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
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
(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 |
The |
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.
☒ | Accelerated filer | ☐ | |
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Non-accelerated filer | ☐ | Smaller reporting company | |
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| Emerging growth company |
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 November 2, 2022,
TABLE OF CONTENTS
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Management's Discussion and Analysis of Financial Condition and Results of Operations | 21 | |
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34 |
PART I. FINANCIAL INFORMATION
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 | |||||
September 30, | ||||||
2022 | 2021 | |||||
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 income (expense) |
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Earnings before income taxes |
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Income taxes (benefit) |
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| ( | ||
Net earnings, including noncontrolling interest |
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Net earnings (loss) attributable to noncontrolling interest |
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| ( | ||
Net earnings attributable to Bio-Techne | $ | | $ | | ||
Other comprehensive income (loss): |
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Foreign currency translation adjustments |
| ( |
| ( | ||
Foreign currency translation reclassified to earnings with Eminence deconsolidation | | — | ||||
Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts disclosed in Note 8 |
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Other comprehensive income (loss) |
| ( |
| ( | ||
Other comprehensive income (loss) attributable to noncontrolling interest |
| ( |
| ( | ||
Other comprehensive income (loss) 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 |
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See Notes to Condensed Consolidated Financial Statements.
1
CONDENSED CONSOLIDATED BALANCE SHEETS
Bio-Techne Corporation and Subsidiaries
(in thousands, except share and per share data)
| September 30, | |||||
2022 | June 30, | |||||
(unaudited) | 2022 | |||||
ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Short-term available-for-sale investments |
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Accounts receivable, less allowance for doubtful accounts of $ |
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Inventories |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Right of use asset |
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Goodwill |
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Intangible assets, net |
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Other assets |
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Total assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Trade accounts payable | $ | | $ | | ||
Salaries, wages and related accruals |
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Accrued expenses |
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Contract liabilities |
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Income taxes payable |
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Operating lease liabilities - current |
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Contingent consideration payable |
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| — | ||
Current portion of long-term debt obligations |
| — |
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Other current liabilities |
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Total current liabilities |
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Deferred income taxes |
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Long-term debt obligations |
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Long-term contingent consideration payable |
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Operating lease liabilities |
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Other long-term liabilities |
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Bio-Techne’s Shareholders’ equity: | ||||||
Undesignated capital stock, |
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Common stock, par value $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
| ( |
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Total Bio-Techne’s shareholders’ equity |
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Noncontrolling interest |
| — |
| ( | ||
Total shareholders’ equity |
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Total liabilities and shareholders’ equity | $ | | $ | |
See Notes to Condensed Consolidated Financial Statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Bio-Techne Corporation and Subsidiaries
(in thousands)
(unaudited)
| Quarter Ended | |||||
September 30, | ||||||
2022 | 2021 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net earnings, including noncontrolling interest | $ | | $ | | ||
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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Fair value adjustment to contingent consideration payable |
| ( |
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Contingent consideration payments - operating |
| — |
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(Gain) Loss on investment, net |
| ( |
| ( | ||
Fair value adjustment on available for sale investments |
| ( |
| — | ||
Asset impairment restructuring | | | ||||
Gain on sale of Eminence | ( | | ||||
Leases, net |
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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 |
| ( |
| ( | ||
Prepaid expenses |
| ( |
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Trade accounts payable, accrued expenses, contract liabilities, and other |
| ( |
| ( | ||
Salaries, wages and related accruals |
| ( |
| ( | ||
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 maturities of available-for-sale investments |
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Purchases of available-for-sale investments |
| ( |
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Proceeds from sale of CCXI investment | | — | ||||
Additions to property and equipment |
| ( |
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Acquisitions, net of cash acquired |
| ( |
| — | ||
Proceeds from sale of Eminence |
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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-purchases of common stock |
| ( |
| — | ||
Borrowings under line-of-credit agreement |
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Repayments of long-term debt |
| ( |
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Contingent consideration payments - financing |
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| ( | ||
Taxes paid on RSUs and net share settlements | ( | ( | ||||
Other financing activity |
| ( |
| — | ||
Net cash provided by (used in) financing activities |
| ( |
| ( | ||
Effect of exchange rate changes on cash and cash equivalents |
| ( |
| ( | ||
Net change in cash and cash equivalents |
| ( |
| ( | ||
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: | ||||||
Cash paid for income taxes | $ | | $ | | ||
Cash paid for interest | $ | | $ | |
See Notes to Condensed Consolidated Financial Statements.
