filings.toolsBio-Techne (TECH) 10-K risk factor changes: FY2013 vs FY2012
The 2013-06-30 10-K against the 2012-06-30 one, compared heading by heading and sentence by sentence. One of these filings carries no fiscal year tag, so its year is the calendar year of the period end.
Item 1A8 rewritten16 added5 removed69 unchanged
All filing items680 rewritten309 added243 removed1,034 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 309 added, 243 removed, 680 rewritten and 1,034 unchanged across 18 items that differ.
Sentences by item
21 items, with every count and a link to each item that changed
Underlined words on a shaded ground are new in FY2013; struck-through words were in FY2012. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. RISK FACTORS
8 rewritten, 16 added, 5 removed, 69 unchanged
The biotechnology and [removed: hematology] [added: clinical control] industries are very competitive.
[removed: Any] [added: Since the Company creates value for its customers through the development of high-quality products, any] significant [added: decline in quality or] disruption of [removed: these] operations for any reason could adversely affect sales and customer relationships, and therefore adversely affect the business.
Approximately [removed: 30%] [added: 31%] of the Company’s sales are made through its foreign subsidiaries, which transact their sales in foreign currencies.
Sales [removed: to] [added: in] Europe made up approximately [removed: 29%] [added: 28%] of the Company’s net sales in fiscal [removed: 2012.][added: 2013.]
The approval process applicable to clinical [removed: diagnostic] [added: control] products of the type that may be developed by the Company may take a year or more.
These securities [added: may] include U.S. government and agency securities, [added: state and municipal securities,] foreign government [removed: and agency] securities, [added: U.S. and foreign] corporate debt and equity securities and certificates of deposit.
The Company has an approximate [removed: 18.0%] [added: 15.0%] equity investment in ChemoCentryx, Inc. (CCXI) that is valued at [removed: $94.7] [added: $89.6] million on the Company’s June 30, [removed: 2012] [added: 2013] Balance Sheet.
These factors make it possible that the Company could experience future dilution or a substantial decline in the [removed: $65.2] [added: $60.2] million unrealized gain it has on its CCXI investment and/or its $29.5 million investment in CCXI.
The Company conducts and plans to grow its business in developing markets.
The Company’s efforts to grow its businesses depends, to a degree, on its success in developing market share in additional geographic markets including, but not limited to, China.
In some cases, these countries have greater political and economic volatility and greater vulnerability to infrastructure and labor disruptions than the Company’s other markets.
Operating and seeking to expand business in a number of different regions and countries exposes the Company to multiple and potentially conflicting cultural practices, business practices and legal and regulatory requirements.
At August 26, 2013, the market value of the Company’s investment in CCXI was $51.2 million and its unrealized gain declined to $21.8 million.
We have identified a material weakness in our internal controls that, if not properly corrected, could adversely affect our operations and result in material misstatements in our financial statements.
As described in “Item 9A.
Controls and Procedures”, we have identified a material weakness in our system of internal control over financial reporting as of June 30, 2013.
A material weakness is a deficiency, or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The Company has identified a material weakness in the design, implementation and operating effectiveness of general IT controls (GITCs) intended to ensure that access to financial applications and data was adequately restricted to appropriate personnel, and that program changes to particular financial applications are documented, tested, and moved into the production environment only by individuals separate from the development function.
As a result, certain classes of transactions subject to controls that rely upon information generated by the Company’s IT systems that are subject to the operation of the GITCs, including the completeness, existence, and accuracy of revenue and accounts receivable, allow for a reasonable possibility that a misstatement is not adequately prevented or detected through the operation of management’s system of internal control over financial reporting.
In response to the material weakness we have developed a plan to enhance our internal testing approach, including related procedures, documentation, and possible expansion of human resources, for select controls to ensure that we have adequately addressed the completeness and accuracy of system-generated information used to support the operation of the controls and to improve segregation of duties.
Although there can be no assurances, we believe these enhancements and improvements, when repeated in future periods, will remediate the material weakness described above.
However, if we are not able to remedy the material weakness in a timely manner, we may be unable to provide holders of our securities with the required financial information in a timely and reliable manner and we may incorrectly report financial information.
Either of these events could subject us to regulatory enforcement and other actions, and could have a material adverse effect on our operations, investor, supplier and customer confidence in our reported financial information and the trading price of our common stock.
##### [Table of Contents](#toc)
The Company may be unsuccessful in integrating Boston Biochem and Tocris into its operations.
The actual financial results of Boston Biochem and Tocris could differ from the Company’s forecasts, effecting the Company’s future sales and net earnings.
If the integrations of the acquired businesses are not successful, the Company may record unexpected impairment charges.
Factors that will affect the success of the acquisitions include any decrease in customer loyalty caused by dissatisfaction with the combined companies’ product lines or its sales and marketing practices, including price increases, the ability to retain key employees and the ability of the Company to achieve synergies among its subsidiary companies.
Such synergies include leveraging the combined companies’ sales and marketing efforts, achieving certain cost savings and effectively combining technologies to develop new products.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
137 rewritten, 66 added, 58 removed, 184 unchanged
The principal forward-looking statements in this report include: the Company’s expectations regarding product releases, governmental license renewals, future income tax rates, [removed: medical device excise tax,] capital expenditures, the performance of the Company’s investments, future dividend declarations, the construction and lease of certain facilities, [added: the] adequacy of owned and leased property for future operations, [added: fluctuations in the Company’s financial results] and sufficiency of capital resources to meet the Company’s foreseeable future cash and working capital requirements.
The adjusted financial measures used in this Annual Report on Form 10-K quantify the impact the following events had on reported net sales, gross margin percentages and net earnings for fiscal [removed: 2012] [added: 2013] as compared to fiscal [removed: 2011] [added: 2012] and [removed: 2010:][added: 2011:]
| [removed: | \-] [added: •] | | fluctuations in exchange rates used to convert transactions in foreign currencies (primarily the Euro, British pound sterling and Chinese yuan) to U.S. dollars; |
| [removed: | \-] [added: •] | | the acquisitions of Boston Biochem, Inc. on April 1, 2011 and Tocris Holdings Limited on April 28, 2011, including the [added: impact of amortizing intangible assets and the] recognition of costs upon the sale of inventory written-up to fair value; |
| [removed: | \-] [added: •] | | professional fees and other costs incurred as part of the acquisitions of Boston Biochem, Inc. and Tocris Holdings [removed: Limited;] [added: Limited in fiscal 2011 and the acquisition of Bionostics Holdings Limited in July 2013;] |
| [removed: | \-] [added: •] | | impairment losses related to the Company’s investments in unconsolidated entities; [added: and] |
[removed: TECHNE] [added: Techne] Corporation and subsidiaries (the Company) are engaged in the development, manufacture and sale of biotechnology products and [removed: hematology calibrators and] [added: clinical diagnostic] controls.
These activities are conducted domestically through its wholly-owned subsidiaries, [removed: Research and Diagnostic] [added: R&D] Systems, Inc. (R&D Systems), Boston Biochem, Inc. (Boston Biochem) and BiosPacific, Inc. (BiosPacific).
The Company has two reportable segments based on the nature of its products (biotechnology and [removed: hematology).][added: clinical controls).]
R&D Systems’ Biotechnology Division, R&D Europe, Tocris, R&D China, BiosPacific and Boston Biochem [removed: operating segments] are included in the biotechnology reporting segment.
The Company’s [removed: hematology] [added: clinical controls] reporting segment, which consists of R&D Systems’ [removed: Hematology] [added: Clinical Controls] Division, develops and manufactures [removed: hematology] controls and calibrators for sale world-wide.
Included in fiscal 2012 and [added: fiscal] 2011 consolidated net sales were $19.4 million and $4.7 [removed: million] [added: million, respectively,] of acquisition-related net [removed: sales that were not comparable to the prior fiscal year.][added: sales.]
Consolidated net earnings in fiscal 2012 [removed: also] included impairment losses of $3.3 million recorded on two of the Company’s investments in unconsolidated entities and a $3.0 million tax benefit from the reversal of deferred tax valuation allowances.
Consolidated net sales [added: decreased 1.3%] and consolidated net earnings [removed: increased 7.8% and 2.3%, respectively,] [added: were flat] for fiscal [removed: 2011] [added: 2013] as compared to fiscal [removed: 2010.][added: 2012.]
Consolidated [added: organic] net [removed: sales] [added: sales, excluding the impact of the acquisitions] in fiscal 2011 [removed: were affected by changes in exchange rates] [added: and the effect of the change] from the prior year [added: in exchange rates] used to convert [removed: consolidated net] sales in foreign currencies [added: (primarily British pound sterling, euros and Chinese yuan)] into U.S. [removed: dollars and the impact of repatriation of prior-year earnings in fiscal 2010.][added: dollars, were as follows (in thousands):]
| | | _Year Ended June 30,_ | | | | | | | [removed: | | | |]
| | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | |
| Consolidated net sales | | $ | 314,560 | | | $ | 289,962 | | [removed: | $ | 269,047 | |]
| Organic sales adjustments: | | | | | | | | | [removed: | | | |]
| Acquisitions | | | (19,385 | ) | | | [removed: (4,683 | ) | | |] 0 | |
| Impact of foreign currency fluctuations | | | 27 | | | | [removed: (466 | ) | | | (888] [added: 0] | [removed: )] |
| Consolidated organic net sales | | $ | 295,202 | | | $ | [removed: 284,813 | | | $ | 268,159] [added: 289,962] | |
| Organic sales growth | | | 1.8 | % | | | [removed: 5.9] | [removed: %] | [removed: | | 1.6 | % |]
| Biotechnology | | $ | [removed: 293,274] [added: 288,156] | | | $ | [removed: 270,287] [added: 293,274] | | | $ | [removed: 250,653] [added: 270,287] | |
| | | $ | [removed: 314,560] [added: 310,575] | | | $ | [removed: 289,962] [added: 314,560] | | | $ | [removed: 269,047] [added: 289,962] | |
Biotechnology segment net sales [removed: increased $23.0] [added: decreased $5.1] million [removed: (8.5%)] [added: (1.8%)] and [removed: $19.6] [added: increased $23.0] million [removed: (7.8%),] [added: (8.5%),] respectively, in fiscal [removed: 2012] [added: 2013] and fiscal [removed: 2011] [added: 2012] from each of the prior fiscal years.
