2014

Techne Corporation Releases Unaudited Third Quarter And Nine Month Fiscal Year 2013 Results

MINNEAPOLIS, April 30, 2013 /PRNewswire/ -- Techne Corporation's (NASDAQ: TECH) financial results for the third quarter and nine months ended March 31, 2013 include the following highlights:

Third quarter earnings were $33.1 million or $0.90 per diluted share.  Adjusted earnings for the quarter were $32.5 million (a decrease of 3.2% from the prior fiscal year period) or $0.88 per diluted share.  Earnings and adjusted earnings were negatively impacted by foreign currency fluctuations, which reduced reported sales and gross margins.  Adjusted earnings and adjusted earnings per share exclude intangible asset amortization and 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 and also exclude certain income tax credits and changes in income tax estimates.  Adjusted earnings and adjusted earnings per diluted share for the third quarter of fiscal 2012 also exclude the impact of impairment charges on certain equity investments and the reversal of deferred tax asset valuation allowances.

Earnings for the nine-month period ended March 31, 2013 were $84.1 million or $2.28 per diluted share.  Adjusted earnings for the nine-month period ended March 31, 2013 were $87.8 million (a decrease of 4.1% from the prior fiscal year period) or $2.38 per diluted share.  Adjusted earnings and earnings per diluted share for the nine-month periods were also impacted by the foreign currency fluctuations and exclude the acquisition-related items, impairment charges, income tax adjustments and the reversal of valuation allowance noted above.

Net sales as reported declined 3.2% to $81.0 million for the quarter ended March 31, 2013. Organic sales declined 3.0% in the quarter.  Organic sales exclude changes in foreign currency exchange rates.  The third quarter of fiscal 2013 had one less ship day as compared to the prior fiscal year and also included the Easter holiday which was in the fourth quarter of the prior fiscal year.

Net sales as reported declined 2.0% to $231 million for the nine months ended March 31, 2013.  Organic sales, which exclude changes in foreign currency exchange rates, declined 0.9% in the nine-month period.  A stronger U.S. dollar as compared to foreign currencies reduced sales by $122,000 and $2.6 million in the quarter and nine-month period ended March 31, 2013, respectively, from the comparable prior-year periods.

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 $75.3 million for the quarter ended March 31, 2013, a decrease of 3.7% from $78.2 million for the quarter ended March 31, 2012.  Biotechnology net sales were $214 million for the nine-month period ended March 31, 2013, a decrease of 2.7% from $220 million for the nine-month period ended March 31, 2012.  Biotechnology sales declined 3.5% and 1.5% for the quarter and nine month period ended March 31, 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

Nine Months Ended


3/31/13

3/31/13




U.S. industrial, pharmaceutical  and biotechnology

(2.5%)

(4.2%)

U.S. academic

(8.5%)

(5.5%)

Europe

(10.3%)

(2.0%)

China

24.9%

19.4%

Pacific Rim

9.6%

4.7%




The Hematology segment includes sales made through R&D Systems' Hematology Division.  Hematology net sales for the quarter and nine month period ended March 31, 2013 were $5.7 million and $16.7 million, increases of 4.9% and 7.0%, respectively, from the comparable prior-year periods.

The gross margin percentage was 75.5% in the quarter ended March 31, 2013 as compared to 75.8% in the comparable prior-year quarter.  For the nine-month period ended March 31, 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 77.7% and 79.0% for the quarters ended March 31, 2013 and 2012, respectively, and 76.9% and 78.5% for the nine-month periods ended March 31, 2013 and 2012, respectively, if such costs were excluded in all periods.  The decrease in adjusted gross margins for the quarter and nine-month periods were primarily caused by lower sales volumes and unfavorable exchange rates.

