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TECHNE CORPORATION RELEASES UNAUDITED FIRST QUARTER
FISCAL YEAR 2014 RESULTS
Minneapolis/October 29, 2013/ Techne Corporation's (NASDAQ:TECH) financial
results for the quarter ended September 30, 2013 include the following
highlights:
First quarter earnings were $27.4 million or $0.74 per diluted share.
Adjusted earnings for the quarter were $30.7 million (an increase of 11.6%
from the prior fiscal year period) or $0.83 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 acquisitions and professional fees
related to an acquisition completed in fiscal 2014.
Net sales as reported increased 14.2% to $85.7 million for the quarter
ended September 30, 2013. Organic sales increased 5.1% in the quarter.
Organic sales exclude sales by Bionostics Holding Limited, which was
acquired on July 22, 2013 for net cash of $103 million, and the impact of
foreign currency exchange rate fluctuations.
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 $73.2 million for the quarter
ended September 30, 2013, an increase of 5.3% from $69.5 million for the
quarter ended September 30, 2012. Biotechnology sales increased 4.4% for the
quarter ended September 30, 2013 excluding the impact of foreign currency
exchange rate fluctuations.
The table below shows changes to the components of organic sales for the
Biotechnology segment, from the same prior-year period.
Quarter Ended
9/30/13
-------------
U.S. industrial, pharmaceutical
and biotechnology 6.3%
U.S. academic (11.8%)
Europe 1.5%
China 38.2%
Pacific Rim 13.9%
The Clinical Controls segment includes sales made through R&D Systems'
Clinical Controls Division and Bionostics. Clinical Controls net sales for
the quarter ended September 30, 2013 were $12.5 million. Excluding sales by
Bionostics subsequent to the acquisition, Clinical Controls sales growth for
the quarter ended September 30, 2013 was 13.3%. This increase was mainly the
result of the timing of shipments at both the beginning and the end of the
quarter.
The consolidated gross margin percentage was 71.3% for the quarter ended
September 30, 2013 compared to 74.1% for the comparable prior-year quarter.
Gross margins adjusted for costs recognized upon sale of acquired inventory
and amortization of intangible assets were 74.4% and 76.8% for the quarters
ended September 30, 2013 and 2012, respectively. The decrease in adjusted
gross margins for the quarter was primarily caused by a change in product mix
from higher margin Biotechnology segment sales to Clinical Controls segment
sales as a result of the Bionostics acquisition.
Selling, general and administrative expenses for the quarter ended September
30, 2013 increased $3.7 million from the quarter ended September 30, 2012.
Selling, general and administrative expenses for the quarter included
$532,000 of professional fees related to the acquisition of Bionostics on
July 22, 2013, $1.1 million of selling, general and administrative expenses
by Bionostics after the acquisition date and an increase in intangible asset
amortization of $736,000 related to the acquisition. Selling, general and
administrative expenses included $569,000 and $303,000 of stock compensation
expense for the quarters ended September 30, 2013 and 2012, respectively. The
remaining increase in selling, general and administrative expense for the
quarter ended September 30, 2013 was mainly the result of increased executive
compensation and additional sales staff added since the first quarter of
fiscal 2013.
Research and development expenses for the quarter ended September 30, 2013
increased $250,000 (3.3%) from the quarter ended September 30, 2012. The
increase in research and development expenses is mainly due to research and
development expenses by Bionostics.
Other non-operating expenses for the quarter ended September 30, 2013
included foreign exchange transaction gains of $51,000 compared to foreign
exchange transaction losses of $78,000 for the quarter ended September 30,
2012.
The effective tax rate for the quarter ended September 30, 2013 was 30.8%
compared to 32.4% for the same prior-year period. The decrease in the
effective tax rate was primarily the result of decreased tax rates in the
U.K. and the increased percentage of pretax income from foreign operations
which have lower income tax rates than the U.S.
The Company's investment in ChemoCentryx, Inc. (CCXI) is included in short-
term available for sale investments at September 30, 2013 and June 30, 2013
at fair-values of $35.2 million and $89.6 million, respectively. The
Company's unrealized gain on the investment at September 30, 2013 and June
30, 2013 of $5.8 million and $60.2 million, respectively, net of income tax
effect, are included in accumulated other comprehensive income.
Cash generated from operations for the quarter ended September 30, 2013 were
$32.6 million. Capital expenditures for the quarter ended September 30, 2013
were $3.8 million.
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 clinical control 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, selling, general and administrative expenses, net earnings and
earnings per share and the effective tax rate for the quarter ended September
30, 2013 as compared to the reported amounts for the same prior-year period:
- 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 which closed
in July 2013.
