Bio-Techne (TECH) 10-K risk factor changes: FY2014 vs FY2013

Any of the following risks or others discussed in this Annual Report on Form 10-K or the Company’s other SEC [removed: filings,] [added: filings] could materially adversely affect the Company’s business, operating results and financial condition.

[removed: The] [added: The] Company’s future growth is dependent on the development of new products in a rapidly changing technological [removed: environment.][added: environment.]

[removed: A major] [added: One] element of the Company’s growth strategy is to increase revenues through new product releases.

There can also be no assurance that the Company’s competitors will not succeed in developing technologies and products [removed: that are] [added: in a] more [added: timely and cost] effective [added: manner] than [removed: any which have been or are being developed by] the [removed: Company or that would render the Company’s technologies and products obsolete or noncompetitive.][added: Company.]

[removed: Changes] [added: Changes] in economic conditions could negatively impact the Company’s revenues and [removed: earnings.][added: earnings.]

Research and development spending by the Company’s customers and the availability of government research funding can fluctuate [removed: based on spending priorities] [added: due to changes in available resources, mergers of pharmaceutical] and [added: biotechnology companies, spending priorities,] general economic [removed: conditions.][added: conditions and institutional and governmental budgetary policies.]

[removed: An economic downturn or a reduction] [added: Such downturns, and other reductions] or [removed: delay] [added: delays] in governmental [removed: funding] [added: funding,] could cause customers to delay or forego purchases of the Company’s products.

[removed: The] [added: The] biotechnology and clinical control industries are very [removed: competitive.][added: competitive, more so recently due to consolidation trends.]

Competitors include companies ranging from start-up companies, [removed: who] [added: which] may be able to more quickly respond to customers’ needs, to large multinational companies, which may have greater [removed: financial] [added: financial, marketing, operational,] and [removed: marketing] [added: research and development] resources than the Company.

In [removed: addition] [added: addition,] consolidation trends in the pharmaceutical and biotechnology industries have served to create fewer customer accounts [removed: and/or] [added: and] to concentrate purchasing decisions for some customers, resulting in increased pricing pressure on the Company.

The entry into the market [removed: of] [added: by] manufacturers in China and other low-cost manufacturing locations is also creating increased pricing [added: and competitive] pressures, particularly in developing markets.

[removed: The] [added: The] Company relies heavily on internal manufacturing and related operations to produce, package and distribute its [removed: products.][added: products.]

Since the Company creates value for its customers through the development of high-quality products, any significant decline in quality or disruption of operations for any [removed: reason] [added: reason, particularly at the Minneapolis facility,] could adversely affect sales and customer relationships, and therefore adversely affect the business.

While the Company has taken certain steps to manage these operational risks, and while insurance coverage may reimburse, in whole or in part, for losses related to such disruptions, the Company’s [removed: ability to provide products in the longer term could adversely affect] future sales growth and [removed: earnings.][added: earnings may be adversely affected by perceived disruption risks or actual disruptions.]

A recall could result in significant costs and damage to the Company’s reputation which could reduce [removed: demand] [added: demand, particularly] for [added: certain of] its [added: regulated] products.

[removed: The] [added: The] Company is significantly dependent on sales made through foreign subsidiaries which are subject to changes in exchange [removed: rates.][added: rates and changes to the strength of foreign governments and economic conditions.]

Approximately [removed: 31%] [added: 30%] of the Company’s [added: net] sales [removed: are] [added: in fiscal 2014 were] made through its foreign subsidiaries, which transact their sales in foreign currencies.

Any adverse movement in foreign currency exchange rates [removed: could] [added: could, therefore,] negatively affect the Company’s revenues and earnings.

[removed: The] [added: The] Company conducts and plans to grow its business in developing [removed: markets.][added: markets.]

[removed: The] [added: The] Company’s success will be dependent on recruiting and retaining highly qualified [removed: personnel.][added: personnel.]

[removed: The] [added: The] Company’s business is subject to governmental laws and [removed: regulations.][added: regulations.]

The Company’s operations are subject to regulation by various [removed: U.S.] [added: US] federal, state and international agencies.

Any changes to laws and regulations governing such activities could have an effect on the Company’s [removed: operations.][added: operations and ability to obtain regulatory clearance or approval of the Company’s products.]

As a multinational corporation, the Company is subject to the tax laws and regulations of [removed: the] U.S. federal, state and local governments and of several international jurisdictions.

[removed: The] [added: The] Company is dependent on maintaining its intellectual property [removed: rights.][added: rights.]

[removed: The] [added: In addition, the] Company’s success [removed: will depend,] [added: depends] in [removed: part,] [added: part] on its ability to [removed: obtain licenses and patents, maintain trade secret protection and] operate without infringing the proprietary rights of [removed: others.][added: others, and to obtain licenses where necessary or appropriate.]

Since the Company has not conducted a patent infringement study for each of its products, it is possible that products of the Company may unintentionally infringe patents of third [removed: parties or that the Company may have to alter its products or processes, pay licensing fees or cease certain activities because of patent rights of third parties, thereby causing additional unexpected costs and delays which may have a material adverse effect on the Company.][added: parties.]

[removed: The] [added: The] Company may incur losses as a result of its investments in ChemoCentryx, [added: Inc., CyVek,] Inc. and other [removed: companies,] [added: companies in which is does not have a majority interest,] the success of which is largely out of the Company’s [removed: control.][added: control.]

The Company’s expansion strategies include [removed: collaborations,] [added: collaborations and] investments in joint ventures and companies developing new products related to the Company’s [removed: business, and the acquisition of businesses for new products, technologies and additional customer base.][added: business.]

The Company has an approximate [removed: 15.0%] [added: 14%] equity investment in ChemoCentryx, Inc. (CCXI) that is valued at [removed: $89.6] [added: $37.1] million on the Company’s June 30, [removed: 2013] [added: 2014 Consolidated] Balance Sheet.

These factors make it possible that the Company could experience future dilution or a [removed: substantial] decline in the [removed: $60.2] [added: $7.6] million unrealized gain it has on its CCXI investment and/or its [added: original] $29.5 million investment in CCXI.

At August [removed: 26, 2013,] [added: 22, 2014,] the market value of the Company’s investment in CCXI was [removed: $51.2 million and its unrealized gain declined to $21.8] [added: $30.9] million.

The U.S. and global economies have experienced a period of economic downturn.

Moreover, customers may believe that consolidated businesses are better able to compete as sole source vendors, and therefore prefer to purchase from such businesses.

If the Company does not appropriately innovate and invest in new technologies, the Company’s technologies will become outdated, rendering the Company’s technologies and products obsolete or noncompetitive.

To the extent the company fails to introduce new and innovative products, the Company may lose market share to its competitors, which may be difficult or impossible to regain.

Acquisitions and divestures pose financial, management and other risks and challenges.

The Company routinely explores acquiring other businesses and assets.

From time to time, the Company may also consider disposing of certain assets, subsidiaries, or lines of business.

In early fiscal 2014, the Company finalized the acquisition of Bionostics.

In the last quarter of fiscal 2014, the Company acquired PrimeGene and announced its investment in CyVek and its intention to acquire the remaining shares of CyVek in the event certain milestones were met.

Subsequent to the close of fiscal 2014, the Company also acquired Novus and ProteinSimple.

Acquisitions or divestitures present financial, managerial and operational challenges, including diversion of management attention, difficulty with integrating acquired businesses, integration of different corporate cultures or separating personnel and financial and other systems, increased expenses, assumption of unknown liabilities, indemnities, and potential disputes with the buyers or sellers, and the need to evaluate the financial systems of and establish internal controls for acquired entities.

There can be no assurance that the Company will engage in any acquisitions or divestitures or that the Company will be able to do so on terms that will result in any expected benefits.

In addition, acquisitions financed with borrowings could make the Company more vulnerable to business downturns and could negatively affect the Company’s earnings due to higher leverage and interest expense.

The Company is subject to risk associated with global operations.

The Company engages in business globally, with approximately 47% of the Company’s sales revenue in fiscal 2014 coming from outside the U.S. This subjects the Company to a number of risks, including international economic, political, and labor conditions; tax laws (including U.S. taxes on foreign subsidiaries); increased financial accounting and reporting burdens and complexities; unexpected changes in, or impositions of, legislative or regulatory requirements; failure of laws to protect intellectual property rights adequately; inadequate local infrastructure and difficulties in managing and staffing international operations; delays resulting from difficulty in obtaining export licenses for certain technology; tariffs, quotas and other trade barriers and restrictions; transportation delays; operating in locations with a higher incidence of corruption and fraudulent business practices; and other factors beyond the Company’s control, including terrorism, war, natural disasters, climate change and diseases.

The application of laws and regulations implicating global transactions is often unclear and may at times conflict.

Compliance with these laws and regulations may involve significant costs or require changes in the Company’s business practices that result in reduced revenue and profitability.

Non-compliance could also result in fines, damages, criminal sanctions, prohibitions business conduct, and damage to the Company’s reputation.

The Company incurs additional legal compliance costs associated with its global operations and could become subject to legal penalties in foreign countries if it does not comply with local laws and regulations, which may be substantially different from those in the U.S.

In many foreign countries, particularly in those with developing economies, it may be common to engage in business practices that are prohibited by U.S. regulations applicable to the Company, such as the Foreign Corrupt Practices Act.

Although the Company implements policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of the Company’s employees, contractors, and agents, as well as those companies to which the Company outsources certain aspects of its business operations, including those based in foreign countries where practices which violate such U.S. laws may be customary, will comply with the Company’s internal policies.

Any such non-compliance, even if prohibited by the Company’s internal policies, could have an adverse effect on the Company’s business and result in significant fines or penalties.

