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TECHNE CORPORATION RELEASES UNAUDITED FOURTH QUARTER
AND FISCAL YEAR 2011 RESULTS
Minneapolis/August 2, 2011/ Techne Corporation's (NASDAQ:TECH) financial
results for the fourth quarter and fiscal year ended June 30, 2011 include
the following highlights:
Fourth quarter earnings grew 9.4% to $28.3 million or $.76 per diluted
share. Earnings for the quarter grew 21.2% to $31.6 million or $.85 per
diluted share when adjusted for intangible asset amortization, costs
recognized upon the sale of inventory that was written up to fair value as
part of the acquisitions completed in the quarter and professional and
other acquisition related costs.
Fiscal year earnings grew 2.3% to $112 million or $3.02 per diluted
share. Earnings for the fiscal year grew 9.9% to $116 million or $3.13
per diluted share when adjusted for the above identified items and the
tax benefit in fiscal 2010 from repatriation of cash.
Net sales as reported grew 17.0% to $78.0 million for the quarter. Organic
sales grew 6.5% in the quarter.
Net sales as reported grew 7.8% to $290 million for the fiscal year.
Organic sales grew 5.9% in the fiscal year.
Consolidated net earnings for the quarter and fiscal year ended June 30, 2011
were impacted by the acquisition of Boston Biochem, Inc. (Boston Biochem) on
April 1, 2011 and Tocris Holdings Limited (Tocris) on April 28, 2011,
including the cost recognized upon the sale of inventory that was written up
to fair value as part of the acquisitions, increased amortization of acquired
intangible assets, professional fees and other costs to complete the
transactions and an increase in the effective tax rate as a result of certain
acquisition costs not being deductible. Increased sales and foreign exchange
transaction gains also helped to improve earnings. Results for the prior
fiscal year included a $4.7 million tax benefit, equating to $.12 per share,
from a foreign exchange tax loss on Techne's repatriation of 50 million
pounds sterling from R&D Systems Europe to its U.S. based parent.
Consolidated net sales for the quarter and fiscal year ended June 30, 2011
include $4.7 million of sales from the acquired companies. A weaker U.S.
dollar as compared to foreign currencies improved sales by $2.3 million and
$466,000 in the quarter and fiscal year ended June 30, 2011, respectively,
from the comparable prior-year periods.
As a result of the acquisitions described above, the Company has revised its
segment reporting and will include the operations of R&D Systems'
Biotechnology Division, R&D Systems Europe, Tocris, R&D Systems China,
BiosPacific and Boston Biochem in its Biotechnology segment. R&D Systems'
Hematology Division operations will continue to be reported as the Company's
Hematology segment.
Biotechnology segment net sales were $73.0 million for the quarter ended June
30, 2011, an increase of 17.3% from $62.3 million for the quarter ended June
30, 2010. Biotechnology net sales were $270 million for the fiscal year
ended June 30, 2011, an increase of 7.8% from $251 million for the fiscal
year ended June 30, 2010. Biotechnology sales growth was 6.1% and 5.8% for
the quarter and fiscal year ended June 30, 2011, respectively, if the sales
from the acquisitions and foreign currency benefit are excluded.
Customer sales growth for the Biotechnology segment from the same prior-year
periods included:
Period ended June 30, 2011
--------------------------
Quarter Fiscal Year
---------- -----------
R&D Systems Biotechnology Division:
Industrial, pharmaceutical
and biotechnology 2.3% 4.8%
Academic 3.0% 6.4%
Pacific Rim distributors 10.2% 4.1%
R&D Europe:
Reported 16.2% 4.4%
In constant currency 3.2% 4.1%
R&D China:
Reported 28.1% 26.0%
In constant currency 22.2% 22.6%
Hematology net sales for the quarter and fiscal year ended June 30, 2011 were
$5.0 million and $19.7 million, increases of 11.9% and 7.0%, respectively,
from the comparable prior-year periods.