Biotechnology segment organic net sales [added: decreased $2.5 million (0.8%) in fiscal 2013 primarily as a result of decreased sales volume in the U.S. Biotechnology segment organic net sales] increased $3.6 million (1.3%) [removed: and $14.5 million (5.8%), respectively,] in fiscal [removed: 2012 and 2011,] [added: 2012,] primarily as a result of increased sales volume.
Included in fiscal [removed: 2012] [added: 2013] and [removed: 2011] [added: 2012] net sales were [removed: $2.7] [added: $2.8] million and [removed: $2.5] [added: $2.7] million, respectively, of sales of new [removed: protein based] biotechnology products which had their first sale in each of the fiscal years.
| | | [added: _2013_ | | | |] _2012_ | | | | _2011_ | | |
| U.S. industrial, pharmaceutical and biotechnology | | | [removed: 3.2] [added: (2.6] | [removed: %] [added: %)] | | | [removed: 4.8] [added: 3.2] | % |
| U.S. academic | | | [removed: (5.1] [added: (5.9] | %) | | | [removed: 6.4] [added: (5.1] | [removed: %] [added: %)] |
| Europe | | | [removed: (1.5] [added: 0.1] | [removed: %)] [added: %] | | | [removed: 4.1] [added: (1.5] | [removed: %] [added: %)] |
| China | | | [removed: 21.6] [added: 18.9] | % | | | [removed: 22.6] [added: 21.6] | % |
| | | [added: _2013_ | | | |] _2012_ | | |
| Industrial, pharmaceutical and biotechnology | | | [removed: 28] [added: 29] | % |
| Academic | | | [removed: 12] [added: 13] | % |
| Europe | | | [removed: 26] [added: 28] | % |
| China | | | [removed: 4] [added: 5] | % |
| Pacific [removed: Rim distributors] [added: rim distributors, excluding China] | | | [removed: 8] [added: 9] | % |
| Rest of world | | | [removed: 2] [added: 3] | % |
| --- | --- | --- |
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| • | | income tax adjustments related to the reversal of valuation allowances on deferred tax assets and the reinstatement of the U.S. credit for research and development expenditures. |
| --- | --- | --- |
Consolidated net earnings for fiscal 2013 included $4.5 million of costs recognized upon the sale of inventory acquired in fiscal 2011 that was written-up to fair value compared to $7.6 million in fiscal 2012.
| Consolidated net sales | | $ | 310,575 | | | $ | 314,560 | |
| Impact of foreign currency fluctuations | | | 2,637 | | | | 0 | |
| Consolidated organic net sales | | $ | 313,212 | | | $ | 314,560 | |
| Organic sales growth | | | (0.4 | %) | | | | |
| Organic sales adjustments: | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Clinical Controls | | | 22,419 | | | | 21,286 | | | | 19,675 | |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | _Year Ended June 30,_ | | | | | | |
| | | _2013_ | | | | _2012_ | | |
| Pacific rim distributors, excluding China | | | 3.5 | % | | | 7.0 | % |
| | | _2013_ | | |
| | | | 55 | % |
Fluctuations in gross margins, as a percentage of net sales, are typically the result of changes in foreign currency exchange rates and changes in product mix.
Such fluctuations are normal and expected to continue in future periods.
Gross margins have also been affected by acquisitions completed in prior years.
| | | _2013_ | | | | _2012_ | | | | _2011_ | | |
| Clinical Controls | | | 49.0 | % | | | 48.6 | % | | | 47.0 | % |
The increase in fiscal 2013 was the results of $607,000 of professional fees related to the acquisition of Bionostics Holdings Limited, which was completed in early fiscal 2014 and $500,000 of professional fees related to the design and engineering for a new facility in the U.K. A decision was made in late fiscal 2013 to pursue other options related to the facilities in the U.K. These increases in fiscal 2013 were offset by a decrease of $1.1 million in profit sharing and bonuses as compared to fiscal 2012.
The remaining increase in fiscal 2013 was the result of increased executive compensation and marketing wages and consulting related to upgrading the Company’s website.
| | | _2013_ | | | | _2012_ | | | | _2011_ | | |
| Clinical Controls | | | 1,561 | | | | 1,697 | | | | 1,451 | |
| | | _2013_ | | | | _2012_ | | | | _2011_ | | |
| Clinical Controls | | | 816 | | | | 800 | | | | 809 | |
Interest income in fiscal 2013 remained flat from fiscal 2012 as a result of increased cash balances offset by lower interest rates.
The Company has a 16.8% ownership interest in Nephromics LLC (Nephromics).
The sale price included a payment at closing, future payment contingent upon the issuance of certain patents, and royalties on future sublicense income.
| | | _2013_ | | | | _2012_ | | | | _2011_ | | |
The Company has a 6.5% ownership percentage in H2Equity (formerly Hemerus Medical, LLC).
The Company accounts for its investment in H2Equity under the equity method of accounting as H2Equity is a limited liability company.
During fiscal 2012, H2Equity entered into an agreement to sell substantially all of its assets.
| --- | --- | --- | --- |
| | \- | | intangible asset amortization; |
| | \- | | the reversal of valuation allowances on deferred tax assets related to the excess tax basis in the Company’s unconsolidated entities; and |
| | \- | | the tax benefit from repatriation of funds from R&D Europe. |
Consolidated net sales for fiscal 2011 included $4.7 million net sales from companies acquired during fiscal 2011.
Consolidated net earnings for fiscal 2010 included a $4.7 million tax benefit as a result of a foreign currency exchange tax loss on the repatriation of prior-year earnings from R&D Europe to the U.S.
Consolidated organic net sales, excluding the impact of the acquisitions and the effect of the change from the prior year in exchange rates used to convert sales in foreign currencies (primarily British pound sterling, euros and Chinese yuan) into U.S. dollars, were as follows (in thousands):
| | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Hematology | | | 21,286 | | | | 19,675 | | | | 18,394 | |
| Pacific Rim | | | 7.0 | % | | | 4.1 | % |
| | | | | |
| Acquisitions | | | 4 | % |
| | | | 57 | % |
| Acquisitions | | | 3 | % |
| | | | 29 | % |
| Hematology | | | 48.6 | % | | | 47.0 | % | | | 47.7 | % |
The change from the comparable fiscal year was primarily the result of the following (in thousands):
| | | _Increase/ (Decrease)_ | | | | | | |
| Increase due to acquired companies selling, general and administrative expenses | | | 3,256 | | | | 945 | |
| Customer relationships and trade names amortization | | | 1,502 | | | | 50 | |
| Non-acquisition related legal fees | | | (117 | ) | | | (555 | ) |
| Stock-based compensation expense | | | 503 | | | | 3 | |
| Profit sharing and bonus expense | | | 40 | | | | 806 | |
| Other, including annual wage, salary and benefit increases | | | 2,337 | | | | 213 | |
| | | $ | 5,786 | | | $ | 3,197 | |
The decrease in non-acquisition related legal fees in fiscal 2012 and 2011 was primarily from lower costs associated with ongoing patent interference and infringement litigation.
Fiscal 2012 legal costs also include $170,000 for the settlement of the litigation.
The increase in fiscal 2012 stock-based compensation expense was the result of options issued to employees in connection with the acquisitions in fiscal 2011.
The increase in 2011 profit sharing and bonus expense reflect the change in financial results from fiscal 2010.
| Hematology | | | 1,697 | | | | 1,451 | | | | 1,393 | |
| Hematology | | | 800 | | | | 809 | | | | 790 | |
The decrease in fiscal 2011 from the prior fiscal year was primarily the result of lower rates of return on cash and available-for-sale investments, offset in part by higher cash and available-for-sale investment balances prior to the acquisitions.
The Company determined such valuation allowance was no longer necessary as a result of the Company’s unrealized gain on its investment in ChemoCentryx, Inc. (CCXI).
The Company has the intent and ability to sell a portion of its CCXI investment and realize a long-term capital gain to offset long-term capital losses from its investments in unconsolidated entities.
The fiscal 2010 consolidated tax rate was positively impacted by a $4.7 million tax benefit from a foreign currency exchange tax loss related to the repatriation of £50 million ($74.4 million) from R&D Europe to the U.S. The Company had previously paid U.S. income taxes on the foreign earnings that were included in the repatriated funds.
Excluding this tax benefit, the effective tax rate for fiscal 2010 would have been 32.8%.
Consolidated net earnings, excluding the impact of accounting for acquired inventory, amortization of intangible assets, acquisition costs, impairment losses on investments and income tax adjustments are as follows (in thousands):
| Professional and other acquisition related costs | | | 0 | | | | 1,735 | | | | 0 | |
| Tax benefit from repatriation | | | 0 | | | | 0 | | | | (4,660 | ) |
An excerpt. Shown here: 40 of 137 rewritten, 40 of 66 added and 40 of 58 removed. The counts are complete. For every sentence, read Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL in the FY2013 filing and the FY2012 filing.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
23 rewritten, 5 added, 6 removed, 22 unchanged
At the end of fiscal [removed: 2012,] [added: 2013,] the Company had a portfolio of fixed income debt securities, excluding those classified as cash and cash equivalents, of [removed: $202] [added: $212] million (see Note C to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K).
As the Company’s fixed income securities are classified as available-for-sale, [removed: no] [added: unrealized] gains or losses are recognized by the Company in [removed: its] [added: “Other comprehensive income (loss)” on the] Consolidated Statement of Earnings and Comprehensive [removed: Income due to changes in interest rates unless such securities are sold prior to maturity.][added: Income.]