Moreover, the financial crisis faced by several Eurozone countries, and the ongoing economic instability in that region, may lead to reduced spending on health care and research by Eurozone governments, which could adversely affect the Company’s European sales, as well as its revenues, financial condition and results of operations.

On April 1, 2014, the Company invested $10 million in CyVek, Inc. in exchange for shares of CyVek’s common stock representing approximately 19.9% of the outstanding voting stock of CyVek.

In connection with this investment, the Company also became a party to CyVek’s existing investor agreements and has an observer seat on CyVek’s board of directors.

CyVek is an instrument company that has developed a microfluidics instrument platform and related reagents for performing immunoassays and other assays for the research market.

Cyvek has incurred significant losses and has not yet achieved profitability.

There is no assurance that the Company’s investment in CyVek will bring sufficient returns, and may in fact result in losses.

The Company’s success depends in part on its ability to protect and maintain its intellectual property, including trade secrets.

The Company attempts to protect trade secrets in part through confidentiality agreements, but those agreements can be breached, and if they are, there may not be an adequate remedy.

If trade secrets become publicly known, the Company could lose its competitive position.

The Company has been and may in the future be sued by third parties alleging that the Company is infringing their intellectual property rights.

These lawsuits are expensive, take significant time, and divert management’s focus from other business concerns.

If the Company is found to be infringing the intellectual property of others, it could be required to cease certain activities, alter its products or processes or pay licensing fees.

This would cause unexpected costs and delays which may have a material adverse effect on the Company.

If the Company is unable to obtain a required license on acceptable terms, or unable to design around any third party patent, it may be unable to sell some of its products and services, which could result in reduced revenue.

In addition, if the Company does not prevail, a court may find damages or award other remedies in favor of the opposing party in any of these suits, which may adversely affect the Company’s earnings.

The Company has entered into and drawn on a revolving credit facility.

The burden of this additional debt could adversely affect the Company, make it more vulnerable to adverse economic or industry conditions, and prevent it from funding its expansion strategy.

In connection with the acquisition of ProteinSimple in July 2014, the Company entered into a revolving credit facility, governed by a Credit Agreement dated July 28, 2014.

The Company’s revenues and earnings are, therefore, affected by fluctuations in currency exchange rates.

The Company faces risk resulting from the economic instability in the Eurozone countries.

Sales in Europe made up approximately 28% of the Company’s net sales in fiscal 2013.

As a result of several Eurozone countries facing fiscal crises and uncertainty about the continued viability of the Euro as a single currency, the Company’s European sales may be adversely affected by reduced spending on health care and research by Eurozone governments and general economic instability in the region.

Such reduced sales would adversely affect the Company’s revenues, financial condition and results of operations.

The Company is exposed to credit risk and fluctuations in the market values of its investment portfolio.

The Company has investments in marketable securities that are classified and accounted for as available-for-sale.

These securities may include U.S. government and agency securities, state and municipal securities, foreign government securities, U.S. and foreign corporate debt and equity securities and certificates of deposit.

These investments may experience reduced liquidity due to changes in market conditions and investor demand.

Although the Company has not recognized any significant losses to date on its available-for-sale securities, any significant future declines in their market values could materially adversely affect the Company’s financial condition and operating results.

Given the global nature of its business, the Company has investments both domestically and internationally.

Credit ratings and pricing of these investments can be negatively impacted by liquidity, credit deterioration or losses, financial results, or other factors.

As a result, the value or liquidity of the Company’s available-for-sale investments could decline and result in a material impairment, which could materially adversely affect the Company’s financial condition and operating results.

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.

The principal forward-looking statements in this report include: the Company’s expectations regarding product [removed: releases,] [added: releases and strategy, acquisition activity,] governmental license renewals, [removed: future income tax rates,] capital expenditures, the performance of the Company’s investments, future dividend declarations, the construction and lease of certain facilities, the adequacy of owned and leased property for future operations, [removed: fluctuations in the Company’s] [added: anticipated] financial results and sufficiency of capital resources to meet the Company’s foreseeable future cash and working capital requirements.

USE OF ADJUSTED FINANCIAL [removed: MEASURES:][added: MEASURES]

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: 2013] [added: 2014] as compared to fiscal [removed: 2012] [added: 2013] and [removed: 2011:][added: 2012:]

| [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; |

| [added: |] • | | the [removed: acquisitions] [added: acquisition] of [removed: Boston Biochem, Inc.] [added: Bionostics Holdings, Ltd. (Bionostics)] on [removed: April 1, 2011] [added: July 22, 2013] and [removed: Tocris Holdings Limited] [added: Shanghai PrimeGene Bio-Tech Co. (PrimeGene)] on April [removed: 28, 2011,] [added: 30, 2014,] including the impact of amortizing intangible assets and the recognition of costs upon the sale of inventory written-up to fair value; |

| [added: |] • | | professional fees and other costs incurred as part of the [removed: acquisitions] [added: acquisition] of [removed: Boston Biochem, Inc.] [added: Bionostics] and [removed: Tocris Holdings Limited] [added: PrimeGene] in fiscal [removed: 2011 and] [added: 2014,] the [removed: acquisition] [added: acquisitions] of [removed: Bionostics Holdings Limited] [added: Novus Biologicals LLC (Novus) and ProteinSimple, which closed] in July [removed: 2013;] [added: 2014, and on-going acquisition activity;] |

| [added: |] • | | impairment losses related to the Company’s investments in unconsolidated [removed: entities; and] [added: entities.] |

| [added: |] • | | income tax adjustments related to the [removed: reversal of valuation allowances on deferred tax assets and the] reinstatement of the U.S. credit for research and development [removed: expenditures.] [added: expenditures in fiscal 2013, the expiration of the credit on December 31, 2013, and the reversal of valuation allowances on deferred tax assets in fiscal 2012; and] |

The [removed: Company’s biotechnology] [added: Biotechnology] reporting segment develops, manufactures and sells biotechnology research and diagnostic products world-wide.

The [removed: Company’s clinical controls reporting segment, which consists of R&D Systems’] Clinical Controls [removed: Division,] [added: reporting segment] develops and manufactures controls and calibrators for [removed: sale world-wide.][added: the global clinical market.]

Consolidated [removed: net sales decreased 1.3% and consolidated] [added: GAAP] net earnings were flat for fiscal 2013 as compared to fiscal 2012.

[removed: Consolidated] [added: For fiscal 2014, consolidated] net sales increased [removed: 8.5% and consolidated net earnings were flat for fiscal 2012] [added: 15%] as compared to fiscal [removed: 2011.][added: 2013.]

Consolidated organic net sales, excluding the impact of [added: net sales contributed by companies acquired during] the [removed: acquisitions in] fiscal [removed: 2011] [added: year] 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):

| | | [added: _2014_ | | | |] _2013_ | | | | _2012_ | | |

| Organic sales growth [added: (decline)] | | | (0.4 | %) | | | | |

| Impact of foreign currency fluctuations | | | [removed: 27] [added: (3,500] | [added: )] | | | 0 | |

| Organic sales growth | | | [removed: 1.8] [added: 3] | % | | | | |

| | | [removed: _2013_] [added: _2014_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | |

| Biotechnology | | $ | [removed: 288,156] [added: 300,578] | | | $ | [removed: 293,274] [added: 288,156] | | | $ | [removed: 270,287] [added: 293,274] | |

| Clinical Controls | | | [removed: 22,419] [added: 57,185] | | | | [removed: 21,286] [added: 22,419] | | | | [removed: 19,675] [added: 21,286] | |

| | | $ | [removed: 310,575] [added: 357,763] | | | $ | [removed: 314,560] [added: 310,575] | | | $ | [removed: 289,962] [added: 314,560] | |

[added: In fiscal 2013,] Biotechnology segment net sales decreased [removed: $5.1 million (1.8%) and increased $23.0 million (8.5%), respectively, in fiscal 2013 and fiscal 2012] [added: 2%] from [removed: each of] the prior fiscal [removed: years.][added: year.]

| | | [added: _2014_ | | | |] _2013_ | | |

Clinical [removed: controls] [added: Controls] segment [added: organic] net sales increased [removed: $1.1 million (5.3%)] [added: 7%] and [removed: $1.6 million (8.2%),] [added: 5%,] respectively, in fiscal [removed: 2013] [added: 2014] and [removed: 2012] [added: 2013] from each of the prior fiscal years, primarily as a result of [removed: increased sales volume.][added: strong end-market demand and operational execution.]

Fluctuations in [added: adjusted] gross margins, as a percentage of net sales, [removed: are typically the result of] [added: have primarily resulted from] changes in foreign currency exchange rates and changes in product mix.

[removed: Consolidated] [added: GAAP reported consolidated] gross margins [removed: for fiscal 2013 and 2012] were negatively impacted as a result of purchase accounting related to inventory and intangible assets acquired during [removed: the fourth quarter of] fiscal [removed: 2011.][added: 2014 and prior years.]

| Consolidated gross margin percentage | | | [removed: 74.4] [added: 70.3] | % | | | [removed: 75.0] [added: 74.4] | % | | | [removed: 77.6] [added: 75.0] | % |

| Costs recognized upon sale of acquired inventory | | | [removed: 1.4] [added: 2.1] | % | | | [removed: 2.4] [added: 1.4] | % | | | [removed: 0.6] [added: 2.4] | % |

| Amortization of intangibles | | | [removed: 1.0] [added: 1.1] | % | | | 1.0 | % | | | [removed: 0.3] [added: 1.0] | % |

| Adjusted gross margin percentage | | | [removed: 76.8] [added: 73.5] | % | | | [removed: 78.4] [added: 76.8] | % | | | [removed: 78.5] [added: 78.4] | % |

| Biotechnology | | | [removed: 76.4] [added: 76.3] | % | | | [removed: 76.9] [added: 76.4] | % | | | [removed: 79.8] [added: 76.9] | % |

| Clinical Controls | | | [removed: 49.0] [added: 38.5] | % | | | [removed: 48.6] [added: 49.0] | % | | | [removed: 47.0] [added: 48.6] | % |

| Consolidated | | | [removed: 74.4] [added: 70.3] | % | | | [removed: 75.0] [added: 74.4] | % | | | [removed: 77.6] [added: 75.0] | % |

The [removed: Biotechnology] [added: Clinical Controls] segment gross margin [removed: percentages] [added: percentage] for fiscal [removed: 2013 and 2012 were] [added: 2014 was] negatively impacted by purchase accounting and intangible asset amortization [added: related to the acquisition of Bionostics in July 2013,] as discussed above.

