UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
BIO-TECHNE CORPORATION
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) (Zip Code) | (Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Non-accelerated filer | ☐ | Smaller reporting company | |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b- 2).
At February 1, 2021,
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Item 1. |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
Bio-Techne Corporation and Subsidiaries
(in thousands, except per share data)
(unaudited)
Quarter Ended December 31, |
Six Months Ended December 31, |
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2020 |
2019 |
2020 |
2019 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
Cost of sales |
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Gross margin |
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Operating expenses: |
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Selling, general and administrative |
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Research and development |
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Total operating expenses |
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Operating income |
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Other (expense) income |
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Earnings before income taxes |
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Income taxes |
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Net earnings, including noncontrolling interest |
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Net earnings attributable to noncontrolling interest |
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Net earnings attributable to Bio-Techne |
$ | $ | $ | $ | ||||||||||||
Other comprehensive (loss) income: |
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Foreign currency translation adjustments |
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Derivative instruments - cash flow hedges |
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Other comprehensive income (loss) |
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Other comprehensive income attributable to noncontrolling interest | ||||||||||||||||
Other comprehensive income attributable to Bio-Techne | ||||||||||||||||
Comprehensive income attributable to Bio-Techne |
$ | $ | $ | $ | ||||||||||||
Earnings per share attributable to Bio-Techne: |
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Basic |
$ | $ | $ | $ | ||||||||||||
Diluted |
$ | $ | $ | $ | ||||||||||||
Weighted average common shares outstanding: |
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Basic |
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Diluted |
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
Bio-Techne Corporation and Subsidiaries
(in thousands, except share and per share data)
December 31, | June 30, | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Short-term available-for-sale investments | ||||||||
Accounts receivable, net of and of reserves, respectively | ||||||||
Inventories | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Right of use asset | ||||||||
Goodwill | ||||||||
Intangible assets, net | ||||||||
Other assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | $ | ||||||
Salaries, wages and related accruals | ||||||||
Accrued expenses | ||||||||
Contract liabilities | ||||||||
Income taxes payable | ||||||||
Operating lease liabilities - current | ||||||||
Contingent consideration payable | ||||||||
Current portion of long-term debt obligations | ||||||||
Other current liabilities | ||||||||
Total current liabilities | ||||||||
Deferred income taxes | ||||||||
Long-term debt obligations | ||||||||
Long-term contingent consideration payable | ||||||||
Operating lease liabilities | ||||||||
Other long-term liabilities | ||||||||
Bio-Techne's shareholders' equity: | ||||||||
Undesignated capital stock, par; authorized shares; issued or outstanding | ||||||||
Common stock, par value per share; authorized ; issued and outstanding and , respectively | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Total Bio-Techne shareholders' equity | ||||||||
Noncontrolling interest | ||||||||
Total shareholders’ equity | ||||||||
Total liabilities and shareholders’ equity | $ | $ |
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Bio-Techne Corporation and Subsidiaries
(in thousands)
(unaudited)
Six Months Ended |
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December 31, |
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2020 |
2019 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net earnings |
$ | $ | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Depreciation and amortization |
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Costs recognized on sale of acquired inventory |
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Deferred income taxes |
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Stock-based compensation expense |
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Contingent consideration payments | ( |
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Fair value adjustment to contingent consideration payable |
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Fair value adjustment on available for sale investments |
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Leases, net | ||||||||
Other operating activity |
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Change in operating assets and operating liabilities, net of acquisition: |
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Trade accounts and other receivables, net |
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Inventories |
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Other current assets |
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Trade accounts payable, accrued expenses, contract liabilities, and other |
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Salaries, wages and related accruals |
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Income taxes payable |
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Net cash provided by (used in) operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Proceeds from sale and maturities of available-for-sale investments |
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Purchases of available-for-sale investments |
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Additions to property and equipment |
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Acquisitions, net of cash acquired |
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Other investing activity | ( |
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Net cash provided by (used in) investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Cash dividends |
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Proceeds from stock option exercises |
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Re-purchase of common stock |
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Proceeds from long-term debt |
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Repayments of long-term debt |
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Other financing activity |
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Net cash provided by (used in) financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
Supplemental disclosure of cash flow information: |
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Cash paid for income taxes |
$ | $ | ||||||
Cash paid for interest |
$ | $ |
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Bio-Techne Corporation and Subsidiaries
(unaudited)
Note 1. Basis of Presentation and Summary of Significant Accounting Policies:
The interim consolidated financial statements of Bio-Techne Corporation and subsidiaries, (the Company) presented here have been prepared by the Company and are unaudited. They have been prepared in accordance with accounting principles generally accepted in the United States of America and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto for the fiscal year ended June 30, 2020, included in the Company's Annual Report on Form 10-K for fiscal year 2020. A summary of significant accounting policies followed by the Company is detailed in the Company's Annual Report on Form 10-K for fiscal year 2020. The Company follows these policies in preparation of the interim unaudited condensed consolidated financial statements.
