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TECHNE CORPORATION RELEASES UNAUDITED FIRST QUARTER
FISCAL YEAR 2013 FINANCIAL RESULTS
Minneapolis/October 23, 2012/ Techne Corporation's (NASDAQ:TECH) financial
results for the quarter ended September 30, 2012 include the following
highlights:
- First quarter earnings were $25.7 million or $.70 per diluted share.
Adjusted earnings for the quarter were $27.5 million (a decrease of 8.2%
from the prior fiscal year period) or $.75 per diluted share. Earnings
and adjusted earnings were negatively impacted by foreign currency
fluctuations, which reduced reported sales and gross margins. Adjusted
earnings and earnings per share exclude intangible asset amortization and
costs recognized upon the sale of inventory that was written-up to fair
value as part of acquisitions completed in the quarter ended June 30,
2011.
- Net sales as reported declined by 3.3% to $75.0 million for the
quarter. The quarter ended September 30, 2012 had one less selling day as
compared to the same prior-year period. Organic sales declined by 0.9% in
the quarter and exclude changes in foreign currency rates. A stronger
U.S. dollar as compared to foreign currencies reduced sales by $1.9
million in the quarter ended September 30, 2012 from the comparable prior-
year period.
The Biotechnology segment includes sales made through R&D Systems'
Biotechnology Division, R&D Systems Europe, Tocris, R&D Systems China,
BiosPacific and Boston Biochem. Biotechnology net sales were $69.5 million, a
decrease of 3.9% from $72.3 million for the quarter ended September 30, 2012.
Biotechnology sales declined 1.2% for the quarter ended September 30, 2012 if
foreign currency changes are excluded.
Organic sales growth for the Biotechnology segment from the same prior-year
periods were:
Quarter Ended
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9/30/12 9/30/11
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U.S. industrial, pharmaceutical and biotechnology (5.0%) 9.3%
U.S. academic (4.0%) (2.5%)
Europe 3.1% (0.7%)
China 25.1% 14.1%
Pacific Rim Unchanged Unchanged
Hematology net sales for the quarter ended September 30, 2012 were $5.5
million, an increase of 4.3% from the comparable prior-year period.
The gross margin percentage declined to 74.1% in the quarter ended September
30, 2012 from 75.2% in the comparable prior-year quarter. The decline was
caused by unfavorable exchange rates that were partially offset by lower
costs recognized upon the sale of the inventory that was written-up to fair
value as part of the acquisitions. Gross margins adjusted for costs
recognized upon sale of acquired inventory and amortization of intangible
assets were 76.8% and 79.0% the quarters ended September 30, 2012 and 2011,
respectively. The decrease was primarily caused by unfavorable exchange
rates.
Selling, general and administrative expenses for the quarter ended September
30, 2012 decreased $445,000 million or 4.1% from the quarter ended September
30, 2011. The decrease in selling, general and administrative expense was
impacted by a $685,000 decrease in profit sharing expense for the quarter as
compared to the prior-year period.
Research and development expenses for the quarter ended September 30, 2012
increased $785,000 (11.8%) from the quarter ended September 30, 2011. The
increase in research and development expenses is mainly due to increases in
personnel and supply costs associated with the continuous development and
release of new high-quality biotechnology products.
Other non-operating expenses include foreign exchange transaction losses of
$78,000 and $524,000 in the quarters ended September 30, 2012 and 2011,
respectively.
The effective tax rate for the quarter ended September 30, 2012 was 32.4% as
compared to 32.0% for the same prior-year period. Effective tax rates for
fiscal 2013 are expected to be 31% to 33%.
The Company's investment in ChemoCentryx, Inc. (CCXI) is included in short-
term available-for-sale investments at September 30, 2012 at a fair-value of
$73.5 million. The Company's unrealized gain of $44.0 million on the
investment, net of deferred tax liability of $15.8 million, was included in
accumulated other comprehensive income at September 30, 2012.
The Company did not repurchase any shares of its common stock during the
quarter ended September 30, 2012. Approximately $27.0 million remains
available at September 30, 2012 for the repurchase and retirement of shares
under the currently-open authorization.
