Bio-Techne (TECH) 10-K risk factor changes: FY2009 vs FY2008

10-K 1 [removed: k2008.txt] [added: k102009.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, [removed: 2008] [added: 2009] 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: [removed: None] [added: Common Stock, $0.01 par value] Securities registered pursuant to Section 12(g) of the Act: [removed: Common Stock, $0.01 par value.][added: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.]

Yes ( ) No [removed: (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.

( ) 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 [removed: 26, 2008] [added: 27, 2009] as reported on The Nasdaq Stock Market was approximately [removed: $2.4] [added: $1.6] billion.

Shares of $0.01 par value Common Stock outstanding at August [removed: 26, 2008: 38,659,580.][added: 27, 2009: 37,244,629.]

DOCUMENTS INCORPORATED BY REFERENCE [removed: Portions] [added: Portion] of the Company's Proxy Statement for its [removed: 2008] [added: 2009] Annual Meeting of Shareholders are incorporated by reference into Part III.

Unresolved Staff Comments [removed: 11] [added: 12] Item 2.

Submission of Matters to a Vote of Security Holders 13 Supplemental [removed: Item--Executive] [added: Item - Executive] Officers of the Company 13 PART II Item 5.

Market for the [removed: Company's] [added: Registrant's] Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 13 Item 6.

Quantitative and Qualitative Disclosures about Market Risk [removed: 24] [added: 23] Item 8.

Financial Statements and Supplementary Data [removed: 25] [added: 24] Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure [removed: 41] [added: 39] Item 9A.

Controls and Procedures [removed: 41] [added: 39] Item 9B.

Other Information [removed: 41] [added: 39] PART III Item 10.

Directors, Executive Officers and Corporate Governance [removed: 42] [added: 39] Item 11.

Executive Compensation [removed: 42] [added: 39] Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters [removed: 42] [added: 40] Item 13.

Certain Relationships and Related Transactions, and Director Independence [removed: 42] [added: 40] Item 14.

Principal [removed: Accountant] [added: Accounting] Fees and Services [removed: 43] [added: 40] PART IV Item 15.

Exhibits and Financial Statement Schedules [removed: 43] [added: 40] SIGNATURES [added: 41] 2 PART I ITEM 1.

TECHNE Corporation and Subsidiaries (the Company) are engaged in the [removed: development] [added: development, manufacture] and [removed: manufacturing] [added: sale] of biotechnology products and hematology calibrators and controls.

[removed: 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 [removed: Systems] Europe [removed: Ltd.] has a sales subsidiary, R&D Systems GmbH, in Germany and a sales office in France.

[removed: In late fiscal 2007, the] [added: The] Company [removed: established a] [added: distributes biotechnology products in China through its wholly-owned] subsidiary, R&D Systems [removed: China] [added: China,] Co. Ltd. (R&D [removed: China), in Shanghai, China, to distribute biotechnology products throughout China.][added: China).]

[removed: On July 1, 2007,] Fortron [added: Bio Science, Inc.] was merged into R&D [removed: Systems.][added: Systems on July 1, 2007.]

The Company has three reportable operating segments based on the nature of products and geographic location: biotechnology, R&D [removed: Systems] Europe and hematology.

The biotechnology segment consists of R&D Systems' Biotechnology Division, [removed: Fortron (through June 30, 2007),] BiosPacific and R&D China, which develop, manufacture and sell biotechnology research and diagnostic products world-wide.

R&D [removed: Systems] Europe distributes Biotechnology Division products throughout Europe.

The hematology segment develops and manufactures hematology controls and calibrators for sale [removed: world-wide.][added: world- wide.]

In fiscal [removed: 2008, 2007] [added: 2009, 2008] and [removed: 2006,] [added: 2007,] net sales from the Company's biotechnology segment were [removed: 64%, 66%] [added: 66%, 64%] and 66%, respectively, of consolidated net sales.

Net sales from the Company's R&D Europe segment were [removed: 30%, 27%] [added: 27%, 30%] and [removed: 26%,] [added: 27%,] respectively, of consolidated net sales for same periods.

The Company's hematology segment net sales were [removed: 6%, 7%] [added: 7%, 6%] and [removed: 8%] [added: 7%] of consolidated net sales for fiscal [removed: 2008, 2007] [added: 2009, 2008] and [removed: 2006,] [added: 2007,] respectively.

Financial information relating to the Company's operating segments is [added: incorporated herein by reference to Note L to the Consolidated Financial Statements] included in Item 8 of this Annual Report on Form 10-K.

[removed: 3 In recent years, the] [added: The] Company [added: also] has [removed: added] enzymes and intracellular cell signaling reagents [removed: to] [added: in] its product portfolio.

[added: 3] The Company markets cytokine assay kits under the tradename Quantikine.

The Company currently manufactures and sells [removed: in excess of 12,000] [added: nearly 14,000] biotechnology products.

[removed: 4] These fundamental blood components (red cells, white cells and platelets) differ widely in size and concentration.

One of the most frequently performed laboratory tests on a blood sample is a complete blood count [removed: or CBC.][added: (CBC).]