Selling, general and administrative expenses increased [removed: $1.7] [added: $17.3] million [removed: (4.1%)] [added: (40%)] and [removed: $5.8] [added: $1.7] million [removed: (16.1%)] [added: (4%)] in fiscal [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] respectively.

| Biotechnology | | $ | [removed: 37,421] [added: 42,863] | | | $ | [removed: 36,453] [added: 37,421] | | | $ | [removed: 30,058] [added: 36,453] | |

| Clinical Controls | | | [removed: 1,561] [added: 9,765] | | | | [removed: 1,697] [added: 1,561] | | | | [removed: 1,451] [added: 1,697] | |

| Unallocated corporate expenses | | | [removed: 4,402] [added: 8,088] | | | | [removed: 3,533] [added: 4,402] | | | | [removed: 4,388] [added: 3,533] | |

| | | $ | [removed: 43,384] [added: 60,716] | | | $ | [removed: 41,683] [added: 43,384] | | | $ | [removed: 35,897] [added: 41,683] | |

Research and development expenses increased [removed: $1.3] [added: $1.7] million [removed: (4.8%)] [added: (6%)] and [removed: $1.9] [added: $1.3] million [removed: (7.4%)] [added: (5%)] in fiscal [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] respectively, as compared to prior-year periods.

| --- | --- | --- | --- |

| --- | --- | --- | --- |

| --- | --- | --- | --- |

| --- | --- | --- | --- |

| --- | --- | --- | --- |

Bio-Techne develops, manufactures and sells biotechnology products and clinical diagnostic controls worldwide.

With our deep product portfolio and application expertise, Bio-Techne is a leader in providing specialized proteins, including cytokines and growth factors, and related immunoassays, small molecules and other reagents to the research, diagnostics and clinical controls markets.

Bio-Techne operates worldwide and has two reportable business segments, Biotechnology and Clinical Controls, both of which service the life science and diagnostic markets.

After adjusting for the impact of the Bionostics and PrimeGene acquisitions in fiscal 2014, as well as foreign currency fluctuations, organic sales for the year increased 3%.

The growth was broad-based, with the Company achieving organic growth in both reporting segments and in most regions of the world.

Commercial investments made globally in fiscal 2014, especially in China, were the biggest contributing factor impacting organic revenue growth.

Consolidated GAAP net earnings decreased 1% for fiscal 2014 as compared to fiscal 2013.

After adjusting for acquisition related costs and certain income tax items in both years, adjusted net earnings increased 6% in fiscal 2014 as compared to fiscal 2013.

Adjusted earnings growth was driven by increased sales partially offset by a lower margin mix from the acquired Bionostics business, as well as investments made in commercial operations and administrative infrastructure during fiscal 2014.

For fiscal 2013, consolidated net sales decreased 1% as compared to fiscal 2012.

There were no acquisitions made in fiscal 2013 or fiscal 2012 and the impact from foreign currency fluctuation was minimal.

The U.S. market in the Biotechnology segment was particularly soft in 2013, with lower National Institute of Health (NIH) funding for our academic customers coupled with industry consolidation in the pharma and biotech markets.

After adjusting for acquisition related costs and certain income tax and impairment items in both years, adjusted net earnings decreased 3% in fiscal 2013 as compared to fiscal 2012.

The lower earnings in fiscal 2013 resulted from lower revenue coupled with a 5% increase in research and development investment and a 4% increase in selling, general and administrative costs primarily related to investments made in global commercial resources, administrative infrastructure, and annual wage, salary and benefits increases.

| Consolidated net sales | | $ | 357,763 | | | $ | 310,575 | |

| Acquisitions | | | (33,879 | ) | | | 0 | |

| Consolidated organic net sales | | $ | 320,384 | | | $ | 310,575 | |

In fiscal 2014, Biotechnology segment net sales increased 4% from the prior fiscal year.

Included in fiscal 2014 Biotechnology segment net sales was $0.7 million from the acquisition of PrimeGene in April 2014 and the positive impact of foreign currency fluctuations of $3.5 million.

Excluding these amounts, organic net sales for the segment increased 3% in fiscal 2014, driven by the commercial investments made in China, solid execution from our Pacific Rim distributors, and a robust pharma and biotech market in the U.S. U.S. academic customers still suffered from decreases in NIH funding, but sales to these customers stabilized sequentially throughout fiscal 2014.

Included in fiscal 2014 net sales were $3.4 million of sales of new biotechnology products released during the fiscal year.

Biotechnology segment organic net sales, excluding the negative impact of foreign currency fluctuations of $2.6 million, decreased 1% in fiscal 2013, primarily as a result of lower NIH funding and pharma consolidation in the U.S. Included in fiscal 2013 net sales were $2.8 million of sales of new biotechnology products during the fiscal year.

Clinical Controls segment net sales increased $34.8 million in fiscal 2014.

Included in Clinical Controls segment net sales was $33.1 million from the acquisition of Bionostics in July 2013.

Consolidated gross margins were 70%, 74% and 75% in fiscal 2014, 2013 and 2012, respectively.

Excluding the impact of acquired inventory sold and amortization of intangibles, adjusted gross margins were 74%, 77% and 78% in fiscal 2014, 2013 and 2012, respectively.

In fiscal 2014, the biggest impact to gross margin, as compared to fiscal 2013, was the change in product mix associated with the acquisition of Bionostics.

We expect that, in the future, gross margins will continue to be impacted by future acquisitions as well as by the introduction and growth of lower-priced brands that will differentiate from our current premium brands, and allow the Company to better compete in more price-sensitive markets.

The increase in fiscal 2014 was mainly the result of the acquisitions of Bionostics and PrimeGene, including $4.2 million of selling, general and administrative expenses by the acquired companies and an increase of $4.0 million of intangible amortization.

Selling, general and administrative expenses in fiscal 2014 also included $2.2 million of acquisition related professional fees compared to $0.6 million in fiscal 2013.

The remaining increase in selling, general and administrative expenses in fiscal 2014 and in fiscal 2013 included investments made in global commercial resources, administrative infrastructure, and annual wage, salary and benefits increases.

| | | _2014_ | | | | _2013_ | | | | _2012_ | | |

Included in research and development expense in fiscal 2014 was $0.9 million of expenses by the companies acquired during fiscal 2014.

| | | _2014_ | | | | _2013_ | | | | _2012_ | | |

Interest income in fiscal 2014 remained flat from fiscal 2013 as a result of lower cash balances during the fiscal year as a result of the acquisition of Bionostics in the first quarter of fiscal 2014.

| --- | --- | --- |

##### [Table of Contents](#toc)

Techne Corporation and subsidiaries (the Company) are engaged in the development, manufacture and sale of biotechnology products and clinical diagnostic controls.

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

The Company’s European biotechnology operations are conducted through its wholly-owned U.K. subsidiaries, R&D Systems Europe Ltd. (R&D Europe) and Tocris Holdings Limited (Tocris).

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

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

R&D China has a sales subsidiary, R&D Systems Hong Kong Ltd., in Hong Kong.

The Company has two reportable segments based on the nature of its products (biotechnology and clinical controls).

R&D Systems’ Biotechnology Division, R&D Europe, Tocris, R&D China, BiosPacific and Boston Biochem are included in the biotechnology reporting segment.

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 earnings in fiscal 2012 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 in fiscal 2012 were impacted by the acquisitions of Boston Biochem and Tocris during the fourth quarter of fiscal 2011.

Included in fiscal 2012 and fiscal 2011 consolidated net sales were $19.4 million and $4.7 million, respectively, of acquisition-related net sales.

Consolidated net earnings for fiscal 2012 included $7.6 million of costs recognized upon the sale of inventory that was written-up to fair value at the time of the acquisitions and $5.1 million amortization of intangible assets compared to $1.8 million and $1.5 million, respectively, in fiscal 2011.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | _Year Ended June 30,_ | | | | | | |

| | | _2012_ | | | | _2011_ | | |

| Consolidated net sales | | $ | 314,560 | | | $ | 289,962 | |

| Acquisitions | | | (19,385 | ) | | | 0 | |

| Consolidated organic net sales | | $ | 295,202 | | | $ | 289,962 | |

Biotechnology segment organic net sales 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%) in fiscal 2012, primarily as a result of increased sales volume.

Included in fiscal 2013 and 2012 net sales were $2.8 million and $2.7 million, respectively, of sales of new biotechnology products which had their first sale in each of the fiscal years.

Biotechnology segment organic sales growth from the same prior-year periods was as follows:

| U.S. industrial, pharmaceutical and biotechnology | | | (2.6 | %) | | | 3.2 | % |

| U.S. academic | | | (5.9 | %) | | | (5.1 | %) |

| Europe | | | 0.1 | % | | | (1.5 | %) |

| China | | | 18.9 | % | | | 21.6 | % |

| Pacific rim distributors, excluding China | | | 3.5 | % | | | 7.0 | % |

Biotechnology segment net sales consisted of the following:

| | | | | |

| --- | --- | --- | --- | --- |

| | | _Year Ended June 30,_ | | |

| United States | | | | |

| Industrial, pharmaceutical and biotechnology | | | 29 | % |

| Academic | | | 13 | % |

| Other | | | 13 | % |

| | | | 55 | % |

| Europe | | | 28 | % |

At the end of fiscal [removed: 2013,] [added: 2014,] the Company had a portfolio of fixed income debt securities, excluding those classified as cash and cash equivalents, of [removed: $212] [added: $11.3] million (see Note C to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K).

