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,
		201__8				2017				2016
Net sales		$	642,993			$	563,003			$	499,023
Cost of sales			210,850				188,462				162,364
Gross margin			432,143				374,541				336,659
Operating expenses:
Selling, general and administrative			240,636				200,443				140,879
Research and development			55,329				53,514				45,187
Total operating expenses			295,965				253,957				186,066
Operating income			136,178				120,584				150,593
Other income (expense):
Interest expense			(10,188	)			(7,361	)			(1,748	)
Interest income			409				304				249
Other non-operating income (expense), net			(447	)			(1,566	)			(1,613	)
Total other income (expense)			(10,226	)			(8,623	)			(3,112	)
Earnings before income taxes			125,952				111,961				147,481
Income taxes			(198	)			35,875				43,005
Net earnings			126,150				76,086				104,476
Other comprehensive income (loss):
Foreign currency translation adjustments			(1,572	)			(3,061	)			(19,888	)
Unrealized gains (losses) on available-for-sale investments, net of tax of $398, $(6,501), and $3,794, respectively			5,693				24,531				(19,924	)
Other comprehensive income (loss)			4,121				21,470				(39,812	)
Comprehensive income		$	130,271			$	97,556			$	64,664
Earnings per share:
Basic		$	3.36			$	2.04			$	2.81
Diluted		$	3.31			$	2.03			$	2.80
Cash dividends per common share:		$	1.28			$	1.28			$	1.28
Weighted average common shares outstanding:
Basic			37,476				37,313				37,194
Diluted			38,055				37,500				37,326

See Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS

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

		June 30,
		2018				2017
ASSETS
Current assets:
Cash and cash equivalents		$	121,990			$	91,612
Short-term available-for-sale investments			59,764				66,102
Accounts receivable, less allowance for doubtful accounts of $839 and $696, respectively			120,296				116,830
Inventories			85,648				60,151
Other current assets			10,668				13,330
Total current assets			398,366				348,025
Property and equipment, net			145,348				135,124
Goodwill			597,890				579,026
Intangible assets, net			446,332				452,042
Other assets			5,266				44,002
Total assets		$	1,593,202			$	1,558,219
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable		$	18,452			$	16,856
Salaries, wages and related accruals			23,710				26,602
Accrued expenses			21,403				18,518
Deferred revenue, current			7,067				5,968
Income taxes payable			8,878				2,478
Contingent consideration payable			-				65,100
Total current liabilities			79,510				135,522
Deferred income taxes			86,293				120,596
Long-term debt obligations			339,000				343,771
Contingent consideration payable			-				3,300
Other long-term liabilities			9,338				5,403
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 37,607,500 and 37,356,041 shares, respectively			376				374
Additional paid-in capital			246,568				199,161
Retained earnings			876,931				799,027
Accumulated other comprehensive loss			(44,814	)			(48,935	)
Total shareholders' equity			1,079,061				949,627
Total liabilities and shareholders’ equity		$	1,593,202			$	1,558,219

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Bio-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, 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 income																			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	)							(287	)
Cash dividends															(47,325	)							(47,325	)
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
Net earnings															126,150								126,150
Other comprehensive income																			4,121				4,121
Common stock issued for exercise of options			204				2				17,661												17,663
Common stock issued for restricted stock awards			34				-				-				(273	)							(273	)
Cash dividends															(47,973	)							(47,973	)
Stock-based compensation expense											27,959												27,959
Common stock issued to employee stock purchase plan			14				-				1,506												1,506
Employee stock purchase plan expense											281												281
Balances at June 30, 2018			37,608			$	376			$	246,568			$	876,931			$	(44,814	)		$	1,079,061

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Bio-Techne Corporation and Subsidiaries (in thousands)

		Year Ended June 30,
		201__8				2017				201__6
Cash flows from operating activities:
Net earnings		$	126,150			$	76,086			$	104,476
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			64,463				60,036				42,764
Costs recognized on sale of acquired inventory			2,455				3,037				5,431
Deferred income taxes			(46,716	)			(3,433	)			(2,624	)
Stock-based compensation expense			28,240				14,631				9,430
Fair value adjustment to contingent consideration payable			20,100				18,400				-
Contingent consideration			(26,600	)			(11,800	)			-
Gain on investment, net			(397	)			-				-
Other operating activity			776				2,215				(279	)
Change in operating assets and liabilities, net of acquisitions:
Trade accounts and other receivables			(2,700	)			(19,686	)			(22,981	)
Inventories			(13,327	)			(732	)			(6,626	)
Prepaid expenses			2,782				(2,088	)			(381	)
Trade accounts payable and accrued expenses			5,026				5,695				8,924
Salaries, wages and related accruals			(89	)			661				5,725
Income taxes payable			10,204				699				298
Net cash provided by operating activities			170,367				143,721				144,157
Cash flows from investing activities:
Proceeds from sale and maturities of available-for-sale investments			36,390				6,079				776
Purchase of available-for-sale investments			(8,571	)			(3,069	)			-
Additions to property and equipment			(20,934	)			(15,179	)			(16,898	)
Acquisitions, net of cash acquired			(67,851	)			(253,785	)			(91,423	)
Investment in unconsolidated entity			21,574				(40,000	)			-
Other investing activities			680				-				(25	)
Net cash used in investing activities			(38,712	)			(305,954	)			(107,570	)
Cash flows from financing activities:
Cash dividends			(47,973	)			(47,325	)			(47,607	)
Proceeds from stock option exercises			19,170				5,257				5,458
Excess tax benefit from stock option exercises			-				514				566
Borrowings under line-of-credit agreement			55,000				368,500				77,000
Payments on line-of-credit			(59,500	)			(116,500	)			(58,500	)
Contingent consideration			(61,900	)			(20,316	)			-
Other financing activities			(3,985	)			(1,017	)			(287	)
Net cash provided by (used in) financing activities			(99,188	)			189,113				(23,370	)
Effect of exchange rate changes on cash and cash equivalents			(2,089	)			495				(3,512	)
Net change in cash and cash equivalents			30,378				27,375				9,705
Cash and cash equivalents at beginning of year			91,612				64,237				54,532
Cash and cash equivalents at end of year		$	121,990			$	91,612			$	64,237

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bio-Techne Corporation and Subsidiaries

Years ended June 30, 2018, 2017 and 2016

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 e__stimates: 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.