3
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, 2022, included in the Company's Annual Report on Form 10-K for fiscal 2022. A summary of significant accounting policies followed by the Company is detailed in the Company's Annual Report on Form 10-K for fiscal 2022. The Company follows these policies in preparation of the interim unaudited condensed consolidated financial statements.
During the quarter ended September 30, 2022, the Company operated under
Partially-owned consolidated subsidiary: On September 1, 2022, the Company completed the sale of its equity shares of Changzhou Eminence Biotechnology Co., Ltd. (Eminence) for approximately $
Investments: In December 2021, the Company paid $
The first part of the forward contract is triggered upon Wilson Wolf achieving approximately $
Once the first part of the forward contract is triggered, the second part of the forward contract will automatically trigger, and requires the Company to acquire the remaining equity interest in Wilson Wolf on December 31, 2027 based on a revenue multiple. The second part of the contract would be accelerated in advance of December 31, 2027, if Wilson Wolf meets its second milestone of approximately $
4
Restructuring actions: Restructuring actions generally include significant actions involving employee-related severance charges, contract termination costs, and impairments and disposals of assets associated with such actions. Employee-related severance charges are based upon distributed employment policies and substantive severance plans. These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the associated actions. Asset impairment and disposal charges include right of use assets, leasehold improvements, and other asset write-downs associated with combining operations and disposal of assets.
Fiscal Year 2023 Restructuring Actions:
In August 2022, the Company informed employees of our decision to close our QT Holdings Corporation (Quad) facility as part of a realignment of activities within our Reagent Solutions division. The closure of the site is expected to be substantially completed in the third quarter of fiscal 2023. As a result of the restructuring activities, an estimated pre-tax charge of $
Employee | Asset | ||||||||
| severance |
| related and other |
| Total | ||||
Selling, general and administrative | $ | | $ | | $ | |
Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):
Employee | Asset | ||||||||
| severance |
| related and other |
| Total | ||||
Expense incurred in the first quarter of 2023 | $ | | $ | | $ | | |||
Cash payments | ( | ( | ( | ||||||
Adjustments | — | ( | ( | ||||||
Accrued restructuring actions balances as of September 30, 2022 | $ | | | |
Fiscal Year 2022 Restructuring Actions:
In September 2021, the Company informed employees of our decision to close our Exosome Diagnostics Germany facility, discontinuing lab and research occurring at the site, as part of a realignment of activities within our Exosome Diagnostics business. The restructuring activities were complete as of June 30, 2022. As a result of the restructuring activities, a pre-tax charge of $
: | |||||||||
Employee | Asset | ||||||||
| severance |
| Impairment and other |
| Total | ||||
Selling, general and administrative | $ | | $ | | $ | |
Employee | Asset | ||||||||
| severance |
| Impairment and other |
| Total | ||||
Expense incurred in the first quarter of 2022 | $ | | $ | | $ | | |||
Incremental expense incurred during fiscal 2022 | — | | | ||||||
Cash payments | ( | ( | ( | ||||||
Adjustments(1) | ( | ( | ( | ||||||
Accrued restructuring actions balances as of June 30, 2022 | $ | — | — | — |
(1)Adjustments include refinements to our estimated close down costs as well as the impacts from foreign currency exchange.
5
Recently Adopted Accounting Pronouncements
There were no accounting pronouncements adopted in the quarter ended September 30, 2022. Refer to the Form 10-K for accounting pronouncements adopted prior to June 30, 2022.
Note 2. Revenue Recognition:
Consumables revenues consist of specialized proteins, immunoassays, antibodies, reagents, blood chemistry and blood gas quality controls, and hematology instrument controls that are typically single-use products 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, 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 had 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 it to have 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 2021 for laboratory services reimbursed by Medicare that were performed prior to July 1, 2020 was approximately $
Prior to fiscal year 2023, the Company recorded revenue based on cash receipts for laboratory services not reimbursed by Medicare, as the variable consideration was constrained since we did not have significant historical experience collecting payments not reimbursed by Medicare or other insurance providers and it would not be probable that a significant amount of revenue would not need to be reversed in future periods for the services provided. During the first half of fiscal 2022, we began to see an increase in claim volume due to strategic initiatives, including broader messaging around the importance of cancer screenings during the COVID-19 pandemic, and the acute phase of the COVID-19 pandemic subsiding. Given these factors, the Company considered it to have sufficient data to estimate variable consideration as of July 1, 2022 for laboratory services that are not reimbursed by Medicare. The amount of cash received in fiscal 2023 for non-Medicare laboratory services that were performed prior to July 1, 2022 was approximately $
We recognize royalty revenues in the period the sales occur using third party evidence. The Company elected the "right to invoice" practical expedient based on the Company's right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.
