2014

Techne Corporation Releases Unaudited Fourth Quarter And Fiscal Year 2012 Results

MINNEAPOLIS, July 31, 2012 /PRNewswire/ -- Techne Corporation's (NASDAQ: TECH) financial results for the fourth quarter and fiscal year ended June 30, 2012 include the following highlights:

Fourth quarter earnings were $27.2 million or $0.74 per diluted share. Adjusted earnings for the quarter were $29.4 million (a decrease of 6.8% from the prior fiscal year period) or $0.80 per diluted share. Earnings and adjusted earnings were negatively impacted by foreign currency fluctuations, which reduced reported sales and gross margins and increased foreign currency transaction losses. Adjusted earnings and earnings per share exclude intangible asset amortization, costs recognized upon the sale of inventory that was written-up to fair value and professional fees incurred as part of the acquisitions of Boston Biochem, Inc. and Tocris Holdings Limited completed in the quarter ended June 30, 2011. 


Earnings for the fiscal year ended June 30, 2012 were $112 million or $3.04 per diluted share.  Adjusted earnings for the fiscal year ended June 30, 2012 were $121 million (an increase of 3.7% from the prior fiscal year) or $3.26 per diluted share.  Adjusted earnings and earnings per diluted share for the fiscal year also exclude the impact of impairment charges on certain equity investments and the reversal of deferred tax asset valuation allowances in addition to the acquisition- related items noted above.


Net sales as reported grew 0.8% to $78.7 million for the quarter ended June 30, 2012. Organic sales grew 0.6% in the quarter compared to the prior fiscal year. Organic sales exclude sales from acquisitions and the changes in foreign currency rates.


Net sales as reported grew 8.5% to $315 million for the fiscal year ended June 30, 2012. Organic sales grew 1.8% for the fiscal year ended June 30, 2012 compared to the prior fiscal year.

A stronger U.S. dollar as compared to foreign currencies reduced sales by $1.6 million in the quarter ended June 30, 2012 from the comparable prior-year quarter. Changes in foreign currency exchange rates did not have a material effect on sales for the fiscal year ended June 30, 2012.

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 segment net sales were $73.0 million for both the quarters ended June 30, 2012 and 2011.  Biotechnology net sales were $293 million for the fiscal year ended June 30, 2012, an increase of 8.5% from $270 million for the fiscal year ended June 30, 2011. Biotechnology sales declined 0.3% and grew 1.3% for the quarter and fiscal year ended June 30, 2012, respectively, if sales from the acquisitions and foreign currency effect are excluded.

Organic sales growth for the Biotechnology segment from the same prior-year periods were:


Period Ended June 30, 2012


Quarter

Fiscal Year




U.S. industrial, pharmaceutical  and biotechnology

(2.6%)

3.2%

U.S. academic

0.3%

(5.1%)

Europe

(3.7%)

(1.5%)

China

19.6%

21.6%

Pacific Rim

9.8%

7.0%




Hematology net sales for the quarter and fiscal year ended June 30, 2012 were $5.7 million and $21.3 million, increases of 14.1% and 8.2%, respectively, from the comparable prior-year periods.

The gross margin percentage declined to 74.8% in the quarter ended June 30, 2012 from 76.4% in the comparable prior-year quarter and to 75.0% in the fiscal year ended June 30, 2012 from 77.6% in the comparable prior fiscal year, due to costs recognized upon the sale of inventory that was written-up to fair value as part of the acquisitions completed during the 2011 fiscal year and the amortization of intangible assets. Gross margins were 78.0% and 79.5% for the quarters ended June 30, 2012 and 2011, respectively, and 78.4% and 78.5% for the fiscal years ended June 30, 2012 and 2011, respectively, if such costs were excluded in all periods. The decrease in adjusted gross margins for the quarter ended June 30, 2012 was primarily caused by unfavorable exchange rates.

Selling, general and administrative expenses for the quarter and fiscal year ended June 30, 2012 decreased $202,000 and increased $5.8 million, respectively, from the quarter and fiscal year ended June 30, 2011.  Excluding the acquired company's selling, general and administrative expenses, professional fees related to the acquisitions and intangible amortization, selling, general and administrative expenses increased $830,000 and $2.8 million for the quarter and fiscal year ended June 30, 2012, respectively, from the same prior-year periods. The increase for the quarter ended June 30, 2012, includes a $440,000 increase in advertising and promotional expenses and a final litigation settlement of $170,000. The increase for the fiscal year is mainly the result of a $1.3 million increase in wages and benefits, including additional personnel added during the year, the litigation settlement and $503,000 additional stock option expense.  

