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Techne Corporation Releases Unaudited Fourth Quarter And Fiscal Year 2012 Results
Date:7/31/2012

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, 2012Quarter

Fiscal YearU.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 ENDEDFISCAL YEAR ENDED6/30/12

    6/30/11

    6/30/12

    6/30/11Net sales

    $78,681

    $78,038

    $314,560

    $289,962Cost of sales

    19,817

    18,407

    78,756

    65,025Gross margin

    58,864

    59,631

    235,804

    224,937Operating expenses:Selling, general and administrative

    10,360

    10,562

    41,683

    35,897Research and development

    7,286

    6,466

    27,912

    25,985Total operating expenses

    17,646

    17,028

    69,595

    61,882Operating income

    41,218

    42,603

    166,209

    163,055Other income (expense):Interest income

    643

    818

    2,639

    3,752Impairment losses on investments in unconsolidated entities

    0

    0

    (3,254)

    0Other non-operating expense, net

    (1,244)

    (450)

    (3,399)

    (1,826)Total other (expense) income

    (601)

    368

    (4,014)

    1,926Earnings before income taxes

    40,617

    42,971

    162,195

    164,981Income taxes

    13,376

    14,640

    49,864

    52,679Net earnings

    $27,241

    $28,331

    $112,331

    $112,302Earnings per share: Basic

    $   0.74

    $   0.76

    $
    3.04

    $   3.03 Diluted

    $   0.74

    $   0.76

    $
    3.04

    $   3.02Weighted average common shares outstanding:  Basic

    36,831

    37,140

    36,939

    37,098  Diluted

    36,894

    37,230

    37,006

    37,172TECHNE CORPORATION

    CONSOLIDATED CONDENSED BALANCE SHEETS

    (In thousands)

    (Unaudited)ASSETS

    6/30/12

    6/30/11Cash and equivalents

    $116,675

    $ 77,613Short-term available-for-sale investments

    152,311

    63,200Trade accounts receivable

    35,668

    35,914Inventory

    38,277

    44,906Other current assets

    3,576

    8,784  Current assets

    346,507

    230,417Available-for-sale investments

    143,966

    131,988Property and equipment, net

    93,788

    95,398Goodwill and intangible assets, net

    132,158

    138,915Other non-current assets

    2,905

    20,952  Total assets

    $719,324

    $617,670LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable and accrued expenses

    $  13,836

    $  12,679Payable for pending available-for-sale investment purchases

    4,429

    0Income taxes – deferred and current

    17,485

    5,509  Current liabilities

    35,750

    18,188Deferred taxes

    9,132

    13,360Stockholders' equity

    674,442

    586,122  Total liabilities and stockholders' equity

    $719,324

    $617,670TECHNE CORPORATION

    RECONCILIATION of ORGANIC SALES

    (In thousands)

    (Unaudited)QUARTER ENDEDFISCAL YEAR ENDED6/30/12

    6/30/11

    6/30/12

    6/30/11Net sales

    $78,681

    $78,038

    $314,560

    $289,962Organic sales adjustments:Acquisitions

    (1,730)

    0

    (19,385)

    0Impact of foreign currency fluctuations

    1,556

    0

    27

    0Organic sales 

    $78,507

    $78,038

    $295,202

    $289,962Organic sales growth

    0.6%1.8%TECHNE CORPORATION

    RECONCILIATION of NET EARNINGS and EARNINGS per SHARE

    (In thousands, except per share data)

    (Unaudited)QUARTER ENDEDFISCAL YEAR ENDED6/30/12

    6/30/11

    6/30/12

    6/30/11Net earnings

    $27,241

    $28,331

    $112,331

    $112,302Identified adjustments:Costs recognized upon sale of acquired inventory

    1,703

    1,835

    7,573

    1,835Amortization of intangibles

    1,273

    954

    5,094

    1,465Acquisition related professional fees

    0

    1,256

    0

    1,735Impairment losses on investments

    0

    0

    3,254

    0Tax impact of above adjustments

    (785)

    (797)

    (4,668)

    (1,119)Tax impact of reversal of valuation allowance

    0

    0

    (3,016)

    02,191

    3,248

    8,237

    3,916Net earnings – adjusted for identified  items

    $29,432

    $31,579

    $120,568

    $116,218Adjusted growth

    (6.8%)3.7%Earnings per share – Diluted – adjusted

    $0.80

    $   0.85

    $
    3.26

    $
    3.13TECHNE CORPORATION

    RECONCILIATION of GROSS MARGIN PERCENTAGES

    (Unaudited)QUARTER ENDEDFISCAL YEAR ENDED6/30/12

    6/30/11

    6/30/12

    6/30/11Gross 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 ENDEDFISCAL YEAR ENDED6/30/12

    6/30/11

    6/30/12

    6/30/11Selling, general and administrative expenses

    $10,360

    $10,562

    $41,683

    $35,897Identified 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

    $32,641TECHNE CORPORATION

    RECONCILIATION of INTANGIBLE AMORTIZATION

    (In thousands)

    (Unaudited)QUARTER ENDEDFISCAL YEAR ENDED6/30/12

    6/30/11

    6/30/12

    6/30/11Amortization of intangible assets included in:Cost of goods sold

    $   755

    $564

    $3,018

    $890Selling, general and administrative expenses

    518

    390

    2,076

    575Total amortization of intangible assets

    $1,273

    $954

    $5,094

    $1,465


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    SOURCE Techne Corporation
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