For contracts with multiple element arrangements, the Company allocates the contract’s transaction price to each element on a relative standalone selling price basis using the Company’s best estimate of the standalone selling price of each distinct product or service in the contract. The primary method used to estimate standalone selling price is the list price of each distinct product or service as this represents the best estimate of selling price. Allocation of the transaction price is determined at the contracts’ inception.

Royalty revenues are based on net sales of the Company’s licensed products by a third party. We recognize royalty revenues in the period the sales occur based on third party evidence received.

Deferred revenues include billings in excess of revenues recognized, such as those resulting from customer advances and deposits and unearned revenue on service contracts.

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 were $3.8 million $4.5 million, and $5.2 million for fiscal 2018, 2017, and 2016 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 six months 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 net realizable value. 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 net realizable value 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, 2018, 2017, and 2016 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.

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 2018.

Impairment of goodwill: We evaluate the carrying value of 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.

2018 and 2017 Goodwill Impairment Analyses

In completing our 2018 and 2017 annual goodwill impairment analyses, 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 2018 and 2017 quantitative analyses 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, 2018 and 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 Goodwill Impairment Analysis

The Company used a qualitative test for all reporting units during the fourth quarter for fiscal year 2016. 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 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 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. We adopted this standard on July 1, 2017. The application of this standard did not have significant impact on our financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This standard includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. We adopted this standard on July 1, 2017. 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 March 2018, the FASB issued ASU No. 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118. The standard added to the FASB Codification the guidance provided by the SEC in December 2017 regarding the accounting for the Tax Cuts and Jobs Act ("Tax Act"). We complied with SAB No. 118 when preparing our annual consolidated financial statements for the year ended June 30, 2018. Reasonable estimates were used in determining several of the components of the impact of the Tax Act, including our fiscal 2018 deferred income tax activity and the amount of post-1986 foreign deferred earnings subject to the repatriation transition tax. We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of our deferred tax balances and the amount of the repatriation toll charge liability, and ultimately cause us to revise our initial estimates in future periods. In addition, changes in interpretations, assumptions and guidance regarding the Tax Act, as well as the potential for technical corrections, could have a material impact on our effective tax rate in future periods.

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting. The standard provides guidance about which changes to the terms or conditions of a share-based payment award require modification accounting, which may result in a different fair value for the award. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2017, which for us is July 1, 2018. The guidance is required to be applied prospectively to awards modified on or after the effective date. We elected to early adopt this guidance on April 1, 2018 in advance of a modification that occurred during the fourth quarter. Adoption of this standard did not have significant impact on our results of operations or financial position.

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. 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 will adopt the standards using cumulative catch-up transition method.

A majority of the Company’s revenue arrangements are routine sales transactions, which generally consist of a single performance obligation to transfer promised goods or service. Therefore, the application of the new guidance including the cumulative effect of the change in the first quarter of fiscal year 2019 will not have a material impact to the Company’s consolidated 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. Among other changes, there will no longer be an available-for-sale classification for which changes in fair value are currently reported in other comprehensive income for equity securities with readily determinable fair values. 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. This ASU could increase income statement volatility, as changes in the fair value of our equity investments will flow through earnings after adoption.

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. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amends narrow aspects of the guidance in ASU No. 2016-02. We have established an implementation team to evaluate and identify the impact of the standard on our financial position, results of operations and cash flows. We are currently assessing our leasing arrangements and evaluating the impact of practical expedients. We are not able to quantify the impact of the standard at this time.

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.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard allows companies to make an election to reclassify from accumulated other comprehensive income to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. This ASU is effective for annual and interim periods beginning after December 15, 2018, which for us is July 1, 2019. Early adoption is permitted. We are currently evaluating this ASU and have not yet made a decision regarding our policy election or early adoption.

Note 2. Acquisitions:

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

2018 Acquisitions

Trevigen

On September 5, 2017 the Company acquired the stock of Trevigen Inc. for approximately $10.6 million, net of cash received. The Company has had a long-standing business relationship with Trevigen as a distributor of its product line. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Biotechnology reportable segment in the first quarter of fiscal 2018. Purchase accounting was finalized during the fourth quarter. The preliminary and final fair values of the assets acquired and liabilities assumed are as follows (in thousands):

		Preliminary Allocation at Acquisition Date				Adjustments to Fair Value				Final Opening Balance Sheet Allocation
Current assets, net of cash		$	1,662							$	1,662
Equipment and other long-term assets			154				(101	)			53
Intangible assets:
Developed technology			3,800				1,300				5,100
Trade name			1,400				(1,240	)			160
Customer relationships			1,900				(1,640	)			260
Goodwill			4,595				1,396				5,991
Total assets acquired			13,511				(285	)			13,226
Liabilities			92				295				387
Deferred income taxes, net			2,785				(590	)			2,195
Net assets acquired		$	10,634			$	10			$	10,644
Cash paid, net of cash acquired		$	10,634			$	10			$	10,644

As summarized in the table, there were adjustments totaling $1.4 million to goodwill during the measurement period. These adjustments primarily relate to refinements made to acquired intangible asset cash flow models, and updates to opening balance sheet deferred tax assets and liabilities upon completion of the December 31, 2017 income tax return.

Tangible assets acquired, net of liabilities assumed, were recorded at fair value on the date of close 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 Consolidated Statement 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 Statement of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2018 are 13 years for developed technology, 11 years for customer relationships, and 1.5 years for trade names. 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.

