orepinephrine
+ T Cells
+ TTTTTTTTT C C C C elelellslsls
CD8+ T Cells
CDCCDCDCCDCDDDDDDDDDCDCDDCCDCDDD8888888888888888888888888888888888888+++++ TTTTTTTT T TTTTTTTTTTTTTTTTTTTT C CC CCCCCelelellleeee lslslss
Dendritic Cell
DDeDeDeDDeDDeDeDDDeDeDeDeeeeDeDDeDDeDeDDDDeDDeeeeDeDeDeeDendndndndnnndnndnnndndnnndnndnnnnnndnnnndnnnnndnnnnn riririirr titititititititiitititititiitiiitiic c cccccc CeCelllll
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CCDCCDCDCDDCDDDCDCDCDDDCDCCCCCCDCCCCCCCDCCCCCC 111111111111111111111111111111111111111111111111111111 ccccccccccccccccccc+++++++++++++++++++++++ TT T
Treg Cells
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e R e a g e n ts
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o
2016
Products and Technology Expansion
Antibodies
trols and IVD C
n
o
C
l
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s Global Footprint
Arrays
1600+
Employees
Assays
To Our Shareholders
Charles Kummeth, CEO
Executing the Strategic Plan
Fiscal year 2016 was a strong year for executing our
strategic plan and our best year in three for growth,
especially organic growth. With nearly $500 million in
revenue, we are now half way to our strategic target of
$1 billion. It will take a combination of more
acquisitions as well as strong organic growth to reach
this goal, but we believe we have a vision to get there.
Our results this year have invigorated the entire
company; the team has never been more energized.
Much of our strategic plan is based on growth through
acquisition. This past year, we continued to execute on
that strategy with the acquisition of Zephyrus
Biosciences in March, Space Import-Export in July and
Advanced Cell Diagnostics (ACD) in August. Both ACD
and Zephyrus are strong additions to the portfolio.
Zephyrus just launched a new instrument platform
branded as “Milo” that performs single cell Western
Blot assays. It is based on a single cell electrophoresis
process, so it fits perfectly into the ProteinSimple line
of instruments. Our latest acquisition, which closed just
after the close of this past fical year, is ACD. The
acquisition of ACD marks Bio-Techne’s entry into the
genomics market. Second, and more importantly, its
innovative and versatile technology has the potential
to change pathology practices. RNAscope®-ISH is a
transformative technology facilitating and improving
the monitoring of gene expression patterns at the
single cell level–while retaining the morphological
context of the tissue being analyzed. ACD’s
technology serves both the research and diagnostic
markets, expanding Bio-Techne’s presence in the
clinical lab setting. These last two acquisitions take our
total to 9 in the past 3 years. All but ACD are nearly
fully integrated and we are proud of the way the
employees from all the sites have worked together to
build an exciting and innovative culture here. (cid:2)
1
To Our Shareholders
Commercial synergies are a priority.
Our strategic directions remain the same:
•
•
•
•
•
•
Expand regionally with smaller ”tuck-in” acquisitions
Expand our antibody portfolio, giving researchers
more choice
Acquire small “new to the world” instrument
technologies that can leverage our reagents and
offer researchers full solutions
Acquire new talent to help the company with its next
phase of accelerated growth
Acquire scientific talent and intellectual property to
expand our product portfolio and drive innovation in
the company
Inspire innovation in the company through
scientific collaboration and support of key opinion
leaders, expanding our intellectual property and
product portfolios
We now have a sales force that has expertise in both
instruments and consumables which together provide our
customers with world class solutions in science. Progress in
the commercial area has also been exceptional with our
acquisitions of CyVek, PrimeGene and Novus Biologicals.
Novus Biologicals has had a stellar year, with revenue
growth now running at near 10%. CyVek’s SimplePlex™
platform is now receiving market acceptance, particularly
with some key peer review papers just released. We still see
huge potential with this business. Roche is using this
technology in three clinical studies and has offered support
for the technology by hosting webinars with our staff.
PrimeGene completed a new, state-of-the-art factory in
Shanghai dedicated to the development and production of
GMP proteins. With the help of PrimeGene, our
“China for China” business has experienced strong
double digit growth.
It’s one thing to have new products and platforms, but we
also needed a strong channel to reach customers, especially
academics. We launched a new R&D Systems website last
summer and the results have been good. The high single
digit growth we have observed in our antibodies and
proteins portfolios, we believe, have resulted in part from
the 10% increase in website traffic.
Additional organic growth came from another
fantastic fiscal year in China as they achieved
20% growth. In three years, we have tripled our
China-based revenue and expanded our staff
from 12 employees to nearly 100. We see China
as a continued growth driver for the company,
with an expectation of revenue near $100
million in 3 to 5 years. We have added
new leadership in the APAC region,
and following a global subsidiary model
we now have operations and managed
distribution in virtually every
country in the Asia Pacific region.
Consequently, we have seen strong
results in Korea, India and Australia.
Japan, unfortunately, had another difficult
year, with the continuing challenges in
government funding for research.
2
Financial Performance in Fiscal 2016
The company ended the year achieving over 6% organic revenue growth! This is a significant
improvement over the 3.6% revenue growth we had last year. We have improved organic revenue
growth in each of the past three years. We expect to see continued growth in organic revenue in
fiscal year 2017 due to our initiatives in the existing business as well as revenue expansion from
the higher growth acquisitions we have made. As we look forward, we expect the currency
headwinds to subside, benefit from improved NIH spending, and continued strong growth in China.
Highlights of our fiscal year 2016 performance:
•
Adjusted earnings were $134 million, about 3% more than last year. Margins in the core
business are relatively flat as we have been re-investing in the business for accelerated
long term growth. Adjusted earnings per share were $3.60, 2% over last year. Currency
exchange impacted earnings per share negatively by ($0.15), or (4%).
• Overall, revenue increased 10% to $499 million. Organic revenue was 6% over the prior
year, with currency translation having a negative impact of (2%) and acquisitions contributing
6% to the revenue growth.
•
Adjusted operating margins for the year were 39.7%, down from 42.1% last year due to the
full year impact of acquisitions made in the prior year and negative foreign currency
exchange rate fluctuations.
• Net cash from operations was $144 million for the year. We returned $47 million to our
shareholders in the form of dividends. (cid:2)
Financial Performance
FISCAL 2016
(In thousands,
except per share data)
Net Sales
Adjusted net earnings(1)
Adjusted diluted earnings
per share(1)
Cash flow from operations
Year Ended June 30,
June 30
2016
2015
2014
2013
$
$
$
$
499,023
134,305
3.60
143,870
$
$
$
$
452,246
130,798
3.51
139,359
$
$
$
$
357,763
130,913
3.54
136,762
$
$
$
$
310,575
118,032
3.20
123,562
(1) Excludes intangible asset amortization, costs recognized upon the sale of inventory that was written-up to fair value as part of
acquisitions, professional fees related to acquisition activity and the impact of certain tax events. See Item 7. of the Company’s
Annual Report on Form 10-K, following, for further details.
June 30,
June 30
(In thousands)
2016
2015
2014
2013
Cash, cash equivalents
and available-for-sale
investments
$
95,835
$
110,921
$
366,929
$
465,313
Total assets
$
1,129,581
$
1,063,360
Long term debt obligations (1)
Stockholders’ equity
$
$
130,000
879,280
$
$
112,024
846,935
$
$
$
862,491
6,997
795,265
$
$
$
Common shares outstanding
37,194
37,153
37,002
778,098
0
737,541
36,835
3
To Our Shareholders
Global Business Units
We are organized around a subsidiary model, with our
divisions and geographic regions sharing responsibility for
financial results. We currently have three divisions:
Biotechnology division – the core and legacy of the
company that focuses on proteins, antibodies and assays;
Protein Platforms division – which includes the global
instruments businesses brought into the company through
the integration of ProteinSimple, CyVek and Zephyrus
Biosciences; and finally, Clinical Controls division – which is
composed of our hematology controls, blood and glucose
chemistries, diagnostics chemistries and BiosPacific
diagnostic products. The Biotechnology division had a great
year with 6% organic growth and $317 million in revenue.
Margins remained strong at 53% due to leverage from scale
and a strong year for productivity programs, which paid for
our investments to drive growth. Protein Platforms division
had a good year with 14% organic growth resulting in $77
million revenue. We spent the first half of the fiscal year
redesigning the marketing and commercial approach for the
business. As a result of these changes, ProteinSimple
experienced 25+% organic growth in the two final quarters
of the fiscal year. We still believe that this business will
become a $200 million dollar business built on three
important platforms: the Simple Western® Western Blot
platform; iCE Biologics instrumentation; and the SimplePlex™
multiplexing platform. All three novel product lines are
experiencing double digit growth as they are becoming
more widely accepted within their respective markets. The
Clinical Controls division had a weaker year with flat organic
growth resulting in $104 million in revenue. Margins
remained strong at 29% and the integration of the four
businesses into a cohesive division that can leverage each
other with OEM customers is working. Cliniqa, our latest
acquisition for this division, had an incredible year with
double digit growth. Cliniqa, combined with our hematology
and blood gas chemistry businesses, makes us a leader in
this market with solutions for the majority of instrument
makers. Our next expansion in this division is in core
diagnostics applications which can be leveraged with our
leading content portfolio. In fact, in recognition of the
expanded product portfolio, which includes many more
products than controls and calibrators, and considering the
growth opportunities resulting from the integration of these
businesses, going forward we will be referring to this as the
Diagnostics division.
Global Markets
For three years in a row we have had double digit growth in
the APAC region with China again leading with 20% growth.
Also, unfortunately, once again Japan had a poor year due
to low levels of research funding by the Japanese
government. With the addition of strong new leadership in
our APAC region, we have made further investments into
building our businesses in countries outside of Japan and
China. We now have great partners in Korea, Australia, India
and Singapore. Our headcount and critical mass continues
to increase in this region, and it now represents 6% of our
global sales.
4
Europe had a fantastic year with 5% organic growth, despite
the challenge of currency fluctuation in the final week of the
fourth quarter as a result of the vote by citizens in the United
Kingdom to exit the European Union. Germany continues to
see strong growth, especially in Bio-Pharma. The UK finished
the year with 6% growth and we see no changes to this
momentum in the near term. Our team has now expanded
under new European leadership, including the acquisition of
our former distributor in Italy, Space Import Export, in July.
We now have subsidiaries in the UK, Germany, Switzerland,
and Italy, with distributors in other countries in Southern and
Eastern Europe as well as the Middle East. Europe and the
Middle East now represent 22% of the company’s revenues.
Channel Strategies
The biggest contributor to growth in our channels has been
our new website. Last summer we launched a complete
overhaul of our main R&D Systems website,
complete with 30+ interactive pathways that allow
researchers to select the reagents they are looking
for to advance their science. Thousands of products
can be selected from our website. Search Engine
Optimization (SEO) is also greatly improved, as is
the speed to order. We have double digit increases
in traffic and purchases. This key difference,
combined with our partnership with Fisher Scientific,
has allowed us to return to solid growth in the
academic sector of the market. Our pharma and
Co-inhibitory Molecules
APC
T Cell
4Ig B7-H3 (Human)
2Ig B7-H3 (Mouse)
Unknown
Receptor
Unknown
Ligand
Unknown
Ligand
Unknown
Receptor
Unknown
Receptor
Unknown
Receptor
Unknown
Receptor
Unknown
Receptor
Unknown
Receptor
Unknown
Receptor
PD-L2/B7-DC
B7-1/CD80
B7-1/CD80
B7-2/CD86
BTN2A2
BTN3A1
BTN3A1
CD160
CTLA-4
BTN1A
BTNL1
B7-H5
B7-H5
B7-H4
B7-H7
HVEM
PD-L1
PD-L1
BTLA
PD-1
Unknown
Receptor
BTNL2
2B4/CD244/
SLAMF4
CD48/SLAMF2
Unknown
Receptor
TIM-4
TIM-3
Galectin-9
Nectin-2/CD112
TIGIT
CD155/PVR
Nectin-3/CD113
LAIR-1
Collagen
biotech business remain strong, largely driven by the web
experience and an increase in sales representatives. We
have added sales staff in all three regions, especially in
China where we now have over 15 sales representatives.