During the six months ended December 31, 2020, the Company operated under two operating segments, Protein Sciences and Diagnostics and Genomics. The operating segments the Company operated under were consistent with the Company's operating segments disclosed in the Company's Annual Report on Form 10-K for fiscal 2020.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendment in this update replaced the previous incurred loss impairment methodology with a methodology that reflects expected credit losses on financial instruments within its scope, including trade and loan receivables and available-for-sale debt securities. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. The Company adopted this standard on July 1, 2020 using a modified retrospective transition approach with a cumulative impact of $
In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the new standard. The Company adopted this standard on a prospective basis on July 1, 2020. The Company will record eligible costs to be capitalized within prepaid assets or other non-current assets depending on the nature of the duration of the asset.
Pronouncements Issued But Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides expedients and exceptions to existing guidance on contract modifications and hedge accounting that is optional to facilitate the market transition from a reference rate, including LIBOR which is being phased out in 2021, to a new reference rate. The provisions of the ASU would impact contract modifications and other changes that occur while LIBOR is phased out. The Company is in the process of evaluating the optional relief guidance provided within this ASU and is also reviewing its debt and derivative instrument that utilizes LIBOR as the reference rate. The Company will continue to evaluate and monitor developments and our assessment of ASU 2020-04 during the LIBOR transition period.
Note 2. Revenue Recognition:
Consumables revenues consist of single-use products and are recognized at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment. Instruments revenues typically consist of longer-lived assets that, for the substantial majority of sales, are recognized at a point in time in a manner similar to consumables. Service revenues consist of extended warranty contracts, post contract support (“PCS”), and custom development projects that are recognized over time as either the customers receive and consume the benefits of such services simultaneously or the underlying asset being developed has no alternative use for the Company at contract inception and the Company has an enforceable right to payment for the portion of the performance completed. Service revenues also include laboratory services recognized at point in time. Prior to fiscal year 2021, the Company has not recognized revenue upon completion of the performance obligation for laboratory services, but rather upon cash receipt, which was subsequent to the performance obligation being satisfied. The Company accounted for these services based on cash receipts as we did not have significant historical experience collecting payments from Medicare or other insurance providers and considered the variable consideration for such services to be constrained as it would not be probable that a significant amount of revenue would not need to be reversed in future periods for the services provided. Given Medicare coverage for our laboratory services became effective on December 1, 2019, the Company considered that it had sufficient data to estimate variable consideration as of July 1, 2020 for laboratory services that are reimbursed by Medicare. The amount of cash received in fiscal year 2021 for laboratory services reimbursed by Medicare that were performed prior to July 1, 2020 was approximately $
The Company elected the exemption to not disclose the unfulfilled performance obligations for contracts with an original length of one year or less and the exemption to exclude future performance obligations that are accounted under the sales-based or usage-based royalty guidance. The Company’s unfulfilled performance obligations were not material as of December 31, 2020.
Contracts with customers that contain instruments may include multiple performance obligations. For these contracts, the Company allocates the contract’s transaction price to each performance obligation on a relative standalone selling price basis. Allocation of the transaction price is determined at the contracts’ inception.
Payment terms for shipments to end-users are generally net 30 days. Payment terms for distributor shipments may range from 30 to 90 days. Service arrangements commonly call for payments in advance of performing the work (e.g. extended warranty and service contracts), upon completion of the service (e.g. custom development manufacturing) or a mix of both.