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 for contracts with an original length greater than one year were not material as of September 30, 2022.
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 September 30, 2022 are not material.
6
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 September 30, 2022 and June 30, 2022 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 | |||||
September 30, | ||||||
| 2022 |
| 2021 | |||
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 | |||||
September 30, | ||||||
| 2022 |
| 2021 | |||
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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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Net Sales | $ | | $ | |
7
Note 3. Selected Balance Sheet Data:
Inventories:
Inventories consist of (in thousands):
| September 30, | June 30, | ||||
| 2022 |
| 2022 | |||
Raw materials | $ | | $ | | ||
Finished goods(1) |
| |
| | ||
Inventories, net | $ | | $ | |
(1) Finished goods inventory of $
Property and Equipment:
Property and equipment consist of (in thousands):
| September 30, | June 30, | ||||
| 2022 |
| 2022 | |||
Land | $ | | $ | | ||
Buildings and improvements |
| |
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Machinery and equipment | | | ||||
Construction in progress |
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Property and equipment, cost |
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Accumulated depreciation and amortization |
| ( |
| ( | ||
Property and equipment, net | $ | | $ | |
Intangible Assets:
Intangible assets consist of (in thousands):
September 30, | June 30, | ||||||
2022 | 2022 | ||||||
Developed technology | $ | | $ | | |||
Trade names |
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Customer relationships |
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Patents |
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Other intangibles |
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Definite-lived intangible assets |
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Accumulated amortization |
| ( |
| ( | |||
Definite-lived intangibles assets, net |
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In process research and development |
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Total intangible assets, net | $ | | $ | |
8
Changes to the carrying amount of net intangible assets for the period ended September 30, 2022 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 September 30, 2022 is as follows (in thousands):
Remainder 2023 |
| $ | |
2024 |
| | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
Thereafter |
| | |
Total | $ | |
Goodwill:
Changes to the carrying amount of goodwill for the period ended September 30, 2022 consist of (in thousands):
|
| Diagnostics and |
| ||||||
Protein Sciences | Genomics | Total | |||||||
June 30, 2022 | $ | | $ | | $ | | |||
Acquisitions |
| | — | | |||||
Currency translation |
| ( | ( | ( | |||||
June 30, 2023 | $ | | $ | | $ | |
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 quantitative goodwill impairment assessment for all of its reporting units during the fourth quarter of fiscal 2022. No indicators of impairment were identified as part of our assessment.
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 that the results of operations of each acquired business be included in our consolidated statements of comprehensive income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred.
Fiscal year 2023 Acquisitions
Namocell, Inc.
On July 1, 2022, the Company acquired all of the ownership interests of Namocell, Inc. for $
9
The allocation of purchase consideration related to Namocell, Inc is considered preliminary with provisional amounts primarily related to goodwill, intangible assets, working capital, certain tax-related, and contingent liability amounts. The Company expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations as of September 30, 2022 were approximately $
Preliminary allocation at acquisition date and at September 30, 2022 | |||
Current assets, net of cash | $ | | |
Equipment and other long-term assets |
| | |
Intangible assets: | |||
Developed technologies |
| | |
Tradenames |
| | |
Customer relationships |
| | |
Non-competition agreement |
| | |
Goodwill |
| | |
Total assets acquired |
| | |
Liabilities |
| | |
Deferred income taxes, net |
| | |
Net assets acquired | $ | | |
Cash paid, net of cash acquired |
| | |
Contingent consideration payable |
| | |
Net assets acquired | $ | |
Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology was based on management’s preliminary forecasted cash inflows and outflows and using a relief from royalty method to calculate the fair value of assets purchased. The purchase price allocated to customer relationships and trade names was based on management's preliminary forecasted cash inflows and outflows and using a multiperiod excess earnings method. 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
10
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 | |||||||||||
September 30, | Inputs Considered as | |||||||||||
2022 | Level 1 | Level 2 | Level 3 | |||||||||
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Assets |
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Exchange traded securities(1) | $ | | $ | | $ | — | $ | — | ||||
Certificates of deposit(2) |
| |
| |
| — |
| — | ||||
Derivative instruments - cash flow hedges |
| |
| — |
| |
| — | ||||
Total assets | $ | | $ | | $ | | $ | — | ||||
Liabilities |
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Contingent consideration | $ | | $ | — | $ | — | $ | | ||||
Total liabilities | $ | | $ | — | $ | — | $ | |
| Total |
| ||||||||||
carrying | ||||||||||||
value as of | Fair Value Measurements Using | |||||||||||
June 30, | Inputs Considered as | |||||||||||
| 2022 |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Assets |
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|
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Exchange traded securities(1) | $ | | $ | | $ | — | $ | — | ||||
Certificates of deposit(2) |
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Derivative instruments - cash flow hedges |
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Total assets | $ | | $ | | $ | | $ | — | ||||
Liabilities |