The gross margin percentage declined to 76.4% in the quarter ended June 30,
2011 from 79.1% in the comparable prior-year quarter due costs recognized
upon the sale of inventory that was written up to fair value as part of the
acquisitions and amortization of intangible assets. Gross margins were 79.5%
and 79.3% for the quarters ended June 30, 2011 and 2010, respectively, if
such costs were excluded in both periods.
Selling, general and administrative expenses for the quarter and fiscal year
ended June 30, 2011 increased $3.0 million and $3.2 million from the quarter
and fiscal year ended June 30, 2010. The acquired businesses added $945,000
of selling, general and administrative expenses in the quarter and fiscal
year, excluding intangible amortization which increased $259,000 in the
quarter. The increase in selling, general and administrative expense for the
quarter and fiscal year was also impacted by increased professional fees and
costs related to the acquisitions ($1.3 million and $1.7 million for the
quarter and fiscal year, respectively) and increased profit sharing expense
($388,000 and $805,000 for the quarter and fiscal year, respectively).
Foreign exchange transaction gains for the quarter and fiscal year ended June
30, 2011 were $177,000 and $844,000, respectively, compared to foreign
exchange transaction losses of $631,000 and $960,000 for the quarter and
fiscal year ended June 30, 2010, respectively.
The effective tax rate for the quarter and fiscal year ended June 30, 2011
was 34.1% and 31.9% as compared to 32.9% and 29.8% for the same prior-year
periods. The effective tax rate for the quarter and fiscal year were impacted
by non-deductible professional fees and other costs related to the
acquisitions, the renewal of the U.S. research and development credit and an
increase in the deduction for qualified production activities. The effective
rates for the prior fiscal year were abnormally low due to the tax benefit
received following repatriation of funds from the U.K. to the U.S. Excluding
this benefit, the effective tax rates for the fiscal year ended June 30, 2010
would have been 32.8%. Effective tax rates for fiscal 2012 are expected to
be 31% to 33%.
Forward Looking Statements:
Our press releases may contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act. Such statements, including
the expected effective tax rate, involve risks and uncertainties that may
affect the actual results of operations. The following important factors,
among others, have affected and, in the future, could affect the Company's
actual results: the integration of the acquired companies, the introduction
and acceptance of new biotechnology and hematology products, the levels and
particular directions of research by the Company's customers, the impact of
the growing number of producers of biotechnology research products and
related price competition, general economic conditions, the retention of
hematology OEM and proficiency survey business, the impact of currency
exchange rate fluctuations, and the costs and results of research and product
development efforts of the Company and of companies in which the Company has
invested or with which it has formed strategic relationships.
For additional information concerning such factors, see the section titled
"Risk Factors" in the Company's annual report on Form 10-K and quarterly
reports on Form 10-Q as filed with the Securities and Exchange Commission.
We undertake no obligation to update or revise any forward-looking statements
we make in our press releases due to new information or future events.
Investors are cautioned not to place undue emphasis on these statements.
Use of Adjusted Financial Measures:
The adjusted financial measures used in this press release quantify the
impact the following events had on reported net sales, gross margin
percentages, selling, general and administrative expenses, effective tax
rates, net earnings and earnings per share for the quarter and fiscal year
ended June 30, 2011 as compared to the reported amounts for the same periods
ended June 30, 2010:
- fluctuations in exchange rates used to convert transactions in foreign
currencies (primarily the Euro, British pound sterling and Chinese
yuan) to U.S. dollars,
- the acquisitions of Boston Biochem on April 1, 2011 and Tocris on April
28, 2011, including the impact of amortizing intangible assets and the
recognition of costs upon the sale of inventory written up to fair
value, and
- the tax benefit received following repatriation of cash from the United
Kingdom in fiscal 2010.
These adjusted financial measures are not prepared in accordance with
generally accepted accounting principles (GAAP) and may be different from
adjusted financial measures used by other companies. Adjusted financial
measures should not be considered as a substitute for, or superior to,
measures of financial performance prepared in accordance with GAAP. We view
these adjusted financial measures to be helpful in assessing the Company's
ongoing operating results. In addition, these adjusted financial measures
facilitate our internal comparisons to historical operating results and
comparisons to competitors' operating results. We include these adjusted
financial measures in our earnings announcement because we believe they are
useful to investors in allowing for greater transparency related to
supplemental information we use in our financial and operational analysis.
