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TECHNE CORPORATION RELEASES UNAUDITED SECOND QUARTER
AND SIX MONTH FISCAL YEAR 2014 RESULTS
Minneapolis/February 4, 2014/ Techne Corporation's (NASDAQ:TECH) financial
results for the second quarter and six months ended December 31, 2013 include
the following highlights:
Second quarter earnings were $25.1 million or $0.68 per diluted share.
Adjusted earnings for the quarter were $27.8 million (an increase of 2.4%
from the prior fiscal year period) or $0.75 per diluted share. 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 acquisitions.
Earnings for the six-month period ended December 31, 2013 were $52.5
million or $1.42 per diluted share. Adjusted earnings for the six-month
period ended December 31, 2013 were $58.5 million (an increase of 7.0%
from the prior fiscal year period) or $1.58 per diluted share. Adjusted
earnings and adjusted earnings per share for the six-month period exclude
the acquisition-related items noted above and professional fees related to
an acquisition completed in fiscal 2014.
Net sales as reported increased 11.9% to $84.0 million for the quarter
ended December 31 2013. Organic sales increased 0.4% in the quarter.
Organic sales exclude sales by Bionostics Holding Limited, which was
acquired on July 22, 2013 for net cash of $103 million, and the impact of
foreign currency exchange rate fluctuations.
Net sales as reported increased 13.0% to $169.7 million for the six months
ended December 31 2013. Organic sales, excluding the sales by Bionostics
Holdings Limited and the impact of foreign currency exchange rate
fluctuations, increased 2.8% in the six-month period.
"I am very pleased with the progress made in the development of the company,"
said Charles Kummeth, President and Chief Executive Officer of Techne.
"Changes made in operations have improved efficiencies in our Biotech
division, allowing us to focus more on growth. Gross margins have remained
strong and expenses are within our plans as we invest in new people, leaders,
technologies, and regions. While growth in the second quarter was less than
in the first quarter, our progress is steady, especially considering the
difficult market situation in the academic and government sector."
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 $70.6 million for the quarter
ended December 31, 2013, an increase of 1.3% from $69.6 million for the
quarter ended December 31, 2012. Biotechnology sales were $143.7 million for
the six-month period ended December 31, 2013, an increase of 3.3% from $139.1
million for the six-month period ended December 31, 2012. Biotechnology
sales increased 0.4% and 2.4% for the quarter and six months ended December
31, 2013, respectively, excluding the impact of foreign currency exchange
rate fluctuations.
The table below shows changes to the components of organic sales for the
Biotechnology segment, from the same prior-year period.
Quarter Ended Six Months Ended
12/31/13 12/31/13
------------- ----------------
U.S. industrial, pharmaceutical
and biotechnology 2.6% 4.5%
U.S. academic (4.6%) (8.5%)
Europe (2.0%) (0.3%)
China 31.7% 34.7%
Pacific Rim 7.5% 10.5%
The Clinical Controls segment includes sales made through R&D Systems'
Clinical Controls Division and Bionostics. Clinical Controls net sales for
the quarter and six months ended December 31, 2013 were $13.5 million and
$25.9 million, respectively. Excluding sales by Bionostics subsequent to the
acquisition, Clinical Controls sales growth for the quarter and six months
ended December 31, 2013 were 0.5% and 7.0%, respectively. The increases were
mainly the result of the timing of shipments at the beginning and end of the
first fiscal quarter and volume increases.
The consolidated gross margin percentage was 69.7% and 73.6% for the quarters
ended December 31, 2013 and 2012, and 70.5% and 73.8% for the six months
ended December 31, 2013 and 2012, respectively. Gross margins adjusted for
costs recognized upon sale of acquired inventory and amortization of
intangible assets were 72.7% and 76.2% for the quarters ended December 31,
2013 and 2012, and 73.6% and 76.4% for the six months ended December 31, 2013
and 2012, respectively. The decrease in adjusted gross margins for the
quarter was primarily caused by a change in product mix from higher margin
Biotechnology segment sales to Clinical Controls segment sales as a result of
the Bionostics acquisition.
Selling, general and administrative expenses for the quarter and six months
ended December 31, 2013 increased $4.0 million and $7.7 million from the
quarter and six months ended December 31, 2012. Selling, general and
administrative expenses for the quarter ended December 31, 2013 included $1.0
million of selling, general and administrative expenses by Bionostics which
was acquired in July 2013 and an increase in intangible asset amortization of
$1.1 million related to the acquisition. Selling, general and administrative
expenses included a $541,000 increase in stock compensation expense for the
quarter ended December 31, 2013 compared to the same prior-year period. The
remaining increase in selling, general and administrative expense for the
quarter ended December 31, 2013 was mainly the result of increased executive
compensation and additional sales staff added since the second quarter of
fiscal 2013.