With the increase in staffing in Europe, including the
commercial teams that have come with our acquisitions, we
are now over 150 strong. The entire commercial team has
been working together on cross training and sales synergies
to leverage our ability to sell full solutions, including
instruments, consumables, and reagents. The wonderful
thing about our company is the strong brand presence of
both R&D Systems and ProteinSimple and other acquired
brands that speak to both quality and innovation. We have
40 years of experience in this market, and researchers know
that they can count on our antibodies, proteins, assays and
instruments to work and be well supported by our strong
technical service commitment.
Cancer Immunotherapy Strategies
Norepinephrine
CD8+ T Cells
CD88D88++ T T T CT CCelelellsellslsls
PMN-MDSCs
PMPMN-M
N-MDN-N-N DDS
PMN-MDSCsC
-MDSCsC
N--MDSC
MDSCss
MN-MDSCs
S
N-NN-
reeTreg Cells
Treg Ce
eg Cells
Treg Cells
reg Cellss
eg CellsCells
l
reg
Treg CellsC ll
eTreg Cells
eg Cells
reg Cells
Treg Cells
Treg Cel
TGF-(cid:5)
IL-10
Arginase
IL-10
NO
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NK Cell
KKKK
K C s
NK CNK CKK CNK Celells
NK Cells
NK Cells
CD11c+ TAM2
CDCD1CDD11D11c1c1c1c1c
TAM2AMAM
++++ TAM2
TAM2
TAM2
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CD 1c
CD8+ T Cells
CD8CCCDCD8DD88CD8888CD8D8888+++ TTTT Cells
TT
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T Cells
T Cells
T Cells
l
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SCs
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Mo-MDSCM
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Mo-MDSCsCs
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Mo-MDS
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Mo-MDSCs
TreTreegTreg Cells
TregTregTreg Cells
s
reg
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Dendritic Cell
DDDenDDeenendri
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CD111c1 c11c
CD11cD11111c11cD11
CD11c
Tumor Cell
Tumor Cell
r
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TuTumo
Domain Key
Ig I-like Domain
Ig V-like Domain
Ig C-like Domain
Carbohydrate
Recognition Domain
Mucin-like Domain
B30.2 Domain
ITSM
ITIM
GPI linkage
YxxM Motif
Sympathetic
SSyympathetic
mpymp
mpatheticc
Sympathetic
Sympathe
Neuron Axon
u
ron Axon
ron Axon
NeurNeuroeurNeuron Axo
NNNeuron A
IL-10
IL-12 (low)
TGF-(cid:5)
CCL2
NK CCN CN CCNNNNK Cells
NNNK CK Cells
NK Cells
CCNK CeKNK Cells
Treg Cells
Trreg C
reg CCCellsCeC ls
Monocyte
MMMonoMonocMonocMonocy
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Monocyte
MonMonMon
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M
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Dendritic Cell
Dendritic Cel
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Dendritic
dritic Cel
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dritic Cel
cc Ce
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Denddritic Cel
IL-4
IL-5
IL-10
IL-13
TThTh2TTTh2ThTTTh2 Cell
TTThThTh22 CCCeellll
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f
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Tumor Cell
TuTumor Cellell
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umor Cell
Tumor Cell
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Tumor Cell
Tumor Cell
TuTumor CelC
umor Cell
umor
Tumor
B7
CD28
CTLA-4
✗
2
Activation
PD-L1
CD8
B7
MHC Class I
Antigen
TCR Complex
PD-1
✗
1
Activation
CD28
2
CD8+ T Cell
CD8CDCD8D8+ T CellCelle
Dendritic Cell
DeDendr
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1
CD4+ T Cell
CD4CD4CD44+ T Cel
T Cell
T Cell
CD4
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1
Activation
TT eT Cell
T Cell
T CT Cel
T Cell
TumomTumor Cell
Tumor Cell
umo
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Tumor Ce
mo
Tumor Cel
Tumor Cell
TT Cell
T CT CellCell
2
1
Activation
Endogenous TCR
• Endogenous TCR complex
• Specific tumor-associated
antigens (TAAs) unknown
• Endogenous T cell
co-signaling pathways
Tumor Cell
Tumor Cell
T mor Cr C
Tumor Cell
umor Cell
Tumor Ce
umor Cel
TTTumor Cell
Dendritic Cell
Dendritic Cel
itic Ce llll
ndritic Cel
DDendritic Cel
MHC
Antigen
TCR Complex
TT Cell
TT CT CeCell
T CeT Cell
B7
CD28
1
2
Activation
1st Generation CAR
• TAA-specific antibody
single-chain variable
fragment (scFv) and the
CD3(cid:2)(cid:3)intracellular
signaling domain
• Signal 1 is induced upon
binding of the target TAA
• Endogenous signal 2
induction is required for
T cell activation
CD28
1
Activation
2
T Cell
T Cel
T Cellll
Split Stimulation
• Two CARs, each with a
unique TAA-specific antibody scFv
• One CAR contains a CD3(cid:2) intra-
cellular signaling domain and the
other has a T cell co-stimulatory
molecule intracellular signaling domain
• Both target TAAs need to be bound
for induction of signal 1 and signal
2 and subsequent T cell activation
(left)
• The assumption is that most healthy
cells will not express both TAAs being
targeted and will therefore not induce
a harmful, off-target T cell response
(right)
T Cell
T Cell
T Cellll
T Cel
1
Healthy Cell
HeHeaHealthy Cel
ealtealthlthy
ealthy Ce
ealthy Cell
2
✗
No Activation
Tumor Cell
Tumor Cell
Tumor Celll
Dendritic Cell
DeDendrit
l
d
Dendrit C
ndrit
Dendritic Cel
Dendritic Cel
MHC
Antigen
TCR Complex
T Cell
T Cell
T Cell
2nd Generation CAR
• TAA-specific antibody scFV;
CD3(cid:2) and T cell co-stimulatory
molecule intracellular
signaling domains
• Both signal 1 and signal 2
are induced upon binding
of the target TAA resulting
in one-step T cell activation
B7
CD28
1
Activation
2
CmTumor Cell
Tumo
T
umo CellC
TTumor Cell
Transgenic TCR
• TAA-specific TCR (cid:4) and (cid:5) chains
• Known tumor reactivity
• Endogenous T cell co-signaling pathways
3rd Generation CAR
• TAA-specific antibody scFv;
intracellular signaling domains
from CD3(cid:2) and two T cell
co-stimulatory molecules
• Binding of the target TAA
induces signal 1 and both
signal 2 co-stimulatory
pathways for a stronger T cell
response compared to the
response generated by a
2nd generation CAR
2
1
Activation
T Cell
T Cell
T Cell
T CeT Cell
T CCCell
TuuTumor Cell
umor Cell
elll
TT
Tumor Cel
Tumor Cel
2
1
✗
Activation
T Cell
T Cell
T Cellll
2
2
1
Activation
T CelCCeT CT CT T Cell
TT Cell
HeeHealthy Cell
Healthy Cell
lthy CellCell
Healthy C
hy Cell
Healthy Cell
2
1
T CT Cell
T Cell
No Activation
Dominant Inhibition
• Two CARS, one with a TAA-specific
antibody scFv, and one with an
antibody scFv targeting an antigen
found on healthy (non-tumor) cells
• The CAR targeting the TAA contains
the intracellular domain of both
CD3(cid:2) and a T cell co-stimulatory
molecule; the healthy antigen-specific
CAR contains the intracellular
domain from either PD-1 or CTLA-4
• Binding of the target TAA induces
signal 1 and signal 2 pathways (left);
additional binding of the healthy
antigen inhibits T cell activation (right)
• The assumption is that healthy
cells that happen to express the
TAA being targeted will be protected
Small Molecule-Gated CAR
• One half of the split CAR contains a TAA-specific
antibody scFv, the intracellular signaling domain
of a T cell co-stimulatory molecule, and a small
molecule-dependent heterodimerization component
• The other half of the split CAR contains a
transmembrane region, the complementary small
molecule-dependent heterodimerization component,
and the CD3(cid:2) intracellular signaling domain
• Binding of the target TAA will induce only signal 2
in the absence of the small molecule (right); addition
of the small molecule induces heterodimerization
and signal 1, resulting in T cell activation (left)
• This strategy would potentially allow for a more
controlled T cell response, including gradual
titration of T cell activation and control of the
timing of T cell activation
2
1
✗
T CellllllCT Cell
T Cell
No Activation
Chimeric Antigen Receptor (CAR) Domain Key
Monoclonal antibody single-chain variable fragment (scFv)
Transmembrane region
CD3(cid:2) signaling domain
Co-stimulatory signaling domain
Co-stimulatory signaling domain
Co-inhibitory signaling domain
Small molecule-dependent heterodimerization domain
Small molecule
LEARN MORE
rndsystems.com/Immunotherapy
bio-techne.com
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Global info@bio-techne.com techsupport@bio-techne.com
North America TEL 800 343 7475
Europe | Middle East | Africa TEL +44 (0)1235 529449
China info.cn@bio-techne.com TEL +86 (21) 52380373
Rest of World(cid:2)(cid:2)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:10)(cid:11)(cid:8)(cid:12)(cid:9)(cid:5)(cid:13)(cid:14)(cid:15)(cid:11)(cid:16)(cid:6)(cid:17)(cid:18)(cid:14)(cid:16)(cid:4)(cid:18)(cid:7)(cid:19)(cid:4)(cid:3)(cid:17)(cid:7)(cid:5)(cid:19)(cid:18)(cid:2)(cid:2)(cid:2)(cid:20)(cid:21)(cid:22)(cid:2)(cid:23)(cid:24)(cid:2)(cid:25)(cid:24)(cid:26)(cid:2)(cid:27)(cid:28)(cid:29)(cid:2)(cid:26)(cid:29)(cid:30)(cid:25)
New Product Development
Innovation is the lifeblood of a science company and we
strive to deliver to our goals of 10% vitality and hundreds of
patents. Last year I wrote about our increased new product
vitality, with first year sales nearing $6 million. This year we
exceeded this number dramatically, topping $12 million in
sales of new products sold in their first year, representing a
500% improvement from three years ago. This is just for
reagents; it does not include our introduction of new
instruments and related products. We have had similar
success in driving scientific innovation, represented in part
by a significant increase in our patent portfolio. We now have
over 140 patents and patent applications, increasing from
about 20 three years ago. We have focused on creating an
environment in the company that nurtures innovation. To
accomplish this, it is important to become a Learning
organization, and one that accepts failure for learning’s sake.
While this will take years to embed in the organization, we
are off to a great start. (cid:2)
5
To Our Shareholders
Company Direction
The leadership team has spent a great deal of time this past year reviewing and
thinking about our strategy and strategic plan. We are three years into the five
year plan we initiated in fiscal year 2014, and we have stayed very true to course.
We have made significant progress both through organic growth and 9
acquisitions—we now have 230% increase in headcount, 22 sites vs 7, 100 people
in China instead of 12, a subsidiary model with three divisions and operating in
three regions. And the growth in revenue has been strong as well, expanding
from $304 million in revenue in fiscal year 2013
to almost $500 million in fiscal year 2016. This is
all great, but we are just beginning. We want to
become a $1 billion revenue business, and we
continually debate what we need to do as a
team to get there. Toward this goal, we decided
to be EPIC. EPIC is our new vision. Our new
mission statement—“We build EPIC tools for
EPIC science”. We have mapped EPIC into all
we do here now, including our human capital
planning, learning and development.
E-Empowerment, P-Passion, I-Innovation, and
C-Collaboration, all resonate with our strategic
direction and our values. We wish to create an
enduring company culture, and we believe
building EPIC into everything we do will help us
achieve that goal.
