, ProteinSimple and CyVek, which are not limited under IRC Section 382. As of June 30, 2017, the Company has foreign net operating loss carryforwards of $4.1 million. The net operating loss carryforwards expire between fiscal 2018 and 2035. The Company has a deferred tax asset of $21.2 million, net of the valuation allowance discussed above, related to the net operating loss carryovers. As of June 30, 2017, the Company has federal and state tax credit carryforwards of $3.7 million and $2.7 million, respectively. The federal tax credit carryforwards expire between 2018 and 2035. A majority of the state credit carryforwards have no expiry date. The Company has a deferred tax asset of $5.7 million, net of the valuation allowance discussed above, related to the tax credit carryovers.

The Company has not recognized a deferred tax liability for unremitted earnings of approximately $68.9 million from its foreign operations because its subsidiaries have invested or will invest the undistributed earnings indefinitely, or the earnings will be remitted in a tax-neutral transaction. Generally, such amounts become subject to United States taxation upon the remittance of dividends and under other circumstances. It is not practical to estimate the amount of the deferred income tax liabilities related to investments in these foreign subsidiaries.

The Company's unrecognized tax benefits at June 30, 2017, 2016 and 2015, including accrued interest and penalties, were not material. The Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase in the next twelve months. The Company files income tax returns in the U.S federal and certain state tax jurisdictions, and several jurisdictions outside the U.S. The Company's federal returns are subject to tax assessment for 2014 and subsequent years. State and foreign income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

Note 11. Segment Information:

The Company has three reportable segments based on the nature of its products; they are Biotechnology, Protein Platforms and Diagnostics.

The Company's Biotechnology reporting segment develops, manufactures and sells proteins, antibodies, immunoassays, flow cytometry products, intracellular signaling products, and biologically active chemical compounds used in biological research. No customer in the Biotechnology segment accounted for more than 10% of the segment’s net sales for the years ended June 30, 2017, 2016, and 2015.

The Company's Protein Platforms segment develops and commercializes proprietary systems and consumables for protein analysis. This segment was formed in fiscal 2015 with the acquisitions of ProteinSimple and CyVek. No customer in the Protein Platforms segment accounted for more than 10% of the segment’s net sales for the years ended June 30, 2017 and 2016.

The Company's Diagnostics reporting segment develops and manufactures a range of controls and calibrators used with diagnostic equipment and as proficiency testing tools, as well as other reagents incorporated into diagnostic kits. One customer accounted for approximately 12% and 13% of the Diagnostics segments net sales for the years ended June 30, 2017 and 2015, respectively. No customer in the Diagnostics segment accounted for more than 10% of the segment’s net sales for the years ended June 30, 2016.

There are no concentrations of business transacted with a particular customer or supplier or concentrations of revenue from a particular product or geographic area that would severely impact the Company in the near term.

Following is financial information relating to the operating segments (in thousands):

		Year Ended June 30,
		2017				2016				2015
External sales
Biotechnology		$	364,504			$	317,340			$	308,437
Protein Platforms			91,464				77,324				66,249
Diagnostics			107,139				104,484				77,866
Intersegment			(104	)			(125	)			(306	)
Consolidated net sales		$	563,003			$	499,023			$	452,246
Operating Income
Biotechnology		$	175,163			$	168,613			$	165,226
Protein Platforms			9,648				3,592				4,469
Diagnostics			28,575				30,412				23,981
Segment operating income			213,386				202,617				193,676
Costs recognized upon sale of acquired inventory			(3,037	)			(5,431	)			(6,952	)
Amortization of intangibles			(44,393	)			(29,395	)			(26,169	)
Stock based compensation			(14,631	)			(9,430	)			(5,957	)
Acquisition related expenses			(25,789	)			(2,761	)			(4,519	)
Corporate general, selling and administrative expenses			(4,952	)			(5,007	)			(3,056	)
Consolidated operating income		$	120,584			$	150,593			$	147,023

The Company has some integrated facilities that serve multiple segments. As such, asset and capital expenditure information by reportable segment has not been provided and is not available, since the Company does not produce or utilize such information internally. In addition, although depreciation and amortization expense is a component of each reportable segment’s operating results, it is not discretely identifiable.

Following is financial information relating to geographic areas (in thousands):

		Year Ended June 30,
		2017				2016				2015
External sales
United States		$	313,195			$	275,859			$	245,217
EMEA, excluding U.K.			125,126				103,060				104,178
U.K.			28,401				28,307				32,309
APAC, excluding Greater China			41,463				38,137				24,015
Greater China			39,078				36,199				34,933
Rest of world			15,740				17,461				11,594
Total external sales		$	563,003			$	499,023			$	452,246
Long-lived assets
United States and Canada		$	119,859			$	116,830			$	117,224
Europe			14,100				14,423				11,239
China			1,165				1,109				1,286
Total long-lived assets		$	135,124			$	132,362			$	129,749

External sales are attributed to countries based on the location of the customer or distributor. Long-lived assets are comprised of land, buildings and improvements and equipment, net of accumulated depreciation and other assets.