Approximately [removed: 30%] [added: 31%] of consolidated net sales are made in foreign currencies, including 15% in euro, 7% in British pound sterling, [removed: 3%] [added: 4%] in Chinese yuan and the remaining 5% in other European currencies.
| | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | |
| High | | $ | [removed: 1.64] [added: 1.62] | | | $ | [removed: 1.67] [added: 1.64] | | | $ | 1.67 | |
| Low | | | [removed: 1.54] [added: 1.52] | | | | [removed: 1.53] [added: 1.54] | | | | [removed: 1.45] [added: 1.53] | |
| Average | | | [removed: 1.59] [added: 1.57] | | | | 1.59 | | | | [removed: 1.58] [added: 1.59] | |
| High | | $ | [removed: 1.44] [added: 1.36] | | | $ | [removed: 1.48] [added: 1.44] | | | $ | [removed: 1.50] [added: 1.48] | |
| Low | | | [removed: 1.24] [added: 1.23] | | | | [removed: 1.27] [added: 1.24] | | | | [removed: 1.22] [added: 1.27] | |
| Average | | | [removed: 1.34] [added: 1.30] | | | | [removed: 1.37] [added: 1.34] | | | | [removed: 1.38] [added: 1.37] | |
| High | | $ | [removed: .159] [added: .163] | | | $ | [removed: .155] [added: .159] | | | $ | [removed: .148] [added: .155] | |
| Low | | | [removed: .155] [added: .157] | | | | [removed: .148] [added: .155] | | | | [removed: .146] [added: .148] | |
| Average | | | [removed: .158] [added: .160] | | | | [removed: .151] [added: .158] | | | | [removed: .146] [added: .151] | |
At June 30, [removed: 2012,] [added: 2013,] the Company had the following trade receivable and intercompany payables denominated in one currency but receivable or payable in another currency (in thousands):
| | | [removed: _Denominated_ _Currency_] [added: _Denominated Currency_] | | | | [added: | | | |] _U. [removed: S._ _Dollar] [added: S. Dollar] Equivalent_ | | |
| Accounts receivable in: | | | | | | | | | [added: | | | |]
| Other European currencies | | £ | [removed: 918] | | | [added: | 1,150 | | |] $ | [removed: 1,442] [added: 1,749] | |
| Intercompany payable in: | | | | | | | | | [added: | | | |]
| U.S. dollars | | [added: |] yuan | [removed: 4,972] | | | [added: 5,906 | | |] $ | [removed: 783] [added: 956] | |
The effects of a hypothetical simultaneous 10% appreciation in the U.S. dollar from June 30, [removed: 2012] [added: 2013] levels against the euro, British pound sterling and Chinese yuan are as follows (in thousands):
| Decrease in translation of [removed: 2012] [added: 2013] earnings into U.S. dollars | | $ | [removed: 2,375] [added: 2,445] | |
| Decrease in translation of net assets of foreign subsidiaries | | | [removed: 14,732] [added: 13,778] | |
| Additional transaction losses | | | [removed: 484] [added: 518] | |
| | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Euros | | £ | | | | | 1,304 | | | $ | 1,984 | |
| Euros | | £ | | | | | 304 | | | $ | 463 | |
| U.S. dollars | | £ | | | | | 2,777 | | | $ | 4,223 | |
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Euros | | £ | 966 | | | $ | 1,518 | |
| Euros | | £ | 163 | | | $ | 255 | |
| U.S. dollars | | £ | 2,584 | | | $ | 4,059 | |
| British pound sterling | | yuan | 152 | | | | 24 | |
Item 1. BUSINESS
74 rewritten, 25 added, 21 removed, 174 unchanged
[removed: TECHNE] [added: Techne] Corporation and subsidiaries (the Company) are engaged in the development, manufacture and sale of biotechnology products and [removed: hematology calibrators and] [added: clinical diagnostic] controls.
These activities are conducted domestically through its wholly-owned subsidiaries, [removed: Research and Diagnostic] [added: R&D] Systems, Inc. (R&D Systems), Boston Biochem, Inc. (Boston Biochem), and BiosPacific, Inc. (BiosPacific).
The Company has two reportable segments based on the nature of its products (biotechnology and [removed: hematology).][added: clinical controls).]
R&D Systems’ Biotechnology Division, R&D Europe, Tocris, R&D China, BiosPacific and Boston Biochem [removed: operating segments] are included in the biotechnology reporting segment.
The Company’s [removed: hematology] [added: clinical controls] reporting [removed: segment,] [added: segment (formerly hematology),] which consists of R&D Systems’ [removed: Hematology] [added: Clinical Controls] Division, develops and manufactures [removed: hematology] controls and calibrators for sale world-wide.
In fiscal [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010,] [added: 2011,] net sales from the Company’s biotechnology segment were 93% of consolidated net sales in each year.
The Company’s [removed: hematology] [added: clinical controls] segment net sales were 7% of consolidated net sales for each of fiscal [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010.][added: 2011.]
Financial information relating to the Company’s segments is incorporated herein by reference to Note [removed: M] [added: L] to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
[removed: Currently] [added: Currently,] nearly all of the Company’s proteins are produced by recombinant DNA technology.
[removed: Quantikine kits] [added: All of these immunoassay products] are used by researchers to quantify the level of a specific protein in biological fluids, such as serum, plasma, or urine.
The [added: Company’s] combined chemical and biological reagents portfolio [removed: of the two companies] provide new tools which customers can use in solving the complexity of important biological pathways and glean knowledge which may lead to a fuller understanding of biological processes and ultimately to the development of novel strategies to address different pathologies.
The Company currently manufactures and sells approximately [removed: 22,000] [added: 24,000] biotechnology products.
[added: Small Molecule] Chemically-based Products.
Original Equipment Manufacturer (OEM) agreements represent the largest market for [removed: hematology] [added: clinical] controls [removed: and calibrators] made by the Company.
In fiscal [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010,] [added: 2011,] OEM agreements accounted for [removed: $9.7] [added: $10.8] million, [removed: $8.7] [added: $9.7] million and [removed: $8.0] [added: $8.7] million, respectively, or 3% of total consolidated net sales in each fiscal year.
The Company sells its [removed: hematology] [added: clinical control] products directly to customers in the United States and through distributors in the rest of the world.
The Company is engaged in ongoing research and development in all of its major product lines: controls and calibrators [removed: (hematology)] and cytokines, antibodies, [removed: assays] [added: assays, small bioactive molecules] and related [removed: products (biotechnology).][added: biotechnology products.]
In fiscal [removed: 2012,] [added: 2013,] the Company introduced [removed: 1,800] [added: 2,100] new biotechnology products.
The Company also developed several new [removed: hematology control] [added: clinical diagnostic] products in fiscal [removed: 2012] [added: 2013] and is continuously working [removed: on] [added: to expand these] product [added: lines along with ongoing product] improvements and enhancements.
| | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | |
| Biotechnology | | $ | [removed: 27,112] [added: 28,441] | | | $ | [removed: 25,176] [added: 27,112] | | | $ | [removed: 24,331] [added: 25,176] | |
| | | $ | [removed: 27,912] [added: 29,257] | | | $ | [removed: 25,985] [added: 27,912] | | | $ | [removed: 25,121] [added: 25,985] | |
| Percent of net sales | | | [removed: 8.9] [added: 9.4] | % | | | [removed: 9.0] [added: 8.9] | % | | | [removed: 9.3] [added: 9.0] | % |
The Company has an [removed: approximate 18.0%] [added: approximately 15.0%] equity investment in ChemoCentryx, Inc. (CCXI).
The Company’s investment in CCXI is included in “Short-term available-for-sale investments” at June 30, [added: 2013 and] 2012 at fair [removed: value] [added: values] of [removed: $94.7] [added: $89.6] million [removed: as the Company has determined that it does not have the ability to exercise significant influence over the operating] and [removed: financial policies of CCXI.][added: $94.7 million, respectively.]
The Company has a [removed: 6.9%] [added: 6.5%] ownership percentage in [added: H2Equity, LLC (formerly] Hemerus Medical, [removed: LLC (Hemerus).][added: LLC).]
[removed: Hemerus owns two patents, has several patent applications pending and has received FDA clearance to market its products in the U.S.] The Company accounts for its investment in [removed: Hemerus] [added: H2Equity] under the equity method of accounting as [removed: Hemerus] [added: H2Equity] is a limited liability company.
During fiscal 2012, [removed: Hemerus] [added: H2Equity] entered into an agreement to sell substantially all of its assets.
The Company’s net investment in [removed: Hemerus] [added: H2Equity] was [removed: $551,000] [added: $26,000] and [removed: $773,000] [added: $551,000] at June 30, [removed: 2012] [added: 2013] and [removed: 2011,] [added: 2012,] respectively.
As a result of the agreement, the Company determined that a portion of its investment in Nephromics was other-than-temporarily impaired and wrote off $2.4 million of this [removed: investment.][added: investment in fiscal 2012.]
The Company’s net investment in Nephromics was $505,000 [removed: and $3.7 million] at [added: both] June 30, [removed: 2012] [added: 2013] and [removed: 2011, respectively.][added: 2012.]
The Company [removed: has a 13.6%] [added: held an] ownership interest in ACTGen, Inc. (ACTGen), a development stage biotechnology company located in [removed: Japan.][added: Japan through October 2012.]
During fiscal 2012, the Company determined [removed: that, based on ACTGen financial results for calendar 2011 and its operational and funding status,] [added: that] the Company’s investment in ACTGen was other-than-temporarily impaired and wrote off its remaining investment of $854,000.
All manufacturers of [removed: hematology] [added: clinical diagnostic] controls [removed: and calibrators] are regulated under the Federal Food, Drug and Cosmetic Act, as amended.
All of the Company’s [removed: hematology] [added: clinical] control products are classified as “_in vitro_ diagnostic products” by the FDA.
The entire [removed: hematology] control manufacturing process, from receipt of raw materials to the monitoring of control products through their expiration date, is strictly regulated and documented.
FDA inspectors make periodic site inspections of the Company’s [removed: hematology] [added: clinical] control operations and facilities.
[removed: Hematology] [added: Clinical] control manufacturing must comply with Quality System Regulations (QSR) as set forth in the FDA’s regulations governing medical devices.
[removed: Both Boston Biochem and] Tocris products are used as research tools and require no regulatory approval for commercialization.
Thus, the Company is subject to regulation and inspection by the Minnesota Department of Health and has been granted a license through August [removed: 2013.][added: 2014.]
On July 22, 2013, the Company acquired Bionostics Holdings Limited (Bionostics) and its U.S. operating subsidiary, Bionostics, Inc. Bionostics is a global leader in the development, manufacture and distribution of clinical control solutions that verify the proper operation of _in-vitro_ diagnostic devices primarily utilized in point of care blood glucose and blood gas testing.
All of the shares of Bionostics were acquired for approximately $104 million in cash, subject to adjustment following closing based on the final level of working capital of Bionostics.
