Bio-Techne Releases Second Quarter Fiscal 2015 Results

MINNEAPOLIS, Feb. 3, 2015 /PRNewswire/ -- Bio-Techne Corporation (NASDAQ:TECH) today reported its financial results for second quarter ended December 31, 2014.

Second Quarter Highlights

  • Increased second quarter revenue by 33% to $111.9 million.
  • Grew second quarter adjusted earnings by 10% to $30.3 million.
  • Generated operating cash flow of $35.7 million in the second quarter, a 14% increase from the prior year.
  • Grew organic revenue in the China region by 27% in the second quarter.
  • Protein Platforms segment grew revenues by 33% in the second quarter on a pro-forma basis while qualifying over 500 Bio-Techne antibodies for use on the Simple Western platform.
  • Completed the acquisition of CyVek, Inc., which has developed a transformative immunoassay technology that integrates an innovatively designed microfluidic cartridge with a state-of-the-art analyzer to deliver the most advanced and efficient bench top immunoassay system. Rebranded and recently launched as "Ella," the system provides "sample to answer" test results precisely and quickly in a sealed disposable device, making it a very attractive platform for both research and clinical applications.

Adjusted EPS, adjusted earnings, adjusted gross margin, adjusted operating income, and adjusted operating margin are non-GAAP measures that exclude certain items detailed later in this press release under the heading "Use of Adjusted Financial Measures."

"We continue to develop and implement our plan of moving our core organic growth into the mid-single digit range, attaining four percent in the second quarter," said Chuck Kummeth, President and Chief Executive Officer of Bio-Techne.  "This solid result is despite the headwinds we face overseas with the rapid strengthening of the US dollar.  However, China was an exceptional standout for us this quarter with 27% growth.  I am particularly proud of our team's continued execution on integration.  The teams from our latest acquisitions at Novus Biologicals, ProteinSimple, and CyVek, along with our legacy R&D Systems team here in Minneapolis, are all working together to develop unique and more complete solutions for our customers using the Protein Platform instruments, while preparing for a full-scale commercial launch of 'Ella' in Q3, the rebranded platform that was developed by CyVek."    

Financial Results

Net sales as reported for the second quarter increased 33% to $111.9 million. Organic growth was 4% in the quarter, with currency translation having a negative impact of 2% and acquisitions contributing 31% to the revenue growth. Adjusted earnings for the second quarter were $30.3 million (an increase of 10% from the prior fiscal year period) or $0.82 per diluted share.

GAAP earnings for the quarter were $33.2 million or $0.89 per diluted share. This compares to $25.1 million or $0.68 per diluted share as reported in the second quarter of fiscal year 2014.  GAAP results in the current quarter reflect an $8.3 million pre-tax gain on the minority investment the Company made in CyVek during fiscal year 2014.  In a business combination achieved in stages, the acquirer is required to re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in earnings.  Consequently, the gain was triggered in the second quarter of fiscal 2015 as a result of the Company's purchase of the remaining 80% interest in CyVek for $60 million plus a potential earn-out payment of up to $35 million based on CyVek revenue over the 30-month period following the acquisition's closing.

Adjusted gross margins were 71.0% for the second quarter of fiscal 2015 compared to 72.7% for the same quarter in fiscal 2014.  The decrease in adjusted gross margins for the quarter compared to last year was caused by a change in product mix from lower margin acquisitions.  GAAP gross margin was 67.7% and 69.7% for the quarters ended December 31, 2014 and 2013 respectively.

Selling, general and administrative expenses for the quarter ended December 31, 2014 increased $16.2 million from the same prior-year quarter. This increase in expenses included the acquired run-rate expenses from recent acquisitions, intangible asset amortization from recent acquisitions, and other costs associated with on-going acquisitions as illustrated in the accompanying table.  The remaining increase includes investments made in commercial resources and administrative infrastructure.

Cash generated from operations for the second quarter of fiscal 2015 was $35.7 million.  Capital expenditures for the second quarter of fiscal 2015 were $3.1 million.

Segment Results

Management uses adjusted operating results to monitor and evaluate performance of the Company's three business segments, as highlighted below. 

Biotechnology Segment

The Company's Biotechnology segment includes proteins, antibodies, immunoassays, flow cytometry products, intracellular signaling products, and biologically active chemical compounds used in biological research.  Biotechnology segment's second quarter 2015 net sales were $78.0 million, an increase of 10% from $70.6 million for the second quarter ended December 31, 2013.  Organic growth for the segment was 5% in the quarter, with currency translation having a negative impact of 2% and acquisitions contributing 7% to the revenue growth.  Biotechnology segment adjusted operating margin was 50.3% in the second quarter of fiscal 2015 compared to 54.0% in the second quarter of fiscal 2014.  The lower margin is driven by a product mix shift as a result of the acquisition of Novus in fiscal year 2015.