Contract assets include revenues recognized in advance of billings. Contract assets are included within other current assets in the accompanying balance sheet as the amount of time expected to lapse until the company's right to consideration becomes unconditional is less than one year. We elected the practical expedient allowing us to expense contract costs that would otherwise be capitalized and amortized over a period of less than one year. Contract assets as of December 31, 2020 are not material.
Contract liabilities include billings in excess of revenues recognized, such as those resulting from customer advances and deposits and unearned revenue on warranty contracts. Contract liabilities as of December 31, 2020 and June 30, 2020 were approximately $
Any claims for credit or return of goods must be made within 10 days of receipt. Revenues are reduced to reflect estimated credits and returns. Although the amounts recorded for these revenue deductions are dependent on estimates and assumptions, historically our adjustments to actual results have not been material.
Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue. Amounts billed to customers for shipping and handling are included in revenue, while the related shipping and handling costs are reflected in cost of products. We elected the practical expedient that allows us to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost, and we accrue costs of shipping and handling when the related revenue is recognized.
The following tables present our disaggregated revenue for the periods presented.
Revenue by type is as follows:
Quarter Ended |
Six Months Ended |
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December 31, |
December 31, |
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2020 |
2019 | 2020 | 2019 | |||||||||||||
Consumables |
$ | $ | $ | $ | ||||||||||||
Instruments |
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Services |
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Total product and services revenue, net |
$ | $ | $ | $ | ||||||||||||
Royalty revenues |
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Total revenues, net |
$ | $ | $ | $ |
Revenue by geography is as follows:
Quarter Ended | Six Months Ended | |||||||||||||||
December 31, |
December 31, |
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2020 | 2019 | 2020 | 2019 | |||||||||||||
United States |
$ | $ | $ | $ | ||||||||||||
EMEA, excluding United Kingdom |
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United Kingdom |
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APAC, excluding Greater China |
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Greater China |
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Rest of World |
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Total revenues, net |
$ | $ | $ | $ |
Note 3. Selected Balance Sheet Data:
Inventories:
Inventories consist of (in thousands):
December 31, | June 30, | |||||||
2020 | 2020 | |||||||
Raw materials | $ | $ | ||||||
Finished goods(1) | ||||||||
Inventories, net | $ | $ |
(1) Finished goods inventory of $
Property and Equipment:
Property and equipment consist of (in thousands):
December 31, | June 30, | |||||||
2020 | 2020 | |||||||
Land | $ | $ | ||||||
Buildings and improvements | ||||||||
Machinery and equipment | ||||||||
Property and equipment, cost | ||||||||
Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
Property and equipment, net | $ | $ |
Intangible Assets:
Intangible assets consist of (in thousands):
December 31, | June 30, | |||||||
2020 | 2020 | |||||||
Developed technology | $ | $ | ||||||
Trade names | ||||||||
Customer relationships | ||||||||
Patents and other intangibles(1) | ||||||||
Intangible assets | ||||||||
Accumulated amortization | ( | ) | ( | ) | ||||
Intangible assets, net | $ | $ |
(1) | Increase in patents and other intangible assets is primarily due to $ |
Changes to the carrying amount of net intangible assets for the quarter ended December 31, 2020 consist of (in thousands):
Beginning balance | $ | |||
Acquisitions | ||||
Other additions | ||||
Amortization expense | ( | ) | ||
Currency translation | ||||
Ending balance | $ |
The estimated future amortization expense for intangible assets as of December 31, 2020 is as follows (in thousands):
2021 remainder | $ | |||
2022 | ||||
2023 | ||||
2024 | ||||
2025 | ||||
Thereafter | ||||
Total | $ |
Goodwill:
Changes to the carrying amount of goodwill for the quarter ended December 31, 2020 consist of (in thousands):
Protein Sciences | Diagnostics and Genomics | Total | ||||||||||
Beginning balance | $ | $ | $ | |||||||||
Acquisitions | ||||||||||||
Currency translation | ||||||||||||
Ending balance | $ | $ | $ |
We evaluate the carrying value of goodwill in the fourth quarter of each fiscal year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. The Company performed a goodwill impairment assessment for all of its reporting units during the fourth quarter of fiscal 2020. No indicators of impairment were identified as part of our assessment.