Other non-operating expenses include foreign exchange transaction losses of $897,000 and gains of $177,000 in the quarters ended June 30, 2012 and 2011, respectively. Other non-operating expenses include foreign exchange transaction losses of $1.4 million and gains of $844,000 in the fiscal years ended June 30, 2012 and 2011, respectively.

Other expenses for the fiscal year ended June 30, 2012 also included $3.3 million of impairment losses on investments in unconsolidated entities.  These losses were the result of Nephromics, LLC signing an agreement to sell substantially all of its assets and ACTGen, Inc. suffering substantial operating losses and encountering funding difficulties.

The effective tax rate for the quarter and fiscal year ended June 30, 2012 was 32.9% and 30.7%, respectively, as compared to 34.1% and 31.9% for the same prior-year periods. Income taxes for the fiscal year ended June 30, 2012 were 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 effective tax rate for the quarter and fiscal year ended June 30, 2011 was impacted by non-deductible professional fees and other costs related to acquisitions, the renewal of U.S. research and development credit and an increase in the deduction for qualified production activities.  The tax rate for fiscal 2013 is expected to be 31% to 33%.

The Company's investment in ChemoCentryx, Inc. (CCXI) is included in short-term available-for-sale investments at June 30, 2012 at a fair-value of $94.6 million.  The Company's investment in CCXI was $14.3 million at June 30, 2011 and included in other non-current assets as CCXI was not publicly traded. During the third quarter of fiscal 2012, CCXI began trading publicly and at that time the Company invested an additional $15 million in CCXI. The Company's unrealized gain of $65.2 million on the investment, net of deferred tax liability of $23.4 million, was included in accumulated other comprehensive income at June 30, 2012. 

The Company repurchased 34,643 and 343,653 shares of its common stock during the quarter and fiscal year ended June 30, 2012, respectively, for approximately $2.3 million and $23.6 million, respectively.  Approximately $27.0 million remains available at June 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, selling, general and administrative expenses, net earnings and earnings per share for the quarter and fiscal year ended June 30, 2012 as compared to the reported amounts for the same periods ended June 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;
  • 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;
  • professional fess incurred as part of the acquisitions of Boston Biochem, Inc. and Tocris Holdings Ltd.;
  • the amount and impact of impairment losses related to the Company's investments in unconsolidated entities; and
  • the reversal of valuation allowances on deferred tax assets related to the excess tax basis in the Company's unconsolidated entities. 

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.





TECHNE CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)

(Unaudited)





QUARTER ENDED

FISCAL YEAR ENDED


6/30/12

6/30/11

6/30/12

6/30/11

Net sales

$78,681

$78,038

$314,560

$289,962

Cost of sales

19,817

18,407

78,756

65,025

Gross margin

58,864

59,631

235,804

224,937

Operating expenses:





   Selling, general and administrative

10,360

10,562

41,683

35,897

      Research and development

7,286

6,466

27,912

25,985

      Total operating expenses

17,646

17,028

69,595

61,882

Operating income

41,218

42,603

166,209

163,055

Other income (expense):





   Interest income

643

818

2,639

3,752

   Impairment losses on investments in unconsolidated entities

0

0

(3,254)

0

   Other non-operating expense, net

(1,244)

(450)

(3,399)

(1,826)

       Total other (expense) income

(601)

368

(4,014)

1,926

Earnings before income taxes

40,617

42,971

162,195

164,981

Income taxes

13,376

14,640

49,864

52,679

Net earnings

$27,241

$28,331

$112,331

$112,302

Earnings per share:





 Basic

$   0.74

$   0.76

$    3.04

$   3.03

 Diluted

$   0.74

$   0.76

$    3.04

$   3.02

Weighted average common shares outstanding:





  Basic

36,831

37,140

36,939

37,098

  Diluted

36,894

37,230

37,006

37,172




TECHNE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)




