Bio-Techne 2008 10-K Annual Report

10-K 1 k2008.txt 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2008 OR ( ) 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: 000-17272 TECHNE CORPORATION (Exact name of Registrant as specified in its charter) Minnesota 41-1427402 (State of Incorporation) (IRS Employer Identification No.) 614 McKinley Place N.E., Minneapolis, MN 55413-2610 (Address of principal executive offices) (Zip Code) Registrant's telephone number: (612) 379-8854 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (X) No ( ) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ( ) No (X) Indicate by check mark whether the Company (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: Yes (X) No ( ) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Securities Exchange Act. Large accelerated filer (X) Accelerated filer ( ) Non-accelerated filer ( ) Small reporting company ( ) Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). ( ) Yes (X) No The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the closing sale price on August 26, 2008 as reported on The Nasdaq Stock Market was approximately $2.4 billion. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded. Shares of $0.01 par value Common Stock outstanding at August 26, 2008: 38,659,580. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's Proxy Statement for its 2008 Annual Meeting of Shareholders are incorporated by reference into Part III. TABLE OF CONTENTS Page PART I Item 1. Business 3 Item 1A. Risk Factors 10 Item 1B. Unresolved Staff Comments 11 Item 2. Properties 12 Item 3. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security Holders 13 Supplemental Item--Executive Officers of the Company 13 PART II Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 13 Item 6. Selected Financial Data 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 24 Item 8. Financial Statements and Supplementary Data 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 41 Item 9A. Controls and Procedures 41 Item 9B. Other Information 41 PART III Item 10. Directors, Executive Officers and Corporate Governance 42 Item 11. Executive Compensation 42 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 42 Item 13. Certain Relationships and Related Transactions, and Director Independence 42 Item 14. Principal Accountant Fees and Services 43 PART IV Item 15. Exhibits and Financial Statement Schedules 43 SIGNATURES 2 PART I ITEM 1. BUSINESS OVERVIEW TECHNE Corporation was incorporated on July 17, 1981 in the state of Minnesota. TECHNE Corporation and Subsidiaries (the Company) are engaged in the development and manufacturing of biotechnology products and hematology calibrators and controls. These activities are conducted domestically through its wholly-owned subsidiary, Research and Diagnostic (R&D) Systems, Inc. The Company distributes biotechnology products in Europe through its wholly-owned U.K. subsidiary, R&D Systems Europe Ltd. (R&D Europe). R&D Systems Europe Ltd. has a sales subsidiary, R&D Systems GmbH, in Germany and a sales office in France. In late fiscal 2007, the Company established a subsidiary, R&D Systems China Co. Ltd. (R&D China), in Shanghai, China, to distribute biotechnology products throughout China. The Company began fulfilling orders for all third-party Chinese distributors from R&D China beginning in the first quarter of fiscal 2008. R&D Systems acquired two subsidiaries effective July 1, 2005. Fortron Bio Science, Inc. (Fortron), a developer and manufacturer of monoclonal and polyclonal antibodies, antigens and other biological reagents, was relocated to the Company's Minneapolis, Minnesota facility in the first quarter of fiscal 2006. On July 1, 2007, Fortron was merged into R&D Systems. The second subsidiary acquired on July 1, 2005, BiosPacific, Inc. (BiosPacific), located in Emeryville, California, is a worldwide supplier of biologics to manufacturers of in vitro diagnostic systems and immunodiagnostic kits. The Company has three reportable operating segments based on the nature of products and geographic location: biotechnology, R&D Systems Europe and hematology. The biotechnology segment consists of R&D Systems' Biotechnology Division, Fortron (through June 30, 2007), BiosPacific and R&D China, which develop, manufacture and sell biotechnology research and diagnostic products world-wide. R&D Systems Europe distributes Biotechnology Division products throughout Europe. The hematology segment develops and manufactures hematology controls and calibrators for sale world-wide. THE MARKET The Company manufactures and sells products for the biotechnology research and clinical diagnostics market (cytokines, assays and related products) and the clinical diagnostics market (hematology controls and calibrators). In fiscal 2008, 2007 and 2006, net sales from the Company's biotechnology segment were 64%, 66% and 66%, respectively, of consolidated net sales. Net sales from the Company's R&D Europe segment were 30%, 27% and 26%, respectively, of consolidated net sales for same periods. The Company's hematology segment net sales were 6%, 7% and 8% of consolidated net sales for fiscal 2008, 2007 and 2006, respectively. Financial information relating to the Company's operating segments is included in Item 8 of this Annual Report on Form 10-K. Biotechnology and R&D Europe Segments The Company, through its biotechnology and R&D Europe segments, is the world's leading supplier of cytokines and cytokine-related reagents to the biotechnology research community. These valuable proteins are produced in minute amounts by different types of cells and can be isolated from these cells or synthesized through recombinant DNA technology. Currently nearly all of the Company's cytokines are produced by recombinant DNA technology. The growing interest by academic and commercial researchers in cytokines is largely due to the profound effect that a tiny amount of a cytokine can have on cells and tissues of the body. Cytokines are intercellular messengers. They act as signals by interacting with specific receptors on the affected cells and trigger events that can lead to significant changes in a cell, tissue or organism. For example, cytokines can signal a cell to acquire the features necessary fo

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