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TECHNE CORPORATION RELEASES UNAUDITED FOURTH QUARTER
AND FISCAL YEAR 2013 RESULTS
Minneapolis/August 6, 2013/ Techne Corporation's (NASDAQ:TECH) financial
results for the fourth quarter and fiscal year ended June 30, 2013 include
the following highlights:
Fourth quarter earnings were $28.4 million or $0.77 per diluted share.
Adjusted earnings for the quarter were $30.2 million (an increase of 2.1%
from the prior fiscal year period) or $0.82 per diluted share. Adjusted
earnings and adjusted earnings per share exclude 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 ended June 30, 2011, professional fees related to an acquisition
completed in July 2013, and certain income tax credits.
Earnings for the fiscal year ended June 30, 2013 were $112 million or
$3.05 per diluted share. Adjusted earnings for the fiscal year ended June
30, 2013 were $118 million (a decrease of 2.6% from the prior fiscal year)
or $3.20 per diluted share. Adjusted earnings and adjusted earnings per
diluted share for the fiscal year were impacted by foreign currency
fluctuations, which reduced reported sales and gross margins. Adjusted
earnings and adjusted earnings per diluted share exclude the acquisition-
related and tax items noted above. In addition, fiscal 2012 adjusted
earnings and adjusted earnings per diluted share also exclude the impact
of impairment charges on certain equity investments and the reversal of
deferred tax asset valuation allowances.
Net sales as reported increased 1.0% to $79.5 million for the quarter
ended June 30, 2013. Organic sales increased 1.1% in the quarter. Organic
sales exclude changes in foreign currency exchange rates. The fourth
quarter of fiscal 2012 included the Easter holiday which was in the third
quarter of the current fiscal year.
Net sales as reported declined 1.3% to $311 million for the fiscal year
ended June 30, 2013. Organic sales, which exclude changes in foreign
currency exchange rates, declined 0.4% in the fiscal year. A stronger
U.S. dollar as compared to foreign currencies reduced sales by $2.6
million in the fiscal year ended June 30, 2013 from the prior fiscal year.
The Biotechnology segment includes sales made through R&D Systems'
Biotechnology Division, R&D Europe, Tocris, R&D China, BiosPacific and Boston
Biochem. Biotechnology segment net sales were $73.7 million for the quarter
ended June 30, 2013, an increase of 1.0% from $73.0 million for the quarter
ended June 30, 2012. Biotechnology net sales were $288 million for the
fiscal year ended June 30, 2013, a decrease of 1.8% from $293 million for the
fiscal year ended June 30, 2012. Biotechnology sales increased 1.1% and
declined 0.8% for the quarter and fiscal year ended June 30, 2013,
respectively, excluding changes in foreign currency exchange rates.
The table below shows changes to the components of organic sales for the
Biotechnology segment, from the same prior-year periods.
Quarter Ended Fiscal Year Ended
6/30/13 6/30/13
------------- -----------------
U.S. industrial, pharmaceutical
and biotechnology 2.6% (2.6%)
U.S. academic (6.8%) (5.9%)
Europe 6.8% 0.1%
China 17.7% 18.9%
Pacific Rim (0.1%) 3.5%
The Clinical Controls segment includes sales made through R&D Systems'
Clinical Controls Division (formerly Hematology). Clinical Controls net
sales for the quarter and fiscal year ended June 30, 2013 were $5.7 million
and $22.4 million, increases of 0.7% and 5.3%, respectively, from the
comparable prior-year periods.
The gross margin percentage was 74.4% in the quarter ended June 30, 2013 as
compared to 74.8% in the comparable prior-year quarter. For the fiscal year
ended June 30, 2013 the gross margin percentage decreased to 74.4% from 75.0%
in the comparable prior-year period. Gross margins adjusted for costs
recognized upon sale of acquired inventory and amortization of intangible
assets were 76.6% and 78.0% for the quarters ended June 30, 2013 and 2012,
respectively, and 76.8% and 78.4% for the fiscal years ended June 30, 2013
and 2012, respectively, if such costs were excluded in all periods. The
decrease in adjusted gross margins for the quarter and fiscal year were
primarily caused by lower sales volumes and unfavorable exchange rates.
Selling, general and administrative expenses for the quarter and fiscal year
ended June 30, 2013 increased $1.8 million and $1.7 million from the quarter
and fiscal year ended June 30, 2012, respectively. Selling, general and
administrative expenses for the quarter and fiscal year ended June 30, 2013
included $607,000 of professional fees related to an acquisition of
Bionostics Holdings Limited and subsidiaries which closed in July 2013 and
$500,000 of professional fees related to design and engineering for a new
facility in the UK. A decision was made during the quarter ended June 30,
2013 to pursue other options related to the facilities in the UK. Selling,
general and administrative expense for the fiscal year ended June 30, 2013
was also impacted by a decrease of $1.1 million in profit sharing and bonuses
compared to the prior fiscal year. The remaining increase in selling,
general and administrative expense for the quarter and fiscal year ended June
30, 2013 was mainly the result of increased executive compensation and wages
and consulting related to upgrading the Company's website.