Investors are encouraged to review the reconciliations of the adjusted
financial measures used in this press release to their most directly
comparable GAAP financial measures as provided with the financial statements
attached to this press release.
* * * * * * * * * * * *
Techne Corporation has two operating subsidiaries: Research and Diagnostic
Systems, Inc. (R&D Systems) of Minneapolis, Minnesota and R&D Systems Europe,
Ltd. (R&D Europe) of Abingdon, England. R&D Systems is a specialty
manufacturer of biological products. R&D Systems has four subsidiaries:
BiosPacific, Inc. (BiosPacific), located in Emeryville, California, Boston
Biochem, Inc., located in Cambridge, Massachusetts, R&D Systems China Co.
Ltd., (R&D China), located in Shanghai, China and Tocris Cookson Inc.,
located in Saint Louis, Missouri. BiosPacific is a worldwide supplier of
biologics to manufacturers of in vitro diagnostic systems and
immunodiagnostic kits. Boston Biochem is a leading developer and manufacturer
of ubiquitin-related research products. R&D China and R&D Europe distribute
biotechnology products. R&D Europe has two subsidiaries: Tocris Holdings
Limited (Tocris) of Bristol, England and R&D Systems GmbH, a German sales
operation. Tocris is a leading supplier of reagents for non-clinical life
science research.
Contact: Greg Melsen, Chief Financial Officer
Kathy Backes, Controller
(612) 379-8854
TECHNE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
---------------- ------------------
6/30/11 6/30/10 6/30/11 6/30/10
------- ------- -------- --------
Net sales $78,038 $66,714 $289,962 $269,047
Cost of sales 18,407 13,943 65,025 54,898
------- ------- -------- --------
Gross margin 59,631 52,771 224,937 214,149
Operating expenses:
Selling, general and
administrative 10,562 7,595 35,897 32,700
Research and development 6,466 6,251 25,985 25,121
------- ------- -------- --------
Total operating expenses 17,028 13,846 61,882 57,821
------- ------- -------- --------
Operating income 42,603 38,925 163,055 156,328
Other income (expense):
Interest income 818 1,011 3,752 4,375
Other non-operating expense, net (450) (1,335) (1,826) (4,257)
------- ------- -------- --------
Total other income (expense) 368 (324) 1,926 118
------- ------- -------- --------
Earnings before income taxes 42,971 38,601 164,981 156,446
Income taxes 14,640 12,706 52,679 46,670
------- ------- -------- --------
Net earnings $28,331 $25,895 $112,302 $109,776
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Earnings per share:
Basic $ 0.76 $ 0.70 $ 3.03 $ 2.95
Diluted $ 0.76 $ 0.69 $ 3.02 $ 2.94
Weighted average common
shares outstanding:
Basic 37,140 37,233 37,098 37,255
Diluted 37,230 37,314 37,172 37,347
TECHNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
6/30/11 6/30/10
-------- --------
ASSETS
Cash and equivalents $ 77,613 $ 94,139
Short-term available-for-sale investments 63,200 44,672
Trade accounts receivable 35,914 30,850
Other receivables 1,946 1,532
Inventory 44,906 13,737
Other current assets 6,838 16,110
-------- --------
Current assets 230,417 201,040
-------- --------
Available-for-sale investments 131,988 171,171
Property and equipment, net 95,398 97,400
Goodwill and intangible assets, net 138,915 27,112
Other non-current assets 20,952 22,093
-------- --------
Total assets $617,670 $518,816
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 18,188 $ 17,024
Deferred taxes 13,360 0
Stockholders' equity 586,122 501,792
-------- --------
Total liabilities and stockholders' equity $617,670 $518,816
======== ========
TECHNE CORPORATION
RECONCILIATION of ORGANIC SALES
(In thousands)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