Approximately [removed: 31%] [added: 30%] of consolidated net sales are made in foreign currencies, including [removed: 15%] [added: 14%] in euro, [removed: 7%] [added: 6%] in British pound sterling, [removed: 4%] [added: 5%] in Chinese yuan and the remaining 5% in other European currencies.

| | | [removed: _2013_] [added: _2014_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | |

| High | | $ | [removed: 1.62] [added: 1.71] | | | $ | [removed: 1.64] [added: 1.62] | | | $ | [removed: 1.67] [added: 1.64] | |

| Low | | | 1.52 | | | | [removed: 1.54] [added: 1.52] | | | | [removed: 1.53] [added: 1.54] | |

| Average | | | [removed: 1.57] [added: 1.64] | | | | [removed: 1.59] [added: 1.57] | | | | 1.59 | |

| High | | $ | [removed: 1.36] [added: 1.39] | | | $ | [removed: 1.44] [added: 1.36] | | | $ | [removed: 1.48] [added: 1.44] | |

| Low | | | [removed: 1.23] [added: 1.32] | | | | [removed: 1.24] [added: 1.23] | | | | [removed: 1.27] [added: 1.24] | |

| Average | | | [removed: 1.30] [added: 1.36] | | | | [removed: 1.34] [added: 1.30] | | | | [removed: 1.37] [added: 1.34] | |

| High | | $ | [removed: .163] [added: .165] | | | $ | [removed: .159] [added: .163] | | | $ | [removed: .155] [added: .159] | |

| Low | | | [removed: .157] [added: .160] | | | | [removed: .155] [added: .157] | | | | [removed: .148] [added: .155] | |

| Average | | | [removed: .160] [added: .163] | | | | [removed: .158] [added: .160] | | | | [removed: .151] [added: .158] | |

At June 30, [removed: 2013,] [added: 2014,] the Company had the following trade receivable and intercompany payables denominated in one currency but receivable or payable in another currency (in thousands):

| | | _Denominated Currency_ | | | | [removed: | | | |] _U. S. Dollar Equivalent_ | | |

| Accounts receivable in: | | | | | | | | | [removed: | | | |]

| Other European currencies | | £ | [removed: | | | | 1,150] [added: 1,135] | | | $ | [removed: 1,749] [added: 1,942] | |

| Intercompany payable in: | | | | | | | | | [removed: | | | |]

| U.S. dollars | | [removed: | yuan | | |] [added: £] | [removed: 5,906] [added: 2,956] | | | $ | [removed: 956] [added: 5,057] | |

The effects of a hypothetical simultaneous 10% appreciation in the U.S. dollar from June 30, [removed: 2013] [added: 2014] levels against the euro, British pound sterling and Chinese yuan are as follows (in thousands):

| Decrease in translation of [removed: 2013] [added: 2014] earnings into U.S. dollars | | $ | [removed: 2,445] [added: 2,577] | |

| Decrease in translation of net assets of foreign subsidiaries | | | [removed: 13,778] [added: 17,849] | |

| Additional transaction losses | | | [removed: 518] [added: 836] | |

In late fiscal 2014, the Company liquidated the majority of its fixed income debt securities in anticipation of acquisitions made in July 2014.

Gains and losses recorded on the liquidation were not material.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Euros | | £ | 1,296 | | | $ | 2,217 | |

| Euros | | £ | 451 | | | $ | 771 | |

| U.S. dollars | | yuan | 20,332 | | | $ | 3,305 | |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Euros | | £ | | | | | 1,304 | | | $ | 1,984 | |

| Euros | | £ | | | | | 304 | | | $ | 463 | |

| U.S. dollars | | £ | | | | | 2,777 | | | $ | 4,223 | |

The [removed: Company’s biotechnology] [added: Biotechnology] reporting segment develops, manufactures and sells biotechnology research and diagnostic products world-wide.

The [removed: Company’s clinical controls reporting segment (formerly hematology), which consists of R&D Systems’] Clinical Controls [removed: Division,] [added: reporting segment] develops and manufactures controls and calibrators for [removed: sale world-wide.][added: the global clinical market.]

[removed: On July 22, 2013, the Company acquired] Bionostics [removed: Holdings Limited (Bionostics) and its U.S. operating subsidiary, Bionostics, Inc. Bionostics] is a global leader in the development, manufacture and distribution of [removed: 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.

[removed: The Company’s clinical controls] [added: Bio-Techne’s Clinical Controls] segment net sales were [removed: 7%] [added: 16%] of consolidated net sales for [removed: each of] fiscal [removed: 2013, 2012 and 2011.][added: 2014.]

Financial information relating to [removed: the Company’s] [added: Bio-Techne’s] segments is 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: The Company, through its biotechnology] [added: Through our Biotechnology] segment, [removed: is] [added: we are] one of the world’s leading suppliers of specialized proteins, such as [removed: cytokines] [added: cytokines, growth factors, immunoassays, antibodies] and related reagents, to the biotechnology research community.

[removed: These valuable] [added: The] proteins are produced [added: naturally] in minute amounts by different [added: cell] types [removed: of cells] and can be isolated [added: in a pure form either] from [removed: these] [added: the same] cells or [removed: synthesized] [added: produced] through recombinant DNA technology.

The growing interest by academic and commercial researchers in cytokines is largely due to the profound effect that [removed: a] tiny [removed: amount] [added: amounts] of a cytokine can have on cells and tissues.

[removed: They] [added: Cytokines are intercellular messengers and, as a result,] act as signaling agents by interacting with specific receptors on the affected cells and trigger events that can lead to significant changes in a [removed: cell, tissue or organ.][added: cell behavior.]

For example, cytokines can induce cells to acquire more specialized functions and [removed: features.][added: features (differentiation) or can play a key role in attracting cells at the site of injury, inducing them to grow and initiate the healing process.]

Enzymes are proteins which act as biological catalysts that accelerate [removed: a variety of] chemical [removed: reactions in cells.][added: reactions.]

Most enzymes, including proteases, kinases and phosphatases, are proteins that modify the structure and function of other [removed: proteins.][added: proteins and in turn affect cell behavior and function.]

[removed: The Company markets] [added: We market] a variety of immunoassays on different testing platforms, including a [removed: microtiter plated] [added: microtiter-plate] based kit sold under the trade name Quantikine®, [added: multiplex] immunoassays based on encoded [removed: beads] [added: bead] technology and immunoassays based on [added: planar] spotted surfaces.

Protein quantification is an integral component of basic [removed: research] [added: research, as potential diagnostic tools for various diseases] and as a valuable indicator of the effects of new therapeutic compounds in the [removed: pharmaceutical] drug discovery [removed: and development] process.

With the acquisition of Tocris in April 2011, [removed: the Company] [added: we] added chemically-based products to [removed: its biotechnology] [added: our Biotechnology] segment.

[removed: Tocris products are] [added: These] small compounds, sold in highly purified forms typically with agonistic or antagonistic properties in a variety of biological [removed: processes.][added: processes, allow customers access to a broad range of compounds and biological reagents to meet their life science research needs.]

[removed: The Company’s] [added: Our] combined chemical and biological reagents portfolio [removed: provide] [added: provides] 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.

Biotechnology [added: Segment] Products

[removed: Cytokines] [added: Cytokines, growth factors] and enzymes, extracted from natural sources or produced using recombinant DNA technology, are [added: developed and] manufactured [removed: to the highest possible purity.][added: in house.]

[removed: The Company’s] [added: Bio-Techne’s] polyclonal antibodies are produced in animals (primarily goats, sheep and rabbits) and purified from the animals’ blood.

Monoclonal antibodies are derived from immortalized rodent cell lines [added: using hybridoma technology] and are isolated from cell culture medium.

[removed: The Company has] [added: We have] received Food and Drug Administration (FDA) marketing clearance for [removed: its] erythropoietin (EPO), transferrin receptor (TfR) and Beta2-microglobulin (ß2M) immunoassays for use as _in vitro_ diagnostic devices.

[removed: This] [added: The flow cytometry] product line includes fluorochrome labeled antibodies and [removed: kits, which] [added: kits that] are used to determine the immuno-phenotypic properties of cells from different tissues.

[removed: The Company sells its] [added: We sell our] biotechnology products directly to customers [added: who are primarily located] in North America, [removed: most of] Western Europe and [removed: to certain customers in] China.

[removed: Third] [added: We also sell through third] party distributors [removed: are used] in [removed: the remainder of China and] [added: China, southern] Europe and in the rest of the world.

_Clinical Controls [removed: Segment (formerly the Hematology Segment)_][added: Segment_]

[removed: The Company] [added: Our Clinical Controls segment] offers a wide range of hematology controls and calibrators for both impedance and laser type cell counters.

[removed: The Company believes its] [added: We believe our] products have improved stability and versatility and a longer shelf life than most of those of [removed: its] [added: our] competitors.

Original Equipment Manufacturer (OEM) agreements represent the largest market for [added: our] clinical controls [removed: made by the Company.][added: products.]

In fiscal [removed: 2013, 2012] [added: 2014, 2013] and [removed: 2011,] [added: 2012,] OEM agreements accounted for [removed: $10.8] [added: $41.2] million, [removed: $9.7] [added: $10.8] million and [removed: $8.7] [added: $9.7] million, respectively, or [added: 12%,] 3% [added: and 3%] of total consolidated net sales in each fiscal [removed: year.][added: year, respectively.]