The five pillars of our strategic plan remain the same:
•
Core Area Innovation
• Geographic Expansion
•
Commercial Execution
• Operational Excellence
•
Talent Recruitment and Retention
We have tactical plans to implement all of these strategies, and the resources and
the people to achieve them. I am very proud of our teams and the progress we
have made in achieving our goals. The company is coming to a true inflection
point in growth as we integrate the strategic acquisitions to date, as well as
improved internal operations for growth. Fiscal year 2017 will be a great year.
Charles Kummeth
President and Chief Executive Officer
6
Fiscal Year Ends: June 30
FY 2016 Revenues: $499 MM
FY 2016 Adj. Gross Margin: 70.8%
FY 2016 Adj. Op Inc.: $197.6 MM
FY 2016 Adjusted EPS: $3.60
Current Market Cap: ~$4 B
1600+
Employees
Global Footprint
e
n
a p o l is Minnesota
M in
Headquarters
e ri c a ,
orth A m
N
E urope, Jap
a
n
a
n
d
C
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i
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a
24 Global Office Locations
Forward Looking Statements
Certain statements in this letter may constitute forward-looking statements as
defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-
looking statements reflect the Company’s current views with respect to future
events and financial performance and include any statement that does not directly
relate to a current or historical fact. Forward-looking statements can generally be
identified by the words “believe,” “expect,” “anticipate” or “intend” or similar
words. There are a number of risks and uncertainties that could affect actual
results. For additional information concerning such risks and uncertainties, see
the section titled “Risk Factors” in the Company’s annual report on Form 10-K and
quarterly reports on Form 10-Q as filed with the Securities and Exchange
Commission. We undertake no obligation to update or revise any forward-looking
statements due to new information or future events. Investors are cautioned not
to place undue emphasis on these statements.
7
To Our Shareholders
Bio-Techne vs. S&P 500 Index
Bio-Techne significantly outperformed the S&P 500 index during the ten-year period from
the end of fiscal 2006 to the end of fiscal 2016. The price of Bio-Techne’s stock increased
150% during this time, providing a compound, annualized stock-price yield to shareholders
of 9.6% vs. 5.2% for the S&P 500 index.
We are proud of Bio-Techne’s long-term record but, as always, past performance should not
be interpreted as an indication of future performance.
10 Year
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Bio-Techne S&P 500 Index
8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2016
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 000-17272
BIO-TECHNE CORPORATION
(Exact name of Registrant as specified in its charter)
Minnesota
(State of Incorporation)
41-1427402
(IRS Employer Identification No.)
614 McKinley Place N.E., Minneapolis, MN
(Address of principal
executive offices)
55413-2610
(Zip Code)
Registrant’s telephone number: (612) 379-8854
Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.01 par value
Name of each exchange on which registered: The Nasdaq Stock Market
LLC(Nasdaq Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (X) No ( )
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ( ) No (X)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days: Yes (X) No ( )
Indicate by check mark whether the registrants has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ( )
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer (X) Accelerated filer ( ) Non-accelerated filer ( ) Small reporting company ( )
Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ( ) No (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, 2015 as reported on The Nasdaq Stock Market ($90.00 per share) was approximately $3.3 billion. Shares of
Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded.
Shares of $0.01 par value Common Stock outstanding at August 26, 2016: 37,296,323
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s Proxy Statement for its 2016 Annual Meeting of Shareholders are incorporated by reference into Part III.
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TABLE OF CONTENTS
PART I
Item 1. Business
Item1A.Risk Factors
Item1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item7A.Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item9A.Controls and Procedures
Item9B. Other Information
PART III
Item10. Directors, Executive Officers and Corporate Governance
Item11. Executive Compensation
Item12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item13. Certain Relationships and Related Transactions, and Director Independence
Item14. Principal Accounting Fees and Services
PART IV
Item15. Exhibits, Financial Statement Schedules
SIGNATURES
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6(cid:3)
6(cid:4)
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PART I
ITEM 1. BUSINESS
OVERVIEW
Bio-Techne and its subsidiaries, collectively doing business as Bio-Techne (Bio-Techne, we, our, us or the Company) develop,
manufacture and sell biotechnology reagents and instruments for the research and clinical diagnostic markets worldwide. With our
deep product portfolio and application expertise, Bio-Techne is a leader in providing specialized proteins, including cytokines and
growth factors, antibodies, related immunoassays, biologically active small molecules and other reagents, as well as instrumentation
designed to simplify key protein analysis processes. Additionally we also serve the clinical markets with regulated products such as
controls, calibrators, reagents and immunoassays intended for diagnostic uses.
A Minneapolis, Minnesota-based company, Bio-Techne originally was founded as Research and Diagnostic Systems, Inc. (R&D
Systems) in 1976. Techne Corporation, a public entity at the time, acquired R&D Systems in 1985 and through this action R&D
Systems became a public company. The initial products focused on the hematology blood controls and calibrators market but soon
expanded through the creation of the Biotechnology segment to include reagents used in life science research, driven by a series of
acquisitions beginning with the Amgen Inc. research business in 1991. From fiscal 2014 through fiscal 2016, we have added seven
new businesses and product portfolios and formed a third segment -- Protein Platforms. We also strengthened our Clinical Controls
segment solutions by acquiring Bionostics Holdings Limited (Bionostics) and also expanded our Biotechnology segment product
offerings through the acquisition of Shanghai-based PrimeGene Bio-Tech Co. (PrimeGene) in fiscal 2014. In fiscal 2015, we acquired
Novus Biologicals LLC (Novus Biologicals) to expand our antibody business which was made part of our Biotechnology segment.
Also in fiscal 2015, we acquired ProteinSimple and CyVek, Inc. (CyVek), both with innovative instrument platforms useful for
protein analysis, and which together form our new Protein Platforms segment. Early in fiscal 2016, we acquired Cliniqa Corporation
(Cliniqa) (July 2015), which specializes in the manufacturing and commercialization of blood chemistry quality controls and
calibrators as well as bulk reagents used for the clinical diagnostic market to further expand and complement our Clinical Controls
solutions. Zephyrus BioSciences, Inc. (Zephyrus) (March 2016) was also acquired with a product line that enables western blotting on
single cells and is now part of our Protein Platforms segment.
Subsequent to the end of fiscal 2016, we acquired our Italian distributor, Space Import-Export Srl (Space) (July 2016) and Advanced
Cell Diagnostics (ACD) (August 2016). Space is a long and trusted business partner of Bio-Techne, distributing its products since
1985 and creating a very effective and visible presence in the Italian market space. ACD develops and commercializes proprietary
consumables for genomic analysis, reinventing the widely used in-situ hybridization technique.
Recognizing the importance of a unified and global approach to meeting our mission and accomplishing our strategies, we have
unified our brands and recent acquisitions under a single global brand, Bio-Techne. In November 2014 we changed the name of the
parent corporation from Techne Corporation to Bio-Techne Corporation. The Bio-Techne name solidifies the new strategic direction
for the Company, and also unifies all of our brands under one complete portfolio.
We operate globally, with offices in multiple locations in the United States, Europe, and Asia. Today, our product line extends to over
300,000 products in state of the art facilities to accommodate many of our manufacturing needs.
We are committed to providing the life sciences community with innovative, high-quality scientific tools to better understand
biological processes and drive discovery. Our mission is to build epic tools for epic science. We intend to build on Bio-Techne’s past
accomplishments, high product quality reputation and sound financial position by executing strategies that position us to serve as 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, participation in scientific discussions
and societies, and leveraging our internal talent we expect to be able to convert 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 will continue to leverage our strong balance sheet to gain access to new technologies
and products that improve our competitiveness in the current market, meet customers’ expanding work flow needs and allow us
to enter adjacent markets.
1
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 continue to redesign our
development and operational processes to create greater efficiencies throughout the organization.
Talent recruitment and retention. We strive to 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 three reportable business segments: Biotechnology, Clinical Controls and Protein
Platforms. The Biotechnology reporting segment develops, manufactures and sells biotechnology research and diagnostic products
world-wide. The Clinical Controls reporting segment develops and manufactures controls, calibrators, immunoassays and other
reagents for the global clinical market. The Protein Platforms reporting segment develops and commercializes proprietary systems and
consumables for protein analysis. In fiscal 2016, net sales from Bio-Techne’s Biotechnology, Clinical Controls and Protein Platforms
segments represented 64%, 21%, and 15% of consolidated net sales, respectively. Financial information relating to Bio-Techne’s
segments is incorporated herein by reference to Note 12 to the Consolidated Financial Statements included in Item 8 of this Annual
Report on Form 10-K.
Biotechnology Segment
Through our Biotechnology segment, we are one of the world’s leading suppliers of specialized proteins, such as cytokines, growth
factors, immunoassays, antibodies and related reagents, to the biotechnology research community. Our combined chemical and
biological reagents portfolio provides new tools which customers can use in solving the complexity of important biological pathways
and glean knowledge which may lead to a more complete understanding of biological processes and ultimately to the development of
novel strategies to address different pathologies.
Biotechnology Segment Products
Proteins. We develop and manufacture in-house a range of cytokines, growth factors and enzymes, extracted from natural sources
or produced using recombinant DNA technology. We produce and characterize all protein products to a high degree of purity and
biological activity. The growing interest by academic and commercial researchers in cytokines is largely due to the profound
effect that tiny amounts of a cytokine can have on cells and tissues. 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 cell behavior. Enzymes are proteins which act as biological catalysts that accelerate chemical reactions. Most enzymes,
including proteases, kinases and phosphatases, are proteins that modify the structure and function of other proteins and in turn
affect cell behavior and function. Additionally, both enzymes and cytokines have the potential to serve as predictive biomarkers
and therapeutic targets for a variety of diseases and conditions including cancer, Alzheimer’s, arthritis, autoimmunity, diabetes,
hypertension, obesity, inflammation, AIDS and influenza.
Antibodies. Antibodies are specialized proteins produced by the immune system of an animal that recognize and bind to target
molecules. We produce our polyclonal antibodies in animals (primarily goats, sheep and rabbits), purifying them from the
animals’ blood. We derive monoclonal antibodies from immortalized rodent cell lines using hybridoma technology, isolating
them from cell culture medium, or we manufacture them through recombinant DNA technology. The flow cytometry product line
includes fluorochrome labeled antibodies and kits that are used to determine the immuno-phenotypic properties of cells from
different tissues.
2
Immunoassays. We market a variety of immunoassays on different testing platforms, including microtiter-plate based kits sold
under the trade name Quantikine®, multiplex immunoassays based on encoded bead technology and immunoassays based on
planar spotted surfaces and microfluidic-based multiplex immunoassays on our automated testing platform. Researchers use these
immunoassay products to quantify the level of a specific protein in biological fluids, such as serum, plasma, or urine. Protein
quantification is an integral component of basic research, as potential diagnostic tools for various diseases and as a valuable
indicator of the effects of new therapeutic compounds in the drug discovery process. Immunoassays can also be useful in clinical
diagnostics. We have received Food and Drug Administration (FDA) marketing clearance for erythropoietin (EPO), transferrin
receptor (TfR) and Beta2-microglobulin (b2M) immunoassays for use as in vitro diagnostic devices.
Small Molecule Chemically-based Products. These products include small natural or synthetic chemical compounds used by
investigators as agonists, antagonists and/or inhibitors of various biological functions. Used in concert with other Company
products, they provide additional tools to elucidate key pathways of cellular functions and can provide insight into the drug
discovery process.
Biotechnology Segment Customers and Distribution Methods
We sell our biotechnology products directly to customers who are primarily located in North America, western Europe and China. We
have 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. We also sell through third party distributors in China,
Japan, southern and eastern Europe and the rest of the world. Our sales are widely distributed, and no single end-user customer
accounted for more than 10% of Biotechnology’s net sales during fiscal 2016, 2015 or 2014.
