Techne Corporation Releases Unaudited First Quarter Results for Fiscal Year 2011

Oct 26, 2010, 07:00 ET from Techne Corporation

MINNEAPOLIS, Oct. 26 /PRNewswire-FirstCall/ -- Techne Corporation's (Nasdaq: TECH) consolidated net earnings for the quarter ended September 30, 2010 decreased 1.5% to $26.4 million or $.71 per diluted share compared with $26.8 million or $.72 per diluted share for the quarter ended September 30, 2009. The decrease in consolidated net earnings for the quarter was primarily due to lower gross margins as a result of changes in the exchange rates used to convert sales in foreign currencies (primarily British pound sterling and euro) into U.S. dollars, changes in product mix and increased royalty expense.

Consolidated net sales for the quarter ended September 30, 2010 were $67.9 million or a 2.1% increase from the quarter ended September 30, 2009. Consolidated net sales for the quarter were negatively affected by a stronger U.S. dollar as compared to foreign currencies for the quarter ended September 30, 2009. Excluding the effect of changes in foreign currency exchange rates, consolidated net sales increased 4.0% for the quarter ended September 30, 2010 from the quarter ended September 30, 2009.

Biotechnology net sales, which include sales by R&D Systems' Biotechnology Division, R&D Systems China and BiosPacific, were $46.7 million for the quarter ended September 30, 2010, an increase of 6.0% from $44.0 million for the quarter ended September 30, 2009. North American biotechnology sales to industrial pharmaceutical and biotechnology customers increased 3.1% during the first quarter of fiscal 2011 as compared to the first quarter of fiscal 2010. Biotechnology sales to academic customers, Pacific Rim distributors and sales in China grew 9.9%, 9.0% and 13.5%, respectively, in the first quarter of fiscal 2011 as compared to the first quarter of fiscal 2010.

R&D Europe's net sales for the quarter ended September 30, 2010 were $16.4 million, a decrease of 8.1% from the same prior-year period. R&D Europe's net sales decreased 1.2% for the quarter ended September 30, 2010 when measured at currency rates in effect in the comparable prior-year period. Hematology net sales for the quarter ended September 30, 2010 were $4.9 million, an increase of 5.1% from the comparable prior-year period.

Consolidated gross margin for the quarter ended September 30, 2010 decreased $929,000 from the quarter ended September 30, 2009. Biotechnology gross margin increased $797,000 for the quarter ended September 30, 2010 as a result of increased net sales partially offset by a decrease in gross margin percentage. R&D Europe gross margin decreased $1.8 million compared to the quarter ended September 30, 2009. Approximately $1.2 million of the decrease in R&D Europe gross margin was the result of changes in exchange rates used to translate sales in foreign currencies into U.S. dollars. Approximately 13.9% and 6.3% of consolidated net sales for the quarter ended September 30, 2010 were made in euro and British pound sterling, respectively. The average euro exchange rate declined 9.0% against the U.S. dollar for the quarter ended September 30, 2010 (euro:$1.31) compared to the same prior-year period (euro:$1.44). The average British pound sterling exchange rate declined 4.3% against the U.S. dollar for the quarter ended September 30, 2010 (British pound sterling:$1.56) compared to the same prior-year period (British pound sterling:$1.63). The remainder of R&D Europe's decrease in gross margin was the result of decreased net sales and changes in product mix.

Consolidated gross margin, as a percentage of net sales, was 77.6% for the quarter ended September 30, 2010, compared to 80.6% for the quarter ended September 30, 2009. R&D Europe gross margin percentage for the quarter ended September 30, 2010 was 47.4% compared to 53.5%, mainly as a result of the effect of exchange rate changes on net sales discussed above. Biotechnology gross margin percentage was 78.4% for the quarter ended September 30, 2010 compared to 80.9% for the quarter ended September 30, 2009. The decrease in the Biotechnology gross margin percentage was mainly the result of changes in product mix and $220,000 additional royalty expense and royalty initiation fees related to new licensing agreements.

Selling, general and administrative expenses for the quarter ended September 30, 2010 decreased $486,000 (6.1%) from the quarter ended September 30, 2009. The decrease in selling, general and administrative expense for the quarter resulted primarily from decreased legal expenses of $108,000, lower profit sharing expense of $224,000 and the effect of the change in exchange rates used to convert foreign expenses to U.S. dollars of $134,000.

Research and development expenses for the quarter ended September 30, 2010 increased $465,000 (7.6%) from the quarter ended September 30, 2009. 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.

The effective tax rate for the quarter ended September 30, 2010 was 32.3% as compared to 32.6% for the same prior-year period. The improvement in the effective tax rate in the first quarter of fiscal 2011 was the result of an increase in the deduction for qualified production activities partially offset by the expiration of the U.S. credit for research and development expenses on December 31, 2009.

Forward Looking Statements:

Our press releases may contain forward-looking statements within the meaning of the Private 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 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 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.

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 two subsidiaries, BiosPacific, Inc. (BiosPacific), located in Emeryville, California 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. R&D China and R&D Europe distribute biotechnology products.

TECHNE CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

QUARTER ENDED

9/30/10

9/30/09

Net sales

$67,945

$66,534

Cost of sales

15,241

12,901

Gross margin

52,704

53,633

Operating expenses:

  Selling, general and administrative

7,552

8,038

  Research and development

6,619

6,154

  Amortization of intangible assets

170

240

     Total operating expenses

14,341

14,432

Operating income

38,363

39,201

Other income (expense):

  Interest income

847

1,168

  Other non-operating expense, net

(257)

(662)

      Total other (expense) income

590

506

Earnings before income taxes

38,953

39,707

Income taxes

12,580

12,935

Net earnings

$26,373

$26,772

Earnings per share:

Basic

$   0.71

$   0.72

Diluted

$   0.71

$   0.72

Weighted average common shares outstanding:

 Basic

37,040

37,245

 Diluted

37,107

37,339

TECHNE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

ASSETS

9/30/10

6/30/10

Cash and equivalents

$115,012

$  94,139

Short-term available-for-sale investments

57,622

44,672

Trade accounts receivable

31,019

30,850

Other receivables

1,589

1,532

Inventory

13,818

13,737

Other current assets

14,139

16,110

 Current assets

233,199

201,040

Available-for-sale investments

161,518

171,171

Property and equipment, net

96,322

97,400

Goodwill and intangible assets, net

26,942

27,112

Other non-current assets

21,643

22,093

 Total assets

$539,624

$518,816

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

$  16,059

$  17,024

Stockholders' equity

523,565

501,792

 Total liabilities and stockholders' equity

$539,624

$518,816

SOURCE Techne Corporation