Selling, general and administrative expenses for the six months ended
December 31, 2013 included $532,000 of professional fees related to the
acquisition of Bionostics on July 22, 2013, $2.1 million of selling, general
and administrative expenses by Bionostics after the acquisition date and an
increase in intangible asset amortization of $1.5 million related to the
acquisition. Selling, general and administrative expenses included an
$807,000 increase in stock compensation expense for the six months ended
December 31, 2013 compared to the same prior-year period. The remaining
increase in selling, general and administrative expense for the six months
ended December 31, 2013 was mainly the result of increased executive
compensation and additional sales staff added since the first half of fiscal
2013.
Research and development expenses for the quarter and six months ended
December 31, 2013 increased $520,000 (7.0%) and $770,000 (5.2%) from the
quarter and six months ended December 31, 2012. Included in research and
development expenses for the quarter and six months ended December 31, 2013
were $192,000 and $386,000, respectively of expenses by Bionostics. The
remainder of the increase in research and development for the quarter and six
months was due to personnel and supply costs associated with the continuous
development and release of new high-quality biotechnology products.
The effective tax rate for both the quarter and six months ended December 31,
2013, 2013 was 30.8% compared to 32.3% for the same prior-year periods. The
decrease in the effective tax rate was primarily the result of decreased tax
rates in the U.K. and the increased percentage of pretax income from foreign
operations which have lower income tax rates than the U.S.
The Company's investment in ChemoCentryx, Inc. (CCXI) is included in short-
term available for sale investments at December 31, 2013 and June 30, 2013 at
fair-values of $36.7 million and $89.6 million, respectively. The Company's
unrealized gain on the investment at December 31, 2013 and June 30, 2013 of
$7.2 million and $60.2 million, respectively, net of income tax effect, are
included in accumulated other comprehensive income.
Cash generated from operations for the quarter and six months ended December
31, 2013 were $31.3 million and $63.9 million, respectively. Capital
expenditures for the quarter and six months ended December 31, 2013 were $3.7
million and $7.5 million, respectively.
Forward Looking Statements:
Our press releases may contain forward-looking statements within the meaning
of the Private Securities 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 clinical control 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, selling, general and administrative expenses, net earnings and
earnings per share for the quarter and six months ended December 31, 2013 as
compared to the reported amounts for the same prior-year period:
- 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 Bionostics on July 22, 2013, Boston Biochem, Inc. in
fiscal 2011 and Tocris Holdings Ltd. in fiscal 2011, including the impact of
amortizing intangible assets and the recognition of costs upon the sale of
inventory written-up to fair value;
- professional fees related to the acquisition of Bionostics which closed
in July 2013.
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 and Subsidiaries (the Company) are engaged in the
development, manufacture and sale of biotechnology products and hematology
calibrators and controls. These activities are conducted through the
Company's 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, Bionostics Holdings Limited (Bionostics), operating in Devens,
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. Bionostics is a leading supplier of control solutions
used in point of care blood glucose and blood gas testing.
R&D China and R&D Europe distribute the Company's 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 chemical reagents for non-clinical life science research.