Bionostics will become part of the Company’s clinical controls segment.
The Company markets a variety of immunoassays on different testing platforms, including a microtiter plated based kit sold under the trade name Quantikine®, immunoassays based on encoded beads technology and immunoassays based on spotted surfaces.
_Clinical Controls Segment (formerly the Hematology Segment)_
| Clinical Controls | | | 816 | | | | 800 | | | | 809 | |
The sale closed in April 2013.
The Company received a $1.1 million distribution at closing and recorded a gain of $708,000.
The sale price included a payment at closing, future payment contingent upon the issuance of certain patents, and royalties on future sublicense income.
| Asia | | | 19 | | | | 1 | |
| | | | 789 | | | | 65 | |
| | | _2013_ | | | | _2012_ | | | | _2011_ | | |
| | | _2013_ | | | | _2012_ | | | | _2011_ | | |
| Kevin Reagan | | | 61 | | | Senior Vice President, Biotech | | | 2013 | |
| J. Fernando Bazan | | | 53 | | | Chief Technical Officer | | | 2013 | |
Prior to joining the Company, he served as President of Mass Spectrometry and Chromatography at Thermo Fisher Scientific Inc. from September 2011.
He was President of that company’s Laboratory Consumables Division from 2009 to September 2011.
Prior to joining Thermo Fisher, Mr. Kummeth served in various roles at 3M Corporation, most recently as the Vice President of the company’s Medical Division from 2006 to 2008.
Dr. Kevin Reagan was appointed Senior Vice President, Biotech on August 1, 2013.
Dr. Reagan joined the Company in January 2012 as R&D Systems’ Vice President of Immunology.
Prior to joining the Company, Dr. Reagan served as Managing Director of Calbiotech Veterinary Diagnostics from 2010 through 2011 and Senior Vice President of Calbiotech, Inc from 2009 through 2011.
From 2005 through 2009, he served as Vice President, R&D, Immunological Systems at Invitrogen, Corp,, a division of Life Technologies Corporation.
Dr. J. Fernando Bazan was appointed Chief Technical Officer when he joined the Company on August 1, 2013.
Dr. Bazan is an adjunct profession at the University of Minnesota School of Medicine and served as Chief Scientific Officer at Neuroscience, Inc., a neuroimmunology startup from 2010 to 2012.
From 2003 through 2010, Dr. Bazan served as Senior Scientist at Genentech, Inc. (Roche).
TECHNE Corporation was incorporated on July 17, 1981 in the state of Minnesota.
The Company markets one type of immunoassay kit under the trade name Quantikine®.
_Hematology segment_
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Hematology | | | 800 | | | | 809 | | | | 790 | |
Hemerus was formed in March 2001 and has acquired and is developing technology for the separation of leukocytes from red blood cells and to extend the shelf life of the isolated blood products.
The Company has determined that it is more-likely-than-not that it will recover its remaining investment in Hemerus.
Nephromics has licensed technology related to the diagnosis of preeclampsia and has sublicensed the technology to several major diagnostic companies for the development of diagnostic assays.
In fiscal 2012 and fiscal 2010, the Company received distributions of $463,000 and $50,000, respectively, from Nephromics.
ACTGen has intellectual property related to the identification and expression of secreted molecules.
The Company’s net investment in ACTGen was $925,000 at June 30, 2011.
| R&D Systems | | | 646 | | | | 33 | |
| BiosPacific | | | 6 | | | | 1 | |
| Boston Biochem | | | 12 | | | | 0 | |
| R&D Europe | | | 57 | | | | 20 | |
| Tocris | | | 45 | | | | 8 | |
| China & Hong Kong: | | | | | | | | |
| R&D China | | | 17 | | | | 2 | |
| | | | 783 | | | | 64 | |
Thomas E.
Mr. Oland also served as Chief Financial Officer of the Company from December 1985 to December 2004 and Treasurer from December 1985 to October 2010.
An excerpt. Shown here: 40 of 74 rewritten, all 25 added and all 21 removed. The counts are complete. For every sentence, read Item 1. BUSINESS in the FY2013 filing and the FY2012 filing.
Item 3. LEGAL PROCEEDINGS
0 rewritten, 1 added, 14 removed, 0 unchanged
As of August 23, 2013, the Company is not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.
In a previously disclosed lawsuit filed by Streck, Inc. (Streck), venued in the U.S. District Court for the District of Nebraska (the Nebraska Court), Streck alleged patent infringement involving certain patents issued to Streck relating to the addition of reticulocytes to hematology controls.
Streck was seeking a royalty on sales of integrated hematology controls containing reticulocytes.
The Company has reason to believe that R&D Systems, and not Streck, first invented the inventions claimed in these patents and several other patents issued to Streck.
As a result, the Company requested, and in 2007 the U.S. Patent and Trademark Office (USPTO) declared, an interference to determine priority of invention between a patent application filed by R&D Systems and five Streck patents, including each of the patents involved in the lawsuit.
On November 2, 2009, the interference board ordered that judgment for the Company and against Streck be entered; finding that R&D Systems was the first to invent the integrated hematology controls containing reticulocytes.
##### [Table of Contents](#toc)
Days earlier, on October 28, 2009, at the conclusion of trial in the Nebraska Court, a jury decided that the Company did not meet its burden of demonstrating by clear and convincing evidence that the Streck patents were invalid.
The jury also found that a reasonable license royalty rate was 12.5%, and that R&D Systems did not willfully infringe, resulting in a judgment in favor of Streck in the amount of approximately $170,000 including court-related costs.
On September 30, 2010, the Nebraska Court upheld the jury verdict and, in a related action, reversed the ruling of the USPTO interference board.
The Nebraska Court entered an injunction prohibiting the making and selling of the products that are the subject of the lawsuit.
In October 2010, the Company appealed the adverse decisions of the Nebraska Court to the Federal Circuit Court of Appeals.
On October 20, 2011, the Federal Circuit issued an opinion upholding the District Court’s interference-related finding of priority in favor of Streck, and on January 10, 2012, the Federal Circuit affirmed the District Court’s infringement finding and permanent injunction.
The Company filed a Petition for Writ of Certiorari to the United States Supreme Court, seeking to reverse or vacate the Federal Circuit affirmances.
The Petition was not granted, and in June 2012, the Company paid $170,000 in full satisfaction of the judgment and court-related costs.
Cover and table of contents
29 rewritten, 31 added, 8 removed, 45 unchanged
For the fiscal year ended June 30, [removed: 2012][added: 2013]
Securities registered pursuant to Section 12(g) of the [removed: Act:][added: Act: None]
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. [removed: x]
The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the closing sale price on December 31, [removed: 2011] [added: 2012] as reported on The Nasdaq Stock Market [removed: ($68.26] [added: ($68.34] per share) was approximately [removed: $2.0] [added: $2.2] billion.
Shares of $0.01 par value Common Stock outstanding at August [removed: 24, 2012: 36,828,834][added: 23, 2013: 36,844,944]
[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]
Portions of the Company’s Proxy Statement for its [removed: 2012] [added: 2013] Annual Meeting of Shareholders are incorporated by reference into Part III.
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| [removed: | | Item] [added: [Item] 1A. [removed: | | [Risk Factors](#tx357001_3)] [added: Risk Factors](#tx545574_3)] | | | 8 | |
| [removed: | | Item] [added: [Item] 1B. [removed: | | [Unresolved] [added: Unresolved] Staff [removed: Comments](#tx357001_4)] [added: Comments](#tx545574_4)] | | | [removed: 11] [added: 12] | |
| [removed: | | Item] [added: [Item] 2. [removed: | | [Properties](#tx357001_5)] [added: Properties](#tx545574_5)] | | | 12 | |
| [removed: | | Item] [added: [Item] 3. [removed: | | [Legal Proceedings](#tx357001_6)] [added: Legal Proceedings](#tx545574_6)] | | | [removed: 12] [added: 13] | |
| [removed: | | Item] [added: [Item] 4. [removed: | | [Mine] [added: Mine] Safety [removed: Disclosures](#tx357001_7)] [added: Disclosures](#tx545574_7)] | | | 13 | |
| [removed: | | Item] [added: [Item] 5. [removed: | | [Market] [added: Market] for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity [removed: Securities](#tx357001_9)] [added: Securities](#tx545574_9)] | | | 13 | |
| [removed: | | Item] [added: [Item] 6. [removed: | | [Selected] [added: Selected] Financial [removed: Data](#tx357001_10)] [added: Data](#tx545574_10)] | | | 15 | |
| [removed: | | Item] [added: [Item] 7. [removed: | | [Management’s] [added: Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx357001_11)] [added: Operations](#tx545574_11)] | | | 16 | |
| [removed: | | Item] [added: [Item] 7A. [removed: | | [Quantitative] [added: Quantitative] and Qualitative Disclosures about Market [removed: Risk](#tx357001_12)] [added: Risk](#tx545574_12)] | | | 26 | |
| [removed: | | Item] [added: [Item] 8. [removed: | | [Financial] [added: Financial] Statements and Supplementary [removed: Data](#tx357001_13)] [added: Data](#tx545574_13)] | | | 28 | |
| [removed: | | Item] [added: [Item] 9. [removed: | | [Changes] [added: Changes] in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx357001_14)] [added: Disclosure](#tx545574_14)] | | | [removed: 47] [added: 45] | |
| [removed: | | Item] [added: [Item] 9A. [removed: | | [Controls] [added: Controls] and [removed: Procedures](#tx357001_15)] [added: Procedures](#tx545574_15)] | | | [removed: 47] [added: 45] | |
| [removed: | | Item] [added: [Item] 9B. [removed: | | [Other Information](#tx357001_16)] [added: Other Information](#tx545574_16)] | | | [removed: 47] [added: 46] | |
| [PART [removed: III](#tx357001_17) | | | |] [added: III](#tx545574_17)] | | | | |
| [removed: | | Item] [added: [Item] 10. [removed: | | [Directors,] [added: Directors,] Executive Officers and Corporate [removed: Governance](#tx357001_18)] [added: Governance](#tx545574_18)] | | | [removed: 47] [added: 46] | |
| [removed: | | Item] [added: [Item] 11. [removed: | | [Executive Compensation](#tx357001_19)] [added: Executive Compensation](#tx545574_19)] | | | [removed: 48] [added: 46] | |
| [removed: | | Item] [added: [Item] 12. [removed: | | [Security] [added: Security] Ownership of Certain Beneficial Owners and Management and Related Shareholder [removed: Matters](#tx357001_20)] [added: Matters](#tx545574_20)] | | | [removed: 48] [added: 47] | |
| [removed: | | Item] [added: [Item] 13. [removed: | | [Certain] [added: Certain] Relationships and Related Transactions, and Director [removed: Independence](#tx357001_21)] [added: Independence](#tx545574_21)] | | | [removed: 48] [added: 47] | |
| [removed: | | Item] [added: [Item] 14. [removed: | | [Principal] [added: Principal] Accounting Fees and [removed: Services](#tx357001_22)] [added: Services](#tx545574_22)] | | | [removed: 48] [added: 47] | |
| [removed: | | Item] [added: [Item] 15. [removed: | | [Exhibits,] [added: Exhibits,] Financial Statement [removed: Schedules](#tx357001_24)] [added: Schedules](#tx545574_24)] | | | [removed: 49] [added: 48] | |
10-K 1 d545574d10k.htm FORM 10-K
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Item 1B. UNRESOLVED STAFF COMMENTS
0 rewritten, 0 added, 1 removed, 1 unchanged
##### [Table of Contents](#toc)
Item 2. PROPERTIES
11 rewritten, 7 added, 7 removed, 7 unchanged
The Minneapolis facilities are utilized by both the Company’s [removed: hematology] [added: clinical controls] and biotechnology segments.