No triggering events were identified during the quarter ended December 31, 2020. There has been no impairment of goodwill since the adoption of Financial Accounting Standards Board (“FASB”) ASC 350 guidance for goodwill and other intangibles on July 1, 2002.
Note 4. Acquisitions:
We periodically complete business combinations that align with our business strategy. Acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and the results of operations of each acquired business are included in our consolidated statements of comprehensive income from their respective dates of acquisition. Acquisition costs are recorded in selling, general and administrative expenses as incurred.
Eminence Biotechnology
On October 20, 2020, the Company acquired
As Eminence was considered a variable interest entity with the Company being the primary beneficiary, the transaction was accounted for in accordance with ASC 805, Business Combinations. In applying ASC 805 to the transaction, the Company has elected to include Eminence in our consolidated financial statements on a one month lag. There were no material changes from the preliminary opening balance sheet included in the table below to the amounts included within the Company's consolidated balance sheet as of December 31, 2020.
The goodwill recorded as result of the acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration. The fair value of the noncontrolling interest in Eminence was calculated utilizing cash flow projections discounted to the acquisition date and control premiums calculated using market data. Acquired goodwill is not deductible for income tax purposes. The business became part of the Protein Sciences reportable segment in the second quarter of fiscal year 2021.
Certain estimated fair values are not yet finalized and are subject to change, which could be significant. The Company expects to finalize our purchasing accounting by the end of fiscal year 2021 when we have finalized our intangible assets valuations and income tax assessment of acquired net operating losses (NOLs). Amounts for intangible assets, deferred tax liabilities, acquired NOLs, and goodwill remain subject to change. The preliminary estimated fair values of the assets acquired and liabilities assumed are as follows (in thousand's):
Preliminary Allocation at Acquisition Date | ||||
Current assets, net of cash | $ | |||
Equipment and other long-term assets | ||||
Intangible assets: | ||||
Developed technology | ||||
Customer relationships | ||||
Goodwill | ||||
Total assets acquired | ||||
Liabilities | ||||
Deferred income taxes, net | ||||
Net assets acquired | $ | |||
Cash paid, net of cash acquired | $ | |||
Fair value of noncontrolling interest in Eminence | ||||
Net assets acquired | $ |
Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology and customer relationships was based on management's forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed technology is estimated to be
Note 5. Fair Value Measurements:
The Company’s financial instruments include cash and cash equivalents, available for sale investments, derivative instruments, accounts receivable, accounts payable, contingent consideration obligations, and long-term debt.
Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. This standard also establishes a hierarchy for inputs used in measuring fair value. This standard maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available in the circumstances.
The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable for the asset or liability and their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 may also include certain investment securities for which there is limited market activity or a decrease in the observability of market pricing for the investments, such that the determination of fair value requires significant judgment or estimation.
The following tables provide information by level for financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):
Total carrying value as of | Fair Value Measurements Using Inputs Considered as | |||||||||||||||
December 31, 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Equity securities (1) | $ | $ | $ | $ | ||||||||||||
Certificates of deposit (2) | ||||||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration | $ | $ | $ | $ | ||||||||||||
Derivative instruments - cash flow hedges | ||||||||||||||||
Total liabilities | $ | $ | $ | $ |
Total carrying value as of | Fair Value Measurements Using Inputs Considered as | |||||||||||||||
June 30, 2020 | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Equity securities (1) | $ | $ | $ | $ | ||||||||||||
Certificates of deposit (2) | ||||||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Liabilities | ||||||||||||||||
Contingent consideration | $ | $ | $ | $ | ||||||||||||
Derivative instruments - cash flow hedges | ||||||||||||||||
Total liabilities | $ | $ | $ | $ |
(1) | Included in available-for-sale investments on the balance sheet. The cost basis in the Company's investment in ChemoCentryx Inc (CCXI) at December 31, 2020 and June 30, 2020 was $ | |
(2) | Included in available-for-sale investments on the balance sheet. The certificate of deposits have contractual maturity dates within one year. |
Fair value measurements of available for sale securities
Our available for sale securities are measured at fair value using quoted market prices in active markets for identical assets and are therefore classified as Level 1 assets.