[removed: The Company sells its] [added: We sell our] clinical control products directly to customers in the United States and through distributors in the rest of the world.

[removed: The Company] [added: Bio-Techne] is engaged in ongoing research and development in all of [removed: its] [added: our] major product lines: controls and calibrators and cytokines, antibodies, assays, small bioactive molecules and related biotechnology products.

[removed: The Company believes] [added: We believe] that [removed: its] [added: our] future success depends, to a large extent, on [removed: its] [added: our] ability to keep pace with changing technologies and [removed: markets.][added: market needs.]

[removed: The Company is] [added: We are] planning to release new proteins, antibodies, immunoassay products and [removed: chemically-based research reagents] [added: small molecules] in the coming year.

All of these products [removed: will be] [added: are] for research use only and therefore [removed: do] [added: did] not require FDA clearance.

| | | [removed: _2013_] [added: _2014_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | |

| Biotechnology | | $ | [removed: 28,441] [added: 29,189] | | | $ | [removed: 27,112] [added: 28,441] | | | $ | [removed: 25,176] [added: 27,112] | |

| Clinical Controls | | | [removed: 816] [added: 1,756] | | | | [removed: 800] [added: 816] | | | | [removed: 809] [added: 800] | |

| | | $ | [removed: 29,257] [added: 30,945] | | | $ | [removed: 27,912] [added: 29,257] | | | $ | [removed: 25,985] [added: 27,912] | |

| Percent of net sales | | | [removed: 9.4] [added: 9] | % | | | [removed: 8.9] [added: 9] | % | | | [removed: 9.0] [added: 9] | % |

Techne and its subsidiaries, collectively doing business as Bio-Techne (Bio-Techne, we, our, us or the Company) develop, manufacture and sell biotechnology products and clinical diagnostic controls worldwide.

With our deep product portfolio and application expertise, Bio-Techne is a leader in providing specialized proteins, including cytokines and growth factors, and related immunoassays, small molecules and other reagents to the research, diagnostics and clinical controls markets.

A Minneapolis, Minnesota-based company, Bio-Techne originally was founded as Research and Diagnostic Systems, Inc. (R&D Systems) in 1976, initially producing hematology controls and calibrators for primary use in clinical settings.

Techne Corporation, a public entity at the time and currently the parent company, acquired R&D Systems in 1984 and through this action made R&D Systems a public company.

The initial products focused on the hematology blood controls and calibrators market but soon expanded through the creation of the Biotechnology Division, to include reagents used in life science research.

A series of acquisitions further expanded the product portfolio.

These included the Amgen research business in 1991, the Genzyme research business in 1997, Fortron Bio Science, Inc. and BiosPacific, Inc. (BiosPacific) in 2005, and Boston Biochem, Inc. and Tocris Holdings Limited (Tocris) in 2011.

In fiscal 2014, we further strengthened our clinical controls solutions by acquiring Bionostics Holdings Limited (Bionostics), and our biotechnology segment offerings were increased by the recent acquisition of Shanghai PrimeGene Bio-Tech Co. (PrimeGene), and an agreement to invest in and possibly acquire CyVek, Inc. (CyVek).

With these recent investments, we will be able to scale our business and expand into new product and geographic markets.

Recognizing the importance of a unified and global approach to meeting our mission and accomplishing our strategies, in fiscal 2014 we implemented a new global brand, Bio-Techne.

The Bio-Techne brand is derived from the Greek words “Bio,” or “life,” and “Techne,” or “the application of knowledge to practical matters.” The combination of these words and their meanings capture the essence of Bio-Techne, its products and mission.

The acquisition of various brands over the years drove the need for an umbrella branding strategy that could hold all of the acquired assets.

The Bio-Techne name solidifies the new strategic direction for the Company along with unifying and positioning all of our brands under one complete portfolio.

With these strategic efforts, as well as the establishment of dedicated subsidiaries in Europe and Asia, we now operate globally along with offices in several locations in the United States, Europe and China.

Today, our product line extends to over 24,000 products, 95% of which are manufactured in-house.

While maintaining our core strengths in cytokines and immunoassays, we also develop antibodies, cell selection and multicolor flow cytometry kits, multiplex assays, biologically active compounds, and stem cell products and kits.

We are committed to providing the life sciences community with innovative, high-quality scientific tools to better understand biological processes and drive discovery.

We intend to build on Bio-Techne’s past accomplishments, strong reputation and financial position by executing strategies that position us to become the standard for biological content in the research market, and to leverage that leadership position to enter the diagnostics and other adjacent markets.

Our strategies include:

| | • | | _Continued innovation in core products._ Through collaborations with key opinion leaders and participation in scientific discussions and associations, we expect to leverage our continued significant investment in our research and development activities to be first-to-market with quality products that are at the leading edge of life science researchers’ needs. |

| --- | --- | --- | --- |

| | • | | _Investments in targeted acquisitions._ We intend to leverage our strong balance sheet to gain access to new technologies and products that improve our competitiveness in the current market and allow us to enter adjacent markets. |

| --- | --- | --- | --- |

| | • | | _Expansion of geographic footprint._ We will continue to expand our sales staff and distribution channels globally in order to increase our global presence and make it easier for customers to transact with us. |

| --- | --- | --- | --- |

| | • | | _Realignment of resources._ In recognition of the increased size and scale of the organization, we intend to redesign our development and operational resources to create greater efficiencies throughout the organization. |

| --- | --- | --- | --- |

| | • | | _Talent recruitment and retention._ We will recruit, train and retain the most talented staff to implement all of our strategies effectively. |

| --- | --- | --- | --- |

OUR PRODUCTS AND MARKETS

Currently Bio-Techne operates worldwide and has two reportable business segments, Biotechnology and Clinical Controls, both of which serve the life science and diagnostic markets.

In fiscal 2014, net sales from Bio-Techne’s Biotechnology segment were 84% of consolidated net sales.

Currently, the majority of the protein products are produced by laboratory processes that use recombinant DNA technology, while our chemically-based products are produced using available chemicals.

Consequently, raw materials are readily available for most of our products in the Biotechnology segment.

All protein products are produced to the highest possible purity and characterized to ensure the highest level of biological activity.

Immunoassays can also be useful in clinical diagnostics.

Recent acquisitions and investments made in fiscal 2014 and 2015 will further expand and complement Bio-Techne’s current product offerings in the Biotechnology segment.

For additional information regarding our investments and acquisitions, see “Acquisitions and Investments” under this Item 1.

Biotechnology Segment Customers and Distribution Methods

In January 2014, we entered into a sales and marketing partnership agreement with Fisher Scientific in order to bolster our market presence in North America and leverage the transactional efficiencies offered by the large Fisher organization.

Techne Corporation and subsidiaries (the Company) are engaged in the development, manufacture and sale of biotechnology products and clinical diagnostic controls.

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

The Company’s European biotechnology operations are conducted through its wholly-owned U.K. subsidiaries, R&D Systems Europe Ltd. (R&D Europe) and Tocris Holdings Limited (Tocris).

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

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

R&D China has a sales subsidiary, R&D Systems Hong Kong Ltd., in Hong Kong.

The Company has two reportable segments based on the nature of its products (biotechnology and clinical controls).

R&D Systems’ Biotechnology Division, R&D Europe, Tocris, R&D China, BiosPacific and Boston Biochem are included in the biotechnology reporting segment.

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 MARKET

The Company manufactures and sells products for the biotechnology research market and the clinical diagnostics market.

In fiscal 2013, 2012 and 2011, net sales from the Company’s biotechnology segment were 93% of consolidated net sales in each year.

Currently, nearly all of the Company’s proteins are produced by recombinant DNA technology.

Cytokines are intercellular messengers.

Another example of the beneficial action of cytokines is their key role played in attracting cells at the site of injury, inducing them to grow and divide and initiate the healing process.

The Company also produces and markets enzymes and intracellular signaling reagents.

The addition of Tocris products to the Company’s product lines allows customers to have access to the broadest range of compounds and biological reagents to meet their life science research needs.

The Company currently manufactures and sells approximately 24,000 biotechnology products.

Proteins, including enzyme substrates and inhibitors, are highly purified and characterized to ensure the highest biological activity.

The immunoassay product line includes Quantikine kits for the detection of human and animal proteins using 96-well plates, along with immunoassays on other testing platforms, which allow researchers to quantify the amount of a specific analyte (typically a cytokine, adhesion molecule or an enzyme) in a sample derived from any biological fluid.

Clinical Diagnostic Immunoassay Kits.

Flow Cytometry Products.

Intracellular Signaling Products.

This diverse product line provides reagents to elucidate signal transduction pathways within cells.

Products include antibodies, phospho-specific antibodies, antibody arrays, active caspases, kinases, phosphatases, and enzyme-linked immunosorbant assay (ELISA) assays to measure the activity of apoptotic and signaling molecules.

One of the most frequently performed laboratory tests on a blood sample is a complete blood count (CBC).

Doctors use this test in disease screening and diagnosis.

At the same time, the Company continues to examine its production processes to ensure high quality and maximum efficiency.

In fiscal 2013, the Company introduced 2,100 new biotechnology products.

The Company also developed several new clinical diagnostic products in fiscal 2013 and is continuously working to expand these product lines along with ongoing product improvements and enhancements.

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 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.

The Company invested an additional $5.0 million in the private placement, as discussed above, and received ten year warrants to purchase 150,000 shares of CCXI common stock at $20 per share.

The Company has a 6.5% ownership percentage in H2Equity, LLC (formerly Hemerus Medical, LLC).