In most [removed: laboratories] [added: laboratories,] the CBC consists of the white cell count, the red cell count, the hemoglobin reading, and the hematocrit reading (the percent of red cells in a volume of whole blood after it has been centrifuged).

[added: 4] These and other characteristics or "parameters" of a blood sample can be measured by automated or semi-automated cell counters.

The Company currently produces controls and calibrators for the following major brands of analyzers: Abbott Diagnostics, Beckman Coulter, Siemens Healthcare Diagnostics, [removed: Horiba ABX] [added: HORIBA Medical] and Sysmex.

Yes ( ) No (X) 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: Yes (X) No ( ) Indicate by check mark whether the registrants has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

These activities are conducted domestically through its wholly-owned subsidiaries, Research and Diagnostic Systems, Inc. (R&D Systems) and BiosPacific, Inc. (BiosPacific).

5 In fiscal 2009, the Company introduced over 1,400 new biotechnology products.

The Company holds a 16.8% ownership percentage in CCX.

In fiscal 2009, as a result of Hemerus repurchasing and retiring a third party's membership units, the Company's ownership percentage increased to 22%.

In fiscal 2009, the Company received a $1.3 million distribution from Nephromics.

See Item 3.

See the description of risks associated with the Company's foreign subsidiaries in Item 1A of this Annual Report on Form 10-K.

Any adverse movement in foreign currency rates could negatively affect the CompanY's revenues and earnings.

Development stage companies of the type the Company has invested in are dependent on their ability to raise additional funds to continue research and development efforts and on receiving patent protection and/or FDA clearance to market their products.

Additionally, if funding were unavailable or inadequate to fund operations of these companies or if patent protection or FDA clearance were not received by them, the Company may determine that its investment in one or more of these unconsolidated companies is "other than temporarily" impaired, and the Company could write off all or a portion of its investment.

Streck is seeking a reasonable royalty on sales of integrated hematology controls containing reticulocytes.

In April 2009, the Company authorized an additional $60 million for its stock repurchase plan.

TECHNE Corporation paid three quarterly cash dividends of $0.25 per share per quarter totaling $28.2 million in fiscal 2009.

COMPARISION OF CUMULATIVE FIVE YEAR TOTAL RETURNS INDEXED RETURNS Year Ending Company/Index June 2005 June 2006 June 2007 June 2008 June 2009 --------------------- --------- --------- --------- --------- --------- Techne Corporation 105.66 117.19 131.67 178.11 148.76 S&P Midcap 400 Index 114.03 128.83 152.67 141.48 101.83 S&P 400 Biotechnology 93.86 95.63 100.32 130.03 126.35 14 ITEM 6.

These activities are conducted domestically through its wholly-owned subsidiaries, Research and Diagnostic Systems, Inc. (R&D Systems) and BiosPacific, Inc. (BiosPacific).

The Company distributes biotechnology products in Europe through its wholly-owned U.K. subsidiary, R&D Systems Europe Ltd. (R&D Europe).

R&D Europe has a sales subsidiary, R&D Systems GmbH, in Germany and a sales office in France.

The Company distributes biotechnology products in China through its wholly-owned subsidiary, R&D Systems China Co. Ltd. (R&D China).

The Company has three reportable operating segments based on the nature of products and geographic location: biotechnology, R&D Europe and hematology.

R&D Europe distributes Biotechnology Division products throughout Europe.

The hematology segment develops and manufactures hematology controls and calibrators for sale world- wide.

Overall Results Consolidated net sales and consolidated net earnings increased 2.5% and 1.6%, respectively, for fiscal 2009 as compared to fiscal 2008.

Consolidated net sales and consolidated net earnings in fiscal 2009 were unfavorably affected by the strengthening of the U.S. dollar as compared to foreign currencies.

Included in consolidated net sales in fiscal 2009 were $3.4 million of sales of new biotechnology products, which had their first sale in fiscal 2009.

Biotechnology net sales to international distributors, pharmaceutical/biotechnology customers and academic customers increased 6.2%, 4.7% and 3.9%, respectively, in fiscal 2009 from fiscal 2008.

R&D Europe net sales decreased $3.2 million (4.2%) in fiscal 2009.

Hematology net sales in fiscal 2009 increased $1.5 million (9.2%) mainly due to increased sales volume.

The decrease in stock-based compensation expense in fiscal 2009 was mainly the result of decreased stock volatility and interest rates used to calculate the fair value of options granted.

The Company introduced over 1,400 new biotechnology products in both fiscal 2009 and 2008, respectively.

17 Interest income and expense.

The decrease in fiscal 2009 from the prior fiscal year was primarily the result of lower rates of return on cash and available-for-sale investments.

The fiscal 2009 consolidated tax rate was positively impacted by the renewal of the U.S. research and development credit.

The fiscal 2009 credit included $354,000 of credit for the January to June 2008 period.

The decrease in cash generated from operating activities in fiscal 2009 as compared to fiscal 2008 was mainly the result of changes in operating assets and liabilities offset by increased net earnings of $1.7 million.