---------------- ------------------
6/30/11 6/30/10 6/30/11 6/30/10
------- ------- -------- --------
Net sales $78,038 $66,714 $289,962 $269,047
Organic sales adjustments:
Acquisitions (4,683) 0 (4,683) 0
Impact of foreign currency
fluctuations (2,328) 0 (466) 0
------- ------- -------- --------
Organic sales $71,027 $66,714 $284,813 $269,047
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TECHNE CORPORATION
RECONCILIATION of NET EARNINGS and EARNINGS per SHARE
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
---------------- ------------------
6/30/11 6/30/10 6/30/11 6/30/10
------- ------- -------- --------
Net earnings $28,331 $25,895 $112,302 $109,776
Identified adjustments:
Costs recognized upon sale
of acquired inventory 1,835 0 1,835 0
Amortization of intangibles 954 240 1,465 960
Professional fees and other
acquisition related costs 1,256 0 1,735 0
Tax benefit from repatriation
of cash 0 0 0 (4,660)
------- ------- -------- --------
4,045 240 5,035 (3,700)
Tax impact of adjustments (797) (86) (1,119) (346)
------- ------- -------- --------
3,247 154 3,915 (4,046)
------- ------- -------- --------
Net earnings - Adjusted for
identified items $31,578 $26,049 $116,217 $105,730
======= ======= ======== ========
Earnings per share -
Diluted - Adjusted $ 0.85 $ 0.70 $ 3.13 $ 2.83
TECHNE CORPORATION
RECONCILIATION of GROSS MARGIN PERCENTAGES
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
---------------- ------------------
6/30/11 6/30/10 6/30/11 6/30/10
------- ------- -------- --------
Gross margin percentage 76.4% 79.1% 77.6% 79.6%
Identified adjustments:
Costs recognized upon sale
of acquired inventory 2.4% 0.0% 0.6% 0.0%
Amortization of intangibles 0.7% 0.2% 0.3% 0.2%
------- ------- -------- --------
Gross margin percentage - Adjusted 79.5% 79.3% 78.5% 79.8%
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TECHNE CORPORATION
RECONCILIATION of SELLING, GENERAL and ADMINISTRATIVE EXPENSES
(In thousands)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
---------------- ------------------
6/30/11 6/30/10 6/30/11 6/30/10
------- ------- -------- --------
Selling, general and
administrative expenses $10,562 $ 7,595 $ 35,896 $ 32,700
Identified adjustments:
Acquired companies' expense,
excluding intangible
amortization (945) 0 (945) 0
Professional fees and other
acquisition related costs (1,256) 0 (1,735) 0
Amortization of intangibles (390) ( 131) (575) (525)
------- ------- -------- --------
Selling, general and administrative
expenses - Adjusted $ 7,971 $ 7,464 $ 32,641 $ 32,175
======= ======= ======== ========
TECHNE CORPORATION
RECONCILIATION of EFFECTIVE TAX RATE
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
---------------- ------------------
6/30/11 6/30/10 6/30/11 6/30/10
------- ------- -------- --------
Effective tax rate 34.1% 32.9% 31.9% 29.8%
Identified adjustments:
Tax benefit from repatriation
of cash 0.0% 0.0% 0.0% 3.0%
Non deductible professional
fees and acquisition costs (1.1%) 0.0% (0.2%) 0.0%
------- ------- -------- --------
Effective tax rate - Adjusted 33.0% 32.9% 31.7% 32.8%
======= ======= ======== ========
TECHNE CORPORATION
RECONCILIATION of INTANGIBLE AMORTIZATION
(In thousands)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
---------------- ------------------
6/30/11 6/30/10 6/30/11 6/30/10
------- ------- -------- --------
Amortization of intangible assets
was included in:
Cost of goods sold $ 564 $ 109 $ 890 $ 435
Selling, general and
administrative expenses 390 131 575 525
------- ------- -------- --------
Total amortization of
intangible assets $ 954 $ 240 $ 1,465 $ 960
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