The [removed: R&D Systems main] [added: Minneapolis] complex includes approximately [removed: 500,000] [added: 800,000] square feet of [removed: administrative, research and manufacturing] space in several adjoining buildings.
Rental income from the above properties was [removed: $693,000, $549,000] [added: $830,000, $693,000] and [removed: $413,000] [added: $549,000] in fiscal [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010,] [added: 2011,] respectively.
| _Subsidiary_ | | _Location_ | | _Type_ | | _Square Feet_ | [removed: | |]
| R&D GmbH | | Wiesbaden-Nordenstadt, Germany | | Office space | | [removed: |] 4,200 | [removed: |]
| BiosPacific | | Emeryville, California | | Office space | | [removed: |] 3,000 | [removed: |]
| R&D China | | Shanghai, China | | Office/warehouse | | [removed: | 7,000 |] [added: 5,600] |
| R&D Hong Kong | | Hong Kong | | Office space | | [removed: |] 1,200 | [removed: |]
| Boston Biochem | | Cambridge, Massachusetts | | Office/lab | | [removed: | 6,000 |] [added: 7,400] |
| Tocris | | Bristol, United Kingdom | | [removed: Office/manufacturing/ lab/warehouse |] [added: Office/manufacturing/lab/warehouse] | | 11,000 | [removed: |]
The Company believes the owned and leased [removed: properties discussed above] [added: properties, other than the Tocris facility,] are adequate to meet its occupancy needs in the foreseeable future.
R&D Systems uses approximately 600,000 square feet of the complex for administrative, research, manufacturing, shipping and warehousing activities.
The Company is currently leasing or plans to lease the remaining space in the complex as retail and office space.
| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
The Company is currently analyzing options related to upgrading the Tocris facility.
The Company is also pursuing a lease for warehouse space near Heathrow airport in London to simplify logistics for the European marketplace.
##### [Table of Contents](#toc)
The Company owns two additional properties adjacent to its main complex.
The Company has renovated the first property and is currently leasing or plans to lease approximately 60% of the 176,000 square foot building as retail and office space and use the remainder as office, warehouse and storage space.
The Company has recently begun renovation of the second property and plans to lease approximately 40% of the 179,000 square foot building as office space and use the remainder for manufacturing and shipping operations.
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
The Company plans to build a new facility for its Tocris operations in Bristol, UK.
Purchase of the land and construction of the 23,000 square foot facility is expected to begin in fiscal 2013 and be completed in fiscal 2014.
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
11 rewritten, 4 added, 4 removed, 13 unchanged
| | | _Fiscal [removed: 2012] [added: 2013] Price_ | | | | | | | | _Fiscal [removed: 2011] [added: 2012] Price_ | | | | | | |
| 1st Quarter | | $ | [removed: 86.43] [added: 76.02] | | | $ | [removed: 66.34] [added: 66.26] | | | $ | [removed: 63.44] [added: 86.43] | | | $ | [removed: 55.63] [added: 66.34] | |
| 2nd Quarter | | | [removed: 73.55] [added: 74.17] | | | | [removed: 62.04] [added: 65.37] | | | | [removed: 68.12] [added: 73.55] | | | | [removed: 58.60] [added: 62.04] | |
| 3rd Quarter | | | 72.20 | | | | [removed: 65.25] [added: 65.67] | | | | [removed: 73.96] [added: 72.20] | | | | [removed: 65.33] [added: 65.25] | |
| 4th Quarter | | | [removed: 74.79] [added: 70.00] | | | | [removed: 63.08] [added: 62.55] | | | | [removed: 83.82] [added: 74.79] | | | | [removed: 71.54] [added: 63.08] | |
As of August 23, [removed: 2012,] [added: 2013,] there were over [removed: 25,000] [added: 29,000] beneficial shareholders of the Company’s common stock and over [removed: 180] [added: 150] shareholders of record.
The Company paid quarterly cash dividends totaling [removed: $41.0] [added: $43.5] million, [removed: $39.7] [added: $41.0] million and [removed: $38.4] [added: $39.7] million in fiscal [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010,] [added: 2011,] respectively.
The comparison assumes $100 was invested on the last trading day before July 1, [removed: 2007] [added: 2008] in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.
[removed: ][added: ]
The following table sets forth the repurchases of Company common stock for the quarter ended June 30, [removed: 2012.][added: 2013.]
In [removed: November 2007,] [added: April 2009,] the Company authorized a plan for the repurchase and retirement of [removed: up to $150] [added: $60] million of its common stock.
| 4/1/13 - 4/30/13 | | | 24,000 | | | | 64.29 | | | | 24,000 | | | $ | 125.5 million | |
| 5/1/13 - 5/31/13 | | | 4,300 | | | | 64.85 | | | | 4,300 | | | $ | 125.2 million | |
| 6/1/13 - 6/30/13 | | | 0 | | | | 0 | | | | 0 | | | $ | 125.2 million | |
In October 2012, the Company increased the amount authorized under the plan by $100 million.
| 4/1/12 – 4/30/12 | | | 31,781 | | | $ | 66.76 | | | | 31,781 | | | $ | 27.2 million | |
| 5/1/12 – 5/31/12 | | | 2,862 | | | $ | 67.79 | | | | 2,862 | | | $ | 27.0 million | |
| 6/1/12 – 6/30/12 | | | 0 | | | | 0 | | | | 0 | | | $ | 27.0 million | |
In April 2009, the Company authorized an additional $60 million for its stock repurchase plan.
Item 6. SELECTED FINANCIAL DATA
31 rewritten, 0 added, 0 removed, 16 unchanged
[removed: (dollars] [added: _(dollars] in thousands, except per share [removed: data)][added: data)_]
| _Income and Share Data:_ | | [added: _2013_ | | | |] _2012_ | | | | _2011 (1)_ | | | | _2010_ | | | | _2009_ | | | [removed: | _2008_ | | |]
| Net sales | | $ | [removed: 314,560] [added: 310,575] | | | $ | [removed: 289,962] [added: 314,560] | | | $ | [removed: 269,047] [added: 289,962] | | | $ | [removed: 263,956] [added: 269,047] | | | $ | [removed: 257,420] [added: 263,956] | |
| Gross margin(2) | | | [removed: 75.0] [added: 74.4] | % | | | [removed: 77.6] [added: 75.0] | % | | | [removed: 79.6] [added: 77.6] | % | | | [removed: 78.8] [added: 79.6] | % | | | [removed: 79.3] [added: 78.8] | % |
| Selling, general and administrative expenses(2) | | | [removed: 13.3] [added: 14.0] | % | | | [removed: 12.4] [added: 13.3] | % | | | [removed: 12.2] [added: 12.4] | % | | | [removed: 12.8] [added: 12.2] | % | | | [removed: 14.5] [added: 12.8] | % |
| Research and development expenses(2) | | | [removed: 8.9] [added: 9.4] | % | | | [removed: 9.0] [added: 8.9] | % | | | [removed: 9.3] [added: 9.0] | % | | | [removed: 8.9] [added: 9.3] | % | | | [removed: 8.7] [added: 8.9] | % |
| Operating income(2) | | | [removed: 52.8] [added: 51.0] | % | | | [removed: 56.2] [added: 52.8] | % | | | [removed: 58.1] [added: 56.2] | % | | | [removed: 57.1] [added: 58.1] | % | | | [removed: 56.1] [added: 57.1] | % |
| Earnings before income taxes(2) | | | [removed: 51.6] [added: 51.7] | % | | | [removed: 56.9] [added: 51.6] | % | | | [removed: 58.1] [added: 56.9] | % | | | [removed: 58.9] [added: 58.1] | % | | | [removed: 59.8] [added: 58.9] | % |
| Net earnings(2) | | | [removed: 35.7] [added: 36.2] | % | | | [removed: 38.7] [added: 35.7] | % | | | [removed: 40.8] [added: 38.7] | % | | | [removed: 39.9] [added: 40.8] | % | | | [removed: 40.2] [added: 39.9] | % |
| Net earnings | | $ | [removed: 112,331] [added: 112,561] | | | $ | [removed: 112,302] [added: 112,331] | | | $ | [removed: 109,776] [added: 112,302] | | | $ | [removed: 105,242] [added: 109,776] | | | $ | [removed: 103,558] [added: 105,242] | |
| Diluted earnings per share | | $ | [removed: 3.04] [added: 3.05] | | | $ | [removed: 3.02] [added: 3.04] | | | $ | [removed: 2.94] [added: 3.02] | | | $ | [removed: 2.78] [added: 2.94] | | | $ | [removed: 2.64] [added: 2.78] | |
| Average common and common equivalent [removed: shares — diluted] [added: shares—diluted] (in thousands) | | | [removed: 37,006] [added: 36,900] | | | | [removed: 37,172] [added: 37,006] | | | | [removed: 37,347] [added: 37,172] | | | | [removed: 37,900] [added: 37,347] | | | | [removed: 39,247] [added: 37,900] | |
| High | | $ | [removed: 85.13] [added: 76.02] | | | $ | [removed: 83.37] [added: 85.13] | | | $ | [removed: 69.65] [added: 83.37] | | | $ | [removed: 81.90] [added: 69.65] | | | $ | [removed: 79.73] [added: 81.90] | |
| Low | | $ | [removed: 62.37] [added: 63.42] | | | $ | [removed: 56.14] [added: 62.37] | | | $ | [removed: 57.10] [added: 56.14] | | | $ | [removed: 45.64] [added: 57.10] | | | $ | [removed: 56.20] [added: 45.64] | |
| _Balance Sheet Data as of June 30:_ | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | | | [removed: _2009_] [added: _2010_] | | | | [removed: _2008_] [added: _2009_] | | |
| Cash, cash equivalents and short-term available-for-sale investments | | $ | [removed: 268,986] [added: 332,937] | | | $ | [removed: 140,813] [added: 268,986] | | | $ | [removed: 138,811] [added: 140,813] | | | $ | [removed: 202,887] [added: 138,811] | | | $ | [removed: 206,345] [added: 202,887] | |
| Receivables | | | [removed: 37,741] [added: 40,175] | | | | [removed: 37,860] [added: 37,741] | | | | [removed: 34,137] [added: 37,860] | | | | [removed: 31,153] [added: 34,137] | | | | [removed: 33,332] [added: 31,153] | |
| Inventories | | | [removed: 38,277] [added: 34,877] | | | | [removed: 44,906] [added: 38,277] | | | | [removed: 13,737] [added: 44,906] | | | | [removed: 11,269] [added: 13,737] | | | | [removed: 9,515] [added: 11,269] | |