In fiscal 2009, changes in operating assets and liabilities negatively impacted net cash from operating activities by $4.1 million compared to a positive impact in fiscal 2008 of $2.2 million as a result of changes in the timing of cash payments and receipts.

In fiscal 2009, the Company purchased two parking lots adjacent to its Minneapolis facility for $2.2 million.

In fiscal 2008, the Company purchased the facility it had been leasing for its R&D Europe operations in Abingdon, England for $8.3 million.

In fiscal years 2006 through 2008, the Company invested an additional $1.75 million in Hemerus, increasing its ownership percentage to 19%.

In fiscal 2009, as a result of Hemerus repurchasing and retiring a third party's membership units, the Company's ownership percentage increased to 22%.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

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.

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.

At July 1, 2005, the Company held a 19.9% interest in CCX.

In April 2006, the Company made an additional $9.0 million investment in CCX in the form of a 5% convertible note subject to the limitation that the Company's holdings in CCX not exceed 19.9% of the outstanding voting shares.

In June 2006, $4.3 million of the note was converted into CCX preferred stock.

In August 2006, the remainder of the note and accrued interest were converted into CCX preferred stock.

The Company's equity interest in CCX after the August 2006 conversion was 19.3%.

The Company has a 16.8% equity interest in Nephromics.

Additionally, if the Company determines that its investment in unconsolidated companies is "other than temporarily" impaired, the Company may write off its entire investment in such company.

These operations were transferred to Minneapolis in the first quarter of fiscal 2006.

This lease agreement expired on October 31, 2007.

The Company believes the owned and leased property discussed above, are adequate to meet its occupancy needs in the foreseeable future.

COMPARISION OF CUMULATIVE FIVE YEAR TOTAL RETURN INDEXED RETURNS Years Ending Company / Index June 2004 June 2005 June 2006 June 2007 June 2008 --------------------- --------- --------- --------- --------- --------- Techne Corp 143.16 151.27 167.78 188.50 254.99 S&P Midcap 400 127.98 145.94 164.88 195.40 181.07 S&P 400 Biotechnology 112.82 105.89 107.89 113.18 146.70 14 ITEM 6.

The Company began fulfilling orders for all third-party Chinese distributors from R&D China in the first quarter of fiscal 2008.

Increased consolidated net sales was the primary reason for the improvement.

Consolidated net earnings increased 16.0% for fiscal 2007 as compared to fiscal 2006.

Increased consolidated net sales and higher gross margins were the primary reason for the improvement.

Consolidated net sales increased 10.3% from fiscal 2006.

The consolidated gross margin percentage increased from 77.4% of consolidated net sales in fiscal 2006 to 79.1% in fiscal 2007 partly due to less purchase accounting impact in fiscal 2007 related to inventory acquired from Fortron and BiosPacific.

Consolidated net sales for fiscal 2007 were $223.5 million, an increase of $20.9 million (10.3%) from fiscal 2006.

Approximately $1.2 million of the increase in biotechnology net sales for fiscal 2007 was the result of price increases.

R&D Europe net sales increased $8.8 million (16.6%) in fiscal 2007.

Hematology net sales in fiscal 2007 decreased $137,000 (1.0%) due to decreased retail sales.

The biotechnology gross margin percentages for fiscal 2007 and 2006 were affected by purchase accounting related to inventory on hand at the acquisition date of Fortron and BiosPacific in fiscal 2006.

Included in cost of sales for fiscal 2007 and 2006 were $455,000 and $1.7 million, respectively, related to inventory purchase accounting.

The increase in legal fees in both fiscal years was due to on-going patent interference and infringement litigation.

Interest expense and income.

In June 2008, IMMC filed for relief under Chapter 11 of the U.S. Bankruptcy Code and announced the sale of substantially all of its assets.

The Company has two equity method of accounting investments in limited liability corporations, Hemerus Medical, LLC (Hemerus) and Nephromics, LLC (Nephromics).

Cash flows from operating activities.

The increase in cash generated from operating activities in fiscal 2007 as compared to fiscal 2006 was the result of increased net earnings of $11.8 million partially offset by decreases in income taxes payable and the excess tax benefit from stock option exercises aggregating $2.0 million in 2007 compared to a $3.1 million increase in fiscal 2006, and an increase in trade and other receivables of $5.0 million compared to an increase of $2.2 million in fiscal 2006.

The $5.1 million decrease in income taxes payable in fiscal 2007 as compared to fiscal 2006 was the result of higher U.S. federal and state income tax deposits.

The increase in trade and other receivable in fiscal 2007 as compared to fiscal 2006 was the result of increased sales.

Cash flows from investing activities.

In fiscal 2006, the Company began construction of additional laboratory space at its Minneapolis facility.

Included in fiscal 2008, 2007 and 2006 capital additions were approximately $4.3 million, $5.6 million and $1.5 million, respectively, related to this construction and the renovation of existing laboratory space.

The additional construction in fiscal 2006 related mainly to additional facilities to house goats and sheep used in the production of antibodies.