Fair value measurements of derivative instruments
In October 2018, the Company entered into forward starting swaps designated as cash flow hedges on outstanding debt. The forward starting swaps reduce the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s long-term debt described in Note 6 to that of a fixed interest rate. Accordingly, as part of the forward starting swaps, the Company exchanges, at specified intervals, the difference between floating and fixed interest amounts based on an initial $
Changes in the fair value of the designated hedged instrument are reported as a component of other comprehensive income and reclassified into interest expense over the corresponding term of the cash flow hedge. The Company reclassified $
Fair value measurements of contingent consideration
In connection with the QT Holdings Corporation (Quad) and B-MoGen Biotechnologies Inc. (B-MoGen) acquisitions the Company is required to make contingent consideration payments of up to $
The following table presents a reconciliation of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter and six months ended December 31, 2020 (in thousands):
Quarter Ended | Six Months Ended | |||||
December 31, 2020 | December 31, 2020 | |||||
Fair value at the beginning of period | $ | $ | ||||
Change in fair value of contingent consideration |
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Payments | ( | ) | ( | ) | ||
Fair value at the end of period | $ | $ |
The use of different assumptions, applying different judgment to matters that inherently are subjective and changes in future market conditions could result in different estimates of fair value of our securities or contingent consideration, currently and in the future. If market conditions deteriorate, we may incur impairment charges for securities in our investment portfolio.
Fair value measurements of other financial instruments – The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate fair value.
Cash and cash equivalents, certificates of deposit, accounts receivable, and accounts payable – The carrying amounts reported in the consolidated balance sheets approximate fair value because of the short-term nature of these items.
Long-term debt – The carrying amounts reported in the consolidated balance sheets for the amount drawn on our line-of-credit facility approximates fair value because our interest rate is variable and reflects current market rates.
Note 6. Debt and Other Financing Arrangements:
On August 1, 2018, the Company entered into a new revolving line-of-credit and term loan governed by a Credit Agreement (the Credit Agreement). The Credit Agreement provides for a revolving credit facility of $
The Credit Agreement matures on August 1, 2023 and contains customary restrictive and financial covenants and customary events of default. As of December 31, 2020, the outstanding balance under the Credit Agreement was $
Note 7. Leases:
As a lessee, the company leases offices, labs, and manufacturing facilities, as well as vehicles, copiers, and other equipment. The Company adopted ASU No. 2016-02 and related standards (collectively ASC 842, Leases), which replaced previous lease accounting guidance, on July 1, 2019.
The Company recognizes operating lease expense on a straight-line basis over the lease term. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is Bio-Techne’s incremental borrowing rate or, if available, the rate implicit in the lease. Bio-Techne determines the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region. During the six months ended December 31, 2020, the Company recognized $
The following table summarizes the balance sheet classification of the Company’s operating leases and amounts of right of use assets and lease liabilities and the weighted average remaining lease term and weighted average discount rate for the Company’s operating leases (asset and liability amounts are in thousands):
Balance Sheet Classification |
As of: December 31, 2020 |
|||||
Operating leases: |
||||||
Operating lease right of use assets |
Right of Use Asset |
$ | ||||
Current operating lease liabilities |
Operating lease liabilities current |
$ | ||||
Noncurrent operating lease liabilities |
Operating lease liabilities |
|||||
Total operating lease liabilities |
$ | |||||
Weighted average remaining lease term (in years): |
||||||
Weighted average discount rate: |
% |
The following table summarizes the cash paid for amounts included in the measurement of operating lease liabilities and right of use assets obtained in exchange for new operating lease liabilities for the three months ended (in thousands):
Six months ended December 31, 2020 |
||||
Cash amounts paid on operating lease liabilities |
$ | |||
Right of use assets obtained in exchange for lease liabilities |
The following table summarizes the fair value of the lease liability by payment date for the Company’s operating leases by fiscal year (in thousands):
Operating Leases |
||||
Remainder of 2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
Thereafter |
||||
Total |
$ | |||
Less: Amounts representing interest |
||||
Total Lease obligations |
$ |
Certain leases include one or more options to renew, with terms that extend the lease term up to
years. Bio-Techne includes option to renew the lease as part of the right of use lease asset and liability when it is reasonably certain the Company will exercise the option. In addition, certain leases contain fair value purchase and termination options with an associated penalty. In general, Bio-Techne is not reasonably certain to exercise such options.