Biotechnology Segment Competitors
A number of companies supply the worldwide market for protein-related and chemically-based research reagents, including GE
Healthcare Life Sciences, BD Biosciences, Merck KGaA/EMD Chemicals, Inc., PeproTech, Inc., Santa Cruz Biotechnology, Inc.,
Abcam plc., Thermo Fisher Scientific, Inc., Cayman Chemical Company and Enzo Biochem, Inc. Market success is primarily
dependent upon product quality, selection and reputation. We believe we are one of the leading world-wide suppliers of cytokine
related products in the research market. We further believe that the expanding line of our products, their recognized quality, and the
growing demand for protein-related and chemically-based research reagents will allow us to remain competitive in the growing
biotechnology research and diagnostic market.
Biotechnology Segment Manufacturing
We develop and manufacture the majority of our cytokines using recombinant DNA technology, thus significantly reducing our
reliance on outside resources. Tocris chemical-based products are synthesized from widely available products. We typically have
several outside sources for all critical raw materials necessary for the manufacture of our products.
The majority of our Biotechnology products are shipped within one day of receipt of the customers’ orders. Consequently, we had no
significant backlog of orders for our Biotechnology segment products as of the date of this Annual Report on Form 10-K or as of a
comparable date for fiscal 2015.
Clinical Controls Segment
Our original business in this segment was focused on controls and calibrators for hematology clinical instruments. With the
acquisition of Bionostics in fiscal 2014 and Cliniqa in fiscal 2016, we expanded this segment to include blood chemistry and blood
gases quality controls diagnostic immunoassays as well as other bulk and custom reagents for the in vitro diagnostic market. Our
BiosPacific brand product revenues are also now included in this segment as of fiscal 2016, and have been reclassified in prior years
for comparative purposes.
Clinical Controls Segment Products
Controls and Calibrators. Proper diagnosis of many illnesses requires a thorough and accurate analysis of a patient’s blood cells,
which is usually done with automated or semi-automated hematology instruments. We derive our hematology controls and calibrators
from various cellular components of blood which have been stabilized. These control and calibrator products ensure that hematology
instruments are performing accurately and reliably.
3
We believe our products have improved stability and versatility and a longer shelf life than most of those of our competitors. We also
offer clinical controls for blood glucose and blood gas devices, as well as coagulation device control products.
Bulk Reagents for Diagnostic Use. We also develop and supply bulk purified proteins, enzymes, disease-state plasmas, infectious
disease antigens and processed serums to the clinical diagnostic industry worldwide. Often we manufacture these reagents on a
custom basis to optimize their use in a customer’s diagnostic assay. We supply these reagents in various formats including liquid,
lyophilized and powder form.
Clinical Controls Segment Customers and Distribution Methods
Original Equipment Manufacturer (OEM) agreements represent the largest market for our clinical controls products. In fiscal 2016,
2015 and 2014, OEM agreements accounted for $54.2 million, $41.1 million, and $41.2 million, respectively, or 8%, 9%, and 12% of
total consolidated net sales in each fiscal year, respectively. The increase in fiscal 2016 was the result of the acquisition of Cliniqa.
We sell our clinical control products directly to customers and, in Europe and Asia, also through distributors. One OEM customer
accounted for approximately 13%, and 14% of Clinical Controls’ net sales during fiscal 2015 and 2014 respectively. This customer
did not amount to 10% or more of the Company's consolidated revenue during these years.
Clinical Controls Segment Competitors
Competition is intense in the clinical controls business. The market is composed of manufacturers of laboratory reagents, chemicals
and coagulation products and independent blood control manufacturers in addition to instrument manufacturers. The principal clinical
control competitors for our products in this segment are Abbott Diagnostics, Beckman Coulter, Inc., Bio-Rad Laboratories, Inc.,
Streck, Inc., Siemens Healthcare Diagnostics Inc. and Sysmex Corporation. We believe we are the third largest supplier of
hematology controls in the marketplace behind Beckman Coulter, Inc. and Streck, Inc. We compete based primarily on product
performance, quality, and price. SeraCare, HyTest Ltd and Thermo Fisher Scientific represent additional competitors in the clinical
diagnostic manufacturing and reagents markets.
Clinical Controls Segment Manufacturing
The primary raw material for our hematology controls products is whole blood. We purchase human blood from commercial blood
banks, and porcine and bovine blood from nearby meat processing plants. After we receive raw blood, we separate it into its cellular
components, and then process and stabilize it. Although the cost of human blood has increased due to the requirement that it be tested
for certain diseases and pathogens prior to use, the higher cost of these materials has not had a material adverse effect on our business.
Bio-Techne does not perform its own pathogen testing, as most suppliers test all human blood collected. Other controls are derived
from various bodily fluids collected which are then processed in house to isolate the product of interest or from other bulk reagent
suppliers that specialize in certain products.
The majority of the hematology controls products are shipped based on a preset, recurring schedule. For the remainder of our Clinical
Controls products, the shipments are determined by our customers’ needs, which can vary significantly from quarter to quarter and
year to year. There was no significant backlog of orders for our Clinical Control products as of the date of this Annual Report on Form
10-K or as of a comparable date for fiscal 2015.
Protein Platforms Segment
Proteins are important for understanding disease because they are the functional units that carry out specific tasks in every cell.
Altered levels of certain proteins can prevent the cell from performing its intended function, produce the energy it requires, maintain
its morphology or survive within the tissue. However, proteins analysis is complex given the varied and unique three dimensional
structure of the many proteins of interest. Our Protein Platforms segment develops, manufactures and sells tools to simplify protein
analysis while at the same time achieving more quantitative and reproducible results.
Protein Platforms Segment Products
The Simple Western Platform. The Western blot, or Western, is one of the most widely-used assays for protein analysis and
identification today. Unchanged since its invention in 1979, the Western assay is used by molecular biologists, biochemists and
clinicians to determine if a specific protein is present in a sample. The Western blot is able to report a protein’s molecular weight as
well as its identity via an antibody mediated reaction. Our Simple Western platform is a fully-automated Western blot analytical
technique that can identify and quantify a protein of interest in a sample. The Simple Western product lines simplify the workflow,
transforming the Western into a real protein analytical tool by providing truly quantitative and high quality data. Our Simple Western
4
products are more sensitive than a traditional Western and in conjunction with the lower sample volume requirements and the ability
to run multiple proteins simultaneously this technology offers many competitive advantages.
SimplePlex Platform. A common assay used in research and clinical diagnostics is the ELISA, or enzyme-linked immunosorbent
assay. The SimplePlex platform is a transformative immunoassay technology which integrates an innovatively designed microfluidic
cartridge with a state-of-the-art analyzer to deliver a bench-top immunoassay system that is more sensitive than ELISA with none of
the traditional challenges of assay design or repeatability. SimplePlex assays are fully automated, multi-analyte immunoassays that
permit the customer to run multiple samples while interrogating multiple analytes in approximately one hour while leveraging the
large biological content menu that has been developed over 30 years. We believe the SimplePlex technology, along with other
immunoassay platforms offered by Bio-Techne, represents the most comprehensive line of immunoassay products to meet customers’
complete workflow in their research and clinical protein applications.
Biologics Instrumentation.
Biologics are complex protein-based therapeutics, and are transforming the pharmaceutical industry and treatment of many diseases.
Biologic drugs are very effective targeted therapeutics for diseases such as arthritis, cancer and diabetes, and their number in
development is increasing because of a variety of advances in biochemistry, immunology and biotechnology. Biologics can be
monoclonal antibodies, recombinant proteins and vaccines. Developers of biologics are required by regulatory agencies, such as FDA,
to develop robust processes to ensure that the specific biologic of interest can be identified and characterized accurately and then
consistently and reliably produced. As a result, a suite of complementary analytical approaches are utilized to measure attributes such
as identity, biological potency, purity, safety and impurities. These analytical approaches are used throughout the product
development process, spanning initial discovery, expression, formulation, process development, quality control and final release. Our
Biologics tools help researchers interrogate protein purity and identify contaminants during the development and production of
biologics. Our iCE3 system is an analytical tool that measures the charge heterogeneity of proteins. Our micro-flow imaging, or MFI,
platform measures the size, shape, count and concentration of particles within the 1 μm to 300 μm size range that may be present in
biologic solutions. In fiscal 2016, we launched a new biologics product, Maurice, which profiles identity, purity, and hetergenity of
biopharmaceuticals in one system.
Single Cell Western Platform. With the acquisition of Zephyrus Biosciences in March 2016, we now sell an instrument and related
reagents to perform western blot assays on individual cells versus an entire cell population. We believe that the Zephyrus technology
is a tool to elucidate the properties of individual cells to better understand cell behavior that can shape the overall cell population
response in a disease or normal state.
Protein Platforms Segment Customers and Distribution Methods.
We sell our protein platforms products directly to customers who are primarily located in North America, western Europe and Japan.
We also sell through third party distributors in China, southern Europe and the rest of the world. Our sales are widely distributed, and
no single end-user customer accounted for more than 10% of Protein Platforms’ net sales during fiscal 2016, 2015 or 2014.
Protein Platforms Segment Competitors.
Our Simple Western platform is a complete replacement for the traditional Western blot. As a result, we face competition from the
vendors that supply instruments and reagents to traditional Western blot users. These competitors include Bio-Rad Laboratories, GE
Healthcare, Merck KGaA, PerkinElmer and Thermo Fisher Scientific. All of these vendors provide elements of the traditional work
flow. Similarly, our SimplePlex platform replaces the traditional ELISA assay as well as some flow-based multiplex assays;
competitors include those who supply instruments and reagents for ELISAs, including Meso Scale Discovery, PerkinElmer, Thermo
Fisher, Luminex, Millipore, Molecular Devices, Tecan BioTek, and Bio-Rad Laboratories. The primary competitors for our Biologics
instrumentation are Agilent Technologies, Danaher and PerkinElmer, as well as GE Healthcare, Shimadzu, Thermo Fisher and
Waters. We believe our competitive position is strong due to the unique aspects of our products and our product quality.
Protein Platforms Segment Manufacturing.
We manufacture our Simple Western products at our facility in San Jose, California and Minneapolis, Minnesota. Our Biologics
instruments and consumables are manufactured at our facilities in Toronto and Ottawa, both located in Ontario, Canada. We
manufacture our Simple Plex products at our facility in Wallingford, Connecticut. We manufacture our own components where we
believe it adds significant value, but we rely on suppliers for the manufacture of some of the consumables, components, subassemblies
and autosamplers used with, or included in, our systems, which are manufactured to our specifications. We are not dependent on any
one supplier and are not required to carry significant amounts of inventory to assure ourselves of a continuous allotment of goods
5
from suppliers. We conduct all final testing and inspection of our products. We have established a quality control program, including a
set of standard manufacturing and documentation procedures.
There was no significant backlog of orders for our Protein Platforms products as of the date of this Annual Report on Form 10-K or as
of a comparable date for fiscal 2015.
Geographic Information
Following is financial information relating to geographic areas (in thousands):
External sales
United States
U.K.
Other Europe
China
Other Asia
Rest of world
Total external sales
Long-lived assets
United States and Canada
Europe
China
Total long-lived assets
Year Ended June 30,
2015
2016
283,270 $
88,680
51,047
27,205
24,809
24,012
499,023 $
245,217 $
68,055
66,022
26,105
23,806
23,041
452,246 $
2014
190,359
55,144
42,013
18,878
32,704
18,665
357,763
As of June 30,
2016
2015
2014
118,207 $
14,423
1,109
133,739 $
119,075 $
11,239
1,286
131,600 $
109,790
8,340
678
118,808
$
$
$
$
Net sales are attributed to countries based on the location of the customer or distributor. Long-lived assets are comprised of land,
buildings and improvements and equipment, net of accumulated depreciation and other assets. See the description of risks associated
with the Company’s foreign subsidiaries in Item 1A of this Annual Report on Form 10-K.
PRODUCTS UNDER DEVELOPMENT
Bio-Techne is engaged in continuous ongoing research and development in all of our major product lines. We believe that our future
success depends, to a large extent, on our ability to keep pace with changing technologies and market needs.