Atlanta Biologicals

On January 2, 2018 the Company acquired the stock of Atlanta Biologicals, Inc. and its affiliated company, Scientific Ventures, Inc., for approximately $51.3 million, net of cash acquired. The transaction was financed through available cash on hand and an additional draw from the Company’s line-of-credit. Atlanta Biologicals fetal bovine serum (FBS) product line strengthens and complements our current tissue culture reagents offering and furthers our efforts to provide more complete solutions to our research customers. The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The goodwill is not deductible for income tax purposes. The business became part of the Biotechnology reportable segment in the third quarter of fiscal 2018. Purchase accounting was finalized during the fourth quarter. The preliminary and final fair values of the assets acquired and liabilities assumed are as follows (in thousands):

		Preliminary Allocation at Acquisition Date				Adjustments to Fair Value				Final Opening Balance Sheet Allocation
Current assets, net of cash		$	18,678			$	(2,956	)		$	15,722
Equipment and other long-term assets			4,348				553				4,901
Intangible assets:
Developed technology			9,000				14,700				23,000
Trade name			1,000				1,300				2,300
Customer relationships			1,500				1,400				3,600
Goodwill			21,695				(11,500	)			10,195
Total assets acquired			56,221				3,497				59,718
Liabilities			90				-				90
Deferred income taxes, net			4,845				3,509				8,354
Net assets acquired		$	51,286			$	(12	)		$	51,274
Cash paid, net of cash acquired		$	51,286			$	(12	)		$	51,274

As summarized in the table, there were adjustments totaling $11.5 million to goodwill during the measurement period. These adjustments primarily relate to refinements made to acquired intangible asset cash flow models, and the calculation of the fair value of acquired inventory.

Tangible assets acquired, net of liabilities assumed, were recorded at fair value on the date of close 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 Consolidated Statement 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 Statement of Earnings and Comprehensive Income. The amortization periods for intangible assets acquired in fiscal 2018 are 13 years for developed technology, 12 years for customer relationships, and 15 years for trade names. 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.

Eurocell Diagnostics

On February 1, 2018, the Company acquired Eurocell Diagnostics SAS a company based in Rennes, France for approximately $7.3 million, net of cash acquired. $6.0 million was paid on the acquisition date and the remaining $1.3 million will be paid on February 1, 2019. The Company has had a long-standing business relationship with Eurocell as a distributor of its product line. Eurocell sells directly to the laboratory markets in the French region as well as servicing the EMEA markets via a network of distributors. The transaction was financed through cash on hand. The primary asset in this acquisition is the customer relationships, however, the acquisition resulted in some 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 Diagnostics reportable segment in the third quarter of fiscal 2018. Purchase accounting was finalized during the fourth quarter. The preliminary and final fair values of the assets acquired and liabilities assumed are as follows (in thousands):

		Preliminary Allocation at Acquisition Date				Adjustments to Fair Value				Final Opening Balance Sheet Allocation
Current assets, net of cash		$	512			$	-			$	512
Equipment and other long-term assets			188				-				188
Intangible assets:
Customer relationships			6,272				-				6,272
Goodwill			113				2,797				2,910
Total assets acquired			7,085				2,797				9,882
Liabilities			483				-				483
Deferred income taxes, net			2,070				-				2,070
Net assets acquired		$	4,532			$	2,797			$	7,329
Cash paid, net of cash acquired		$	3,136			$	2,797			$	5,933
Consideration payable		$	1,396			$	-			$	1,396

As summarized in the table, there were adjustments totaling $2.8 million to goodwill during the measurement period. These adjustments primarily relate to the finalization of our opening balance sheet audit procedures and identification of acquired assets.

Tangible assets acquired, net of liabilities assumed, were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to customer relationships was based on management's forecasted cash inflows and outflows using a multi-period excess earnings method to calculate the fair value of assets purchased. Amortization expense related customer relationships is reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships acquired in fiscal 2018 is 7 years. The deferred income tax liability represents the net amount of the estimated future impact of intangible asset amortization, which is not deductible for income tax purposes.

2017 Acquisitions

Advanced Cell Diagnostics (ACD)

On August 1, 2016, the Company acquired ACD for approximately $258.0 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 was paid to current employees who held ACD unvested stock as of the acquisition date. In order to receive payment for unvested shares, the individuals had to remain employees of ACD over an 18-month vesting period which extended from the acquisition date through March 31, 2018. Any amounts that would have been owed to individuals who left the company during the vesting period was 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 represented purchase price consideration paid for pre-acquisition services. However, the remaining $7.4 million represented compensation expense as the amount the individual employees received was tied to future service. This liability recorded on the Consolidated Balance Sheets under the caption “Salaries, wages and related accruals” for the fiscal year ended June 30, 2017.

During the third quarter of fiscal 2017, management determined that the calendar year 2016 revenue milestone was met. During the third quarter of fiscal 2018, management determined that the calendar year 2017 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 revenue milestones as of June 30, 2018 and 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.

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 was 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.

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 acquisition included contingent payments up to $7.0 million. $3.5 million paid if and when 10 instruments are sold prior to the 3-year anniversary of the closing date ( March 14, 2019) and 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 and a $3.5 million payment in the fourth quarter of fiscal 2018 after Zephyrus met the $3.0 million revenue milestone. Refer to Note 4 for discussion of these payments as well as discussion of the changes to the fair value estimate for these milestones as of June 30, 2018 and 2017.

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.

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.

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.

The aggregate purchase price of the acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as a result of the fiscal year 2017 and 2016 acquisitions (in thousands):

		ACD				Space				Zephyrus				Cliniqa
Current assets, net of cash		$	15,824			$	2,128				56				11,926
Equipment			2,757				159				32				1,436
Other long-term assets			3,812				-				-				58
Intangible Assets:
Developed technology			150,000				-				8,300				18,000
Trade name			21,900				-				-				1,100
Customer relationships			6,300				6,769				-				27,000
Goodwill			143,967				3,517				8,686				42,669
Total assets acquired			344,560				12,573				17,074				102,189
Liabilities			4,179				1,445				53				1,508
Deferred income taxes, net			52,743				2,125				2,521				17,793
Net assets acquired		$	287,638			$	9,003			$	14,500			$	82,888
Cash paid, net of cash acquired		$	247,038			$	6,747				8,000				82,888
Consideration payable			3,600				2,256				-				-
Contingent consideration payable			37,000				-				6,500				-
Net assets acquired		$	287,638			$	9,003			$	14,500			$	82,888

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, 2018 and June 30, 2017 were $59.8 million and $66.1 million, respectively. The decrease was caused by the sale of $26.9 million of the Company’s investment in ChemoCentryx, Inc. (CCXI) in the fourth quarter of fiscal 2018 and the maturity of $2.1 million in corporate bond securities held by Advanced Cell Diagnostics (ACD). This decrease was partially offset by year-over-year increases in the stock price of CCXI, from $9.36 per share at June 30, 2017 to $13.17 per share at June 30, 2018 resulting in a $15.7 million increase in the fair value of the Company's investment in CCXI. The amortized cost basis of the Company's investment in CCXI as of June 30, 2018 and 2017 was $18.8 million and $29.5 million, respectively.