As of August [removed: 23, 2013,] [added: 22, 2014,] 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.

For the fiscal year ended June 30, [removed: 2013][added: 2014]

| (State [removed: of Incorporation)] [added: of Incorporation)] | | (IRS [removed: Employer Identification] [added: Employer Identification] No.) |

| Non-accelerated filer | | ¨ | | [removed: Small] [added: Smaller] reporting company | | ¨ |

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: 2012] [added: 2013] as reported on The Nasdaq Stock Market [removed: ($68.34] [added: ($94.67] per share) was approximately [removed: $2.2] [added: $2.7] billion.

Shares of $0.01 par value Common Stock outstanding at August [removed: 23, 2013: 36,844,944][added: 22, 2014: 37,007,203]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Company’s Proxy Statement for its [removed: 2013] [added: 2014] Annual Meeting of Shareholders are incorporated by reference into Part III.

| | | [removed: Page] | | [added: Page] | [added: | |]

| [removed: [Item] [added: Item] 1. [removed: Business](#tx545574_2)] | | [added: [Business](#toc744730_2)] | [added: | |] 1 | |

| [removed: [Item] [added: Item] 1A. [removed: Risk Factors](#tx545574_3)] | | [added: [Risk Factors](#toc744730_3)] | [removed: 8] | | [added: 10 | |]

| [removed: [Item] [added: Item] 1B. [removed: Unresolved] [added: | | [Unresolved] Staff [removed: Comments](#tx545574_4)] [added: Comments](#toc744730_4)] | | | [removed: 12] [added: 15] | |

| [removed: [Item] [added: Item] 2. [removed: Properties](#tx545574_5)] | | [added: [Properties](#toc744730_5)] | [removed: 12] | | [added: 15 | |]

| [removed: [Item] [added: Item] 3. [removed: Legal Proceedings](#tx545574_6)] | | [added: [Legal Proceedings](#toc744730_6)] | [removed: 13] | | [added: 16 | |]

| [removed: [Item] [added: Item] 4. [removed: Mine] [added: | | [Mine] Safety [removed: Disclosures](#tx545574_7)] [added: Disclosures](#toc744730_7)] | | | [removed: 13] [added: 16] | |

| [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](#tx545574_9)] [added: Securities](#toc744730_9)] | | | [removed: 13] [added: 16] | |

| [removed: [Item] [added: Item] 6. [removed: Selected] [added: | | [Selected] Financial [removed: Data](#tx545574_10)] [added: Data](#toc744730_10)] | | | [removed: 15] [added: 18] | |

| [removed: [Item] [added: Item] 7. [removed: Management’s] [added: | | [Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx545574_11)] [added: Operations](#toc744730_11)] | | | [removed: 16] [added: 19] | |

| [removed: [Item] [added: Item] 7A. [removed: Quantitative] [added: | | [Quantitative] and Qualitative Disclosures about Market [removed: Risk](#tx545574_12)] [added: Risk](#toc744730_12)] | | | [removed: 26] [added: 28] | |

| [removed: [Item] [added: Item] 8. [removed: Financial] [added: | | [Financial] Statements and Supplementary [removed: Data](#tx545574_13)] [added: Data](#toc744730_13)] | | | [removed: 28] [added: 30] | |

| [removed: [Item] [added: Item] 9. [removed: Changes] [added: | | [Changes] in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx545574_14)] [added: Disclosure](#toc744730_14)] | | | [removed: 45] [added: 48] | |

| [removed: [Item] [added: Item] 9A. [removed: Controls] [added: | | [Controls] and [removed: Procedures](#tx545574_15)] [added: Procedures](#toc744730_15)] | | | [removed: 45] [added: 48] | |

| [removed: [Item] [added: Item] 9B. [removed: Other Information](#tx545574_16)] | | [added: [Other Information](#toc744730_16)] | [removed: 46] | | [added: 49 | |]

| [PART [removed: III](#tx545574_17)] [added: III](#toc744730_17)] | | | | | [added: | |]

| [removed: [Item] [added: Item] 10. [removed: Directors,] [added: | | [Directors,] Executive Officers and Corporate [removed: Governance](#tx545574_18)] [added: Governance](#toc744730_18)] | | | [removed: 46] [added: 50] | |

| [removed: [Item] [added: Item] 11. [removed: Executive Compensation](#tx545574_19)] | | [added: [Executive Compensation](#toc744730_19)] | [removed: 46] | | [added: 50 | |]

| [removed: [Item] [added: Item] 12. [removed: Security] [added: | | [Security] Ownership of Certain Beneficial Owners and Management and Related Shareholder [removed: Matters](#tx545574_20)] [added: Matters](#toc744730_20)] | | | [removed: 47] [added: 50] | |

| [removed: [Item] [added: Item] 13. [removed: Certain] [added: | | [Certain] Relationships and Related Transactions, and Director [removed: Independence](#tx545574_21)] [added: Independence](#toc744730_21)] | | | [removed: 47] [added: 50] | |

| [removed: [Item] [added: Item] 14. [removed: Principal] [added: | | [Principal] Accounting Fees and [removed: Services](#tx545574_22)] [added: Services](#toc744730_22)] | | | [removed: 47] [added: 51] | |

| [removed: [Item] [added: Item] 15. [removed: Exhibits,] [added: | | [Exhibits,] Financial Statement [removed: Schedules](#tx545574_24)] [added: Schedules](#toc744730_24)] | | | [removed: 48] [added: 51] | |

10-K 1 d744730d10k.htm 10-K

| --- | --- | --- |

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| [PART I](#toc744730_1) | | | | | | |

| | | | | | | |

| [PART II](#toc744730_8) | | | | | | |

| | | | | | | |

| | | | | | | |

| [PART IV](#toc744730_23) | | | | | | |

| | | | | | | |

| [SIGNATURES](#toc744730_25) | | | | | 52 | |

10-K 1 d545574d10k.htm FORM 10-K

| | | | | |

| --- | --- | --- | --- | --- |

| [PART I](#tx545574_1) | | | | |

| [PART II](#tx545574_8) | | | | |

| [PART IV](#tx545574_23) | | | | |

| [SIGNATURES](#tx545574_25) | | | 49 | |

[removed: R&D Systems] [added: Bio-Techne] uses approximately [removed: 600,000] [added: 625,000] square feet of the complex for administrative, research, manufacturing, shipping and warehousing activities.

A portion of the land and buildings are [removed: being] leased to third parties as cropland and for a dairy operation.

The remaining property is used by the Company to house [removed: goats and sheep] [added: animals] for polyclonal antibody production for its [removed: biotechnology] [added: Biotechnology] segment.

Rental income from the above properties was [removed: $830,000, $693,000] [added: $1.0 million, $0.8 million] and [removed: $549,000] [added: $0.7 million] in fiscal [removed: 2013, 2012] [added: 2014, 2013] and [removed: 2011,] [added: 2012,] respectively.

The Company leases the following facilities, all of which are utilized by the Company’s [removed: biotechnology segment:][added: Biotechnology segment with the exception of the location used by the Company’s Bionostics subsidiary (Clinical Control segment):]

| _Subsidiary_ | | _Location_ | | _Type_ | | _Square Feet_ | [added: | |]

| R&D GmbH | | Wiesbaden-Nordenstadt, Germany | | Office space | | [added: |] 4,200 | [added: |]

| BiosPacific | | Emeryville, California | | Office space | | [added: |] 3,000 | [added: |]

| R&D China | | [removed: Shanghai,] [added: Shanghai and Bejing,] China | | Office/warehouse | | [removed: 5,600] | [added: 8,200 | |]

| R&D Hong Kong | | Hong Kong | | Office space | | [added: |] 1,200 | [added: |]

| Boston Biochem | | Cambridge, Massachusetts | | Office/lab | | [added: |] 7,400 | [added: |]

| Tocris | | Bristol, United Kingdom | | Office/manufacturing/lab/warehouse | | [added: |] 11,000 | [added: |]

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| R&D Europe | | Langely, U.K. | | Warehouse | | | 14,300 | |

| PrimeGene | | Shanghai, China | | Office/manufacturing/lab | | | 13,700 | |

| Bionostics | | Devens, Massachusetts | | Office/manufacturing | | | 48,000 | |

The Company is currently pursuing new lease space for its Tocris operations.

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

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.

| | | _Fiscal [removed: 2013] [added: 2014] Price_ | | | | | | | | _Fiscal [removed: 2012] [added: 2013] Price_ | | | | | | |

| 1st Quarter | | $ | [removed: 76.02] [added: 83.83] | | | $ | [removed: 66.26] [added: 69.30] | | | $ | [removed: 86.43] [added: 76.02] | | | $ | [removed: 66.34] [added: 66.26] | |

| 2nd Quarter | | | [removed: 74.17] [added: 94.78] | | | | [removed: 65.37] [added: 77.14] | | | | [removed: 73.55] [added: 74.17] | | | | [removed: 62.04] [added: 65.37] | |

| 3rd Quarter | | | [removed: 72.20] [added: 96.96] | | | | [removed: 65.67] [added: 82.51] | | | | 72.20 | | | | [removed: 65.25] [added: 65.67] | |

| 4th Quarter | | | [removed: 70.00] [added: 93.06] | | | | [removed: 62.55] [added: 82.63] | | | | [removed: 74.79] [added: 70.00] | | | | [removed: 63.08] [added: 62.55] | |

As of August [removed: 23, 2013,] [added: 22, 2014,] there were over [removed: 29,000] [added: 31,000] beneficial shareholders of the Company’s common stock and over 150 shareholders of record.

The Company paid quarterly cash dividends totaling [removed: $43.5] [added: $45.4] million, [removed: $41.0] [added: $43.5] million and [removed: $39.7] [added: $41.0] million in fiscal [removed: 2013, 2012] [added: 2014, 2013] and [removed: 2011,] [added: 2012,] respectively.