In fiscal 2016, Bio-Techne introduced approximately 1,600 new biotechnology products to the life science market. All of these
products are for research use only and therefore did not require FDA clearance. We also expect to significantly expand our portfolio of
products through acquisitions of existing businesses. However, there is no assurance that any of the products in the research and
development phase can be successfully completed or, if completed, can be successfully introduced into the marketplace.
Research expense (in thousands):
Biotechnology
Clinical Controls
Protein Platforms
Year Ended June 30,
2015
2016
$
$
26,981 $
3,596
14,610
45,187 $
28,201 $
1,628
11,024
40,853 $
2014
29,189
1,756
0
30,945
Percent of net sales
9%
9%
9%
6
ACQUISITIONS AND INVESTMENTS
Fiscal 2017 Acquisitions
On July 1, 2016, Bio-Techne’s affiliate, Bio-Techne Ltd., acquired Space Import-Export Srl (Space) of Milan, Italy for approximately
$11 million. Space is a long and trusted partner of Bio-Techne, distributing its products since 1985 and creating an effective and
visible presence in the Italian market. The acquisition of Space provides a platform to expand our sales presence in Southern Europe.
On August 1, 2016, Bio-Techne closed on the acquisition of Advanced Cell Diagnostics (ACD) for $250 million in cash plus
contingent consideration of $75 million due upon the achievement of certain milestones. The transaction was financed through a
combination of cash on hand and a revolving line of credit facility that Bio-Techne obtained prior to the closing of the acquisition.
Fiscal 2016 Acquisitions
On March 21, 2016, Bio-Techne acquired all of the outstanding equity of Zephyrus. Zephyrus develops research tools to enable
protein analysis at the single cell level. Zephyrus’s first product, the Milo system, enables western blotting on individual cells. We
believe researchers will utilize Zephyrus products to gain new insights into the biology of cancer, stem cells, neurology, and diseases.
The acquisition expanded our Protein Platforms product lines.
On July 8, 2015, Bio-Techne acquired all of the outstanding equity of Cliniqa for approximately $83 million. Cliniqa, based in San
Marcos, California, specializes in the manufacturing and commercialization of blood chemistry quality controls and calibrators as well
as bulk reagents used in the clinical diagnostic market. Its controls and reagents are used in a wide variety of diagnostic tests for such
pathologies as cardiac disease, diabetes, cancer, immunological disorders, therapeutic drug monitoring, urine analysis and toxicology.
The acquisition further expanded and complemented our Clinical Controls product lines.
Fiscal 2015 Acquisitions
On July 31, 2014, Bio-Techne closed on the acquisition of all of the outstanding equity of ProteinSimple for approximately $300
million. The purchase price was adjusted post-closing based on the final levels of cash and working capital of ProteinSimple at
closing. ProteinSimple develops, markets and sells Western-blotting instruments, biologics and reagents. Western blotting remains
one of the most frequently practiced life science techniques, and ProteinSimple’s tools allow researchers to perform this basic research
technique with greater speed and efficiency. Automation of the Western blotting technique has the potential to drive additional sales
of the consumables Bio-Techne already sells, especially antibodies which have been validated for Western blotting applications. The
ProteinSimple products became the foundation of our Protein Platforms segment.
On July 2, 2014, Bio-Techne acquired all of the issued and outstanding equity interests of Novus Biologicals, for approximately $60.0
million. Novus Biologicals is a Littleton, Colorado-based supplier of a large portfolio of both outsourced and in-house developed
antibodies and other biologicals for life science research, delivered through an innovative digital commerce platform. The acquisition
further expanded our antibody portfolio, consistent with our long term strategic business plan to serve customers with a complete and
quality line of reagents, and became a part of our Biotechnology segment.
Fiscal 2014 Investments and Acquisitions
After investing $10.0 million in CyVek on April 1, 2014, Bio-Techne’s wholly-owned subsidiary, R & D Systems, Inc. acquired all of
CyVek’s equity on November 4, 2014 for approximately $60.0 million. Bio-Techne completed the acquisition as a result of CyVek
meeting certain pre-agreed commercial milestones. We will pay CyVek stockholders up to an additional $35.0 million based on the
revenue generated by CyVek’s products and related products before May 4, 2017. We will also pay CyVek’s stockholders 50% of the
amount, if any, by which the revenue from CyVek’s products and related products exceeds $100 million in calendar year 2020. This
strategic investment allowed us to offer the SimplePlex platform as part of our Protein Platforms segment, strengthening our market
position in the immunoassay market where multiplex testing platforms are becoming more significant.
On April 30, 2014, Bio-Techne’s China affiliate, R&D Systems China, acquired PrimeGene for approximately $18.8 million.
PrimeGene is a leader in the China market in the development and manufacture of recombinant proteins for research and industrial
applications, and has large scale protein manufacturing capabilities to serve the Chinese market as well as global industrial customers.
PrimeGene is included in Bio-Techne’s Biotechnology segment.
7
On July 22, 2013, the Company’s R&D Systems subsidiary acquired for approximately $103 million cash all of the outstanding shares
of Bionostics. Bionostics is a global leader in the development, manufacture and distribution of control solutions that verify the proper
operation of in-vitro diagnostic devices primarily utilized in point of care blood glucose and blood gas testing. Bionostics is included
in Bio-Techne’s Clinical Controls segment.
Prior Investments
Bio-Techne has an approximate 14% equity investment in ChemoCentryx, Inc. (CCXI). CCXI is a technology and drug development
company working in the area of chemokines. Chemokines are cytokines which regulate the trafficking patterns of leukocytes, the
effector cells of the human immune system. Bio-Techne’s investment in CCXI is included in “Short-term available-for-sale
investments” at June 30, 2016 and 2015 at fair values of $28.6 million and $52.3 million, respectively.
GOVERNMENT REGULATION
All manufacturers of clinical diagnostic controls and reagents are regulated under the Federal Food, Drug and Cosmetic Act, as
amended. Most of Bio-Techne’s Clinical Control segment products are classified as "in vitro diagnostic products" by the U.S. Food
and Drug Administration (FDA). The entire manufacturing process, from receipt of raw materials to the monitoring of products
through their expiration date, is strictly regulated and documented. FDA inspectors make periodic site inspections of Bio-Techne’s
Clinical Control operations and facilities. Clinical Control segment manufacturing must comply with Quality System Regulations
(QSR) as set forth in the FDA’s regulations governing medical devices.
Three of Bio-Techne’s immunoassay kits, EPO, TfR and b2M, have FDA clearance to be sold for clinical diagnostic use. Bio-Techne
must comply with QSR for the manufacture of these kits. Biotechnology products manufactured in the U.S. and sold for use in the
research market do not require FDA clearance. The products manufactured and sold through our Protein Platforms segment are all
sold for research use only and also do not require FDA clearance. Tocris products are used as research tools and require no regulatory
approval for commercialization. However, some of Tocris’ products are considered controlled substances and require government
permits to stock such products and to ship them to end-users. Bio-Techne has no reason to believe that these annual permits will not
be re-issued.
Bio-Techne is subject to the medical device excise tax which was included as part of the Affordable Care Act. The tax applies to the
sale of medical devices by a manufacturer, producer or importer of the device and is 2.3% of the sale price. The tax applies to Bio-
Techne’s in vitro diagnostic products, including its clinical control products and biotechnology clinical diagnostic immunoassay kits.
PATENTS AND TRADEMARKS
Our success depends at least in part upon our ability to protect our core technologies and intellectual property. To accomplish this, we
rely on a combination of intellectual property rights, including patents, trade secrets and trademarks, as well as customary contractual
protections. As of June 30, 2016, we had rights to 76 granted patents and approximately 70 pending patent applications, primarily
relating to our Protein Platforms products. Patent protection, if granted, generally has a life of 20 years from the date of the patent
application or patent grant. We cannot assure you whether any of our pending patent applications will result in the grant of a patent,
whether the examination process will require us to narrow our claims, and whether our claims will provide adequate coverage of our
competitors’ products or services. Bio-Techne is not substantially dependent on products for which it has obtained patent protection.
In addition to pursuing patents on our products, we also preserve much of our innovation as trade secrets. We have taken steps to
protect our intellectual property and proprietary technology by entering into confidentiality agreements and intellectual property
assignment agreements with our employees, consultants, corporate partners and, when needed, our advisors. Such agreements may not
be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of
unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure.
Monitoring unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are,
or will be, adequate.
No assurance can be given that Bio-Techne’s products do not infringe upon patents or proprietary rights owned or claimed by others,
particularly for genetically engineered products. Bio-Techne has not conducted a patent infringement study for each of its products.
Where we have been contacted by patent holders with certain intellectual property rights, Bio-Techne has entered into licensing
agreements with patent holders under which it has the exclusive and/or non-exclusive right to use patented technology as well as the
right to manufacture and sell certain patented products to the research market. In addition, certain of our Protein Platforms products
are covered by licenses from third parties to supplement our own patent portfolio.
8
Bio-Techne has obtained federal trademark registration for certain of its brand and product names. Bio-Techne believes it has
common law trademark rights to certain marks in addition to those which it has registered.
SEASONALITY OF BUSINESS
Biotechnology and Protein Platforms segment products marketed by Bio-Techne historically experience a slowing of sales or of the
rate of sales growth during the summer months. Bio-Techne also usually experiences a slowing of sales in all of its reportable
segments during the Thanksgiving to New Year holiday period. Bio-Techne believes this seasonality is a result of vacation and
academic schedules of its world-wide customer base. A majority of Clinical Controls products are manufactured in large bulk lots and
sold on a schedule set by the customer. Consequently, sales for that segment can be unpredictable, although not necessarily based on
seasonality.
EMPLOYEES
Through its subsidiaries, Bio-Techne employed approximately 1,560 full-time and part-time employees as of June 30, 2016.
INVESTOR INFORMATION
We are subject to the information requirements of the Securities Exchange Act of 1934 (the Exchange Act). Therefore, we file
periodic reports, proxy statements, and other information with the Securities and Exchange Commission (SEC). Such reports, proxy
statements, and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, N.E., Room
1580, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site
(http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file
electronically.
Financial and other information about us is available on our web site (http://www.bio-techne.com). We make available on our web site
copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act as soon as reasonably practicable after filing such
material electronically or otherwise furnishing it to the SEC.
9
EXECUTIVE OFFICERS OF THE REGISTRANT
Currently, the names, ages, positions and periods of service of each executive officer of the Company are as follows:
Name
Charles Kummeth
James T. Hippel
Brenda Furlow
J. Fernando Bazan
Kevin Gould
David Eansor
Robert Gavin
Age
56
45
58
56
52
54
48
Position
Officer Since
President, Chief Executive Officer and Director
Senior Vice President, Chief Financial Officer
Senior Vice President, General Counsel and Secretary
Chief Technology Officer
Senior Vice President, Clinical Controls
Senior Vice President, Biotechnology
Senior Vice President, Protein Platforms
2013
2014
2014
2013
2016
2014
2014
Set forth below is information regarding the business experience of each executive officer. There are no family relationships among
any of the officers named, nor is there any arrangement or understanding pursuant to which any person was selected as an officer.
Charles Kummeth has been President and Chief Executive Officer of the Company since April 1, 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.
James T. Hippel has been Chief Financial Officer of the Company since April 1, 2014. Prior to joining the Company, Mr. Hippel
served as Senior Vice President and Chief Financial Officer for Mirion Technologies, Inc., a $300 million global company that
provides radiation detection and identification products. Prior to Mirion, Mr. Hippel served as Vice President, Finance at Thermo
Fisher Scientific, Inc., leading finance operations for its Mass Spectrometry & Chromatography division and its Laboratory
Consumables division. In addition, Mr. Hippel’s experience includes nine years of progressive financial leadership at Honeywell
International, within its Aerospace Segment. Mr. Hippel started his career with KPMG LLP.