The unrealized gain (loss) on available-for-sale investments for fiscal 2018 includes a $35.4 million unrealized gain related to our investment in CCXI. As of June 30, 2018, the stock price of CCXI was $13.17 per share compared to our cost basis of $4.73 per share.

Inventories:

Inventories consist of (in thousands):

		June 30,
		201__8				201__7
Raw materials		$	30,956			$	22,074
Finished goods			54,692				38,077
Inventories, net		$	85,648			$	60,151

Property and Equipment:

Property and equipment consist of (in thousands):

		June 30,
		2018				2017
Cost:
Land		$	7,065			$	6,270
Buildings and improvements			170,110				158,495
Machinery, equipment and other			107,625				98,596
Property and equipment			284,800				263,361
Accumulated depreciation and amortization			(139,452	)			(128,237	)
Property and equipment, net		$	145,348			$	135,124

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

							June 30,
		Useful Life (years)					2018				201__7
Developed technology		9	-	15			$	305,303			$	276,959
Trade names		2	-	20				89,608				87,092
Customer relationships		7	-	16				212,228				204,243
Non-compete agreements		3	-	5				-				3,264
Patents			10					1,401				633
Intangible assets								608,540				572,191
Accumulated amortization								(162,208	)			(120,149	)
Intangibles assets, net							$	446,332			$	452,042

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

		June 30,
		2018				2017
Beginning balance		$	452,042			$	310,524
Acquisitions			40,673				185,869
Other additions			908				976
Amortization expense			(47,076	)			(44,393	)
Currency translation			(215	)			(934	)
Ending balance		$	446,332			$	452,042

Amortization expense related to technologies included in cost of sales was $25.3 million $23.1 million, and $11.1 million in fiscal 2018, 2017, and 2016, respectively. Amortization expense related to trade names, customer relationships, non-compete agreements, and patents included in selling, general and administrative expense was $21.6 million, $21.3 million, and $18.3 million, in fiscal 2018, 2017, and 2016 respectively.

The estimated future amortization expense for intangible assets as of June 30, 2018 is as follows (in thousands):

2019		$	47,841
2020			47,137
2021			46,772
2022			45,060
2023			43,176
Thereafter			216,346
Total		$	446,332

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

		Biotechnology				Protein Platforms				Diagnostics				Total
June 30, 2016		$	108,723			$	218,889			$	103,270			$	430,882
Acquisitions (Note 2)			147,484				-				-				147,484
Prior year acquisitions			-				1,809				-				1,809
Currency translation			(1,277	)			128				-				(1,149	)
June 30, 2017		$	254,930			$	220,826			$	103,270			$	579,026
Acquisitions (Note 2)			16,186				-				2,910				19,096
Currency translation			759				(815	)			(176	)			(232	)
June 30, 2018		$	271,875			$	220,011			$	106,004			$	597,890

Other Assets:

Other assets consist of (in thousands):

		June 30,
		2018				2017
Investments		$	2,606			$	40,385
Other			2,660				3,617
Other long-term assets		$	5,266			$	44,002

As of June 30, 2018, the Company had $5.3 million of other assets compared to $44.0 million as of June 30, 2017. The decrease was due to the impairment and sale of its investment in Astute Medical, Inc. (Astute) during fiscal 2018. The Company held a 16.4% ownership interest in Astute and accounted for the investment under the cost method. During the third quarter of fiscal 2018, the Company learned that Astute intended to accept an offer to sell the company to a third party. As a result of this triggering event, the Company completed an impairment assessment and determined that a portion of its investment in Astute was other-than-temporarily impaired and adjusted the carrying value of its investment by $16.2 million to other income (expense) in the accompanying Consolidated Statements of Earnings and Comprehensive Income. During the fourth quarter of fiscal 2018, the Company decreased its investment in Astute by another $22.5 million after receiving cash payment upon the closing of the acquisition. As of June 30, 2018, the Company has a $1.3 million remaining investment in Astute for the additional cash payment it expects to receive upon liquidation of the escrow account.

Supplemental C__ash F__low I__nformation_:_

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

		Year Ended June 30,
		2018				2017				2016
Income taxes paid		$	35,076			$	42,900			$	44,900
Interest paid			9,844				7,452				1,661
Non-cash activities:
Acquisition-related liabilities (1)			1,396				32,856				42,259

(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, 2018				Level 1				Level 2				Level 3
Assets
Equity securities (1)		$	54,286			$	54,286			$	-			$	-
Certificates of deposit (1)			5,478				5,478				-				-
Total Assets		$	59,764			$	59,764			$	-			$	-
Liabilities
Contingent Consideration		$	-			$	-			$	-			$	-

		Total carrying value a__s of				Fair Value Measurements Using Inputs Considered as
		June 30, 201__7				Level 1				Level 2				Level 3
Assets
Equity securities (1)		$	59,616			$	59,616			$	-			$	-
Certificates of deposit (1)			4,429				4,429				-				-
Corporate bond securities (1)			2,057				-				2,057				-
Total Assets		$	66,102			$	64,045			$	2,057			$	-
Liabilities
Contingent Consideration		$	68,400			$	-			$	-			$	68,400

	(1)	Included in available-for-sale investments 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 outstanding as of June 30, 2017 had maturity dates of less than one year and were sold during fiscal 2018.