Note 8. Supplemental Equity and Accumulated Other Comprehensive Income (Loss):
Supplemental Equity
The Company has declared cash dividends per share of $
Consolidated Changes in Equity (amounts in thousands)
Bio-Techne Shareholders | ||||||||||||||||||||||||||||
Accumulated |
| |||||||||||||||||||||||||||
Additional | Other |
| ||||||||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Noncontrolling | ||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income(Loss) | Interest | Total | ||||||||||||||||||||||
Balances at June 30, 2020 | $ | $ | $ | $ | ( | ) | $ |
| $ | |||||||||||||||||||
Cumulative effect adjustments due to adoption of new accounting standards | ( | ) | ( | ) | ||||||||||||||||||||||||
Net earnings | ||||||||||||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||||||
Common stock issued for exercise of options | ||||||||||||||||||||||||||||
Common stock issued for restricted stock awards | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
Cash dividends | ( | ) | ( | ) | ||||||||||||||||||||||||
Stock-based compensation expense | ||||||||||||||||||||||||||||
Common stock issued to employee stock purchase plan | ||||||||||||||||||||||||||||
Employee stock purchase plan expense | ||||||||||||||||||||||||||||
Balances at September 30, 2020 | $ | $ | $ | $ | ( | ) | $ |
| $ | |||||||||||||||||||
Non-controlling interest in Eminence |
| |||||||||||||||||||||||||||
Net earnings | ( | ) | ||||||||||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||||||
Common stock issued for exercise of options | ( | ) | ||||||||||||||||||||||||||
Common stock issued for restricted stock awards | ( | ) |
| |||||||||||||||||||||||||
Cash dividends | ( | ) | ( | ) | ||||||||||||||||||||||||
Stock-based compensation expense | ||||||||||||||||||||||||||||
Employee stock purchase plan expense | ||||||||||||||||||||||||||||
Balances at December 31, 2020 | $ | $ | $ | $ | ( | ) | $ |
| $ |
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | |||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income(Loss) | Total | |||||||||||||||||||
Balances at June 30, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
Cumulative effect adjustments due to adoption of new accounting standards and other | ( | ) | ( | ) | ||||||||||||||||||||
Net earnings | ||||||||||||||||||||||||
Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||
Common stock issued for exercise of options | ||||||||||||||||||||||||
Common stock issued for restricted stock awards | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Cash dividends | ( | ) | ( | ) | ||||||||||||||||||||
Stock-based compensation expense | ||||||||||||||||||||||||
Common stock issued to employee stock purchase plan | ||||||||||||||||||||||||
Employee stock purchase plan expense | ||||||||||||||||||||||||
Balances at September 30, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
Net earnings | ||||||||||||||||||||||||
Other comprehensive loss |
|
| ||||||||||||||||||||||
Common stock issued for exercise of options | ||||||||||||||||||||||||
Common stock issued for restricted stock awards | ( | ) |
|
| ||||||||||||||||||||
Cash dividends | ( | ) | ( | ) | ||||||||||||||||||||
Stock-based compensation expense | ||||||||||||||||||||||||
Common stock issued to employee stock purchase plan | ||||||||||||||||||||||||
Employee stock purchase plan expense | ||||||||||||||||||||||||
Balances at December 31, 2019 | $ | $ | $ | $ | ( | ) | $ |
Accumulated Other Comprehensive Income
The components of other comprehensive income (loss) consist of changes in foreign currency translation adjustments and changes in net unrealized gains (losses) on derivative instruments designated as cash flow hedges. The Company reclassified $
The accumulated balances related to each component of other comprehensive income (loss) attributable to Bio-Techne, net of tax, are summarized as follows:
Unrealized Gains (Losses) on Derivative Instruments | Foreign Currency Translation Adjustments | Total | ||||||||||
Balance as of June 30, 2020 attributable to Bio-Techne | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Other comprehensive income (loss) before reclassifications, net of taxes, attributable to Bio-Techne | ||||||||||||
Reclassification from loss on derivatives to interest expense, net of taxes, attributable to Bio-Techne(1) | ||||||||||||
Balance as of December 31, 2020 attributable to Bio-Techne(3) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Unrealized Gains (Losses) on Derivative Instruments | Foreign Currency Translation Adjustments | Total | ||||||||||