Brenda Furlow joined the Company as Senior Vice President and General Counsel on August 4, 2014. Most recently, Ms. Furlow was
an associate with Alphatech Counsel, SC and served as general counsel to emerging growth technology companies. Ms. Furlow was
General Counsel for TomoTherapy, Inc., a global, publicly traded company that manufactured and sold radiation therapy equipment
from 2007 to 2011. From 1998 to 2007, Ms. Furlow served as General Counsel for Promega Corporation, a global life sciences
company. In addition, Ms. Furlow’s experience includes five years in various positions with a credit union trade association. Ms.
Furlow began her legal career as an associate with a Chicago-based law firm.
Dr. J. Fernando Bazan was appointed Chief Technical Officer when he joined the Company on August 1, 2013. Dr. Bazan is an
adjunct professor 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).
Kevin Gould became Senior Vice President, Clinical Controls Division on January 1, 2016. Prior to that, Mr. Gould was President and
CEO of Cliniqa prior to its acquisition by Bio-Techne in July 2015. Prior to Cliniqa, Mr. Gould held senior level positions in other
diagnostic product business, including Vice President, SeraCare BBI Diagnostics business unit of SeraCare Life Sciences, Inc.; and
Vice President, Sales & Marketing for Medical Analysis Systems Inc., now part of Thermo Fisher Scientific Inc.
David Eansor has served as Senior Vice President, Biotechnology Division since April, 2015. Prior to that, Mr. Eansor was Senior
Vice President, Novus Biologicals, since the Company completed its acquisition of Novus on July 2, 2014. From January 2013 until
the date of the acquisition, Mr. Eansor was the Senior Vice President of Corporate Development of Novus Biologicals. Prior to joining
Novus, Mr. Eansor was the President of the Bioscience Division of Thermo Fisher Scientific. Mr. Eansor was promoted to Division
President in early 2010 after 5 years as President of Thermo Fisher’s Life Science Research business.
10
Robert Gavin was appointed Senior Vice President of the Protein Platforms Division in December 2014. Mr. Gavin had previously
been Vice President of Product Development at ProteinSimple, which was acquired by the Company in July, 2014. Prior to joining
ProteinSimple in 2008, Mr. Gavin served as Director of Engineering at MDS Analytical Technologies (previously Molecular Devices,
Inc.). Prior to Molecular Devices, Mr. Gavin managed a team of engineers at Affymax Research Institute.
11
ITEM 1A. RISK FACTORS
Statements in this Annual Report on Form 10-K and elsewhere that are forward-looking involve risks and uncertainties which may
affect the Company’s actual results of operations. Certain of these risks and uncertainties which have affected and, in the future, could
affect the Company’s actual results are discussed below. The Company undertakes no obligation to update or revise any forward-
looking statements made due to new information or future events. Investors are cautioned not to place undue emphasis on these
statements.
The following risk factors should be read carefully in connection with evaluation of the Company’s business and any forward-looking
statements made in this Annual Report on Form 10-K and elsewhere. Any of the following risks or others discussed in this Annual
Report on Form 10-K or the Company’s other SEC filings could materially adversely affect the Company’s business, operating results
and financial condition.
Acquisitions pose financial, management and other risks and challenges.
The Company routinely explores acquiring other businesses and assets. During fiscal 2015, the Company acquired
Novus, ProteinSimple, and CyVek, and in fiscal 2016, we acquired Cliniqa Corporation and Zephyrus BioSciences. However, we
may be unable to identify or complete promising acquisitions for many reasons, including competition among buyers, the high
valuations of businesses in our industry, the need for regulatory and other approvals, and availability of capital. When we do
identify and consummate acquisitions, we may face financial, managerial and operational challenges, including diversion of
management attention, difficulty with integrating acquired businesses, integration of different corporate cultures, increased
expenses, assumption of unknown liabilities, indemnities, potential disputes with the 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
additional acquisitions 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.
We may be required to record a significant charge to earnings if our goodwill and other amortizable intangible assets, or other
investments become impaired.
We are required under generally accepted accounting principles to test goodwill for impairment at least annually and to review
our amortizable intangible assets, including goodwill and other assets acquired through merger and acquisition activity, for
impairment when events or changes in circumstance indicate the carrying value may not be recoverable. Factors that could lead to
impairment of goodwill and amortizable intangible assets (including goodwill or assets acquired via acquisitions) include
significant adverse changes in the business climate and actual or projected operating results (affecting our company as a whole or
affecting any particular segment) and declines in the financial condition of our business. We have recorded and may be required
in the future to record additional charges to earnings if our goodwill, amortizable intangible assets or other investments become
impaired. Any such charge would adversely impact our financial results.
The Company is dependent on maintaining its intellectual property rights.
The Company’s success depends in part on its ability to protect and maintain its intellectual property, including trade secrets. If
we fail to protect our intellectual property, third parties may be able to compete more effectively against us, we may lose our
technological or competitive advantage, or we may incur substantial litigation costs in our attempts to recover or restrict use of
our intellectual property. 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 also attempts to protect and maintain intellectual property through the patent process. As of June 30, 2016, we
owned or exclusively licensed 76 granted U.S. patents and approximately 70 pending patent applications. We cannot be
confident that any of our currently pending or future patent applications will result in granted patents, and we cannot predict
how long it will take for such patents to be granted. It is possible that, if patents are granted to us, others will design around our
patented technologies. Further, other parties may challenge any patents granted to us and courts or regulatory agencies may hold
our patents to be invalid or unenforceable. We may not be successful in defending challenges made against our patents and
patent applications. Any successful third-party challenge to our patents could result in the unenforceability or invalidity of such
patents. Our ability to establish or maintain a technological or competitive advantage over our competitors may be diminished
because of these uncertainties. To the extent our intellectual property offers inadequate protection, or is found to be invalid or
12
unenforceable, we would be exposed to a greater risk of direct competition. If our intellectual property does not provide
adequate coverage of our competitors’ products, our competitive position could be adversely affected, as could our business.
Both the patent application process and the process of managing patent disputes can be time consuming and expensive.
We may be involved in disputes to determine the scope, coverage and validity of others’ proprietary rights, or to defend
against third-party claims of intellectual property infringement, any of which could be time-intensive and costly and may
adversely impact our business.
The Company’s success depends in part on its ability to operate without infringing the proprietary rights of others, and to obtain
licenses where necessary or appropriate. The Company has obtained and continues to negotiate licenses to produce a number of
products claimed to be owned by others. 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 parties.
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 Advanced Cell Diagnostics on August 1, 2016, the Company entered into a new revolving
credit facility, governed by a Credit Agreement dated July 28, 2016. The Credit Agreement provides for a revolving credit facility
of $400 million. Borrowings under the Credit Agreement bear interest at a variable rate. As of August 26, 2016, the Company had
drawn $250 million under the Credit Agreement.
The terms of the Credit Agreement and the burden of the indebtedness incurred thereunder could have negative consequences for
us, such as:
(cid:5)
(cid:5)
limiting our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements,
expansion strategy, or other needs;
increasing the Company’s vulnerability to, and reducing its flexibility in planning for, adverse changes in economic, industry
and competitive conditions; and
(cid:5)
increasing the Company’s vulnerability to increases in interest rates.
The Credit Agreement also contains negative covenants that limit our ability to engage in specified types of transactions. These
covenants limit our ability to, among other things, sell, lease or transfer any properties or assets, with certain exceptions; and
enter into certain merger, consolidation or other reorganization transactions, with certain exceptions.
A breach of any of these covenants could result in an event of default under our credit facility. Upon the occurrence of an event of
default, the lender could elect to declare all amounts outstanding under such facility to be immediately due and payable and
terminate all commitments to extend further credit. In addition, the Company would be subject to additional restrictions if an
event of default exists under the Credit Agreement, such as a prohibition on the payment of cash dividends.
We may experience difficulties implementing our enterprise resource planning system.
We are implementing a new enterprise resource planning (“ERP”) system. Our ERP system is critical to our ability to
accurately maintain books and records, record transactions, provide important information to our management and prepare our
financial statements. The implementation of the new ERP system requires the investment of significant financial and human
resources. We completed the first phase of implementation in July of 2016. During this initial implementation, which covered
most of our operations and accounting systems at our headquarters in Minneapolis, we experienced some disruption in our
shipping and invoicing activities we believe will impact revenues in the short term. As we continue expanding the use of our
13
new ERP system to additional locations, we may experience further difficulties. Any further disruptions, delays or deficiencies
in the design and implementation of the new ERP system could adversely affect our ability to process orders, ship products,
provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate
our business.
We have identified a material weakness in our internal control over financial reporting which could, if not remediated, harm
our operating results or cause us to fail to meet our reporting obligations.
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined
in Rule 13a-15(f) under the Securities Exchange Act. As disclosed in Item 9A, management identified a material weakness in our
internal control over financial reporting involving the effectiveness of the control environment and risk assessment, information,
communication, and monitoring processes resulting in a lack of effective controls over general information technology controls
(GITC) for certain applications. A material weakness is defined as 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. As a result of this material weakness, our management concluded
that our internal control over financial reporting was not effective based on criteria set forth by the Committee of Sponsoring
Organization of the Treadway Commission in Internal Control—An Integrated Framework (2013 Framework). We are actively
engaged in developing a remediation plan designed to address this material weakness. Any failure to implement effective internal
controls could harm our operating results or cause usto fail to meet our reporting obligations. Inadequate internal controls could
also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading
price of our common stock, and may require us to incur additional costs to improve our internal control system.
The Company is subject to risk associated with global operations.
The Company engages in business globally, with approximately 37% of the Company’s sales revenue in fiscal 2016 coming from
outside the U.S. This subjects the Company to a number of risks, including international economic, political, and labor
conditions; currency fluctuations; 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, prohibited 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.
The Company conducts and plans to grow its business in developing markets, which may cause additional operational and
legal risk.
The Company’s efforts to grow its businesses depend, 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. For example, a
recent incident involving a Chinese university student who died after seeking treatment for a rare form of cancer from a treatment
center identified through an internet search has led to a government investigation and a temporary halt to certain cancer
treatments until more comprehensive safety regulations can be implemented, leading to lower sales growth in certain products
offered by the Company. 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.
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
14
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.
The Company is significantly dependent on sales made through foreign subsidiaries which are subject to changes in exchange
rates and changes to the strength of foreign governments and economic conditions.
Approximately 23% of the Company’s net sales in fiscal 2016 were made through its foreign subsidiaries, which transact their
sales in foreign currencies. Any adverse movement in foreign currency exchange rates could, therefore, negatively affect the
Company’s revenues and earnings. In June of 2016, Britain voted to exit the European Union. The uncertainty over the
consequences of that decision has negatively impacted the value of the British pound and has led to some disruption in economic
activity in the UK and in the Eurozone region. The Company maintains its European headquarters and shipping facilities in the
UK. It is also unclear how and whether the British vote to depart the European Union will impact our ability to conduct business
cost effectively from our UK headquarters. 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.
The Company’s success will be dependent on recruiting and retaining highly qualified personnel.
Recruiting and retaining qualified scientific, production, sales and marketing, and management personnel are critical to the
Company’s success. The Company’s anticipated growth and its expected expansion into areas and activities requiring additional
expertise will require the addition of new personnel and the development of additional expertise by existing personnel. The
Company also operates in several geographic locations where competition for talent is strong, making employee retention
particularly challenging in those locations. The Company’s growth by acquisition also creates challenges in retaining employees.
As the Company integrates acquisitions and evolves its corporate culture to incorporate the new workforces, some employees
may not find such integration or cultural changes appealing. The failure to attract and retain such personnel could adversely affect
the Company’s business.
Changes in economic conditions could negatively impact the Company’s revenues and earnings.