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 were required to make contingent payments, subject to the entities achieving certain sales and revenue thresholds. The contingent consideration payments were 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 calculations include 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 2018, the Company made $88.5 million in cash payments towards the ACD, CyVek and Zephyrus contingent consideration liabilities after it determined certain sales and revenue thresholds were met. Of the $88.5 million in total payments, $61.9 million is classified as financing on the statement of cash flows. The remaining $26.6 million is recorded as operating on the statement of cash flows as it represents the consideration liability that exceeds the amount of the contingent consideration liability recognized at the acquisition date. The Company has no remaining contingent consideration liabilities as of June 30, 2018.

In fiscal 2017, the Company made $28.5 million ($3.5 million for Zephyrus and $25.0 million for ACD) in cash payments towards the ACD and Zephyrus contingent consideration liabilities after it determined that certain sales and revenue thresholds were met. 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,
		2018				2017
Fair value at the beginning of period		$	68,400			$	38,500
Purchase price contingent consideration (Note 2)			-				40,000
Payments			(88,500	)			(28,500	)
Change in fair value of contingent consideration			20,100				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 into 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 would have matured on July 28, 2021 and contains customary restrictive and financial covenants and customary events of default. As of June 30, 2018, the outstanding balance under the Credit Agreement was $339.0 million.

In connection with the acquisition of Exosome Diagnostics, Inc. on August 1, 2018, the Company entered into a new credit facility that provides for a revolving credit facility of $600 million, which can be increased by an additional $200 million subject to certain conditions, and a term loan of $250 million. The credit facility is governed by a Credit Agreement dated August 1, 2018 and matures on August 1, 2023. This facility replaced the revolving line-of-credit facility mentioned above and bears interest at a variable rate.

Note 6. Commitments and Contingencies:

The Company leases office and warehouse space, vehicles and various office equipment under operating leases. At June 30, 2018, 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):

2019		$	10,654
2020			10,527
2021			10,281
2022			10,524
2023			10,411
Thereafter			37,900
Total		$	90,297

Total rent expense was approximately $10.8 million, $9.8 million, and $8.1 million for the years ended June 30, 2018, 2017, and 2016, 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, at June 30 consists of (in thousands):

		Unrealized Gains (Losses) on Available- for-Sale Investments				Foreign Currency Translation Adjustments				Total
Balance June 30, 2015		$	14,382				(44,975	)		$	(30,593	)
Other comprehensive income (loss) before reclassifications			(19,924	)			(19,888	)			(39,812	)
Balance June 30, 2016		$	(5,542	)			(64,863	)		$	(70,405	)
Other comprehensive income (loss) before reclassifications			24,531				(3,061	)			21,470
Balance June 30, 2017		$	18,989				(67,924	)		$	(48,935	)
Other comprehensive income (loss) before reclassifications			18,108				(1,572	)			16,536
Amounts reclassified from accumulated other comprehensive loss to income			(12,415	)			-				(12,415	)
Balance June 30, 2018		$	24,682				(69,496	)		$	(44,814	)

Note 8. Earnings Per Share:

The following table reflects the calculation of basic and diluted earnings per share (in thousands, except per share amounts):

		Year Ended June 30,
		2018				2017				2016
Earnings per share – basic:
Net income		$	126,150			$	76,086			$	104,476
Income allocated to participating securities			(108	)			(65	)			(52	)
Income available to common shareholders		$	126,042			$	76,021			$	104,424
Weighted-average shares outstanding – basic			37,476				37,313				37,194
Earnings per share – basic		$	3.36			$	2.04			$	2.81
Earnings per share – diluted:
Net income		$	126,150			$	76,086			$	104,476
Income allocated to participating securities			(108	)			(65	)			(52	)
Income available to common shareholders		$	126,042			$	76,021			$	104,424
Weighted-average shares outstanding – basic			37,476				37,313				37,194
Dilutive effect of stock options and restricted stock units			579				187				132
Weighted-average common shares outstanding – diluted			38,055				37,500				37,326
Earnings per share – diluted		$	3.31			$	2.03			$	2.80

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 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 0.9 million, 2.0 million, and 1.2 million for the fiscal years ended June 30, 2018, 2017 and 2016, 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 Second Amended and Restated 2010 Equity Incentive Plan (the Second 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 6.6 million shares of common stock authorized for grant under the Second A&R 2010 Plan. At June 30, 2018, there were 2.4 million shares of common stock available for grant under the Second A&R 2010 Plan. The maximum term of incentive options granted under the Second A&R 2010 Plan is ten years. The Second A&R 2010 Plan amended and restated the Company's Amended and Restate 2010 Equity Incentive Plan (the A&R 2010 Plan). The A&R 2010 Plan replaced the Company's 1998 Nonqualified Stock Option Plan (the 1998 Plan). The Second 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, 2018 under the Second A&R 2010 Plan and the 1998 Plan were 3.4 million and 35,000, respectively. On April 26, 2018 the Compensation Committee of the Board of Directors approved a modification to the Equity Incentive Plan. The modification implements a new retirement policy that permits retirees to continue vesting in certain time-based stock options granted during employment, resulting in accelerated stock compensation expense for those employees meeting the definition of retirement eligible. This modification resulted in an additional $8.3 million of expense during fiscal year 2018 and affected all employees who participate in the plan.

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,
		2018					2017					2016
Dividend yield			1.1%					1.2%					1.2%
Expected volatility		20%	-	21%			21%	-	24%			20%	-	23%
Risk-free interest rates		1.7%	-	2.8%			1.0%	-	1.9%			1.2%	-	1.9%
Expected lives (years)			4.7					4.7					4.8

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.

