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Techne Corporation Releases Unaudited Second Quarter And Six Month Fiscal Year 2013 Results
Date:2/5/2013

MINNEAPOLIS, Feb. 5, 2013 /PRNewswire/ -- Techne Corporation's (NASDAQ: TECH) financial results for the second quarter and six months ended December 31, 2012 include the following highlights:

Second quarter earnings were $25.4 million or $0.69 per diluted share.  Adjusted earnings for the quarter were $27.2 million (a decrease of 2.9% from the prior fiscal year period) or $0.74 per diluted share.  Earnings and adjusted earnings were negatively impacted by foreign currency fluctuations, which reduced reported sales and gross margins.  Adjusted earnings and 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.

Earnings for the six-month period ended December 31, 2012 were $51.0 million or $1.38 per diluted share.  Adjusted earnings for the six-month period ended December 31, 2012 were $54.7 million (a decrease of 5.6% from the prior fiscal year period) or $1.48 per diluted share.  Adjusted earnings and earnings per diluted share for the six-month period were also impacted by the foreign currency fluctuations and exclude the acquisition-related items noted above.

Net sales as reported grew 0.6% to $75.1 million for the quarter ended December 31, 2012. Organic sales grew 1.3% in the quarter.  Organic sales exclude changes in foreign currency exchange rates.

Net sales as reported declined 1.4% to $150 million for the six months ended December 31, 2012.  Organic sales, which exclude changes in foreign currency exchange rates, grew 0.2% in the six-month period.  A stronger U.S. dollar as compared to foreign currencies reduced sales by $577,000 and $2.5 million in the quarter and six-month period ended December 31, 2012, 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 $69.6 million for the quarter ended December 31, 2012, a decrease of 0.3% from $69.8 million for the quarter ended December 31, 2011.  Biotechnology net sales were $139 million for the six-month period ended December 31, 2012, a decrease of 2.1% from $142 million for the six-month period ended December 31, 2011.  Biotechnology sales growth was 0.6% and declined 0.4% for the quarter and six month period ended December 31, 2012, 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

Six Months Ended12/31/12

12/31/12U.S. industrial, pharmaceutical  and biotechnology

(5.2%)

(5.1%)U.S. academic

(3.9%)

(3.9%)Europe

2.4%

2.7%China

12.6%

16.5%Pacific Rim

3.3%

1.7%The Hematology segment includes sales made through R&D Systems' Hematology Division.  Hematology net sales for the quarter and six month period ended December 31, 2012 were $5.5 million and $11.0 million, increases of 12.4% and 8.2%, respectively, from the comparable prior-year periods.

The gross margin percentage was 73.6% in the quarter ended December 31, 2012 as compared to 73.9% in the comparable prior-year quarter.  For the six-month period ended December 31, 2012 the gross margin percentage declined to 73.8% from 74.6% in the comparable prior-year period. Gross margins adjusted for costs recognized upon sale of acquired inventory and amortization of intangible assets were 76.2% and 77.3% for the quarters ended December 31, 2012 and 2011, respectively, and 77.3% and 78.2% for the six-month periods ended December 31, 2012 and 2011, respectively, if such costs were excluded in all periods.  The decrease in adjusted gross margins for the quarter and six-month periods were primarily caused by unfavorable exchange rates.

Selling, general and administrative expenses for the quarter and six-month periods ended December 31, 2012 increased $305,000 and declined $140,000 from the quarter and six-month period ended December 31, 2011, respectively. Selling, general and administrative expenses were impacted by decreases in profit sharing expense of $62,000 and $747,000 for the quarter and six-month periods, respectively, as compared to the prior-year periods.

Research and development expenses for the quarter and six-month periods ended December 31, 2012 increased $566,000 (8.3%) and $1.4 million (10.0%) from the quarter and six-month periods ended December 31, 2011, 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 six-month periods ended December 31, 2012 included foreign exchange transaction gains of $149,000 and $71,000, respectively, compared to foreign exchange transaction losses of $105,000 and $629,000 for the quarter and six-month period ended December 31, 2011, respectively.

The effective tax rate for both the quarter and six-month period ended December 31, 2012 was 32.3% as compared to 31.8% and 31.9% for the same prior-year periods. Effective tax rates for fiscal 2013 are expected to be 31% to 33%.  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, Techne will record the credit for calendar 2012 in the third quarter of fiscal 2013.  The amount of the retroactive credit is approximately $975,000.

The Company's investment in ChemoCentryx, Inc. (CCXI) is included in short-term available for sale investments at December 31, 2012 at a fair-value of $69.1 million.  The Company's unrealized gain of $39.6 million on the investment, net of a deferred tax liability of $14.2 million, was included in accumulated other comprehensive income at December 31, 2012.