Selling, general and administrative expenses for the quarter and nine-month periods ended March 31, 2013 increased $83,000 and declined $57,000 from the quarter and nine-month period ended March 31, 2012, respectively. Selling, general and administrative expenses were impacted by decreases in profit sharing expense of $399,000 and $1.1 million for the quarter and nine-month periods, respectively, as compared to the prior-year periods.  The increase in selling, general and administrative expense, excluding profit sharing impact, was mainly the result of increased marketing wages and consulting related to upgrading the Company's website.

Research and development expenses for the quarter and nine-month periods ended March 31, 2013 increased $97,000 (1.4%) and $1.4 million (7.0%) from the quarter and nine-month periods ended March 31, 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 nine-month periods ended March 31, 2013 included foreign exchange transaction gains of $289,000 and $360,000, respectively, compared to foreign exchange transaction gains of $164,000 and foreign exchange transaction losses of $465,000 for the quarter and nine-month periods ended March 31, 2012, respectively.

The effective tax rate for the quarter and nine-month periods ended March 31, 2013 were 25.5% and 29.8% as compared to 26.5% and 30.0% 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, in addition to the credit for the quarter ended March 31, 2013, the Company recorded the credit for calendar 2012 in the third quarter of fiscal 2013.  Also included in third quarter fiscal 2013 income taxes was a reduction in U.S. tax expense due to changes in estimates related to foreign source income.  Income taxes for the quarter and nine-month periods ended March 31, 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.  Effective tax rates for the remainder of fiscal 2013 are expected to be 30% to 32%. 

The Company's investment in ChemoCentryx, Inc. (CCXI) is included in short-term available for sale investments at March 31, 2013 at a fair-value of $87.5 million.  The Company's unrealized gain of $58.0 million on the investment, net of a deferred tax liability of $20.8 million, was included in accumulated other comprehensive income at March 31, 2013.

The Company did not repurchase any shares of its common stock during the quarter or nine-month periods ended March 31, 2013.  Approximately $127 million remains available at March 31, 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, 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 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 nine-month periods ended March 31, 2013 as compared to the reported amounts for the same periods ended March 31, 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;

  - 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, the reinstatement of the U.S. credit for research and development expenditures and the effect of changes in estimates related to foreign source income.

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 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

NINE MONTHS ENDED


3/31/13

3/31/12

3/31/13

3/31/12

Net sales

$80,992

$83,621

$231,100

$235,879

Cost of sales

19,845

20,238

59,107

58,939

Gross margin

61,147

63,383

171,993

176,940

Operating expenses:





   Selling, general and administrative

9,982

9,899

31,266

31,323

   Research and development

7,219

7,122

22,074

20,626

      Total operating expenses

17,201

17,021

53,340

51,949

Operating income

43,946

46,362

118,653

124,991

Other income (expense):





   Interest income

638

470

1,976

1,996

   Impairment loss on investments in unconsolidated entities

0

(3,254)

0

(3,254)

   Other non-operating expense, net

(118)

(373)

(731)

(2,155)

       Total other income (expense)

520

(3,157)

1,245

(3,413)

Earnings before income taxes

44,466

43,205

119,898

121,578

Income taxes

11,348

11,449

35,748

36,488

Net earnings

$33,118

$ 31,756

$ 84,150

$ 85,090

Earnings per share:





 Basic

$    0.90

$    0.86

$    2.28

$    2.30

 Diluted

$   0.90

$    0.86

$   2.28

$    2.30

Weighted average common shares outstanding:





  Basic

36,842

36,864

36,835

36,975

  Diluted

36,908

36,930

36,901

37,043

 

TECHNE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)




ASSETS

3/31/13

6/30/12

Cash and equivalents

$150,713

$116,675

Short-term available-for-sale investments

162,162

152,311

Trade accounts receivable

38,138

35,668

Inventory

35,675

38,277

Other current assets

3,469

3,576

  Current assets

390,157

346,507

Available-for-sale investments

135,765

143,966

Property and equipment, net

105,202

93,788

Goodwill and intangible assets, net

126,090

132,158

Other non-current assets

3,076

2,905

  Total assets

$760,290

$719,324

LIABILITIES AND STOCKHOLDERS' EQUITY



Accounts payable and accrued expenses

$  13,638

$  13,836

Payable for pending available-for-sale investment purchases

4,599

4,429

Income taxes – deferred and current

14,244

17,485

  Current liabilities

32,481

35,750

Deferred taxes

8,300

9,132

Stockholders' equity

719,509

674,442

  Total liabilities and stockholders' equity

$760,290

$719,324

 