Clinical Controls Segment

The Company's Clinical Controls segment provides a range of hematology controls, calibrators, and products used as proficiency testing tools by clinical laboratories and proficiency certifying agencies.  Clinical Controls segment's second quarter fiscal 2015 net sales were $13.7 million, an increase of 2% from $13.5 million from the quarter ended December 31, 2013. Organic sales growth for the Clinical Controls segment was also 2% for the quarter.  The Clinical Controls segment adjusted operating margin was 27.9% in the second quarter of fiscal 2015 compared to 27.4% in the second quarter of fiscal 2014.

Protein Platforms Segment

The Company's Protein Platforms segment now includes the ProteinSimple product lines along with the November acquisition of CyVek, further expanding the Company's solutions that it can offer its customers by developing and commercializing proprietary systems and consumables for protein analysis.  In the second quarter of fiscal 2015, segment revenue was $20.3 million and operating margin was 17.6%.

Forward Looking Statements:

Our press releases may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements involve risks and uncertainties that may affect the actual results of operations. The following important factors, among others, have affected and, in the future, could affect the Company's actual results: the effect of new branding and marketing initiatives, the integration of new leadership, the introduction and acceptance of new products, the funding and focus of the types of research by the Company's customers, the impact of the growing number of producers of biotechnology research products and related price competition, general economic conditions, the impact of currency exchange rate fluctuations, and the costs and results of research and product development efforts of the Company and of companies in which the Company has invested or with which it has formed strategic relationships.

For additional information concerning such factors, see the section titled "Risk Factors" in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking statements we make in our press releases due to new information or future events. Investors are cautioned not to place undue emphasis on these statements.

Use of Adjusted Financial Measures:

The adjusted financial measures used in this press release quantify the impact the following events had on reported net sales, gross margin percentages, selling, general and administrative expenses, net earnings and earnings per share for the quarter ended December 31, 2014 as compared to the same prior-year period:

 - fluctuations in exchange rates used to convert transactions in foreign currencies (primarily the Euro, British pound sterling and Chinese yuan) to U.S. dollars when referencing organic revenue growth;

 - the acquisitions in fiscal 2015 of CyVek on November 4, 2014, ProteinSimple on July 31, 2014, and Novus on July 1, 2014 and acquisitions in prior years, including the impact of amortizing intangible assets and the recognition of costs upon the sale of inventory written up to fair value;

 - expenses related to the acquisitions noted above and other on-going acquisition activity.

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.

Bio-Techne Corporation (NASDAQ: TECH) is a global life sciences company providing innovative tools and bioactive reagents for the research and clinical diagnostic communities. Bio-Techne products assist scientific investigations into biological processes and the nature and progress of specific diseases. They aid in drug discovery efforts and provide the means for accurate clinical tests and diagnoses. With thousands of products in its portfolio, Bio-Techne generated approximately $358 million in net sales in fiscal 2014 and has over 1,300 employees worldwide. For more information on Bio-Techne and its brands, please visit www.bio-techne.com.

 

BIO-TECHNE CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)





QUARTER ENDED

SIX MONTHS ENDED


12/31/14

12/31/13

12/31/14

12/31/13

Net sales

$111,948

$ 84,017

$220,425

$169,685

Cost of sales

36,205

25,424

71,616

49,978

Gross margin

75,743

58,593

148,809

119,707

Operating expenses:





   Selling, general and administrative

31,137

14,926

59,838

28,947

   Research and development

10,026

7,923

19,175

15,625

      Total operating expenses

41,163

22,849

79,013

44,572

Operating income

34,580

35,744

69,796

75,135

Other (expense) income

7,983

474

7,365

737

Earnings before income taxes

42,563

36,218

77,161

75,872

Income taxes

9,354

11,163

20,045

23,389

Net earnings

$33,209

$25,055

$ 57,116

$ 52,483

Earnings per share:





 Basic

$   0.90

$    0.68

$     1.54

$     1.42

 Diluted

$   0.89

$    0.68

$     1.54

$     1.42

Weighted average common shares outstanding:





  Basic

37,085

36,882

37,048

36,862

  Diluted

37,211

37,015

37,181

36,968

 

 


BIO-TECHNE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)