Research and development expenses for the quarter and fiscal year ended June
30, 2013 decreased $103,000 (1.4%) and increased $1.3 million (4.8%) from the
quarter and fiscal year ended June 30, 2012, respectively. 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 for the quarter and fiscal year ended June 30,
2013 included foreign exchange transaction losses of $21,000 and foreign
exchange transaction gains of $339,000, respectively, compared to foreign
exchange transaction losses of $897,000 and $1.4 million for the quarter and
fiscal year ended June 30, 2012, respectively. Included in other non-
operating expenses for the quarter and fiscal year ended June 30, 2013 is a
$708,000 gain from the sale of substantially all of the assets of Hemerus
Medical, LLC. one of the Company's equity investments. The sale closed in
April 2013 and the Company received a $1.1 million distribution at the time
of the close and recorded the gain.
The effective tax rate for the quarter and fiscal year ended June 30, 2013
were 30.3% and 29.9% as compared to 32.9% and 30.7% for the same prior-year
periods. In January 2013, the U.S. federal credit for research and
development was reinstated retroactively for the period of January 2012
through December 2013. As a result, the credit for the January to June 30,
2012 period is included in fiscal year 2013 income tax expense. Income tax
for the fiscal year ended June 30, 2012 was positively impacted by $3.0
million due to the reversal of a valuation allowance on deferred tax assets
related to the excess tax basis in the Company's investments in
unconsolidated entities.
The Company's investment in ChemoCentryx, Inc. (CCXI) is included in short-
term available for sale investments at June 30, 2013 at a fair-value of $89.6
million. The Company's unrealized gain of $60.2 million on the investment,
net of a deferred tax liability of $21.5 million, was included in accumulated
other comprehensive income at June 30, 2013.
The Company repurchased 28,300 shares of its common stock during the quarter
ended June 30, 2013 for $1.8 million. Approximately $125 million remains
available at June 30, 2013 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 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 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 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 and the effective tax rate
for the quarter and fiscal year ended June 30, 2013 as compared to the
reported amounts for the same periods ended June 30, 2012:
- fluctuations in exchange rates used to convert transactions in foreign
currencies (primarily the Euro, British pound sterling and Chinese yuan) to
U.S. dollars;
- professional fees related to the acquisition of Bionostics Holdings
Limited and subsidiaries which closed in July 2013.
- the acquisitions of Boston Biochem, Inc. on April 1, 2011 and Tocris
Holdings Ltd. 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;
- impairment losses related to the Company's investments in unconsolidated
entities; and
- income tax adjustments related to the reversal of valuation allowances on
deferred tax assets and the reinstatement of the U.S. credit for research and
development expenditures.
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 and Subsidiaries (the Company) are engaged in the
development, manufacture and sale of biotechnology products and hematology
calibrators and controls. These activities are conducted through the
Company's 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, Bionostics Holdings Limited (Bionostics), operating in Devens,
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. Bionostics is a leading supplier of control solutions
used in point of care blood glucose and blood gas testing.