The Company’s biotechnology and protein platforms products are sold primarily to research scientists at pharmaceutical and
biotechnology companies and at university and government research institutions. Research and development spending by the
Company’s customers and the availability of government research funding can fluctuate due to changes in available resources,
mergers of pharmaceutical and biotechnology companies, spending priorities, general economic conditions and institutional and
governmental budgetary policies. The Company’s clinical controls products are intended primarily for the medical diagnostics
market, which relies largely on government healthcare-related policies and funding. Changes in government reimbursement for
certain diagnostic tests or reductions in overall healthcare spending could negatively impact our customers and, correspondingly,
our sales to them. The U.S. and global economies recently experienced a period of economic downturn and have been slow to
recover. In Japan, government investment in biotechnology research remains weak. Such downturns, and other reductions or
delays in governmental funding, could cause customers to delay or forego purchases of the Company’s products. The Company
carries essentially no backlog of orders and changes in the level of orders received and filled daily can cause fluctuations in
quarterly revenues and earnings.
The industry segments in which we operate are very competitive, more so recently due to consolidation trends.
The Company faces significant competition across all of its product lines and in each market in which it operates. Competitors
include companies ranging from start-up companies, which may be able to more quickly respond to customers’ needs, to large
multinational companies, which may have greater financial, marketing, operational, and research and development resources than
the Company. In addition, consolidation trends in the pharmaceutical and biotechnology and diagnostics industries have served to
create fewer customer accounts and to concentrate purchasing decisions for some customers, resulting in increased pricing
pressure on the Company. Moreover, customers may believe that consolidated businesses are better able to compete as sole
source vendors, and therefore prefer to purchase from such businesses. The entry into the market by manufacturers in China,
India and other low-cost manufacturing locations is also creating increased pricing and competitive pressures, particularly in
developing markets. Failure to anticipate and respond to competitors’ actions may impact the Company’s future sales and
earnings.
The Company’s future growth is dependent on the development of new products in a rapidly changing technological
environment.
15
One element of the Company’s growth strategy is to increase revenues through new product releases. As a result, the Company
must anticipate industry trends and develop products in advance of customer needs. New product development requires planning,
designing and testing at both technological and manufacturing-process levels and may require significant research and
development expenditures. There can be no assurance that any products now in development, or that the Company may seek to
develop in the future, will achieve feasibility or gain market acceptance. There can also be no assurance that the Company’s
competitors will not succeed in developing technologies and products in a more timely and cost effective manner than the
Company. 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.
The Company’s business is subject to governmental laws and regulations.
The Company’s operations are subject to regulation by various US federal, state and international agencies. Laws and regulations
enacted and enforced by these agencies impact all aspects of the Company’s operations including design, development,
manufacturing, labeling, selling and the importing and exporting of products across international borders. Any changes to laws
and regulations governing such activities could have an effect on the Company’s operations and ability to obtain regulatory
clearance or approval of the Company’s products. If the Company fails to comply with any of these regulations, it may become
subject to fines, penalties or actions that could impact development, manufacturing and distribution and/or increase costs or
reduce sales. The approval process applicable to clinical control products and certain immunoassay kits that may be developed by
the Company may take a year or more. Delays in obtaining approvals could adversely affect the marketing of new products
developed by the Company, and negatively affect the Company’s revenues.
As a multinational corporation, the Company is subject to the tax laws and regulations of U.S. federal, state and local
governments and of several international jurisdictions. From time to time, new tax legislation may be implemented which could
adversely affect current or future tax filings or negatively impact the Company’s effective tax rate and thus increase future tax
payments.
The Company relies heavily on internal manufacturing and related operations to produce, package and distribute its
products.
The Company’s internal quality control, packaging and distribution operations support the majority of the Company’s sales. Since
certain Company products must comply with Food and Drug Administration Quality System Regulations and because in all
instances, 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 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 future sales growth and earnings may be adversely affected by perceived disruption risks or actual disruptions.
The design and manufacture of products involves certain inherent risks. Manufacturing or design defects could lead to recalls,
litigation or alerts relating to the Company’s products. A recall could result in significant costs and damage to the Company’s
reputation which could reduce demand, particularly for certain of its regulated products.
Disruptions in the supply and cost of raw materials could reduce the Company’s earnings, cash flow, and ability to meet
customers’ needs.
The Company’s products are made from a wide variety of raw materials that are generally available from alternate sources of
supply. However, some of the Company’s products are available only from a single supplier. If such suppliers were to limit or
terminate production or otherwise fail to supply these materials for any reason, such failures could have a material adverse impact
on the Company’s product sales and business. In addition, price increases for raw materials could adversely affect the Company’s
earnings and cash flow.
Increased exposure to product liability claims could adversely affect the Company’s earnings.
Product liability is a major risk in testing and marketing biotechnology and pharmaceutical products offered by the Company’s
customers. Currently these risks are primarily borne by the Company’s customers. As the Company’s products and services are
further integrated into customers’ production processes, the Company may become increasingly exposed to product liability and
other claims in the event that the use of its products or services is alleged to have resulted in adverse effects. There can be no
assurance that a future product liability claim or series of claims brought against the Company would not have an adverse effect
16
on the Company’s business or the results of operations. The Company’s business may be materially and adversely affected by a
successful product liability claim or claims in excess of any insurance coverage that it may have. In addition, product liability
claims, regardless of their merits, could be costly, divert management’s attention, and adversely affect the Company’s reputation
and demand for its products.
Any such product liability claims brought against the Company could be significant and any adverse determination may result in
liabilities in excess of the Company’s insurance coverage. Although the Company carries product liability insurance, it cannot be
certain that current insurance will be sufficient to cover these claims or that it can be maintained on acceptable terms, if at all.
The Company may incur losses as a result of its investments in ChemoCentryx, Inc. and other companies in which it does not
have a majority interest, the success of which is largely out of the Company’s control.
The Company’s expansion strategies include collaborations and investments in joint ventures and companies developing new
products related to the Company’s business. These strategies carry risks that objectives will not be achieved and future earnings
will be adversely affected.
The Company has an approximate 14% equity investment in ChemoCentryx, Inc. (CCXI) that is valued at $28.6 million on the
Company’s June 30, 2016 Consolidated Balance Sheet. CCXI is a biopharmaceutical company focused on discovering,
developing and commercializing orally-administered therapeutics to treat autoimmune diseases, inflammatory diseases and
cancers. The development of new drugs is a highly risky undertaking. CCXI is dependent on a limited number of products, must
achieve favorable clinical trial results, obtain regulatory and marketing approval for these products. CCXI has also incurred
significant losses and has yet to achieve profitability.
The ownership of CCXI shares is very concentrated, the share price is highly volatile and there is limited trading of the shares.
These factors make it possible that the Company could experience future dilution or lose its original $29.5 million investment in
CCXI. At August 26, 2016, the market value of the Company’s investment in CCXI was approximately $31.8 million.
Cyber security risks and the failure to maintain the confidentiality, integrity, and availability of the Company’s computer
hardware, software, and Internet applications and related tools and functions could result in damage to the Company’s
reputation and/or subject the Company to costs, fines, or lawsuits.
The integrity and protection of the Company’s own data, and that of its customers and employees, is critical to the Company’s
business. The regulatory environment governing information, security and privacy laws is increasingly demanding and continues
to evolve. Maintaining compliance with applicable security and privacy regulations may increase the Company’s operating costs
and/or adversely impact the Company’s ability to market its products and services to customers. Although the Company’s
computer and communications hardware is protected through physical and software safeguards, it is still vulnerable to fire, storm,
flood, power loss, earthquakes, telecommunications failures, physical or software break-ins, software viruses, and similar events.
These events could lead to the unauthorized access, disclosure and use of non-public information. The techniques used by
criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and
remote areas of the world. As a result, the Company may not be able to address these techniques proactively or implement
adequate preventative measures. If the Company’s computer systems are compromised, it could be subject to fines, damages,
litigation, and enforcement actions, customers could curtail or cease using its applications, and the Company could lose trade
secrets, the occurrence of which could harm its business.
We are now subject to regulations related to “conflict minerals” which may cause us to incur additional expenses and could
limit the supply and increase the cost of certain metals used in manufacturing our products.
With our acquisitions of ProteinSimple and CyVek in fiscal 2015, we now manufacture and sell products that may be covered
under the Securities and Exchange Commission’s (SEC) rule regarding “conflict minerals.” We are now required to determine
whether these products contain conflict minerals, and, if so, to perform an extensive inquiry into our supply chain in an effort to
determine whether or not such conflict minerals originate from the Democratic Republic of Congo (DRC) or an adjoining
country. Under the regulations, we are required to file a report with the SEC by May 31, 2017, to disclose and report whether or
not such conflict minerals originate from the DRC or an adjoining country. Complying with this regulation could affect sourcing
at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products,
including tantalum, tin, gold and tungsten. The number of suppliers who provide conflict-free minerals may be limited. In
addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to
determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or
sources of supply as a consequence of such verification activities. We may not be able to sufficiently verify the origins of the
relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation.
17
In addition, we may encounter challenges to satisfy those customers who require that all of the components of our products be
certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.
18
There are no unresolved staff comments as of the date of this report.
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
The Company owns the facilities that its headquarters and R&D Systems subsidiary occupy in Minneapolis, Minnesota. The
Minneapolis facilities are utilized by both the Company’s Clinical Controls and Biotechnology segments.
The Minneapolis complex includes approximately 800,000 square feet of space in several adjoining buildings. Bio-Techne uses
approximately 625,000 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 owns the 17,000 square foot facility that its R&D Europe subsidiary occupies in Abingdon, England. This facility is
utilized by the Company’s Biotechnology and Protein Platforms segments.
The Company leases the following material facilities, all of which are utilized by the Company’s Biotechnology segment with the
exception of the location used by the Company’s Bionostics and Cliniqa subsidiaries (Clinical Controls segment), and the
ProteinSimple and CyVek sites which support the Protein Platforms segment. Certain locations are not named because they were not
significant individually or in the aggregate as of the date of this report.
Subsidiary
Location
Type
Square Feet
Bio-Techne Europe Ltd.
R&D Systems China Co.,
Ltd.
Boston Biochem, Inc.
Tocris Crookson Limited
Shanghai PrimeGene Bio-
Tech Co., Ltd.
Bionostics, Inc.
Novus Biologicals, LLC
ProteinSimple
ProteinSimple Canada
CyVek Inc.
Cliniqa, Inc.
Langely, U.K.
Shanghai and Bejing, China
Warehouse
Office/warehouse
Cambridge, Massachusetts
Bristol, United Kingdom
Shanghai, China
Office/lab
Office/manufacturing/lab/warehouse
Office/manufacturing/lab
Devens, Massachusetts
Littleton, Colorado
Santa Clara, California
Ottawa and Toronto, Canada
Wallingford, Connecticut
San Marcos, California
Office/manufacturing
Office/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
14,300
5,700
7,400
40,900
13,700
48,000
22,500
167,000
10,000
17,500
37,200
The Company is currently pursuing new lease space for its Cliniqa operations. The Company believes the owned and leased
properties, other than the Cliniqa facility, are adequate to meet its occupancy needs in the foreseeable future.
19
As of August 26, 2016, 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.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
20
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Price of Common Stock
The Company’s common stock trades on the NASDAQ Global Select Market under the symbol "TECH." The following table sets
forth for the periods indicated the high and low sales price per share for the Company’s common stock as reported by the NASDAQ
Global Select Market.
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Holders of Common Stock and Dividends Paid
Fiscal 2016 Price
Fiscal 2015 Price
High
Low
High
$
114.56 $
96.81
96.83
114.62
87.49 $
83.90
79.95
91.45
97.15 $
95.89
101.60
103.56
Low
89.03
86.01
87.24
95.37
As of August 26, 2016, there were over 31,000 beneficial shareholders of the Company’s common stock and over 150 shareholders of
record. The Company paid quarterly cash dividends totaling $47.6 million, $47.1 million and $45.4 million in fiscal 2016, 2015 and
2014, respectively. The Board of Directors periodically considers the payment of cash dividends, and there is no guarantee that the
Company will pay comparable cash dividends, or any cash dividends, in the future. The Company entered into a revolving line of
credit in July 2016, 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 2016. The maximum approximate dollar value of shares that may yet
be purchased under the Company’s existing stock repurchase plan is approximately $125 million. The plan does not have an
expiration date.