- the acquisitions of Bionostics on July 22, 2013, Boston Biochem, Inc. in
fiscal 2011 and Tocris Holdings Ltd. in fiscal 2011, including the impact of
amortizing intangible assets and the recognition of costs upon the sale of
inventory written-up to fair value;
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
-------------------
9/30/13 9/30/12
------- -------
Net sales $85,668 $75,025
Cost of sales 24,554 19,442
------- -------
Gross margin 61,114 55,583
Operating expenses:
Selling, general and administrative 14,021 10,328
Research and development 7,702 7,452
------- -------
Operating income 39,391 37,803
Other income (expense):
Interest income 567 661
Other non-operating expense, net (304) (478)
------- -------
Total other income (expense) 263 183
------- -------
Earnings before income taxes 39,654 37,986
Income taxes 12,226 12,318
------- -------
Net earnings $27,428 $25,668
======= =======
Earnings per share:
Basic $ 0.74 $ 0.70
Diluted $ 0.74 $ 0.70
Weighted average common shares outstanding:
Basic 36,842 36,828
Diluted 36,928 36,895
TECHNE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
9/30/13 6/30/13
-------- --------
ASSETS
Cash and equivalents $ 83,856 $163,786
Short-term available-for-sale investments 100,843 169,151
Trade accounts receivable 42,240 38,183
Inventory 39,957 34,877
Deferred income taxes 9,527 0
Other current assets 4,213 3,519
-------- --------
Current assets 280,636 409,516
Available-for-sale investments 138,477 132,376
Property and equipment, net 113,362 108,756
Goodwill and intangible assets, net 244,323 124,888
Other non-current assets 2,492 2,562
-------- --------
Total assets $779,290 $778,098
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 17,307 $ 13,385
Payable for pending available-for-sale
investment purchases 0 6,479
Income taxes payable 2,969 2,276
Deferred income taxes 0 9,944
-------- --------
Current liabilities 20,276 32,084
-------- --------
Deferred taxes 32,251 8,473
Stockholders' equity 726,763 737,541
-------- --------
Total liabilities and stockholders' equity $779,290 $778,098
======== ========
TECHNE CORPORATION
RECONCILIATION of ORGANIC SALES (In thousands)
(Unaudited)
QUARTER ENDED
-------------------
9/30/13 9/30/12
-------- --------
Net sales $ 85,668 $ 75,025
Organic sales adjustments:
Acquisition (6,220) 0
Impact of foreign currency fluctuations (610) 0
-------- --------
Organic sales $ 78,838 $ 75,025
======== ========
Organic sales growth 5.1% (0.9%)
TECHNE CORPORATION
RECONCILIATION of GROSS MARGIN PERCENTAGES
(Unaudited)
QUARTER ENDED
-------------------
9/30/13 9/30/12
-------- --------
Gross margin percentage 71.3% 74.1%
Identified adjustments:
Costs recognized upon sale of
acquired inventory 2.0% 1.7%
Amortization of intangibles 1.1% 1.0%
-------- --------
Gross margin percentage - adjusted 74.4% 76.8%
======== ========
TECHNE CORPORATION
RECONCILIATION of SELLING, GENERAL and ADMINISTRATIVE EXPENSES
(In thousands)
(Unaudited)
QUARTER ENDED
-------------------
9/30/13 9/30/12
-------- --------
Selling, general and administrative expenses $ 14,021 $ 10,328
Identified adjustments:
Acquired company expense, excluding
intangible amortization (1,090) 0
Acquisition related professional fees (532) 0
Amortization of intangibles (1,255) (519)
-------- --------
Selling, general and administrative
expenses - adjusted $ 11,144 $ 9,809
======== ========
TECHNE CORPORATION
RECONCILIATION of NET EARNINGS and EARNINGS per SHARE
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED
-------------------
9/30/13 9/30/12
-------- --------
Net earnings $ 27,428 $ 25,668
Identified adjustments:
Costs recognized upon sale of
acquired inventory 1,731 1,264
Amortization of intangibles 2,188 1,272
Acquisition related professional fees 532 0
Tax impact of above adjustments (1,173) (679)
-------- --------
Net earnings - adjusted $ 30,706 $ 27,525
======== ========
Adjusted growth 11.6%
Earnings per share - diluted - adjusted $ 0.83 $ 0.75
TECHNE CORPORATION
RECONCILIATION of INTANGIBLE AMORTIZATION
(In thousands)
(Unaudited)
QUARTER ENDED
-------------------
9/30/13 9/30/12
-------- --------
Amortization of intangible assets
included in:
Cost of goods sold $ 933 $ 753
Selling, general and administrative
expenses 1,255 519
-------- --------
Total amortization of intangible assets $ 2,188 $ 1,272
======== ========
