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Foreign currency fluctuations and general economic conditions continued to have a negative impact on consolidated net sales and earnings in the quarter ended March 31, 2009. The change in exchange rates used to convert foreign currencies (primarily British pound sterling and euros) to U.S. dollars reduced net earnings by $1.5 million ($.04 per diluted share) for the quarter and $3.3 million ($.09 per diluted share) for the nine months ended March 31, 2009, as compared to the same periods in last fiscal year.
Consolidated net sales for the quarter and nine months ended March 31, 2009 were $67.9 million and $199.1 million, respectively. This was a 2.4% decrease and a 5.0% increase from the quarter and nine months ended March 31, 2008, respectively. Consolidated net sales were negatively affected by the strength of the U.S. dollar as compared to foreign currencies. Excluding the effect of changes in foreign currency exchange rates, consolidated net sales increased 2.9% and 8.3% for the quarter and nine months ended March 31, 2009, respectively, from the comparable prior year periods.
Biotechnology net sales, which include sales by R&D Systems' Biotechnology Division, R&D Systems China and BiosPacific, were $45.1 million for the quarter ended March 31, 2009, essentially the same as in the quarter ended March 31, 2008. Biotechnology sales were $131.6 million for the nine months ended March 31, 2009, an increase of 6.9% over the same period last year. North American biotechnology sales to industrial pharmaceutical and biotechnology customers declined approximately 5% during the third quarter of fiscal 2009. Biotechnology sales to academic and Pacific Rim distributor customers grew about 3% during the same period. The Company attributes the lower third quarter sales growth rate to customer caution in a time of economic uncertainty.
R&D Europe's net sales for the quarter and nine months ended March 31, 2009 were $18.3 million and $54.5 million, decreases of 9.6% and 0.3%, respectively, from the same prior-year periods. R&D Europe's net sales increased 8.5% and 11.3% for the quarter and nine months ended March 31, 2009 when measured at currency rates in effect in the comparable prior periods.
Hematology net sales for the quarter and nine months ended March 31, 2009 were $4.4 million and $12.9 million, increases of 5.4% and 9.3%, respectively, compared to the quarter and nine months ended March 31, 2008.
Consolidated gross margins were 78.9% and 79.5% for the quarter and nine months ended March 31, 2009, respectively, compared to 79.7% and 79.4% for the quarter and nine months ended March 31, 2008, respectively. The decrease in gross margins in the third quarter was primarily caused by lower gross margins in Europe resulting from unfavorable exchange rates.
Selling, general and administrative expenses for the quarter and nine months ended March 31, 2009 decreased $1.9 million (21.5%) and $2.1 million (7.7%), respectively from the quarter and nine months ended March 31, 2008. The decrease in selling, general and administrative expenses from the comparable prior-year periods were the result of the following (in thousands):
Quarter Nine Months
-------- -----------
Reduction in profit sharing expense $(1,326) $(1,943)
Change in exchange rates to convert foreign
expenses to U.S. dollars (651) (1,538)
Other, including annual wage, salary and
benefits increases 44 1,356
-------- --------
$(1,933) $(2,125)
======== ========
Research and development expenses decreased $30,000 (0.5%) and increased $983,000 (5.9%), respectively, for the quarter and nine months ended March 31, 2009 from the comparable prior-year periods.
Interest income decreased $1.6 million and $2.8 million for the quarter and nine months ended March 31, 2009, respectively, from the comparable prior-year periods, primarily as a result of lower rates of return on cash and available-for-sale investments and, to a lesser extent, to lower cash and available-for-sale investment balances.
The effective tax rate for both the quarter and nine months ended March 31, 2009 was 32.3% as compared to effective tax rates of 31.2% and 32.7%, respectively, from the same prior-year periods. The effective rate in the quarter ended March 31, 2008 was positively impacted by changes in state apportionment estimates. The Company expects its fiscal 2009 effective income tax rate to range from approximately 32.0% to 33.0%.