ASSETS

12/31/14

6/30/14

Cash and equivalents

$     92,968

$318,568

Short-term available-for-sale investments

46,970

44,786

Trade accounts receivable

57,214

47,874

Inventory

52,815

38,847

Deferred income taxes

13,090

9,623

Income taxes receivable

4,182

0

Other current assets

6,291

9,715

  Current assets

273,530

469,413




Available-for-sale investments

4,085

3,575

Property and equipment, net

124,776

117,120

Goodwill and intangible assets, net

714,906

260,249

Other non-current assets

1,701

12,134

  Total assets

$1,118,998

$862,491

LIABILITIES AND STOCKHOLDERS' EQUITY



Accounts payable and accrued expenses

$    31,486

$19,946

Income taxes payable

4,001

496

Related party note payable – current

5,982

5,949

Deferred revenue – current

2,811

0

  Current liabilities

44,280

26,391




Long-term debt obligations

186,037

6,997

Deferred taxes

66,103

33,838

Other long-term liabilities

1,896

0

Stockholders' equity

820,682

795,265

  Total liabilities and stockholders' equity

$1,118,998

$862,491

 

 

BIO-TECHNE CORPORATION

RECONCILIATION OF GROSS MARGIN PERCENTAGES

(Unaudited)



QUARTER ENDED

SIX MONTHS ENDED


12/31/14

12/31/13

12/31/14

12/31/13

Gross margin percentage

67.7%

69.7%

67.5%

70.5%

Identified adjustments:





     Costs recognized upon sale of acquired inventory

1.1%

1.7%

2.0%

1.9%

     Amortization of intangibles

2.2%

1.3%

2.0%

1.2%

Gross margin percentage - adjusted

71.0%

72.7%

71.5%

73.6%

 

 

BIO-TECHNE CORPORATION

RECONCILIATION of SELLING, GENERAL and ADMINISTRATIVE EXPENSES

(In thousands)

(Unaudited)



QUARTER ENDED

SIX MONTHS ENDED


12/31/14

12/31/13

12/31/14

12/31/13

Selling, general and administrative expenses

$31,137

$14,926

$59,838

$28,947

Identified adjustments:





     Acquired company expense, excluding intangible amortization

(10,780)

0

(19,787)

0

     Acquisition related expenses

(1,201)

0

(3,571)

(532)

     Amortization of intangibles

(4,360)

(1,528)

(8,086)

(2,783)

Selling, general and administrative expenses - adjusted 

$14,796

$13,398

$28,394

$25,632

 

 


BIO-TECHNE CORPORATION

RECONCILIATION of NET EARNINGS and EARNINGS per SHARE

(In thousands, except per share data)

(Unaudited)


QUARTER ENDED

SIX MONTHS ENDED


12/31/14

12/31/13

12/31/14

12/31/13

Net earnings

$33,209

$25,055

$57,116

$52,483

Identified adjustments:





     Costs recognized upon sale of acquired inventory

1,188

1,404

4,355

3,135

     Amortization of intangibles

6,858

2,587

12,586

4,775

     Acquisition related expenses

1,201

0

3,571

532

     Gain on investment

(8,300)

0

(8,300)

0

     Tax impact of above adjustments

(2,901)

(1,210)

(6,337)

(2,383)

     Tax impact of research and development credit

(910)

(246)

(910)

(476)

Net earnings - adjusted 

$30,345

$27,590

$62,081

$58,066






Earnings per share - diluted – adjusted

$   0.82

$    0.75

$     1.67

$    1.57

 

 

BIO-TECHNE CORPORATION

SEGMENT REVENUE

(In thousands, except per share data)

(Unaudited)



QUARTER ENDED

SIX MONTHS ENDED


12/31/14

12/31/13

12/31/14

12/31/13

Biotechnology segment revenue

$77,951

$70,557

$159,419

$143,747

Clinical Controls segment revenue

13,698

13,460

27,793

25,938

Protein Platforms segment revenue

20,299

0

33,213

0

   Consolidated revenue

$111,948

$84,017

$220,425

$169,685

 

 

BIO-TECHNE CORPORATION

SEGMENT OPERATING INCOME

(In thousands, except per share data)

(Unaudited)



QUARTER ENDED

SIX MONTHS ENDED


12/31/14

12/31/13

12/31/14

12/31/13

Biotechnology segment operating income

$39,210

$38,135

$81,230

$79,123

Clinical Controls segment operating income

3,818

3,686

8,353

7,705

Protein Platforms segment operating income

3,567

0

6,171

0

   Segment operating income

46,595

41,821

95,754

86,828

Costs recognized upon sale of acquired inventory

(1,188)

(1,404)

(4,355)

(3,135)

Amortization of intangibles

(6,858)

(2,587)

(12,586)

(4,775)

Acquisition related expenses

(1,201)

(0)

(3,571)

(532)

Corporate general, selling and administrative expenses

(2,768)

(2,086)

(5,446)

(3,251)

Operating income 

$34,580

$35,744

$69,796

$75,135

 

 

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SOURCE Bio-Techne Corporation