Contact: Chuck Kummeth, Chief Executive Officer
(612) 379-8854
TECHNE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- --------
Net sales $84,017 $75,083 $169,685 $150,108
Cost of sales 25,424 19,820 49,978 39,262
-------- -------- -------- --------
Gross margin 58,593 55,263 119,707 110,846
Operating expenses:
Selling, general and administrative 14,926 10,956 28,947 21,284
Research and development 7,923 7,403 15,625 14,855
-------- -------- -------- --------
Total operating expenses 22,849 18,359 44,572 36,139
-------- -------- -------- --------
Operating income 35,744 36,904 75,135 74,707
Other income (expense):
Interest income 545 677 1,112 1,338
Other non-operating expense, net (71) (135) (375) (613)
-------- -------- -------- --------
Total other income (expense) 474 542 737 725
-------- -------- -------- --------
Earnings before income taxes 36,218 37,446 75,872 75,432
Income taxes 11,163 12,082 23,389 24,400
-------- -------- -------- --------
Net earnings $25,055 $25,364 $ 52,483 $ 51,032
======== ======== ======== ========
Earnings per share:
Basic $ 0.68 $ 0.69 $ 1.42 $ 1.39
Diluted $ 0.68 $ 0.69 $ 1.42 $ 1.38
Weighted average common
shares outstanding:
Basic 36,882 36,834 36,862 36,831
Diluted 37,015 36,900 36,968 36,897
TECHNE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
12/31/13 6/30/13
-------- --------
ASSETS
Cash and equivalents $ 98,402 $163,786
Short-term available-for-sale investments 88,454 169,151
Trade accounts receivable 38,306 38,183
Inventory 39,992 34,877
Deferred income taxes 9,878 0
Other current assets 4,109 3,519
-------- --------
Current assets 279,141 409,516
-------- --------
Available-for-sale investments 162,590 132,376
Property and equipment, net 115,159 108,756
Goodwill and intangible assets, net 242,907 124,888
Other non-current assets 2,368 2,562
-------- --------
Total assets $802,165 $778,098
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 16,272 $ 13,385
Payable for pending available-for-sale
investment purchases 4,019 6,479
Income taxes payable 1,818 2,276
Deferred income taxes 0 9,944
-------- --------
Current liabilities 22,109 32,084
-------- --------
Deferred taxes 31,528 8,473
Stockholders' equity 748,528 737,541
-------- --------
Total liabilities and stockholders' equity $802,165 $778,098
======== ========
TECHNE CORPORATION
RECONCILIATION of ORGANIC SALES (In thousands)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- --------
Net sales $84,017 $75,083 $169,685 $150,108
Organic sales adjustments:
Acquisition (7,975) 0 (14,195) 0
Impact of foreign currency
fluctuations (643) 0 (1,253) 0
-------- -------- -------- --------
Organic sales $75,399 $75,083 $154,237 $150,108
======== ======== ======== ========
Organic sales growth 0.4% 1.3% 2.8% 0.2%
TECHNE CORPORATION
RECONCILIATION of GROSS MARGIN PERCENTAGES
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- --------
Gross margin percentage 69.7% 73.6% 70.5% 73.8%
Identified adjustments:
Costs recognized upon sale of
acquired inventory 1.7% 1.6% 1.9% 1.6%
Amortization of intangibles 1.3% 1.0% 1.2% 1.0%
-------- -------- -------- --------
Gross margin percentage - adjusted 72.7% 76.2% 73.6% 76.4%
======== ======== ======== ========
TECHNE CORPORATION
RECONCILIATION of SELLING, GENERAL and ADMINISTRATIVE EXPENSES
(In thousands)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- --------
Selling, general and
administrative expenses $ 14,926 $ 10,956 $ 28,947 $ 21,284
Identified adjustments:
Acquired company expense,
excluding intangible amortization (1,010) 0 (2,100) 0
Acquisition related professional fees 0 0 (532) 0
Amortization of intangibles (1,528) (521) (2,783) (1,040)
-------- -------- -------- --------
Selling, general and administrative
expenses - adjusted $ 12,388 $ 10,435 $ 23,532 $ 20,244
======== ======== ======== ========
TECHNE CORPORATION
RECONCILIATION of NET EARNINGS and EARNINGS per SHARE
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- --------
Net earnings $ 25,055 $ 25,364 $ 52,483 $ 51,032
Identified adjustments:
Costs recognized upon sale of
acquired inventory 1,404 1,196 3,135 2,464
Amortization of intangibles 2,587 1,282 4,775 2,554
Acquisition related professional fees 0 0 532 0
Tax impact of above adjustments (1,210) (667) (2,383) (1,346)
-------- -------- -------- --------
Net earnings - adjusted $ 27,836 $ 27,175 $ 58,542 $ 54,704
======== ======== ======== ========
Adjusted growth 2.4% 7.0%
Earnings per share - diluted
- adjusted $ 0.75 $ 0.74 $ 1.58 $ 1.48
TECHNE CORPORATION
RECONCILIATION of INTANGIBLE AMORTIZATION
(In thousands)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/13 12/31/12 12/31/13 12/31/12
-------- -------- -------- --------
Amortization of intangible assets
included in:
Cost of goods sold $ 1,059 $ 761 $ 1,992 $ 1,514
Selling, general and
administrative expenses 1,528 521 2,783 1,040
-------- -------- -------- --------
Total amortization of
intangible assets $ 2,587 $ 1,282 $ 4,775 $ 2,554
======== ======== ======== ========