ASSETS

6/30/12

6/30/11

Cash and equivalents

$116,675

$ 77,613

Short-term available-for-sale investments

152,311

63,200

Trade accounts receivable

35,668

35,914

Inventory

38,277

44,906

Other current assets

3,576

8,784

  Current assets

346,507

230,417

Available-for-sale investments

143,966

131,988

Property and equipment, net

93,788

95,398

Goodwill and intangible assets, net

132,158

138,915

Other non-current assets

2,905

20,952

  Total assets

$719,324

$617,670

LIABILITIES AND STOCKHOLDERS' EQUITY



Accounts payable and accrued expenses

$  13,836

$  12,679

Payable for pending available-for-sale investment purchases

4,429

0

Income taxes – deferred and current

17,485

5,509

  Current liabilities

35,750

18,188

Deferred taxes

9,132

13,360

Stockholders' equity

674,442

586,122

  Total liabilities and stockholders' equity

$719,324

$617,670




TECHNE CORPORATION

RECONCILIATION of ORGANIC SALES

(In thousands)

(Unaudited)





QUARTER ENDED

FISCAL YEAR ENDED


6/30/12

6/30/11

6/30/12

6/30/11

Net sales

$78,681

$78,038

$314,560

$289,962

Organic sales adjustments:





     Acquisitions

(1,730)

0

(19,385)

0

      Impact of foreign currency fluctuations

1,556

0

27

0

Organic sales 

$78,507

$78,038

$295,202

$289,962






Organic sales growth

0.6%


1.8%





TECHNE CORPORATION

RECONCILIATION of NET EARNINGS and EARNINGS per SHARE

(In thousands, except per share data)

(Unaudited)





QUARTER ENDED

FISCAL YEAR ENDED


6/30/12

6/30/11

6/30/12

6/30/11

Net earnings

$27,241

$28,331

$112,331

$112,302

Identified adjustments:





     Costs recognized upon sale of acquired inventory

1,703

1,835

7,573

1,835

     Amortization of intangibles

1,273

954

5,094

1,465

     Acquisition related professional fees

0

1,256

0

1,735

     Impairment losses on investments

0

0

3,254

0

     Tax impact of above adjustments

(785)

(797)

(4,668)

(1,119)

     Tax impact of reversal of valuation allowance

0

0

(3,016)

0


2,191

3,248

8,237

3,916

Net earnings – adjusted for identified  items

$29,432

$31,579

$120,568

$116,218






Adjusted growth

(6.8%)


3.7%







Earnings per share – Diluted – adjusted

$0.80

$   0.85

$     3.26

$      3.13










TECHNE CORPORATION

RECONCILIATION of GROSS MARGIN PERCENTAGES

(Unaudited)





QUARTER ENDED

FISCAL YEAR ENDED


6/30/12

6/30/11

6/30/12

6/30/11

Gross margin percentage

74.8%

76.4%

75.0%

77.6%

Identified adjustments:





     Costs recognized upon sale of acquired inventory

2.2%

2.4%

2.4%

0.6%

      Amortization of intangibles

1.0%

0.7%

1.0%

0.3%

Gross margin percentage – adjusted

78.0%

79.5%

78.4%

78.5%





TECHNE CORPORATION

RECONCILIATION of SELLING, GENERAL and ADMINISTRATIVE EXPENSES

(In thousands)

(Unaudited)





QUARTER ENDED

FISCAL YEAR ENDED


6/30/12

6/30/11

6/30/12

6/30/11

Selling, general and administrative expenses

$10,360

$10,562

$41,683

$35,897

Identified selling, general and administrative expense

  adjustments:





      Acquired companies' expense, excluding intangible amortization

(1,041)

(945)

(4,201)

(945)

      Amortization of intangibles

(518)

(390)

(2,076)

(575)

      Acquisition related professional fees

0

(1,256)

0

(1,735)

Selling, general and administrative expenses – adjusted

$8,801

$7,971

$35,406

$32,641




TECHNE CORPORATION

RECONCILIATION of INTANGIBLE AMORTIZATION

(In thousands)

(Unaudited)





QUARTER ENDED

FISCAL YEAR ENDED


6/30/12

6/30/11

6/30/12

6/30/11

Amortization of intangible assets included in:





     Cost of goods sold

$   755

$564

$3,018

$890

     Selling, general and administrative expenses

518

390

2,076

575

Total amortization of intangible assets

$1,273

$954

$5,094

$1,465

SOURCE Techne Corporation



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