The Company did not repurchase any shares of its common stock during the quarter or six-month periods ended December 31, 2012.  Approximately $127 million remains available at December 31, 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 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 for the quarter and six-month period ended December 31, 2012 as compared to the reported amounts for the same periods ended December 31, 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, and

- 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.

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

SIX MONTHS ENDED12/31/12

12/31/11

12/31/12

12/31/11Net sales

$75,083

$74,662

$150,108

$152,258Cost of sales

19,820

19,492

39,262

38,701Gross margin

55,263

55,170

110,846

113,557Operating expenses:Selling, general and administrative

10,956

10,651

21,284

21,424Research and development

7,403

6,837

14,855

13,504Total operating expenses

18,359

17,488

36,139

34,928Operating income

36,904

37,682

74,707

78,629Other income (expense):Interest income

677

798

1,338

1,526Other non-operating expense, net

(135)

(607)

(613)

(1,782)Total other income (expense)

542

191

725

(256)Earnings before income taxes

37,446

37,873

75,432

78,373Income taxes

12,082

12,060

24,400

25,039Net earnings

$25,364

$25,813

$51,032

$53,334Earnings per share: Basic

$
.69

$
.70

$
.39

$
.44 Diluted

$   0.69

$
.70

$   1.38

$
.44Weighted average common shares outstanding:  Basic

36,834

36,966

36,831

37,030  Diluted

36,900

37,028

36,897

37,099 

 

TECHNE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)ASSETS

12/31/12

6/30/12Cash and equivalents

$143,286

$116,675Short-term available-for-sale investments

142,809

152,311Trade accounts receivable

32,187

35,668Inventory

37,600

38,277Other current assets

3,849

3,576  Current assets

359,731

346,507Available-for-sale investments

128,569

143,966Property and equipment, net

101,133

93,788Goodwill and intangible assets, net

132,104

132,158Other non-current assets

3,033

2,905  Total assets

$724,570

$719,324LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable and accrued expenses

$  13,350

$  13,836Payable for pending available-for-sale investment purchases

1,420

4,429Income taxes – deferred and current

6,498

17,485  Current liabilities

21,268

35,750Deferred taxes

8,737

9,132Stockholders' equity

694,565

674,442  Total liabilities and stockholders' equity

$724,570

$719,324 

 

TECHNE CORPORATION

RECONCILIATION of ORGANIC SALES

(In thousands)

(Unaudited)QUARTER ENDED

SIX MONTHS ENDED12/31/12

12/31/11

12/31/12

12/31/11Net sales

$75,083

$74,662

$150,108

$152,258Organic sales adjustments:Impact of foreign currency fluctuations

577

0

2,483

0Organic sales 

$75,660

$74,662

$152,591

$152,258Organic sales growth

1.3%

1.8%

0.2%

2.5% 

 

TECHNE CORPORATION

RECONCILIATION of NET EARNINGS and EARNINGS per SHARE

(In thousands, except per share data)

(Unaudited)QUARTER ENDED

SIX MONTHS ENDED12/31/12

12/31/11

12/31/12

12/31/11Net earnings

$25,364

$25,813

$51,032

$53,334Identified adjustments:Costs recognized upon sale of acquired inventory

1,196

1,767

2,464

3,915Amortization of intangibles

1,282

1,268

2,554

2,553Tax impact of above adjustments

(667)

(858)

(1,346)

(1,826)1,811

2,177

3,672

4,642Net earnings – adjusted for identified  items

$27,175

$27,990

$54,704

$57,976Adjusted growth

(2.9%)

5.1%

(5.6%)

9.1%Earnings per share – Diluted – adjusted

$   0.74

$
.76

$   1.48

$
.56 

 

TECHNE CORPORATION

RECONCILIATION of GROSS MARGIN PERCENTAGES

(Unaudited)QUARTER ENDED

SIX MONTHS ENDED12/31/12

12/31/11

12/31/12

12/31/11Gross margin percentage

73.6%

73.9%

73.8%

74.6%Identified adjustments:Costs recognized upon sale of acquired inventory

1.6%

2.4%

1.6%

2.6%Amortization of intangibles

1.0%

1.0%

1.0%

1.0%Gross margin percentage – adjusted

76.2%

77.3%

76.4%

78.2% 

 

TECHNE CORPORATION

RECONCILIATION of INTANGIBLE AMORTIZATION

(In thousands)

(Unaudited)QUARTER ENDED

SIX MONTHS ENDED12/31/12

12/31/11

12/31/12

12/31/11Amortization of intangible assets included in:Cost of goods sold

$   761

$  749

$1,514

$1,513Selling, general and administrative expenses

521

519

1,040

1,040Total amortization of intangible assets

$1,282

$1,268

$2,554

$2,553 


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SOURCE Techne Corporation
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