Stock option activity under the Plans for the three years ended June 30, 2018, consists of the following (shares in thousands):

		Number of Shares (in thousands)				Weighted Average Exercise Price				Aggregate Intrinsic Value (millions)				Weighted Average Contractual Life (years)
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
Granted			1,087				120.67
Forfeited			(252	)			86.62
Exercised			(204	)			111.51
Outstanding at June 30, 2018			3,452			$	105.17			$	144.7				4.8
Exercisable at June 30, 2016:			596				75.74
Exercisable at June 30, 2017:			843				82.93
Exercisable at June 30, 2018:			1,151				90.75			$	65.8				3.8

The weighted average fair value of options granted during fiscal 2018, 2017 and 2016 was $22.07, $18.21, and $18.50 respectively. The total intrinsic value of options exercised during fiscal 2018, 2017 and 2016 were $10.6 million, $2.3 million, and $2.4 million respectively. The total fair value of options vested during fiscal 2018, 2017 and 2016 were $8.8 million, $5.0 million, and $2.0 million respectively.

Restricted common stock activity under the Plans for the three years ended June 30, 2018, consists of the following (units in thousands):

		Number of Shares (in thousands)				Weighted Average Grant Date Fair Value				Weighted Average R__emaining Contractual Term (years)
Unvested at June 30, 2015			19			$	83.94
Granted			20				99.53
Vested			(16	)			83.58
Forfeited			-				-
Unvested at June 30, 2016			23			$	98.03
Granted			24				104.94
Vested			(15	)			92.62
Forfeited			-				-
Unvested at June 30, 2017			32			$	105.80
Granted			20				125.05
Vested			(17	)			104.66
Forfeited			-				-
Unvested at June 30, 2018			35			$	117.39				6.2

The total fair value of restricted shares that vested was $1.7 million for fiscal 2018, $1.4 million for fiscal 2017 and $1.4 million for fiscal 2016.

Restricted stock unit activity under the Plans for the three years ended June 30, 2018, consists of the following (units in thousands):

		Number of Units (in thousands)				Weighted Average Grant Date Fair Value				Weighted Average R__emaining Contractual Term (years)
Outstanding at June 30, 2015			29			$	93.51
Granted			35				105.01
Vested			(5	)			92.15
Forfeited			-				-
Outstanding at June 30, 2016			59			$	100.40
Granted			65				109.36
Vested			(9	)			92.94
Forfeited			(4	)			98.04
Outstanding at June 30, 2017			111			$	106.39
Granted			71				129.99
Vested			(16	)			95.46
Forfeited			(18	)			115.01
Outstanding at June 30, 2018			148			$	117.95				5.5

The total fair value of restricted stock units that vested was $1.6 million for fiscal 2018, $0.9 million for fiscal 2017 and $0.5 million for fiscal 2016. The restricted stock units vest over a three-year period.

Stock-based compensation cost of $28.2 million, $14.6 million, and $9.4 million was included in selling, general and administrative expense in fiscal 2018, 2017 and 2016, respectively. The income tax benefit associated with stock-based compensation costs was $0.5 million and $0.6 million in fiscal 2017, and 2016, respectively. As of June 30, 2018, there was $26.7 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 2019 through 2022 using a 3% forfeiture rate. The weighted average period over which the compensation cost is expected to be recognized is 2.1 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 $281,000, $213,000 and $144,000 expense for the ESPP in fiscal 2018, 2017 and 2016, 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 $2.5 million, $2.2 million, and $1.2 million for the years ended June 30, 2018, 2017, and 2016, 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 $1.4 million, $0.8, and $0.8 million for the years ended June 30, 2018, 2017 and 2016, respectively.

Performance incentive programs: In fiscal 2018, under certain employment agreements and a Management Incentive Plan available to executive officers and certain management personnel, the Company recorded cash bonuses of $7.2 million, granted options for 553,750 shares of common stock, issued 14,194 restricted common shares and 35,174 restricted stock units. In fiscal 2017 and fiscal 2016, the Company recorded cash bonuses of $4.7 million and $4.2 million, granted options for 896,778 and 620,917 shares of common stock, and issued 16,653 and 11,522 restricted common stock shares and 39,931 and 26,583 restricted stock, respectively.

Note 10. Income Taxes:

Income before income taxes was comprised of the following (in thousands):

		Year Ended June 30,
		2018				2017				2016
Domestic		$	81,557			$	81,721			$	120,154
Foreign			44,395				30,240				27,327
Income before income taxes		$	125,952			$	111,961			$	147,481

The provision for income taxes consisted of the following (in thousands):

		Year Ended June 30,
		2018				2017				2016
Taxes on income consist of:
Currently tax provision:
Federal		$	28,416			$	28,462			$	34,805
State			5,315				4,051				2,958
Foreign			11,983				8,212				7,579
Total current tax provision			45,714				40,725				45,342
Deferred tax provision:
Federal			(40,378	)			(901	)			1,906
State			(1,381	)			(968	)			(428	)
Foreign			(4,154	)			(2,981	)			(3,815	)
Total deferred tax provision			(45,912	)			(4,850	)			(2,337	)
Total income tax provision		$	(198	)		$	35,875			$	43,005

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code which impacted our fiscal year ended June 30, 2018. These impacts include, but are not limited to, (1) reducing the U.S. federal corporate tax rate, (2) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that may electively be paid over eight years, and (3) accelerated first year expensing of certain capital expenditures. The Tax Act reduced the federal corporate tax rate from 35% to 21% effective January 1, 2018. Internal Revenue Code Section 15 provides that for our fiscal year ended June 30, 2018 we calculate a blended corporate tax rate of 28.1%, which is based on a proration of the applicable tax rates before and after effective date of the Tax Act. The statutory tax rate of 21% will apply for fiscal 2019 and beyond.

The Tax Act also puts in place new tax laws that will impact our taxable income beginning in fiscal 2019, which include, but are not limited to (1) creating a Base Erosion Anti-abuse Tax (BEAT), which is a new minimum tax, (2) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries, (3) a new provision designed to tax currently global intangible low-taxed income (GILTI), (4) a provision that could limit the amount of deductible interest expense, (5) the repeal of the domestic production activity deduction, (6) additional limitations on the deductibility of certain executive compensation, and (7) limitations on the utilization of foreign tax credits to reduce the U.S. income tax liability.

Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118) which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. In accordance with SAB 118, the Company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC Topic 740 is complete. In March 2018, the FASB issued ASU No. 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118. which added FASB Codification the guidance provided by the SEC in December 2017.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, the Company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined. If a Company cannot determine a provisional estimate to be included in the financial statements, the Company should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. If a Company is unable to provide a reasonable estimate of the impacts of the Tax Act in a reporting period, a provisional amount must be recorded in the first reporting period in which a reasonable estimate can be determined.

We complied with SAB No. 118 when preparing our annual consolidated financial statements for the year ended June 30, 2018. Reasonable estimates were used in determining several of the components of the impact of the Tax Act, including our fiscal 2018 deferred income tax activity and the amount of post-1986 foreign deferred earnings subject to the repatriation transition tax. We are still analyzing certain aspects of the Tax Act including state tax implications and refining our calculations, which could potentially affect the measurement of our deferred tax balances and the amount of the repatriation toll charge liability, and ultimately cause us to revise our initial estimates in future periods. In addition, changes in interpretations, assumptions and guidance regarding the Tax Act, as well as the potential for technical corrections, could have a material impact on our effective tax rate in future periods.

Transition Tax: The transition tax is a tax on the previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries as of December 22, 2017. In order to determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. E&P is similar to retained earnings of the subsidiary but requires other adjustments to conform to U.S. tax rules. We are able to make a reasonable estimate of the transition tax and recorded a provisional transition tax obligation of $3.3 million which the Company expects to elect to pay, net of certain tax credit carryforwards, over eight years beginning in fiscal year 2019. Of this liability, $0.3 million is recorded as a current liability with the remaining $3.0 million classified as a long-term liability within our June 30, 2018 balance sheet. We are in the process of analyzing if proposed regulations REG-104226-18 issued on August 9, 2018 will have any impact to our current estimate of our transition tax liability. In addition, we have considered state income tax implications and concluded at this time that the impact is immaterial. However, we continue to monitor for additional interpretative guidance including information regarding state income tax implications.

The following is a reconciliation of the federal tax calculated at the statutory rate of 28.1% to the actual income taxes provided (in thousands):

		Year Ended June 30,
		2018				2017				2016
Income tax expense at federal statutory rate			28.1	%			35.0	%			35.0	%
State income taxes, net of federal benefit			2.5	%			1.9	%			1.3	%
Qualified production activity deduction			(2.4	)%			(3.4	)%			(2.7	)%
Research and development tax credit			(1.4	)%			(1.4	)%			(1.1	)%
Contingent consideration adjustment			3.3	%			4.1	%			-	%
Foreign tax rate differences			(3.5	)%			(4.6	)%			(3.1	)%
Option exercises			(1.8)	%			-	%			-	%
Domestic tax legislation changes			(26.2	)%			-	%			-	%
Other, net			1.2	%			0.4	%			(0.2	)%
Effective tax rate			(0.2	)%			32.0	%			29.2	%

The effective tax rate for the year ended June 30, 2018 decreased by 32.2% compared to the prior year. The decrease in the Company’s tax rate for fiscal 2018 was due to the impact of discrete items, primarily the net tax benefit of $33.0 million related to the Tax Act discussed above. This net tax benefit consisted of $36.5 million due to the re-measurement of the Company’s deferred tax accounts to reflect the U.S. federal corporate tax rate reduction impact to our net deferred tax balances offset by expense for the federal transition tax of $3.3 million. Also impacting the Company’s fiscal 2018 effective tax rate was a $2.2 million tax benefit related to stock option exercises offset by a net discrete tax expense of $4.2 million related to the revaluation of contingent consideration, which is not a tax deductible expense.

The effective tax 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.

Deferred taxes on the Consolidated Balance Sheets consisted of the following temporary differences (in thousands):

		June 30
		2018				2017
Inventory		$	5,873			$	9,415
Net operating loss carryovers			15,938				24,617
Tax credit carryovers			7,029				6,386
Excess tax basis in equity investments			2,813				4,381
Deferred compensation			7,806				9,052
Other			3,864				9,937
Valuation allowance			(2,978	)			(3,341	)
Deferred tax assets			40,345				60,447
Net unrealized gain on available-for-sale investments			(8,384	)			(11,153	)
Intangible asset amortization			(111,247	)			(162,460	)
Depreciation			(6,349	)			(5,628	)
Other			(658	)			(1,802	)
Deferred tax liabilities			(126,638	)			(181,043	)
Net deferred tax liabilities		$	(86,293	)		$	(120,596	)

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, 2018 was $3.0 million, a decrease of $0.3 million from the prior year. The decrease was driven by a decrease in the valuation allowance for the Company’s net operating loss and credit carryforwards.

As of June 30, 2018, the $3.0 million 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 Company believes it is more likely than not that these tax carryovers will not be realized.

As of June 30, 2018, the Company has federal operating loss carryforwards of approximately $38.4 million and state operating loss carryforwards of $72.8 million from its acquisitions of ACD, ProteinSimple and CyVek, which are not limited under IRC Section 382. As of June 30, 2018, the Company has foreign net operating loss carryforwards of $3.2 million. The net operating loss carryforwards expire between fiscal 2019 and 2035. The Company has a deferred tax asset of $14.0 million, net of the valuation allowance discussed above, related to the net operating loss carryovers. As of June 30, 2018, the Company has federal and state tax credit carryforwards of $3.5 million and $4.4 million, respectively. The federal tax credit carryforwards expire between 2019 and 2035. The majority of the state credit carryforwards have no expiry date. The Company has a deferred tax asset of $6.0 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 foreign earnings of approximately $124.6 million from its foreign operations because its subsidiaries have invested or will invest the undistributed earnings indefinitely. The transition tax noted above results in the previously untaxed foreign earnings being included in the federal and state fiscal 2018 taxable income. We are currently analyzing our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which include local country withholding tax and potential U.S. state taxation. At this time, and until we fully analyze the applicable provisions of the Tax Act, our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. Therefore, it is not practical to estimate the amount of the deferred income tax liabilities related to investments in these foreign subsidiaries.