R&D China and R&D Europe distribute the Company's 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 chemical 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
6/30/13 6/30/12 6/30/13 6/30/12
------- ------- -------- --------
Net sales $79,475 $78,681 $310,575 $314,560
Cost of sales 20,358 19,817 79,465 78,756
------- ------- -------- --------
Gross margin 59,117 58,864 231,110 235,804
Operating expenses:
Selling, general and administrative 12,118 10,360 43,384 41,683
Research and development 7,183 7,286 29,257 27,912
------- ------- -------- --------
Total operating expenses 19,301 17,646 72,641 69,595
------- ------- -------- --------
Operating income 39,816 41,218 158,469 166,209
Other income (expense):
Interest income 670 643 2,646 2,639
Impairment loss on investments
in unconsolidated entities 0 0 0 (3,254)
Other non-operating expense, net 278 (1,244) (453) (3,399)
------- ------- -------- --------
Total other income (expense) 948 (601) 2,193 (4,014)
------- ------- -------- --------
Earnings before income taxes 40,764 40,617 160,662 162,195
Income taxes 12,353 13,376 48,101 49,864
------- ------- -------- --------
Net earnings $28,411 $27,241 $112,561 $112,331
======= ======= ======== ========
Earnings per share:
Basic $ 0.77 $ 0.74 $ 3.06 $ 3.04
Diluted $ 0.77 $ 0.74 $ 3.05 $ 3.04
Weighted average common
shares outstanding:
Basic 36,841 36,831 36,836 36,939
Diluted 36,897 36,894 36,900 37,006
TECHNE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
6/30/13 6/30/12
-------- --------
ASSETS
Cash and equivalents $163,786 $116,675
Short-term available-for-sale investments 169,151 152,311
Trade accounts receivable 38,183 35,668
Inventory 34,877 38,277
Other current assets 3,519 3,576
-------- --------
Current assets 409,516 346,507
-------- --------
Available-for-sale investments 132,376 143,966
Property and equipment, net 108,756 93,788
Goodwill and intangible assets, net 124,888 132,158
Other non-current assets 2,562 2,905
-------- --------
Total assets $778,098 $719,324
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 13,385 $ 13,836
Payable for pending available-for-sale
investment purchases 6,479 4,429
Income taxes - deferred and current 12,220 17,485
-------- --------
Current liabilities 32,084 35,750
Deferred taxes 8,473 9,132
Stockholders' equity 737,541 674,442
-------- --------
Total liabilities and stockholders' equity $778,098 $719,324
======== ========
TECHNE CORPORATION
RECONCILIATION of ORGANIC SALES
(In thousands)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
6/30/13 6/30/12 6/30/13 6/30/12
------- ------- -------- --------
Net sales $79,475 $78,681 $310,575 $314,560
Organic sales adjustments:
Impact of foreign currency
fluctuations 33 0 2,637 0
------- ------- -------- --------
Organic sales $79,508 $78,681 $313,212 $314,560
======= ======= ======== ========
Organic sales growth 1.1% 0.6% (0.4%) 1.8%
TECHNE CORPORATION
RECONCILIATION of GROSS MARGIN PERCENTAGES
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
6/30/13 6/30/12 6/30/13 6/30/12
------- ------- -------- --------
Gross margin percentage 74.4% 74.8% 74.4% 75.0%
Identified adjustments:
Costs recognized upon sale of
acquired inventory 1.3% 2.2% 1.4% 2.4%
Amortization of intangibles 0.9% 1.0% 1.0% 1.0%
------- ------- -------- --------
Gross margin percentage - adjusted 76.6% 78.0% 76.8% 78.4%
======= ======= ======== ========
TECHNE CORPORATION
RECONCILIATION of NET EARNINGS and EARNINGS per SHARE
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
6/30/13 6/30/12 6/30/13 6/30/12
------- ------- -------- --------
Net earnings $28,411 $27,241 $112,561 $112,331
Identified adjustments:
Costs recognized upon sale of
acquired inventory 1,005 1,703 4,501 7,573
Amortization of intangibles 1,249 1,273 5,061 5,094
Acquisition related professional fees 607 0 607 0
Impairment losses on investments 0 0 0 3,254
Tax impact of above adjustments (630) (785) (2,596) (4,668)
Tax impact of research and
development credit (206) (35) (1,392) (465)
Tax impact of foreign source income (210) 196 (710) 1,058
Tax impact of reversal of
valuation allowance 0 0 0 (3,016)
------- ------- -------- --------
Net earnings - adjusted $30,226 $29,593 $118,032 $121,161
======= ======= ======== ========
Adjusted growth 2.1% (2.6%)
Earnings per share - diluted
- adjusted $ 0.82 $ 0.80 $ 3.20 $ 3.27
TECHNE CORPORATION
RECONCILIATION of EFFECTIVE TAX RATE
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
6/30/13 6/30/12 6/30/13 6/30/12
------- ------- -------- --------
Effective tax rate 30.3% 32.9% 29.9% 30.7%
Identified adjustments:
Research and development credit 0.5% 0.1% 0.9% 0.3%
Foreign source income 0.5% (0.5%) 0.4% (0.7%)
Reversal of valuation allowance 0.0% 0.0% 0.0% 1.9%
------- ------- -------- --------
Effective tax rate - adjusted 31.3% 32.5% 31.2% 32.2%
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TECHNE CORPORATION
RECONCILIATION of INTANGIBLE AMORTIZATION
(In thousands)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
6/30/13 6/30/12 6/30/13 6/30/12
------- ------- -------- --------
Amortization of intangible assets
included in:
Cost of goods sold $ 736 $ 755 $ 2,992 $ 3,018
Selling, general and
administrative expenses 513 518 2,069 2,076
------- ------- -------- --------
Total amortization of
intangible assets $ 1,249 $ 1,273 $ 5,061 $ 5,094
======= ======= ======== ========