TECHNE CORPORATION

RECONCILIATION of ORGANIC SALES

(In thousands)

(Unaudited)



QUARTER ENDED

NINE MONTHS ENDED


3/31/13

3/31/12

3/31/13

3/31/12

Net sales

$80,992

$83,621

$231,100

$235,879

Organic sales adjustments:





      Impact of foreign currency fluctuations

122

0

2,604

0

Organic sales

$81,114

$83,621

$233,704

$235,879






Organic sales growth

(3.0%)

1.8%

(0.9%)

2.3%

 

TECHNE CORPORATION

RECONCILIATION of GROSS MARGIN PERCENTAGES

(Unaudited)





QUARTER ENDED

NINE MONTHS ENDED


3/31/13

3/31/12

3/31/13

3/31/12

Gross margin percentage

75.5%

75.8%

74.4%

75.0%

Identified adjustments:





     Costs recognized upon sale of acquired inventory

1.3%

2.3%

1.5%

2.5%

     Amortization of intangibles

0.9%

0.9%

1.0%

1.0%

Gross margin percentage - adjusted

77.7%

79.0%

76.9%

78.5%

 


TECHNE CORPORATION

RECONCILIATION of NET EARNINGS and EARNINGS per SHARE

(In thousands, except per share data)

(Unaudited)





QUARTER ENDED

NINE MONTHS ENDED


3/31/13

3/31/12

3/31/13

3/31/12

Net earnings

$33,118

$31,756

$84,150

$85,090

Identified adjustments:





     Costs recognized upon sale of acquired inventory

1,032

1,955

3,496

5,870

     Amortization of intangibles

1,252

1,268

3,806

3,821

     Impairment losses on investments

0

3,254

0

3,254

     Tax impact of above adjustments

(619)

(2,069)

(1,965)

(3,883)

     Tax impact of  research and development credit

(1,186)

0

(1,186)

(430)

     Tax impact of foreign source income

(1,138)

379

(500)

862

     Tax impact of reversal of valuation allowance

0

(3,016)

0

(3,016)

Net earnings - adjusted 

$32,459

$33,527

$87,801

$91,568






Adjusted growth

(3.2%)


(4.1%)







Earnings per share - diluted – adjusted

$   0.88

$    0.91

$2.38

$     2.47

 

TECHNE CORPORATION

RECONCILIATION of EFFECTIVE TAX RATE

(Unaudited)





QUARTER ENDED

NINE MONTHS ENDED


3/31/13

3/31/12

3/31/13

3/31/12

Effective tax rate

25.5%

26.5%

29.8%

30.0%

Identified adjustments:





     Reversal of valuation allowance

0.0%

7.0%

0.0%

2.5%

     Research and development credit

2.7%

0.0%

1.0%

0.4%

     Foreign source income

2.5%

(0.9%)

0.4%

(0.8%)

Effective tax rate - adjusted

30.7%

32.6%

31.2%

32.1%

           

TECHNE CORPORATION

RECONCILIATION of INTANGIBLE AMORTIZATION

(In thousands)

(Unaudited)





QUARTER ENDED

NINE MONTHS ENDED


3/31/13

3/31/12

3/31/13

3/31/12

Amortization of intangible assets included in:





     Cost of goods sold

$   742

$  750

$2,256

$2,263

     Selling, general and administrative expenses

516

518

1,556

1,558

Total amortization of intangible assets

$1,258

$1,268

$3,812

$3,821

 

SOURCE Techne Corporation



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