Note 12. Quarterly Financial Data (unaudited)

(in thousands, except per share data)
2017		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
Net sales		$	130,581			$	131,807			$	144,037			$	156,578			$	563,003
Cost of sales (1)			43,236				43,664				47,355				54,207				188,462
Net earnings (1)		$	18,843			$	7,467			$	22,167			$	27,609			$	76,086
Earnings per common share: (1)
Basic		$	0.51			$	0.20			$	0.59			$	0.74			$	2.04
Diluted		$	0.50			$	0.20			$	0.59			$	0.74			$	2.03
Weighted average common shares outstanding:
Basic			37,281				37,308				37,320				37,344				37,313
Diluted			37,473				37,478				37,494				37,546				37,500

(in thousands, except per share data)
2016		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
Net sales		$	112,381			$	120,907			$	130,973			$	134,762			$	499,023
Cost of sales			36,990				39,320				40,984				45,070				162,364
Net earnings		$	22,707			$	25,851			$	30,291			$	25,626			$	104,476
Earnings per common share:
Basic		$	0.61			$	0.70			$	0.81			$	0.69			$	2.81
Diluted		$	0.61			$	0.69			$	0.81			$	0.69			$	2.80
Weighted average common shares outstanding:
Basic			37,169				37,189				37,196				37,224				37,194
Diluted			37,315				37,301				37,299				37,384				37,326

	(1)	During the fourth quarter, management identified certain errors related to purchase accounting items for the ACD acquisition recorded during the first quarter of fiscal year 2017. These errors were corrected by adjusting previously reported amounts in the first, second and third quarter of fiscal year 2017. These items impact the cost recognized upon the sale of acquired inventory, other acquisition related costs recorded within selling, general and administrative costs, interest expense, and income taxes and resulted in a favorable impact as compared to previously reported results and as outlined in the table below.

(in thousands)
2017		First Quarter				Second Quarter				Third Quarter
Cost of sales		$	(2,875	)		$	(3,061	)		$	(2,499	)
Selling, general and administrative			(839	)			1,326				1,302
Interest expense			57				86				86
Income taxes			1,097				495				333
Incremental net earnings			2,560				1,154				778

We concluded that these errors were not material to each of the respective periods; however, we have elected to report the corrected amount for the fourth quarter. The amounts recorded in this table for the previously reported 2017 quarterly information have been revised for these updates. We will revise the fiscal year 2017 quarterly reported information in future filings to reflect the properly stated amounts. These identified items have no impact to year to date GAAP results.

Note 13. Subsequent Events:

In July 2017, management determined that CyVek achieved the required revenue threshold for the additional consideration payment discussed in Note 4 resulting in a payment of $34.0 million to the former owners.

On September 5, 2017, Bio-Techne acquired Trevigen Inc for approximately $11.0 million. The purchase accounting for this acquisition is in progress.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Bio-Techne Corporation:

We have audited the accompanying consolidated balance sheets of Bio-Techne Corporation and subsidiaries as of June 30, 2017 and 2016, and the related consolidated statements of earnings and comprehensive income, shareholders' equity, and cash flows for each of the fiscal years in the three-year period ended June 30, 2017. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bio-Techne Corporation and subsidiaries as of June 30, 2017 and 2016, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended June 30, 2017, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Bio-Techne Corporation's internal control over financial reporting as of June 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 7, 2017 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP

Minneapolis, Minnesota September 7, 2017

R****eport of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Bio-Techne Corporation:

We have audited Bio-Techne Corporation's internal control over financial reporting as of June 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Bio-Techne Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to the Company not maintaining effective monitoring or information and communication processes, and not having effective control activities over the establishment of general information technology controls for certain of its information technology platforms, have been identified and included in management’s assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Bio-Techne Corporation and subsidiaries as of June 30, 2017 and 2016, and the related consolidated statements of earnings and comprehensive income, shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended June 30, 2017. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the fiscal year 2017 consolidated financial statements, and this report does not affect our report dated September 7, 2017, which expressed an unqualified opinion on those consolidated financial statements.

In our opinion, because of the effect of the aforementioned material weaknesses on the achievement of the objectives of the control criteria, Bio-Techne Corporation has not maintained effective internal control over financial reporting as of June 30, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The scope of management’s assessment of the effectiveness of internal control over financial reporting excluded the operations of Space Import-Export, Srl (Space) and Advanced Cell Diagnostics (ACD), which were acquired on July 1, 2016 and August 1, 2016, respectively. Space and ACD represented 22.9% of Bio-Techne Corporation’s total assets and 7.5% of its total revenues as of and for the fiscal year ended June 30, 2017. Our audit of internal control over financial reporting of Bio-Techne Corporation also excluded an evaluation of the internal control over financial reporting of Space and ACD.

/s/ KPMG LLP

Minneapolis, Minnesota September 7, 2017