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Techne Corporation Releases Unaudited Fourth Quarter and Fiscal Year 2011 Results

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MINNEAPOLIS, Aug. 2, 2011 /PRNewswire/ -- 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 to 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.

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

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)

ASSETS

6/30/11

6/30/10

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




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)


3,248

154

3,916

(4,046)

Net earnings – Adjusted for identified items

$31,579

$26,049

$116,218

$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%




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




SOURCE Techne Corporation



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