[removed: Its] [added: The] Board of Directors periodically considers the payment of cash dividends, and there is no guarantee that the Company will pay [added: comparable] cash [removed: dividends] [added: dividends, or any cash dividends,] in the future.

The comparison assumes $100 was invested on the last trading day before July 1, [removed: 2008] [added: 2009] in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.

[removed: ][added: ]

_Market Price of Common Stock_

_Holders of Common Stock and Dividends Paid_

The Company entered into a revolving line of credit in July 2014, which would prohibit payment of dividends to Company shareholders in the event of a default thereunder.

The Credit Agreement that governs the revolving line of credit contains customary events of default.

_Issuer Purchases of Equity Securities_

There was no share repurchase activity by the Company in fiscal 2014.

The maximum approximate dollar value of shares that may yet be purchased under the Company’s existing stock repurchase plan is approximately $125 million.

_Stock Performance Graph_

| | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

The following table sets forth the repurchases of Company common stock for the quarter ended June 30, 2013.

| _Period_ | | _Total Number of Shares Purchased_ | | | | _Average Price Paid Per Share_ | | | | _Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs_ | | | | _Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs_ | | |

| 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 April 2009, the Company authorized a plan for the repurchase and retirement of $60 million of its common stock.

In October 2012, the Company increased the amount authorized under the plan by $100 million.

| _Income and Share Data:_ | | [removed: _2013_] [added: _2014 (1)_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011 (1)_] [added: _2012_] | | | | [removed: _2010_] [added: _2011 (2)_] | | | | [removed: _2009_] [added: _2010_] | | |

| Net sales | | $ | [removed: 310,575] [added: 357,763] | | | $ | [removed: 314,560] [added: 310,575] | | | $ | [removed: 289,962] [added: 314,560] | | | $ | [removed: 269,047] [added: 289,962] | | | $ | [removed: 263,956] [added: 269,047] | |

| Net earnings | | [removed: $] | [removed: 112,561] [added: 110,948] | | | [removed: $] | [removed: 112,331] [added: 112,561] | | | [removed: $] | [removed: 112,302] [added: 112,331] | | | [removed: $] | [removed: 109,776] [added: 112,302] | | | [removed: $] | [removed: 105,242] [added: 109,776] | |

| Diluted earnings per share | | [removed: $] | [removed: 3.05] [added: 3.00] | | | [removed: $] | [removed: 3.04] [added: 3.05] | | | [removed: $] | [removed: 3.02] [added: 3.04] | | | [removed: $] | [removed: 2.94] [added: 3.02] | | | [removed: $] | [removed: 2.78] [added: 2.94] | |

| Average common and common equivalent [removed: shares—diluted] [added: shares – diluted] (in thousands) | | | [removed: 36,900] [added: 37,005] | | | | [removed: 37,006] [added: 36,900] | | | | [removed: 37,172] [added: 37,006] | | | | [removed: 37,347] [added: 37,172] | | | | [removed: 37,900] [added: 37,347] | |

| _Balance Sheet Data as of June 30:_ | | [removed: _2013_] [added: _2014_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | | | [removed: _2009_] [added: _2010_] | | |

| Cash, cash equivalents and short-term available-for-sale investments | | $ | [removed: 332,937] [added: 363,354] | | | $ | [removed: 268,986] [added: 332,937] | | | $ | [removed: 140,813] [added: 268,986] | | | $ | [removed: 138,811] [added: 140,813] | | | $ | [removed: 202,887] [added: 138,811] | |

| Working capital | | | [removed: 377,432] [added: 443,022] | | | | [removed: 310,757] [added: 377,432] | | | | [removed: 212,229] [added: 310,757] | | | | [removed: 184,016] [added: 212,229] | | | | [removed: 239,944] [added: 184,016] | |

| Total assets | | | [removed: 778,098] [added: 862,491] | | | | [removed: 719,324] [added: 778,098] | | | | [removed: 617,670] [added: 719,324] | | | | [removed: 518,816] [added: 617,670] | | | | [removed: 472,005] [added: 518,816] | |

| _Cash Flow Data:_ | | [removed: _2013_] [added: _2014_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | | | [removed: _2009_] [added: _2010_] | | |

| Net cash provided by operating activities | | $ | [removed: 123,562] [added: 136,762] | | | $ | [removed: 126,746] [added: 123,562] | | | $ | [removed: 127,194] [added: 126,746] | | | $ | [removed: 111,260] [added: 127,194] | | | $ | [removed: 111,321] [added: 111,260] | |

| Capital expenditures | | | [removed: 22,454] [added: 13,821] | | | | [removed: 6,017] [added: 22,454] | | | | [removed: 3,630] [added: 6,017] | | | | [removed: 4,644] [added: 3,630] | | | | [removed: 6,556] [added: 4,644] | |

| Cash dividends [removed: paid] [added: declared] per [removed: common share(3)] [added: share] | | | [removed: 1.18] [added: 1.23] | | | | [removed: 1.11] [added: 1.18] | | | | [removed: 1.07] [added: 1.11] | | | | [removed: 1.03] [added: 1.07] | | | | [removed: 0.75] [added: 1.03] | |

| _Employee Data as of June 30:_ | | [removed: _2013_] [added: _2014_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | | | [removed: _2010_] [added: _2011_] | | | | [removed: _2009_] [added: _2010_] | | |

| Full-time employees | | | [removed: 789] [added: 967] | | | | [removed: 783] [added: 789] | | | | [removed: 763] [added: 783] | | | | [removed: 684] [added: 763] | | | | [removed: 687] [added: 684] | |

| [removed: (1)] [added: (2)] | The Company acquired Boston Biochem, Inc. on April 1, 2011 and Tocris Holdings Limited and subsidiaries on April 28, 2011. |

| Operating income | | | 159,750 | | | | 158,469 | | | | 166,209 | | | | 163,055 | | | | 156,328 | |

| Earnings before income taxes (3) | | | 161,392 | | | | 160,662 | | | | 162,195 | | | | 164,981 | | | | 156,446 | |

| Total shareholders’ equity | | | 795,265 | | | | 737,541 | | | | 674,442 | | | | 586,122 | | | | 501,792 | |

| (1) | The Company acquired Bionostics Holdings, Ltd on July 22, 2013 and Shanghai PrimeGene Bio-Tech Co. on April 30, 2014. |

| (3) | Earnings before income taxes included acquisition related expenses related to amortization of intangibles, costs recognized on sale of acquired inventories and professional fees associated with acquisition activity, as follows: 2014 – $20.0 million; 2013 – $10.2 million; 2012 – $12.7 million; 2011 – $5.0 million; 2010 – $1.0 million. |

| | | | | | | | | | | | | | | | | | | | | |

| Gross margin(2) | | | 74.4 | % | | | 75.0 | % | | | 77.6 | % | | | 79.6 | % | | | 78.8 | % |

| Selling, general and administrative expenses(2) | | | 14.0 | % | | | 13.3 | % | | | 12.4 | % | | | 12.2 | % | | | 12.8 | % |

| Research and development expenses(2) | | | 9.4 | % | | | 8.9 | % | | | 9.0 | % | | | 9.3 | % | | | 8.9 | % |

| Operating income(2) | | | 51.0 | % | | | 52.8 | % | | | 56.2 | % | | | 58.1 | % | | | 57.1 | % |

| Earnings before income taxes(2) | | | 51.7 | % | | | 51.6 | % | | | 56.9 | % | | | 58.1 | % | | | 58.9 | % |

| Net earnings(2) | | | 36.2 | % | | | 35.7 | % | | | 38.7 | % | | | 40.8 | % | | | 39.9 | % |

| Closing price per share: | | | | | | | | | | | | | | | | | | | | |

| High | | $ | 76.02 | | | $ | 85.13 | | | $ | 83.37 | | | $ | 69.65 | | | $ | 81.90 | |

| Low | | $ | 63.42 | | | $ | 62.37 | | | $ | 56.14 | | | $ | 57.10 | | | $ | 45.64 | |

| Receivables | | | 40,175 | | | | 37,741 | | | | 37,860 | | | | 34,137 | | | | 31,153 | |

| Inventories | | | 34,877 | | | | 38,277 | | | | 44,906 | | | | 13,737 | | | | 11,269 | |

| _Financial Ratios:_ | | _2013_ | | | | _2012_ | | | | _2011_ | | | | _2010_ | | | | _2009_ | | |

| Return on average equity | | | 15.9 | % | | | 17.8 | % | | | 20.6 | % | | | 22.9 | % | | | 22.3 | % |

| Return on average assets | | | 15.0 | % | | | 16.8 | % | | | 19.8 | % | | | 22.2 | % | | | 21.5 | % |

| Current ratio | | | 12.8 | | | | 9.7 | | | | 12.7 | | | | 11.8 | | | | 16.5 | |

| Price to earnings ratio(4) | | | 23 | | | | 24 | | | | 28 | | | | 20 | | | | 23 | |

| --- | --- |

| (2) | As a percent of net sales. |

| (3) | The Company’s Board of Directors periodically considers the payment of cash dividends. |

| (4) | Common share price at end of fiscal year (June 30) divided by the diluted earnings per share for the respective fiscal year. |

| | | [removed: _2013_] [added: _2014_] | | | | [removed: _2012_] [added: _2013_] | | | | [removed: _2011_] [added: _2012_] | | |

| Net sales | | $ | [removed: 310,575] [added: 357,763] | | | $ | [removed: 314,560] [added: 310,575] | | | $ | [removed: 289,962] [added: 314,560] | |

| Cost of sales | | | [removed: 79,465] [added: 106,352] | | | | [removed: 78,756] [added: 79,465] | | | | [removed: 65,025] [added: 78,756] | |