In November 2007, the Company's Board of Directors authorized the repurchase and retirement of up to $150 million of the Company's common stock. The Company repurchased approximately 213,000 shares of its common stock during the third quarter of fiscal 2009 for approximately $10.5 million. Approximately $7.5 million remains available for the repurchase of shares under this authorization.
Forward Looking Statements:
This earnings release contains forward-looking statements within the meaning of the Private Litigation Reform Act. These statements, including the Company's expectations as to consolidated income tax rates, involve risks and uncertainties that may affect the actual results of operations. The following important factors, among others, have affected and, in the future, could affect the Company's actual results: the introduction and acceptance of new biotechnology and hematology products, the levels and particular directions of research by the Company's customers, the impact of the growing number of producers of biotechnology research products and related price competition, general economic conditions, the retention of hematology OEM and proficiency survey business, the impact of currency exchange rate fluctuations, and the costs and results of research and product development efforts of the Company and of companies in which the Company has invested or with which it has formed strategic relationships.
For additional information concerning such factors, see the 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 this release due to new information or future events. Investors are cautioned not to place undue emphasis on these statements.
Techne Corporation has two operating subsidiaries: Research and Diagnostic Systems, Inc. (R&D Systems) of Minneapolis, Minnesota and R&D Systems Europe, Ltd. (R&D Europe) of Abingdon, England. R&D Systems is a specialty manufacturer of biological products. R&D Systems has two subsidiaries, BiosPacific, Inc. (BiosPacific), located in Emeryville, California and R&D Systems China Co. Ltd., (R&D China), located in Shanghai, China. BiosPacific is a worldwide supplier of biologics to manufacturers of in vitro diagnostic systems and immunodiagnostic kits. R&D China and R&D Europe distribute biotechnology products.
TECHNE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED NINE MONTHS ENDED
3/31/09 3/31/08 3/31/09 3/31/08
------- ------- ------- -------
Net sales $67,866 $69,522 $199,066 $189,651
Cost of sales 14,316 14,146 40,832 39,001
------ ------ ------ ------
Gross margin 53,550 55,376 158,234 150,650
------ ------ ------- -------
Operating expenses:
Selling, general and
administrative 7,061 8,994 25,604 27,729
Research and development 5,809 5,839 17,565 16,582
Amortization of intangible
assets 240 283 720 853
--- --- --- ---
Total operating expenses 13,110 15,116 43,889 45,164
------ ------ ------ ------
Operating income 40,440 40,260 114,345 105,486
Other income (expense):
Interest income 1,504 3,155 6,596 9,405
Other non-operating
expense, net (1,103) (423) (3,002) (1,565)
------- ----- ------- -------
Total other income 401 2,732 3,594 7,840
--- ----- ----- -----
Earnings before income taxes 40,841 42,992 117,939 113,326
Income taxes 13,200 13,402 38,083 37,025
------ ------ ------ ------
Net earnings $27,641 $29,590 $79,856 $76,301
======= ======= ======= =======
Earnings per share:
Basic $0.74 $0.76 $2.10 $1.94
Diluted $0.74 $0.76 $2.10 $1.94
Weighted average common shares
outstanding:
Basic 37,427 39,000 37,986 39,296
Diluted 37,499 39,108 38,085 39,396
TECHNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
ASSETS 3/31/09 6/30/08
------ ------- -------
Cash and equivalents $133,821 $166,992
Short-term available-for-sale investments 33,296 39,353
Trade accounts receivable 31,593 31,747
Other receivables 3,020 1,585
Inventory 10,749 9,515
Other current assets 10,196 9,241
------ -----
Current assets 222,675 258,433
------- -------
Available-for-sale investments 66,925 87,384
Property and equipment, net 97,428 101,722
Goodwill and intangible assets, net 28,312 29,032
Other non-current assets 26,463 30,798
------ ------
Total assets $441,803 $507,369
======== ========
LIABILITIES
-----------
Current liabilities $14,914 $20,239
Stockholders' equity 426,889 487,130
------- -------
Total liabilities and equity $441,803 $507,369
======== ========
SOURCE Techne Corporation
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