Balance as of June 30, 2019 attributable to Bio-Techne | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Other comprehensive income (loss), net of tax before reclassifications, attributable to Bio-Techne |
| |||||||||||
Reclassification from loss on derivatives to interest expense, net of taxes, attributable to Bio-Techne(2) | ||||||||||||
Balance as of December 31, 2019 attributable to Bio-Techne(3) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(1) Gains (losses) on the interest swap are reclassified into interest expense as payments on the derivative agreement are made. The Company reclassified $
(2) The Company reclassified ($
(3) The Company had deferred tax benefits of $
Note 9. Earnings Per Share:
The following table reflects the calculation of basic and diluted earnings per share (in thousands, except per share amounts):
Quarter Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Earnings per share – basic: | ||||||||||||||||
Net earnings, including noncontrolling interest | $ | |||||||||||||||
Less net earnings attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
Net earnings attributable to Bio-Techne | $ | $ | $ | $ | ||||||||||||
Income allocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income available to common shareholders | $ | $ | $ | $ | ||||||||||||
Weighted-average shares outstanding – basic | ||||||||||||||||
Earnings per share – basic | $ | $ | $ | $ | ||||||||||||
Earnings per share – diluted: | ||||||||||||||||
Net earnings, including noncontrolling interest | $ | $ | $ | $ | ||||||||||||
Less net earnings attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
Net earnings attributable to Bio-Techne | $ | $ | $ | $ | ||||||||||||
Income allocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income available to common shareholders | $ | $ | $ | $ | ||||||||||||
Weighted-average shares outstanding – basic | ||||||||||||||||
Dilutive effect of stock options and restricted stock units | ||||||||||||||||
Weighted-average common shares outstanding – diluted | ||||||||||||||||
Earnings per share – diluted | $ | $ | $ | $ |
The dilutive effect of stock options and restricted stock units in the above table excludes all options for which the aggregate exercise proceeds exceeded the average market price for the period. The number of potentially dilutive option shares excluded from the calculation was
Note 10. Share-based Compensation:
During the six months ended December 31, 2020 and 2019, the Company granted
Stock options for
Stock-based compensation expense, inclusive of employer payroll tax, of $
Note 11. Other Income / (Expense):
The components of other income (expense) in the accompanying Statement of Earnings and Comprehensive Income are as follows:
Quarter Ended |
Six Months |
|||||||||||||||
December 31, |
December 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Interest expense |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
||||
Interest income |
||||||||||||||||
Other non-operating income (expense), net(1) |
|
|
||||||||||||||
Total other income (expense) |
$ | $ |
|
$ | ( |
) | $ |
|
(1) The changes in other non-operating income (expense) were driven by changes in the fair value of our CCXI investment as further described in Note 5 above.
Note 12. Income Taxes:
The Company’s effective income tax rate for the second quarter of fiscal 2021 and 2020 was
The Company recognized total net benefits related to discrete tax items of $
The Company continues to monitor changes in interpretations, assumptions guidance, and additional regulations regarding the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on December 22, 2017. The Company recognizes potential changes to these items could have a material impact on our effective tax rate in future periods.
Note 13. Segment Information:
The Company's management evaluates segment operating performance based on operating income before certain charges to cost of sales and selling, general and administrative expenses, principally associated with acquisition accounting related to inventory, amortization of acquisition-related intangible assets and other acquisition-related expenses. The Protein Sciences and Diagnostics and Genomics segments both include consumables, instruments, services and royalty revenue.
The following is financial information relating to the Company's reportable segments (in thousands):
Quarter Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net sales: | ||||||||||||||||
Protein Sciences | $ | $ | $ |