The following is a reconciliation of the beginning and ending balance of unrecognized tax benefits (in thousands):

		Year Ended June 30,
		2018				2017				2016
Beginning balance		$	1,747			$	1,480			$	1,688
Additions due to acquisitions							628
Additions for tax positions of current year			35				13				36
Closure of tax years							(374	)			(244	)
Tax Reform			165
Ending balance		$	1,947			$	1,747			$	1,480

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 2015 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 segment is comprised of the legacy biotechnology business and ACD. These businesses manufacture consumables used for conducting laboratory experiments by both industry and academic scientists within the biotechnology and biomedical life science fields Our protein, antibodies, immunoassays, and small molecules products in the legacy biotechnology business are tools to help our customers analyze the protein component of cells, and the ACD technology allows our customers to analyze the genetic changes within cells. When used together, our customers have a more complete set of tools to study normal and abnormal cell behavior. No customer in the Biotechnology segment accounted for more than 10% of the segment’s net sales for the years ended June 30, 2018, 2017, and 2016.

The Company's Protein Platforms segment develops and commercializes proprietary systems and consumables for protein analysis. No customer in the Protein Platforms segment accounted for more than 10% of the segment’s net sales for the years ended June 30, 2018, 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% for the fiscal year ended June 30, 2017. No customer in the Diagnostics segment accounted for more than 10% of the segment’s net sales for the fiscal years ended June 30, 2018 and 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,
		201__8				201__7				201__6
Net sales:
Biotechnology		$	421,536			$	364,504			$	317,340
Protein Platforms			111,885				91,464				77,324
Diagnostics			110,108				107,139				104,484
Intersegment			(536	)			(104	)			(125	)
Consolidated net sales		$	642,993			$	563,003			$	499,023
Operating Income:
Biotechnology		$	199,100			$	175,163			$	168,613
Protein Platforms			17,996				9,648				3,592
Diagnostics			28,280				28,575				30,412
Segment operating income			245,376				213,386				202,617
Costs recognized upon sale of acquired inventory			(2,455	)			(3,037	)			(5,431	)
Amortization of intangibles			(46,983	)			(44,393	)			(29,395	)
Acquisition related expenses			(24,429	)			(25,789	)			(2,761	)
Restructuring costs			(376	)			-				-
Stock-based compensation			(28,240	)			(14,631	)			(9,430	)
Corporate general, selling and administrative expenses			(6,715	)			(4,952	)			(5,007	)
Consolidated operating income		$	136,178			$	120,584			$	150,593

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.

The revenues from external customers within each of our segments represent a similar group of products.

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

		Year Ended June 30,
		2018				2017				2016
Net sales:
United States		$	346,293			$	313,195			$	275,859
EMEA, excluding U.K.			148,599				125,126				103,060
U.K.			33,704				28,401				28,307
APAC, excluding Greater China			48,392				41,463				38,137
Greater China			47,950				39,078				36,199
Rest of world			18,055				15,740				17,461
Total external sales		$	642,993			$	563,003			$	499,023

External sales are attributed to countries based on the location of the customer or distributor.

			Year ended June 30,
Long-lived assets:			2018				2017
United States and Canada		$	129,360			$	119,859
Europe			14,597				14,100
China			1,391				1,165
Total long-lived assets		$	145,348			$	135,124
Intangible assets:
United States and Canada		$	417,430			$	424,579
Europe			21,386				18,710
China			7,516				8,753
Total intangible assets		$	446,332			$	452,042

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)
2018		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
Net sales		$	144,613			$	154,153			$	163,973			$	180,254			$	642,993
Cost of sales			46,745				52,319				53,712				58,074				210,850
Net earnings(1)		$	15,863			$	48,847			$	19,738			$	41,701			$	126,150
Earnings per common share:
Basic		$	0.42			$	1.30			$	0.53			$	1.11			$	3.36
Diluted		$	0.42			$	1.29			$	0.52			$	1.08			$	3.31
Weighted average common shares outstanding:
Basic			37,376				37,449				37,503				37,585				37,476
Diluted			37,705				37,926				38,142				38,347				38,055

(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			43,236				43,664				47,355				54,207				188,462
Net earnings		$	18,843			$	7,467			$	22,167			$	27,609			$	76,086
Earnings per common share:
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

(1) Net earnings in total and per share do not sum due to rounding

Note 13. Subsequent Events:

On July 2, 2018, the Company acquired QT Holdings Corporation (Quad) for approximately $20 million plus $51 million in potential milestone payments. On August 1, 2018, the Company acquired Exosome Diagnostics, Inc. (Exosome) for approximately $250 million plus $325 million in potential milestone payments. The purchase accounting for these acquisitions are in progress.

In connection with the acquisition of Exosome Diagnostics, Inc. on August 1, 2018, the Company entered into a new credit facility that provides for a revolving credit facility of $600 million, which can be increased by an additional $200 million subject to certain conditions, and a term loan of $250 million. The credit facility is governed by a Credit Agreement dated August 1, 2018 and matures on August 1, 2023.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors Bio-Techne Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Bio-Techne Corporation and subsidiaries. as of June 30, 2018 and 2017, 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, 2018, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three‑year period ended June 30, 2018, 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), the Company’s internal control over financial reporting as of June 30, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 27, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

Minneapolis, Minnesota August 27, 2018

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors Bio-Techne Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Bio-Techne Corporation’s and subsidiaries’ (the Company) internal control over financial reporting as of June 30, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission_._ In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of June 30, 2018 and 2017, 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, 2018, and related notes (collectively, the consolidated financial statements), and our report dated August 27, 2018 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Trevigen, Inc., Atlanta Biologicals, Inc., and Eurocell Diagnostics SAS during fiscal 2018, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2018, Trevigen Inc., Atlanta Biologicals, Inc., and Eurocell Diagnostics SAS ’s internal control over financial reporting associated with total assets of 5.3% and total revenues of 1.7% included in the consolidated financial statements of the Company as of and for the year ended June 30, 2018. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Trevigen, Inc., Atlanta Biologicals, Inc., and Eurocell Diagnostics SAS.

Basis for Opinion

The Company’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 Item 9A 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.

Definition and Limitations of Internal Control Over Financial Reporting

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.

/s/ KPMG LLP

Minneapolis, Minnesota August 27, 2018