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Contingent consideration | $ | | $ | — | $ | — | $ | | ||||
Derivative instruments - cash flow hedges |
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Total liabilities | $ | | $ | — | $ | | $ | |
(1) | Included in available-for-sale investments on the balance sheet. During the quarter ended September 30, 2022, the Company sold all of its outstanding shares of ChemoCentryx Inc (CCXI). The cost basis and fair value of the Company’s available-for-sale equity investment in CCXI was $ |
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(2) | Included in available-for-sale investments on the balance sheet. The certificates of deposit 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 $
In May 2021, the Company entered into a new forward starting swap designated as a cash flow hedge on forecasted debt. The forward starting swap reduces the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s forecasted variable interest long-term debt to that of a fixed interest rate. Accordingly, as part of the forward starting swap, the Company exchanges, at specified intervals, the difference between floating and fixed interest amounts based on $
Changes in the fair value of the designated hedged instruments 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
The Company has $
The Asuragen contingent agreement is based on achieving certain revenue thresholds by December 31, 2022 and December 31, 2023. The opening balance sheet fair value of the liabilities was $
The Namocell contingent agreement is based on achieving certain revenue thresholds by December 31, 2022 and December 31, 2023. The opening balance sheet fair value of the liabilities was $
As of September 30, 2022, the Company's obligation for potential contingent consideration payments related to the Quad acquisition was relieved as both parties in the purchase agreement agreed the threshold would not be met. The Company’s obligation for potential
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contingent consideration payments related to the B-Mogen acquisition was relieved as there is a remote likelihood that the revenue thresholds and product milestones would be achieved in the timeframe established within the purchase agreement. The Company reversed an accrual for the fair value of the contingent liabilities at the date of settlement during fiscal 2022.
The ultimate settlement of contingent consideration liabilities could deviate from current estimates based on the actual results of the financial measures described above. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for these acquisitions is included in general and administrative expense.
The following table presents a reconciliation of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):
| Quarter Ended | |||
September 30, | ||||
2022 | ||||
Fair value at the beginning of period | $ | | ||
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Additions |
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Payments |
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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 and long-term debt approximates fair value because our interest rate is variable and reflects current market rates.
Note 6. Debt and Other Financing Arrangements:
On August 31, 2022, the Company entered into an amended and restated Credit Agreement (the Amended Credit Agreement). This replaced the revolving line-of-credit and term loan (the prior Credit Agreement), which provided for a revolving credit facility of $
The Amended Credit Agreement provides for a revolving credit facility of $
The amended and restated Credit Agreement matures on August 1, 2027 and contains customary restrictive and financial covenants and customary events of default. As of September 30, 2022, the outstanding balance under the Credit Agreement was $
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Note 7. Leases:
As a lessee, the company leases offices, labs, and manufacturing facilities, as well as vehicles, copiers, and other equipment. 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 three months ended September 30, 2022, 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):
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September 30, |
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Balance Sheet Classification | 2022 |
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Operating leases: |
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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 |
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Total operating lease liabilities | $ | | |||||
Weighted average remaining lease term (in years): |
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Weighted average discount rate: |
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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):
Quarter ended | |||
September 30, | |||
| 2022 | ||
Cash amounts paid on operating lease liabilities | $ | | |
Right of use assets obtained in exchange for lease liabilities |
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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):
| September 30, 2022 | ||
Operating | |||
Leases | |||
Remainder 2023 | $ | | |
2024 |
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2025 |
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2026 |
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2027 |
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Thereafter |
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Total | $ | | |
Less: Amounts representing interest |
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Total Lease obligations | $ | |
Certain leases include one or more options to renew, with terms that extend the lease term up to
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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)
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Balances at June 30, 2022 |
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Net earnings |
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Other comprehensive loss |
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Reclassification of cumulative translation adjustment for Eminence to non-operating income | - | - | - | - | | ( |