| Gross margin | | | [removed: 231,110] [added: 251,411] | | | | [removed: 235,804] [added: 231,110] | | | | [removed: 224,937] [added: 235,804] | |

| Selling, general and administrative | | | [removed: 43,384] [added: 60,716] | | | | [removed: 41,683] [added: 43,384] | | | | [removed: 35,897] [added: 41,683] | |

| Research and development | | | [removed: 29,257] [added: 30,945] | | | | [removed: 27,912] [added: 29,257] | | | | [removed: 25,985] [added: 27,912] | |

| Total operating expenses | | | [removed: 72,641] [added: 91,661] | | | | [removed: 69,595] [added: 72,641] | | | | [removed: 61,882] [added: 69,595] | |

| Operating income | | | [removed: 158,469] [added: 159,750] | | | | [removed: 166,209] [added: 158,469] | | | | [removed: 163,055] [added: 166,209] | |

| Interest income | | | [removed: 2,646] [added: 2,684] | | | | [removed: 2,639] [added: 2,646] | | | | [removed: 3,752] [added: 2,639] | |

| Impairment losses on investments | | | 0 | | | | [removed: (3,254] [added: 0] | [removed: )] | | | [removed: 0] [added: (3,254] | [added: )] |

| Other non-operating expense, net | | | [removed: (453] [added: (1,042] | ) | | | [removed: (3,399] [added: (453] | ) | | | [removed: (1,826] [added: (3,399] | ) |

| Total other income (expense) | | | [removed: 2,193] [added: 1,642] | | | | [removed: (4,014] [added: 2,193] | [removed: )] | | | [removed: 1,926] [added: (4,014] | [added: )] |

| Earnings before income taxes | | | [removed: 160,662] [added: 161,392] | | | | [removed: 162,195] [added: 160,662] | | | | [removed: 164,981] [added: 162,195] | |

| Income taxes | | | [removed: 48,101] [added: 50,444] | | | | [removed: 49,864] [added: 48,101] | | | | [removed: 52,679] [added: 49,864] | |

| Net earnings | | | [removed: 112,561] [added: 110,948] | | | | [removed: 112,331] [added: 112,561] | | | | [removed: 112,302] [added: 112,331] | |

| Foreign currency translation adjustments | | | [removed: (3,538] [added: 15,819] | [removed: )] | | | [removed: (3,804] [added: (3,538] | ) | | | [removed: 5,028] [added: (3,804] | [added: )] |

| Unrealized (losses) gains on available-for-sale investments, net of tax of [removed: ($2,129), $23,422] [added: ($17,110), ($2,129)] and [removed: ($44),] [added: $23,422,] respectively | | | [removed: (3,684] [added: (35,760] | ) | | | [removed: 41,870] [added: (3,684] | [added: )] | | | [removed: (85] [added: 41,870] | [removed: )] |

| Other comprehensive [removed: income] (loss) [added: income] | | | [removed: (7,222] [added: (19,941] | ) | | | [removed: 38,066] [added: (7,222] | [added: )] | | | [removed: 4,943] [added: 38,066] | |

| Comprehensive income | | $ | [removed: 105,339] [added: 91,007] | | | $ | [removed: 150,397] [added: 105,339] | | | $ | [removed: 117,245] [added: 150,397] | |

| Basic | | $ | [removed: 3.06] [added: 3.01] | | | $ | [removed: 3.04] [added: 3.06] | | | $ | [removed: 3.03] [added: 3.04] | |

| Diluted | | $ | [removed: 3.05] [added: 3.00] | | | $ | [removed: 3.04] [added: 3.05] | | | $ | [removed: 3.02] [added: 3.04] | |

| Cash dividends per common share: | | $ | [removed: 1.18] [added: 1.23] | | | $ | [removed: 1.11] [added: 1.18] | | | $ | [removed: 1.07] [added: 1.11] | |

| Basic | | | [removed: 36,836] [added: 36,890] | | | | [removed: 36,939] [added: 36,836] | | | | [removed: 37,098] [added: 36,939] | |

| Diluted | | | [removed: 36,900] [added: 37,005] | | | | [removed: 37,006] [added: 36,900] | | | | [removed: 37,172] [added: 37,006] | |

| | | [added: _2014_ | | | |] _2013_ | | | | _2012_ | | |

| Cash and cash equivalents [added: at beginning of year] | | [removed: $] | 163,786 | | | [removed: $] | 116,675 | | [added: | | 77,613 | |]

| Short-term available-for-sale investments | | | [removed: 169,151] [added: 44,786] | | | | [removed: 152,311] [added: 169,151] | |

| Trade accounts receivable, less allowance for doubtful accounts of [removed: $428] [added: $487] and [removed: $455,] [added: $428,] respectively | | | [removed: 38,183] [added: 47,874] | | | | [removed: 35,668] [added: 38,183] | |

| Other receivables | | | [removed: 1,992] [added: 7,127] | | | | [removed: 2,073] [added: 1,992] | |

| Inventories | | | [removed: 34,877] [added: 38,847] | | | | [removed: 38,277] [added: 34,877] | |

| Prepaid expenses | | | [removed: 1,527] [added: 2,588] | | | | [removed: 1,503] [added: 1,527] | |

| Total current assets | | | [removed: 409,516] [added: 469,413] | | | | [removed: 346,507] [added: 409,516] | |

| Available-for-sale investments | | | [removed: 132,376] [added: 3,575] | | | | [removed: 143,966] [added: 132,376] | |

| Property and equipment, net | | | [removed: 108,756] [added: 117,120] | | | | [removed: 93,788] [added: 108,756] | |

| [removed: Goodwill] [added: Consolidated goodwill] | | [added: $] | [added: 151,473 | | | $ |] 84,336 | | | [added: $] | 85,682 | |

| [removed: Intangible] [added: Consolidated intangible] assets, net | | [added: $] | [added: 108,776 | | | $ |] 40,552 | | | [added: $] | 46,476 | |

| Investments in unconsolidated entities | | | [removed: 531] [added: 10,446] | | | | [removed: 1,056] [added: 531] | |

| Other assets | | | [removed: 2,031] [added: 1,688] | | | | [removed: 1,849] [added: 2,031] | |

| [added: Consolidated assets] | | $ | [added: 862,491 | | | $ |] 778,098 | | | $ | 719,324 | |

| Trade accounts payable | | $ | [removed: 6,236] [added: 9,652] | | | $ | [removed: 6,291] [added: 6,236] | |

| | | _2014_ | | | | _2013_ | | |

| Deferred income taxes | | | 9,623 | | | | 0 | |

| | | $ | 862,491 | | | $ | 778,098 | |

| Related party note payable, current | | | 5,949 | | | | 0 | |

| Related party note payable, long-term | | | 6,997 | | | | 0 | |

| | | $ | 862,491 | | | $ | 778,098 | |

| | | _Shares_ | | | | _Amount_ | | | | | | | | | | | | | | | | | | |

| Net earnings | | | | | | | | | | | | | | | 110,948 | | | | | | | | 110,948 | |

| Other comprehensive loss | | | | | | | | | | | | | | | | | | | (19,941 | ) | | | (19,941 | ) |

| Common stock issued for restricted stock awards | | | 26 | | | | 0 | | | | | | | | | | | | | | | | 0 | |

| Balances at June 30, 2014 | | | 37,002 | | | $ | 370 | | | $ | 147,004 | | | $ | 653,279 | | | $ | (5,388 | ) | | $ | 795,265 | |

| Investment in unconsolidated entity | | | (10,000 | ) | | | 0 | | | | 0 | |

| Other | | | 25 | | | | 352 | | | | (366 | ) |

With its deep product portfolio and application expertise, Bio-Techne is a leader in providing specialized proteins, including cytokines and growth factors, and related immunoassays, small molecules and other reagents to the research, diagnostics and clinical controls markets.

_Property and equipment:_ Property and equipment are recorded at cost.

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

In the current year, the Company has identified no such events.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

In the current year, the Company has identified no such events.

_Shanghai PrimeGene Bio-Tech Co._: On April 30, 2014, the Company acquired all of the ownership interest of Shanghai PrimeGene Bio-Tech Co. (PrimeGene).

PrimeGene manufactures recombinant proteins and is included in the Company’s Biotechnology segment.

The Company paid approximately $6.0 million at closing, with the remaining purchase price payable over fiscal years 2015 to 2017.

The note payable is due to individuals who are currently employed by PrimeGene.

The goodwill recorded as a result of the PrimeGene acquisition represents the strategic benefits of growing the Company’s product portfolio and the expected revenue growth from increased market penetration from future products and customers.

The aggregate purchase price of the acquisitions was allocated to the assets acquired and liabilities assumed based on their preliminarily estimated fair values at the date of acquisition.

The preliminary estimate of the excess of purchase price over the fair value of net tangible assets acquired was allocated to identifiable intangible assets and goodwill.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as a result of the acquisitions (in thousands):

| | | _Bionostics_ | | | | _PrimeGene_ | | |

| Current assets | | $ | 9,605 | | | $ | 1,272 | |

| Intangible Assets | | | 60,500 | | | | 14,622 | |

| Goodwill | | | 56,349 | | | | 5,518 | |

| Equipment | | | 2,180 | | | | 546 | |

| Total assets acquired | | | 128,634 | | | | 21,958 | |

| Liabilities | | | 3,007 | | | | 887 | |

| Deferred income taxes | | | 22,478 | | | | 2,310 | |

| Net assets acquired | | $ | 103,149 | | | $ | 18,761 | |

| Cash paid, net of cash acquired | | $ | 103,149 | | | $ | 6,031 | |

| Note payable | | | 0 | | | | 12,730 | |