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 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, net earnings and earnings per share for the quarter ended
September 30, 2012 as compared to the reported amounts for the same period
ended September 30, 2011:
- fluctuations in exchange rates used to convert transactions in foreign
currencies (primarily the Euro, British pound sterling and Chinese yuan)
to U.S. dollars; and
- the impact of amortizing intangible assets and the recognition of costs
upon the sale of inventory written-up to fair value resulting from the
fiscal 2011 the acquisitions of Boston Biochem, Inc. and Tocris Holdings
Ltd.
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 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 three operating
subsidiaries: BiosPacific, Inc. BiosPacific), located in Emeryville,
California, Boston Biochem, Inc., located in Cambridge, Massachusetts and R&D
Systems China Co. Ltd., (R&D China), located in Shanghai, China. 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 Ltd (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
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9/30/12 9/30/11
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Net sales $75,025 $77,596
Cost of sales 19,442 19,209
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Gross margin 55,583 58,387
Operating expenses:
Selling, general and administrative 10,328 10,773
Research and development 7,452 6,667
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Total operating expenses 17,780 17,440
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Operating income 37,803 40,947
Other income (expense):
Interest income 661 728
Other non-operating expense, net (478) (1,175)
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Total other (expense) income 183 (447)
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Earnings before income taxes 37,986 40,500
Income taxes 12,318 12,979
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Net earnings $25,668 $27,521
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Earnings per share:
Basic $ 0.70 $ 0.74
Diluted $ 0.70 $ 0.74
Weighted average common shares outstanding:
Basic 36,828 37,095
Diluted 36,895 37,170
TECHNE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
9/30/12 6/30/12
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ASSETS
Cash and equivalents $130,805 $116,675
Short-term available-for-sale investments 142,262 152,311
Trade accounts receivable 35,119 35,668
Inventory 38,397 38,277
Other current assets 3,560 3,576
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Current assets 350,143 346,507
-------- --------
Available-for-sale investments 131,713 143,966
Property and equipment, net 94,920 93,788
Goodwill and intangible assets, net 133,009 132,158
Other non-current assets 2,844 2,905
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Total assets $712,629 $719,324
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 14,178 $ 13,836
Payable for pending available-for-sale
investment purchases 0 4,429
Income taxes - deferred and current 8,723 17,485
-------- --------
Current liabilities 22,901 35,750
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Deferred taxes 9,123 9,132
Stockholders' equity 680,605 674,442
-------- --------
Total liabilities and stockholders' equity $712,629 $719,324
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TECHNE CORPORATION
RECONCILIATION of ORGANIC SALES
(In thousands)
(Unaudited)
Quarter Ended
------------------
9/30/12 9/30/11
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Net sales $75,025 $77,596
Organic sales adjustments:
Impact of foreign currency fluctuations 1,906 0
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Organic sales $76,931 $77,596
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Organic sales growth (0.9%) 3.2%
TECHNE CORPORATION
RECONCILIATION of NET EARNINGS and EARNINGS per SHARE
(In thousands, except per share data)
(Unaudited)
Quarter Ended
------------------
9/30/12 9/30/11
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Net earnings $25,668 $27,521
Identified adjustments:
Costs recognized upon sale of acquired inventory 1,268 2,148
Amortization of intangibles 1,264 1,285
Tax impact of above adjustments (679) (968)
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1,853 2,465
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Net earnings - adjusted for identified items $27,521 $29,986
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Adjusted growth (8.2%) 13.2%
Earnings per share - Diluted - adjusted $ 0.75 $ 0.81
TECHNE CORPORATION
RECONCILIATION of GROSS MARGIN PERCENTAGES
(Unaudited)
Quarter Ended
------------------
9/30/12 9/30/11
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Gross margin percentage 74.1% 75.2%
Identified adjustments:
Costs recognized upon sale of acquired inventory 1.7% 2.8%
Amortization of intangibles 1.0% 1.0%
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Gross margin percentage - adjusted 76.8% 79.0%
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TECHNE CORPORATION
RECONCILIATION of INTANGIBLE AMORTIZATION
(In thousands)
(Unaudited)
Quarter Ended
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9/30/12 9/30/11
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Amortization of intangible assets included in:
Cost of goods sold $ 753 $ 764
Selling, general and administrative expenses 519 521
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Total amortization of intangible assets $ 1,272 $ 1,285
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