2014

Techne Corporation Releases Unaudited Second Quarter and Six Month Fiscal Year 2012 Results

MINNEAPOLIS, Jan. 31, 2012 /PRNewswire/ -- Techne Corporation's (NASDAQ: TECH) financial results for the second quarter and six months ended December 31, 2011 include the following highlights:

Second quarter earnings were $25.8 million or $0.70 per diluted share.  Adjusted earnings for the quarter grew 5.1%, to $28.0 million or $0.76 per diluted share after adjustment for intangible asset amortization and costs recognized upon the sale of inventory that was written-up to fair value as part of the acquisitions of Boston Biochem, Inc. and Tocris Holdings Limited completed in the quarter ended June 30, 2011.

Earnings for the six-month period ended December 31, 2011 were $53.3 million or $1.44 per diluted share.  Adjusted earnings for the six-month period ended December 31, 2011 grew 9.1%, to $58.0 million or $1.56 per diluted share after adjustment for 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 grew 10.3% to $74.7 million for the quarter ended December 31, 2011. Organic sales grew 1.8% in the quarter.  Organic sales exclude sales from acquisitions and the changes in foreign currency rates.

Net sales as reported grew 12.2% to $152 million for the six months ended December 31, 2011.  Organic sales grew 2.5% in the six-month period.

A weaker U.S. dollar as compared to foreign currencies improved sales by $238,000 and $2.1 million in the quarter and six-month period ended December 31, 2011, respectively, from the comparable prior-year periods.

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 $69.8 million for the quarter ended December 31, 2011, an increase of 10.7% from $63.1 million for the quarter ended December 31, 2010.  Biotechnology net sales were $142 million for the six-month period ended December 31, 2011, an increase of 12.7% from $126 million for the six-month period ended December 31, 2010.  Biotechnology sales growth was 1.5% and 2.2% for the quarter and six month period ended December 31, 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 include:



Period Ended December 31, 2011


Quarter

Six Months

R&D Systems Biotechnology Division:



   Industrial, pharmaceutical  and biotechnology

4.6%

7.0%

   Academic

(4.1%)

(3.3%)

   Pacific Rim distributors

11.2%

5.8%

R&D Europe:



    Reported

1.0%

5.9%

    Organic

(0.8%)

(0.8%)

R&D China:



   Reported

48.5%

36.7%

   Organic

32.8%

23.8%




Hematology net sales for the quarter and six month period ended December 31, 2011 were $4.9 million and $10.1 million, increases of 4.9% and 6.5%, respectively, from the comparable prior-year periods.

The gross margin percentage declined to 73.9% in the quarter ended December 31, 2011 from 77.4% in the comparable prior year quarter and to 74.6% in the six-month period ended December 31, 2011 from 77.4% in the comparable prior-year period, due 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 77.3% and 77.6% for the quarters ended December 31, 2011 and 2010, respectively, and 78.5% and 77.6% for the six-month period ended December 31, 2011 and 2010, respectively, if such costs were excluded in all periods.

Selling, general and administrative expenses for the quarter and six-month period ended December 31, 2011 increased $2.2 million and $5.4 million from the quarter and six-month period ended December 31, 2010. The acquired businesses added $1.7 million and $3.3 million of selling, general and administrative expenses, excluding intangible asset amortization, in the quarter and six-month period ended December 31, 2011, respectively.  Intangible amortization increased $458,000 and $918,000 in the quarter and six-month period ended December 31, 2011, respectively, from the same prior-year periods. The increase in selling, general and administrative expense for the six-month period ended December 31, 2011 was also impacted by increased profit sharing expense of $832,000 from the comparable prior-year period.

Other non-operating expenses for the quarter and six-month period ended December 31, 2011 included foreign exchange transaction losses of $104,000 and $629,000, respectively, compared to foreign exchange transaction losses of $87,000 and foreign exchange transaction gains of $418,000 for the quarter and six-month period ended December 31, 2010, respectively.

The effective tax rate for the quarter and six-month period ended December 31, 2011 was 31.8% and 31.9% as compared to 29.6% and 31.0% for the same prior-year periods. The U.S. research and development credit was renewed in late calendar 2010, reducing the effective tax rate in the quarter and six months ended December 31, 2010.  Effective tax rates for fiscal 2012 are expected to be 31% to 33%.  

Techne repurchased 113,167 and 263,027 shares of its common stock curing the quarter and six months ended December 31, 2011, respectively, for approximately $7.5 million and $18.2 million.  Approximately $32.4 million remains available at December 31, 2011 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 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, net earnings and earnings per share for the quarter and six-month period ended December 31, 2011 as compared to the reported amounts for the same periods ended December 31, 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, and

 - 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.