| Working capital | | | [removed: 310,757] [added: 377,432] | | | | [removed: 212,229] [added: 310,757] | | | | [removed: 184,016] [added: 212,229] | | | | [removed: 239,944] [added: 184,016] | | | | [removed: 238,194] [added: 239,944] | |
| Total assets | | | [removed: 719,324] [added: 778,098] | | | | [removed: 617,670] [added: 719,324] | | | | [removed: 518,816] [added: 617,670] | | | | [removed: 472,005] [added: 518,816] | | | | [removed: 507,369] [added: 472,005] | |
| _Cash Flow Data:_ | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | | | [removed: _2009_] [added: _2010_] | | | | [removed: _2008_] [added: _2009_] | | |
| Net cash provided by operating activities | | $ | [removed: 126,746] [added: 123,562] | | | $ | [removed: 127,194] [added: 126,746] | | | $ | [removed: 111,260] [added: 127,194] | | | $ | [removed: 111,321] [added: 111,260] | | | $ | [removed: 115,317] [added: 111,321] | |
| Capital expenditures | | | [removed: 6,017] [added: 22,454] | | | | [removed: 3,630] [added: 6,017] | | | | [removed: 4,644] [added: 3,630] | | | | [removed: 6,556] [added: 4,644] | | | | [removed: 16,365] [added: 6,556] | |
| Cash dividends paid per common share(3) | | | [removed: 1.11] [added: 1.18] | | | | [removed: 1.07] [added: 1.11] | | | | [removed: 1.03] [added: 1.07] | | | | [removed: 0.75] [added: 1.03] | | | | [removed: 0.00] [added: 0.75] | |
| _Financial Ratios:_ | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | | | [removed: _2009_] [added: _2010_] | | | | [removed: _2008_] [added: _2009_] | | |
| Return on average equity | | | [removed: 17.8] [added: 15.9] | % | | | [removed: 20.6] [added: 17.8] | % | | | [removed: 22.9] [added: 20.6] | % | | | [removed: 22.3] [added: 22.9] | % | | | [removed: 22.4] [added: 22.3] | % |
| Return on average assets | | | [removed: 16.8] [added: 15.0] | % | | | [removed: 19.8] [added: 16.8] | % | | | [removed: 22.2] [added: 19.8] | % | | | [removed: 21.5] [added: 22.2] | % | | | 21.5 | % |
| Current ratio | | | [removed: 9.7] [added: 12.8] | | | | [removed: 12.7] [added: 9.7] | | | | [removed: 11.8] [added: 12.7] | | | | [removed: 16.5] [added: 11.8] | | | | [removed: 12.8] [added: 16.5] | |
| Price to earnings ratio(4) | | | [removed: 24] [added: 23] | | | | [removed: 28] [added: 24] | | | | [removed: 20] [added: 28] | | | | [removed: 23] [added: 20] | | | | [removed: 29] [added: 23] | |
| _Employee Data as of June 30:_ | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | | | [removed: _2009_] [added: _2010_] | | | | [removed: _2008_] [added: _2009_] | | |
| Full-time employees | | | [removed: 783] [added: 789] | | | | [removed: 763] [added: 783] | | | | [removed: 684] [added: 763] | | | | [removed: 687] [added: 684] | | | | [removed: 666] [added: 687] | |
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
279 rewritten, 85 added, 104 removed, 417 unchanged
| | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | |
| Net sales | | $ | [removed: 314,560] [added: 310,575] | | | $ | [removed: 289,962] [added: 314,560] | | | $ | [removed: 269,047] [added: 289,962] | |
| Cost of sales | | | [removed: 78,756] [added: 79,465] | | | | [removed: 65,025] [added: 78,756] | | | | [removed: 54,898] [added: 65,025] | |
| Gross margin | | | [removed: 235,804] [added: 231,110] | | | | [removed: 224,937] [added: 235,804] | | | | [removed: 214,149] [added: 224,937] | |
| Selling, general and administrative | | | [removed: 41,683] [added: 43,384] | | | | [removed: 35,897] [added: 41,683] | | | | [removed: 32,700] [added: 35,897] | |
| Research and development | | | [removed: 27,912] [added: 29,257] | | | | [removed: 25,985] [added: 27,912] | | | | [removed: 25,121] [added: 25,985] | |
| Total operating expenses | | | [removed: 69,595] [added: 72,641] | | | | [removed: 61,882] [added: 69,595] | | | | [removed: 57,821] [added: 61,882] | |
| Operating income | | | [removed: 166,209] [added: 158,469] | | | | [removed: 163,055] [added: 166,209] | | | | [removed: 156,328] [added: 163,055] | |
| Interest income | | | [removed: 2,639] [added: 2,646] | | | | [removed: 3,752] [added: 2,639] | | | | [removed: 4,375] [added: 3,752] | |
| Impairment losses on investments | | | [removed: (3,254] [added: 0] | [removed: )] | | | [removed: 0] [added: (3,254] | [added: )] | | | 0 | |
| Other non-operating expense, net | | | [removed: (3,399] [added: (453] | ) | | | [removed: (1,826] [added: (3,399] | ) | | | [removed: (4,257] [added: (1,826] | ) |
| Total other [removed: (expense)] income [added: (expense)] | | | [removed: (4,014] [added: 2,193] | [removed: )] | | | [removed: 1,926] [added: (4,014] | [added: )] | | | [removed: 118] [added: 1,926] | |
| Earnings before income taxes | | | [removed: 162,195] [added: 160,662] | | | | [removed: 164,981] [added: 162,195] | | | | [removed: 156,446] [added: 164,981] | |
| Income taxes | | | [removed: 49,864] [added: 48,101] | | | | [removed: 52,679] [added: 49,864] | | | | [removed: 46,670] [added: 52,679] | |
| Net earnings | | | [removed: 112,331] [added: 112,561] | | | | [removed: 112,302] [added: 112,331] | | | | [removed: 109,776] [added: 112,302] | |
| Foreign currency translation adjustments | | | [removed: (3,804] [added: (3,538] | ) | | | [removed: 5,028] [added: (3,804] | [added: )] | | | [removed: (13,932] [added: 5,028] | [removed: )] |
| Unrealized [removed: gains] (losses) [added: gains] on available-for-sale investments, net of tax of [removed: $23,422, ($44)] [added: ($2,129), $23,422] and [removed: $97,] [added: ($44),] respectively | | | [removed: 41,870] [added: (3,684] | [added: )] | | | [removed: (85] [added: 41,870] | [removed: )] | | | [removed: 175] [added: (85] | [added: )] |
| Other comprehensive income (loss) | | | [removed: 38,066] [added: (7,222] | [added: )] | | | [removed: 4,943] [added: 38,066] | | | | [removed: (13,757] [added: 4,943] | [removed: )] |
| Comprehensive income | | $ | [removed: 150,397] [added: 105,339] | | | $ | [removed: 117,245] [added: 150,397] | | | $ | [removed: 96,019] [added: 117,245] | |
| Basic | | $ | [removed: 3.04] [added: 3.06] | | | $ | [removed: 3.03] [added: 3.04] | | | $ | [removed: 2.95] [added: 3.03] | |
| Diluted | | $ | [removed: 3.04] [added: 3.05] | | | $ | [removed: 3.02] [added: 3.04] | | | $ | [removed: 2.94] [added: 3.02] | |
| Cash dividends per common share: | | $ | [removed: 1.11] [added: 1.18] | | | $ | [removed: 1.07] [added: 1.11] | | | $ | [removed: 1.03] [added: 1.07] | |
| Basic | | | [removed: 36,939] [added: 36,836] | | | | [removed: 37,098] [added: 36,939] | | | | [removed: 37,255] [added: 37,098] | |
| Diluted | | | [removed: 37,006] [added: 36,900] | | | | [removed: 37,172] [added: 37,006] | | | | [removed: 37,347] [added: 37,172] | |
| | | [added: _2013_ | | | |] _2012_ | | | | _2011_ | | |
| Cash and cash equivalents [added: at beginning of year] | | [removed: $] | 116,675 | | | [removed: $] | 77,613 | | [added: | | 94,139 | |]
| Short-term available-for-sale investments | | | [removed: 152,311] [added: 169,151] | | | | [removed: 63,200] [added: 152,311] | |
| Trade accounts receivable, less allowance for doubtful accounts of [removed: $455] [added: $428] and [removed: $448,] [added: $455,] respectively | | | [removed: 35,668] [added: 38,183] | | | | [removed: 35,914] [added: 35,668] | |
| Other receivables | | | [removed: 2,073] [added: 1,992] | | | | [removed: 1,946] [added: 2,073] | |
| Inventories | | | [removed: 38,277] [added: 34,877] | | | | [removed: 44,906] [added: 38,277] | |
| Deferred income taxes | | | [removed: 0] [added: 9,944] | | | | [removed: 5,797] [added: 14,234] | |
| Prepaid expenses | | | [removed: 1,503] [added: 1,527] | | | | [removed: 1,041] [added: 1,503] | |
| Total current assets | | | [removed: 346,507] [added: 409,516] | | | | [removed: 230,417] [added: 346,507] | |
| Available-for-sale investments | | | [removed: 143,966] [added: 132,376] | | | | [removed: 131,988] [added: 143,966] | |
| Property and equipment, net | | | [removed: 93,788] [added: 108,756] | | | | [removed: 95,398] [added: 93,788] | |
| [removed: Goodwill] [added: Consolidated goodwill] | | [added: $] | [added: 84,336 | | | $ |] 85,682 | | | [added: $] | 86,633 | |
| [removed: Intangible] [added: Consolidated intangible] assets, net | | [added: $] | [added: 40,552 | | | $ |] 46,476 | | | [added: $] | 52,282 | |
| Investments in unconsolidated entities | | | [removed: 1,056] [added: 531] | | | | [removed: 19,633] [added: 1,056] | |
| Other assets | | | [removed: 1,849] [added: 2,031] | | | | [removed: 1,319] [added: 1,849] | |
| [added: Consolidated assets] | | $ | [added: 778,098 | | | $ |] 719,324 | | | $ | 617,670 | |
| Cash and cash equivalents | | $ | 163,786 | | | $ | 116,675 | |
| Goodwill | | | 84,336 | | | | 85,682 | |
| | | $ | 778,098 | | | $ | 719,324 | |
| | | $ | 778,098 | | | $ | 719,324 | |
| Net earnings | | | | | | | | | | | | | | | 112,561 | | | | | | | | 112,561 | |
| Other comprehensive income | | | | | | | | | | | | | | | | | | | (7,222 | ) | | | (7,222 | ) |
| Common stock issued for restricted stock award | | | 15 | | | | 0 | | | | | | | | | | | | | | | | 0 | |
| Balances at June 30, 2013 | | | 36,835 | | | $ | 368 | | | $ | 134,895 | | | $ | 587,725 | | | $ | 14,553 | | | $ | 737,541 | |
The cumulative translation adjustment is a component of accumulated other comprehensive income (loss) on the consolidated balance sheets.
| | | _2013_ | | | | | | | | _2012_ | | | | | | |
| Foreign corporate debt securities | | | 4,484 | | | | 4,490 | | | | 6,080 | | | | 6,110 | |
| Certificates of deposit | | | 14,809 | | | | 14,809 | | | | 9,961 | | | | 9,961 | |
| | | $ | 241,032 | | | $ | 301,527 | | | $ | 229,967 | | | $ | 296,277 | |
The Company had previously disclosed that available-for-sale debt securities were valued using Level 1 inputs and has determined that such securities should have been categorized as Level 2 securities.
Certificates of deposit are carried at cost and are not subject to the fair value hierarchy.
There were no transfers between Level 1 and Level 2 securities during fiscal 2013.
The fair value of the warrants as of June 30, 2013 and 2012 were $1.5 million and $1.1 million, respectively, and were valued using Level 2 inputs.
Subsequent to June 30, 2013 the share price of CCXI has experienced a significant decline in value.
| | | $ | 54,257 | | | $ | 218 | |
| | | $ | 211,880 | |
| | | _2013_ | | | | _2012_ | | |
| | | $ | 34,877 | | | $ | 38,277 | |
| | | _2013_ | | | | _2012_ | | |
| Machinery and equipment | | | 39,706 | | | | 37,368 | |
| | | | 189,800 | | | | 168,098 | |
| | | $ | 108,756 | | | $ | 93,788 | |
| | | | | | | | 55,328 | | | | 56,393 | |
| Goodwill | | | | | | $ | 84,336 | | | $ | 85,682 | |
The change in the carrying amount of goodwill for in fiscal 2013 resulted from currency translation.
| | | _2013_ | | | | _2012_ | | |
| 2014 | | $ | 4,289 | |
| 2015 | | | 4,289 | |
| 2016 | | | 4,269 | |
| 2017 | | | 4,209 | |
| 2018 | | | 4,209 | |
| Thereafter | | | 19,287 | |
| | | $ | 40,552 | |
The sale closed in April 2013.
The Company received a $1.1 million distribution at closing and recorded a gain of $708,000.
The Company received an additional distribution in July 2013 of $26,000.
##### [Table of Contents](#toc)
| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Deferred income taxes | | | 9,132 | | | | 13,360 | |
| Balances at June 30, 2009 | | | 37,244 | | | $ | 372 | | | $ | 117,946 | | | $ | 345,641 | | | $ | (7,477 | ) | | $ | 456,482 | |
| Net earnings | | | | | | | | | | | | | | | 109,776 | | | | | | | | 109,776 | |
| Other comprehensive loss | | | | | | | | | | | | | | | | | | | (13,757 | ) | | | (13,757 | ) |
| Cash and cash equivalents at beginning of year | | | 77,613 | | | | 94,139 | | | | 160,940 | |
In September 2011, the FASB issued ASU No. 2011-08 _Intangibles – Goodwill and Other_ under an amendment to Topic 350_,_ which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test.
If an entity concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the two-step impairment test for that reporting unit.
The Company adopted ASU No. 2011-08 for its fiscal year 2012 annual impairment test.
The adoption did not have a material impact on the Company’s consolidated financial statements.
In July 2012, the FASB issued ASU No. 2012-02 _Intangibles – Goodwill and Other_ under an amendment to Topic 350_,_ which permits an entity to make a qualitative assessment of whether it is more likely than not that an indefinite-lived intangible assets is impaired as a basis for determining whether it is necessary to perform a quantitative impairment test.
An entity will have an option not to calculate annually the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that that the asset is impaired.
The update is effective for the Company for annual and interim impairment tests for fiscal 2014.
Early adoption is permitted.
The Company adopted ASU No. 2012-02 in the fourth quarter of fiscal 2012.
Recent accounting pronouncements: In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05 _Comprehensive Income_ under an amendment to Topic 220.
Under this update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.
In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.
ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.
The update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
The Company must comply with ASU No. 2011-05 for the quarter ended September 30, 2012.
The Company adopted ASU No. 2011-05 in the fourth quarter of fiscal 2012.
| Foreign corporate debt securities | | | 16,041 | | | | 16,071 | | | | 7,474 | | | | 7,489 | |
| U.S. government securities | | | 0 | | | | 0 | | | | 1,502 | | | | 1,517 | |
| Foreign government securities | | | 0 | | | | 0 | | | | 3,090 | | | | 3,090 | |
| | | $ | 229,967 | | | $ | 296,277 | | | $ | 194,171 | | | $ | 195,188 | |
At June 30, 2011, the Company had a $14.3 million investment in the preferred stock of CCXI and accounted for the investment on a cost basis.
The investment was included in “Investments in unconsolidated entities” at June 30, 2011.
In September 2011, the Company entered into a $10.0 million loan agreement with CCXI.
The loan was carried at fair value (Level 3 input) while outstanding.
The loan agreement contained a number of conversion features contingent upon CCXI obtaining future debt or equity financing.
The agreement also included a $5.0 million commitment by the Company to participate in a private placement in the event of a successful public offering of CCXI shares.
On February 8, 2012, CCXI completed its initial public offering (IPO) at $10 per share.
Upon the close of the IPO, the Company’s investment in CCXI’s preferred shares and the loan, plus accrued interest, converted into CCXI common stock.
Activity related to available-for-sale investments with Level 3 inputs were as follows (in thousands):
| | | | | |
| --- | --- | --- | --- | --- |
| Issuance of note receivable | | | 10,000 | |
An excerpt. Shown here: 40 of 279 rewritten, 40 of 85 added and 40 of 104 removed. The counts are complete. For every sentence, read Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in the FY2013 filing and the FY2012 filing.
Item 9A. CONTROLS AND PROCEDURES
5 rewritten, 18 added, 4 removed, 1 unchanged
As [added: required by Rule 13a-15(b)] of the [added: Securities Exchange Act of 1934 (the “Exchange Act”), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the] end of the period covered by this report, the [removed: Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer,] [added: effectiveness] of [removed: the Company’s] [added: our] disclosure controls and procedures [removed: (as] [added: as] defined in [removed: Rules 13a-15(e) and 15d-15(e) under the Securities] Exchange Act [removed: of 1934 (the “Exchange Act”)).][added: Rule 13a-15(e).]
[removed: _Management’s Annual Report on Internal Control over Financial Reporting_][added: MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING]
[removed: The management of the Company] [added: Management] is responsible for establishing and maintaining adequate internal control over financial [removed: reporting, as such term is] [added: reporting (as] defined in [removed: Exchange Act] Rule [removed: 13a-15(f).][added: 13a-15(f) under the Exchange Act).]
[removed: As of June 30, 2012, management, under the supervision of the chief executive officer and chief financial officer, assessed the effectiveness of the Company’s internal control over financial reporting based on] [added: In making this assessment, our management used] the criteria for effective internal control over financial reporting [removed: established] [added: described] in “Internal [removed: Control — Integrated Framework,”] [added: Control—Integrated Framework (1992)”] issued by the Committee of Sponsoring Organizations of the Treadway [removed: Commission (COSO).][added: Commission.]
Based on [removed: the] [added: this] assessment, management [added: has] determined that [added: due to] the [removed: Company maintained effective] [added: material weaknesses described below, our] internal control over financial reporting [added: was not effective] as of June 30, [removed: 2012.][added: 2013.]
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that due to the material weakness in our internal control over financial reporting that is described below in Management’s Report on Internal Control over Financial Reporting, our disclosure controls and procedures were not effective as of June 30, 2013.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of June 30, 2013.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The Company has identified a material weakness in the design, implementation and operating effectiveness of general IT controls (GITCs) intended to ensure that access to financial applications and data was adequately restricted to appropriate personnel, and that program changes to particular financial applications are documented, tested, and moved into the production environment only by individuals separate from the development function.