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 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 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

SIX MONTHS ENDED


12/31/11

12/31/10

12/31/11

12/31/10

Net sales

$74,662

$67,708

$152,258

$135,653

Cost of sales

19,492

15,327

38,701

30,677

Gross margin

55,170

52,381

113,557

104,976

Operating expenses:





  Selling, general and administrative

10,651

8,427

21,424

16,040

     Research and development

6,837

6,603

13,504

13,222

     Total operating expenses

17,488

15,030

34,928

29,262

Operating income

37,682

37,351

78,629

75,714

Other income (expense):





  Interest income

798

1,020

1,526

1,867

  Other non-operating expense, net

(607)

(698)

(1,782)

(955)

      Total other (expense) income

191

322

(256)

912

Earnings before income taxes

37,873

37,673

78,373

76,626

Income taxes

12,060

11,139

25,039

23,719

Net earnings

$25,813

$26,534

$53,334

$52,907

Earnings per share:





Basic

$   0.70

$   0.72

$   1.44

$   1.43

Diluted

$   0.70

$   0.71

$   1.44

$   1.42

Weighted average common shares outstanding:





 Basic

36,966

37,093

37,030

37,066

 Diluted

37,028

37,156

37,099

37,131




TECHNE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



ASSETS

12/31/11

6/30/11

Cash and equivalents

$  80,994

$ 77,613

Short-term available-for-sale investments

56,758

63,200

Trade accounts receivable

32,351

35,914

Other receivables

2,194

1,946

Inventory

40,978

44,906

Other current assets

13,941

6,838

 Current assets

227,216

230,417

Available-for-sale investments

148,114

131,988

Property and equipment, net

94,604

95,398

Goodwill and intangible assets, net

133,919

138,915

Other non-current assets

20,395

20,952

 Total assets

$624,248

$617,670

LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities

$  14,123

$  18,188

Deferred taxes

12,619

13,360

Stockholders' equity

597,506

586,122

 Total liabilities and stockholders' equity

$624,248

$617,670




TECHNE CORPORATION

RECONCILIATION of ORGANIC SALES

(In thousands)

(Unaudited)





QUARTER ENDED

SIX MONTHS ENDED


12/31/11

12/31/10

12/31/11

12/31/10

Net sales

$74,662

$67,708

$152,258

$135,653

Organic sales adjustments:





    Acquisitions

(5,515)

0

(11,055)

0

     Impact of foreign currency fluctuations

(238)

0

(2,116)

0

Organic sales  

$68,909

$67,708

$139,087

$135,653




TECHNE CORPORATION

RECONCILIATION of  NET EARNINGS and EARNINGS per SHARE

(In thousands, except per share data)

(Unaudited)





QUARTER ENDED

SIX MONTHS ENDED


12/31/11

12/31/10

12/31/11

12/31/10

Net earnings

$25,813

$26,534

$53,334

$52,907

Identified adjustments:





    Costs recognized upon sale of acquired inventory

1,767

0

3,915

0

    Amortization of intangibles

1,268

171

2,553

341


3,035

171

6,468

341

    Tax impact of adjustments

(858)

(63)

(1,826)

(126)


2,177

108

4,642

215

Net earnings – Adjusted for identified  items

$27,990

$26,642

$57,976

$53,122






Earnings per share – Diluted – Adjusted

$   0.76

$   0.72

$   1.56

$   1.43




TECHNE CORPORATION

RECONCILIATION of GROSS MARGIN PERCENTAGES

(Unaudited)




QUARTER ENDED

SIX MONTHS ENDED


12/31/11

12/31/10

12/31/11

12/31/10

Gross margin percentage

73.9%

77.4%

74.6%

77.4%

Identified adjustments:





    Costs recognized upon sale of acquired inventory

2.4%

0.0%

2.6%

0.0%

     Amortization of intangibles

1.0%

0.2%

1.0%

0.2%

Gross margin percentage – Adjusted

77.3%

77.6%

78.2%

77.6%




TECHNE CORPORATION

RECONCILIATION of SELLING, GENERAL and ADMINISTRATIVE EXPENSES

(In thousands)

(Unaudited)




QUARTER ENDED

SIX MONTHS ENDED


12/31/11

12/31/10

12/31/11

12/31/10

Selling, general and administrative expenses

$10,651

$8,427

$21,424

$16,040

Identified selling, general and administrative expense  adjustments:





     Acquired companies' expense, excluding intangible amortization

(1,720)

0

(3,282)

0

     Amortization of intangibles

(519)

(61)

(1,040)

( 122)

Selling, general and administrative expenses – Adjusted

$8,412

$8,366

$17,102

$15,918




TECHNE CORPORATION

RECONCILIATION of INTANGIBLE AMORTIZATION

(In thousands)

(Unaudited)




QUARTER ENDED

SIX MONTHS ENDED


12/31/11

12/31/10

12/31/11

12/31/10

Amortization of intangible assets included in:





    Cost of goods sold

$749

$110

$1,513

$219

    Selling, general and administrative expenses

519

61

1,040

122

Total amortization of intangible assets

$1,268

$171

$2,553

$341




SOURCE Techne Corporation



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