As a result, certain classes of transactions subject to controls that rely upon information generated by the Company’s IT systems that are subject to the operation of the GITCs, including the completeness, existence, and accuracy of revenue and accounts receivable, allow for a reasonable possibility that a misstatement is not adequately prevented or detected through the operation of management’s system of internal control over financial reporting.
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_Remediation Plan for Material Weakness in Internal Control over Financial Reporting_
In light of the material weakness identified above, the Company performed additional analysis and other post-closing procedures to ensure that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles and accurately reflect its financial position and results of operation as of and for the year ended June 30, 2013.
As a result, notwithstanding the material weakness as described above, management concluded that the consolidated financial statements included in this Form 10-K present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented.
In response to the material weakness we have developed a plan with the oversight of the Audit Committee of the Board of Directors to remediate the material weakness.
We will enhance our internal testing approach, including related procedures, documentation, and possible expansion of human resources, for select controls to ensure that we have adequately addressed the completeness and accuracy of system generated information used to support the operation of the controls and to improve segregation of duties.
The Company’s internal control over financial reporting as of June 30, 2013 has been audited by KPMG LLP, as stated in their report which is included elsewhere herein.
With the actions described in this Item 9A, we conclude that the consolidated financial statements included in this 2013 Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
_Changes in Internal Control over Financial Reporting_
There were no other material changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(e) that occurred during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective.
_Changes in Internal Controls_
There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
KPMG LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
1 rewritten, 0 added, 0 removed, 1 unchanged
Other than “Executive Officers of the Registrant” which is set forth at the end of Item 1 in Part I of this report, the information required by Item 10 is incorporated herein by reference to the sections entitled “Election of Directors,” “Corporate Governance” and “Compliance With Section 16(a) of the Exchange Act” in the Company’s Proxy Statement for its [removed: 2012] [added: 2013] Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
Item 11. EXECUTIVE COMPENSATION
1 rewritten, 0 added, 0 removed, 0 unchanged
The information required by Item 11 is incorporated herein by reference to the section entitled “Corporate Governance” and “Executive Compensation Discussion and Analysis” in the Company’s Proxy Statement for its [removed: 2012] [added: 2013] Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
3 rewritten, 0 added, 0 removed, 7 unchanged
Information about the Company’s equity compensation plans at June 30, [removed: 2012] [added: 2013] is as follows:
| Equity compensation plans approved by Shareholders (1) | | | [removed: 575,000] [added: 728,000] | | | $ | [removed: 65.78] [added: 66.70] | | | | [removed: 2.7] [added: 2.5] million | |
The remaining information required by Item 12 is incorporated by reference to the sections entitled “Principal Shareholders” and “Management Shareholdings” in the Company’s Proxy Statement for its [removed: 2012] [added: 2013] Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
1 rewritten, 0 added, 0 removed, 0 unchanged
The information required by Item 13 is incorporated by reference to the sections entitled “Corporate Governance” in the Company’s Proxy Statement for its [removed: 2012] [added: 2013] Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
1 rewritten, 0 added, 0 removed, 2 unchanged
The information required by Item 14 is incorporated herein by reference to the section entitled “Audit Matters” in the Company’s Proxy Statement for its [removed: 2012] [added: 2013] Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
65 rewritten, 51 added, 11 removed, 69 unchanged
[removed: Consolidated] [added: | [Consolidated] Statements of Earnings and Comprehensive Income for the Years Ended June 30, [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010][added: 2011](#tx545574_26) | | | 28 | |]
[removed: Consolidated] [added: | [Consolidated] Balance Sheets as of June 30, [removed: 2012] [added: 2013] and [removed: 2011][added: 2012](#tx545574_27) | | | 29 | |]
[removed: Consolidated] [added: | [Consolidated] Statements of Shareholders’ Equity for the Years Ended June 30, [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010][added: 2011](#tx545574_28) | | | 30 | |]
[removed: Consolidated] [added: | [Consolidated] Statements of Cash Flows for the Years Ended June 30, [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010][added: 2011](#tx545574_29) | | | 31 | |]
[removed: Notes] [added: | [Notes] to Consolidated Financial Statements for the Years Ended June 30, [removed: 2012, 2011] [added: 2013, 2012] and [removed: 2010][added: 2011](#tx545574_30) | | | 32 | |]
[removed: Report] [added: | [Report] of Independent Registered Public Accounting [removed: Firm][added: Firm](#tx545574_31) | | | 44 | |]
| | | [added: | |] TECHNE CORPORATION | [added: | |]
| | | [added: | |] Its: President | [added: | |]
| Date | | [added: | |] Signature and Title |
| | | [added: | |] Chairman of the [removed: Board, President,] [added: Board and Director] |
| | | [added: | | Charles Kummeth,] Chief Executive Officer |
| | | [added: | | Vice Chairman] and Director |
| | | [added: | |] (principal executive officer) |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Roger C. Lucas, Ph.D. |
| | | [added: | |] Dr. Roger C. Lucas |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Howard V. O’Connell |
| | | [added: | |] Howard V. O’Connell, Director |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Randolph C. Steer, Ph.D., M.D. |
| | | [added: | |] Dr. Randolph C. Steer, Director |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Robert V. Baumgartner |
| | | [added: | |] Robert V. [removed: Baumgartner, Director] [added: Baumgartner] |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Charles A. Dinarello, M.D. |
| | | [added: | |] Dr. Charles A. Dinarello, Director |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Karen A. Holbrook, Ph.D. |
| | | [added: | |] Dr. Karen A. Holbrook, Director |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ John L. Higgins |
| | | [added: | |] John L. Higgins, Director |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Roeland Nusse, Ph.D. |
| | | [added: | |] Dr. Roeland Nusse, Director |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Gregory J. Melsen |
| | | [added: | |] Gregory J. Melsen, Chief Financial Officer |
| | | [added: | |] (principal financial officer) |
| August 29, [removed: 2012] [added: 2013] | | [added: | |] /s/ Kathleen M. Backes |
| | | [added: | |] Kathleen M. Backes, Controller |
for Form 10-K for the [removed: 2012] [added: 2013] Fiscal Year
| Exhibit Number | | Description | [added: | |]
| [removed: 3.1] [added: 3.2] | | Restated Articles of Incorporation of [added: the] Company, as amended to date—incorporated by reference to Exhibit [removed: 3.1] [added: 3.2] of the Company’s Form [removed: 10-Q for the quarter ended September 30, 2000.*] [added: 8-K, dated October 25, 2012.*] |
| [removed: 3.2] [added: 3.1] | | Restated Bylaws of [removed: the] Company, as amended to date—incorporated by reference to Exhibit 3.1 of the Company’s Form [removed: 8-K,] [added: 8-K] dated [removed: November 14, 2007.*] [added: October 25, 2012.*] |
| [removed: 10.13] [added: 10.18] | | Amended and Restated Employment Agreement, dated [removed: April 30, 2010,] [added: July 1, 2011,] with [removed: Gregory J. Melsen—incorporated] [added: Marcel Veronneau—incorporated] by reference to Exhibit [removed: 10.14] [added: 10.19] of the Company’s 10-K for the year ended June 30, [removed: 2010.*] [added: 2011.*] |
| [removed: 10.15] [added: 10.14] | | 2010 Equity Incentive Plan—incorporated by reference to Exhibit 10.1 of the Company’s 8-K dated October 28, 2010.* |
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| Date: August 29, 2013 | | | | /s/ Charles Kummeth | | |
| | | | | By: Charles Kummeth | | |
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| --- | --- | --- | --- | --- |
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| August 29, 2013 | | | | /s/ Charles Kummeth |
| | | | | |
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| 10.13 | | Description of Management Incentive Bonus Under the Techne Corporation 2010 Equity Incentive Plan. |
| 10.20 | | Amended and Restated Employment Agreement, dated November 30, 2012, with Gregory J. Melsen —incorporated by reference to Exhibit 99.1 of the Company’s 8-K Amendment dated October 31, 2012.* |
| 10.21 | | Employment Agreement by and between the Company and Charles Kummeth—incorporated by reference to Exhibit 10.1 of the Company’s 8-K dated March 16, 2013.* |
| 10.22 | | Form of Restricted Stock Agreement for the 2010 Equity Incentive Plan—incorporated by reference to Exhibit 10.1 of the Company’s 10-Q for the quarter ended March 31, 2013.* |
| 10.23 | | Amendment No. 2 to Amended and Restated Employment Agreement, dated April 12, 2013, with Gregory J. Melsen. |
| 10.24 | | Share Purchase Agreement by and among Research and Diagnostic Systems, Inc., Bionostics Holdings Limited, Bionostics, Inc., the shareholders of Bionostics Holdings Limited, and Harwood Capital, LLP as Sellers’ Representative, dated June 17, 2013—incorporated by reference to Exhibit 2.1 of the Company’s 8-K dated June 17, 2013.* |
| 10.25 | | Description of Non-employee Director Compensation Plan. |
| 10.26 | | Employment Agreement by and between the Company and Kevin Reagan, dated January 24, 2012. |
| 10.27 | | Employment Agreement by and between the Company and Dr. J. Fernando Bazan, dated August 1, 2013. |
| 10.28 | | Compensation Arrangement for the Executive Officers for Fiscal Year 2014. |
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| Date: August 29, 2012 | | /s/ Thomas E. Oland |
| | | By: Thomas E. Oland |
| August 29, 2012 | | /s/ Thomas E. Oland |
| | | Thomas E. Oland |
| | | Vice Chairman and Director |
| 10.14 | | Description of Amended Executive Officer’s Incentive Bonus Plan—incorporated by reference to Exhibit 10.14 of the Company’s 10-K for the year ended June 30, 2010.* |
| 10.19 | | Amended and Restated Employment Agreement, dated July 1, 2011, with Marcel Veronneau—incorporated by reference to Exhibit 10.19 of the Company’s 10-K for the year ended June 30, 2011.* |
| --- | --- |
| * | Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings. |
An excerpt. Shown here: 40 of 65 rewritten, 40 of 51 added and all 11 removed. The counts are complete. For every sentence, read Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES in the FY2013 filing and the FY2012 filing.