21
Stock Performance Graph
The following chart compares the cumulative total shareholder return on the Company’s common stock with the S&P Midcap 400
Index and the S&P 400 Biotechnology Index. The comparison assumes $100 was invested on the last trading day before July 1, 2010
in the Company’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Bio-Techne Corpration, the S&P Midcap 400 Index, and S&P400 MidCap Biotechnology Index
$350
$300
$250
$200
$150
$100
$50
$0
6/11
6/12
6/13
6/14
6/15
6/16
Bio-Techne Corpration
S&P Midcap 400
S&P400 MidCap Biotechnology Index
*$100 invested on 6/30/11 in stock or index, including reinvestment of dividends.
Fiscal year ending June 30.
Copyright© 2016 S&P, a division of McGraw Hill Financial. All rights reserved.
22
ITEM 6. SELECTED FINANCIAL DATA
(dollars in thousands, except per share data)
Income and Share Data:
2016(1)
2015(2)
2014(3)
2013
2012
Net sales
Operating income
Earnings before income taxes (4)
Net earnings
Diluted earnings per share
$
499,023 $
150,593
147,481
104,476
2.80
452,246 $
147,023
154,162
107,735
2.89
357,763 $
159,750
161,392
110,948
3.00
310,575 $
158,469
160,662
112,561
3.05
314,560
166,209
162,195
112,331
3.04
Average common and common equivalent shares -
diluted (in thousands)
37,326
37,231
37,005
36,900
37,006
Balance Sheet Data as of June 30:
2016
2015
2014
2013
2012
Cash, cash equivalents and short-term available-for-sale
investments
Working capital
Total assets
Total shareholders’ equity
95,835 $
199,744
1,129,581
879,280
110,921 $
208,515
1,063,360
846,935
363,354 $
443,022
862,491
795,265
332,937 $
377,432
778,098
737,541
268,986
310,757
719,324
674,442
Cash Flow Data:
2016
2015
2014
2013
2012
Net cash provided by operating activities
$
Capital expenditures
Cash dividends declared per share
143,870 $
16,898
1.28
139,359 $
19,904
1.27
136,762 $
13,821
1.23
123,562 $
22,454
1.18
126,746
6,017
1.11
Employee Data as of June 30:
2016
2015
2014
2013
Employees
1,560
1,356
967
789
2012
783
(1) The Company acquired Cliniqa on July 8, 2015, and Zephyrus on March 21, 2016.
(2) The Company acquired Novus Biologicals on July 2, 2014, ProteinSimple on July 31, 2014, and CyVek, on November 3, 2014.
(3) The Company acquired Bionostics on July 22, 2013 and PrimeGene on April 30, 2014.
(4) 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: 2016 - $37.6 million; 2015 - $37.6 million;
2014 - $20.0 million; 2013 - $10.2 million; 2012 - $12.7 million.
23
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements, which are based on the Company’s current assumptions and expectations. The
principal forward-looking statements in this report include the Company’s expectations regarding product releases and strategy, future
financial results, acquisition activity, the competitive environment, currency fluctuation and exchange 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, anticipated financial results and sufficiency of capital resources to meet the
Company’s foreseeable future cash and working capital requirements.
All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995, as amended. Although the Company believes there is a reasonable basis for
the forward-looking statements, the Company’s actual results could be materially different. The most important factors which could
cause the Company’s actual results to differ from forward-looking statements are set forth in the Company’s description of risk factors
in Item 1A to this Annual Report on Form 10-K.
Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update
any forward-looking statements.
USE OF ADJUSTED FINANCIAL 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 2016 as compared to fiscal 2015 and 2014:
(cid:5)
(cid:5)
fluctuations in exchange rates used to convert transactions in foreign currencies (primarily the Euro, British pound sterling and
Chinese yuan) to U.S. dollars;
the acquisitions in fiscal 2016 of Cliniqa, Inc. (Cliniqa) on July 8, 2015 and Zephyrus BioSciences, Inc. on March 21, 2016. In
fiscal 2015 of CyVek, Inc. (CyVek) on November 4, 2014, ProteinSimple on July 31, 2014, and Novus Biologicals, LLC
(Novus) on July 1, 2014 and in fiscal 2014 of Shanghai-based PrimeGene Bio-Tech Co. (PrimeGene) on April 30, 2014 and
Bionostics Holdings, Ltd. (Bionostics) on July 22, 2013 including the impact of amortizing intangible assets and the recognition
of costs upon the sale of inventory written-up to fair value;
(cid:5)
professional fees and other costs incurred as part of the acquisitions of the acquisitions listed above and other ongoing activity;
(cid:5)
expenses related to stock based compensation; and
(cid:5)
the gain on the purchase of CyVek;
These adjusted financial measures are not prepared in accordance with generally accepted accounting principles (GAAP) and may be
different from adjusted financial measures used by other companies. Adjusted financial measures should not be considered as a
substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The Company views these
adjusted financial measures to be helpful in assessing the Company's ongoing operating results. In addition, these adjusted financial
measures facilitate our internal comparisons to historical operating results and comparisons to competitors' operating results. These
adjusted financial measures are included in this Annual Report on Form 10-K because the Company believes they are useful to
investors in allowing for greater transparency related to supplemental information used in the Company’s financial and operational
analysis. Investors are encouraged to review the reconciliations of adjusted financial measures used in this Annual Report on Form 10-
K to their most directly comparable GAAP financial measures.
24
OVERVIEW
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 three reportable segments based on the nature of products; they are Biotechnology, Clinical
Controls and Protein Platforms. The Biotechnology reporting segment develops, manufactures and sells biotechnology research and
diagnostic products world-wide. The Clinical Controls reporting segment develops and manufactures controls, calibrators, and other
reagents for the global clinical market. The Protein Platforms reporting segment includes the product lines associated with the
acquisitions of ProteinSimple in July, 2014, CyVek in November, 2014 and Zephyrus Biosceinces in March 2016, all of which expand
the Company’s solutions that it can offer its customers by developing and commercializing proprietary systems and consumables for
protein analysis.
OVERALL RESULTS
For fiscal 2016, consolidated net sales increased 10% as compared to fiscal 2015. After adjusting for the impact of the Cliniqa
acquisition in fiscal 2016, as well as foreign currency fluctuations, organic sales for the year increased 6% with currency translation
having a negative impact of 2% and acquisitions contributing 6% to the revenue growth. The organic growth was broad-based, with
the Company achieving growth in all three of its segments reporting segments. A strong bio-pharma end-market in the US and
significant government funding of life science research in China and additional market demand for Protein Platform instruments were
the biggest contributing factors impacting organic growth.
Consolidated GAAP net earnings decreased 3% for fiscal 2016 as compared to fiscal 2015. After adjusting for acquisition related
costs, stock based compensation, and certain income tax items in both years, adjusted net earnings increased 3% in fiscal 2016 as
compared to fiscal 2015. Adjusted earnings growth was driven by increased revenue partially offset by negative mix and a negative
impact from foreign currency.
For fiscal 2015, consolidated net sales increased 26% as compared to fiscal 2014. After adjusting for the impact of the Novus,
ProteinSimple and CyVek acquisitions in fiscal 2015, as well as foreign currency fluctuations, organic sales for the year increased 4%
with currency translation having a negative impact of 2% and acquisitions contributing 25% to the revenue growth. The organic
growth was broad-based, with the Company achieving growth in both the Biotechnology and Clinical Controls reporting segments. A
strong bio-pharma end-market in the US and significant government funding of life science research in China were the biggest
contributing factors impacting organic growth.
Consolidated GAAP net earnings decreased 3% for fiscal 2015 as compared to fiscal 2014. After adjusting for acquisition related
costs and certain income tax items in both years, adjusted net earnings increased 1% in fiscal 2015 as compared to fiscal 2014.
Adjusted earnings growth was driven by increased organic sales and contribution from acquisitions partially offset by a negative
impact from foreign currency translation.
25
RESULTS OF OPERATIONS
Reorganization of Segments
As previously disclosed, beginning in fiscal 2016, the Clinical Controls segment includes the financial results of the Company’s
BiosPacific business. Historically, this business was managed and reported as part of the Biotechnology segment. The recent
acquisition of Cliniqa and its commonality of customer and end markets with BiosPacific influenced this management and reporting
change. All comparisons to prior periods reflect the new reporting structure as if it existed in the prior reporting periods.
Net Sales
Consolidated organic net sales exclude the impact of net sales contributed by companies acquired during the fiscal 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.
Consolidated net sales growth was as follows:
Organic sales growth
Acquisitions sales growth
Impact of foreign currency fluctuations
Consolidated net sales growth (may not foot due to rounding)
Consolidated net sales by reportable segment were as follows (in thousands):
Year Ended June 30,
2016
2015
6%
6%
-2%
10%
4%
25%
-2%
26%
Biotechnology
Clinical Controls
Protein Platforms
Intersegment
Consolidated net sales
Year Ended June 30,
2015
2016
$
$
317,340 $
104,484
77,324
(125)
499,023 $
308,437 $
77,866
66,249
(305)
452,247 $
2014
285,142
72,621
0
0
357,763
In fiscal 2016, Biotechnology segment net sales increased 3% from the prior fiscal year. Organic growth for the segment was 6% for
the fiscal year, with currency translation having an unfavorable impact of 3% on revenue growth. Growth was achieved in all major
geographies, especially in China and from BioPharma customers in the U.S. and Europe. Japan was the only notable exception, where
demand was weak due to delayed funding from Japanese government agencies.
In fiscal 2016, Clinical Controls segment net sales increased 34%. Included in fiscal 2016 Clinical Controls segment net sales was
$26.6 million generated by the acquisition of Cliniqa in July 2015, contributing essentially all of the growth. Solid organic growth in
the hematology controls product line was offset by customer delayed projects in the glucose controls product line due to
reimbursement pricing pressures in that particular market segment.
In fiscal 2016, the Protein Platforms segment net sales increased 17% from the prior fiscal year. Organic revenue increased 14% with
an unfavorable currency impact of 2% and acquisitions adding 5% to segment growth. This segment includes the ProteinSimple
product lines associated with the acquisitions of ProteinSimple in July, 2014, CyVek in November, 2014, and Zephyrus in March
2016, all of which expand the Company’s solutions that it can offer its customers by developing and commercializing proprietary
systems and consumables for protein analysis. Organic growth was driven by additional market demand for Simple Western
instruments and consumables, a new instrument product launch in the Biologics product line (Maurice), and instrument/consumable
sales of Ella, the Elisa-multiplexing solution that was the key technology acquired as part of the CyVek acquisition in the prior fiscal
year. Revenue from acquisitions included sales from ProteinSimple and CyVek for the months that we did not own them in the prior
year. There was no revenue from the Zephyrus acquisition in fiscal 2016.
26
In fiscal 2015, Biotechnology segment net sales increased 8% from the prior fiscal year. Included in fiscal 2015 Biotechnology
segment net sales was $18.5 million generated by the acquisition of Novus Biologicals in July 2014 and the negative impact of foreign
currency fluctuations of $8.5 million. Excluding these amounts, organic net sales for the segment increased 3% in fiscal 2015, driven
by a strong bio-pharma end-market in the US and significant government funding of life science research in China. The academia and
government end-market in the U.S. continued to improve sequentially each quarter in 2015, which the Company capitalized on
through its distribution partnership with Fisher Scientific. In Europe, most countries experienced growth in 2015, but this growth was
negated by the timing of research cycles experienced by the Company’s large pharma customers located in Germany. The Pacific Rim
regions delivered modest growth, with the exception of Japan, where the devaluation of the yen versus the US dollar encouraged local
distributors to hold lower levels of inventory than in the prior year.
In fiscal 2015, Clinical Controls segment net sales increased 7%, with organic sales contributing 5% to growth and the acquisition of
Bionostics contributing 1% to growth. Growth came equally from solid demand for both the segment’s hematology-based controls
and blood glucose/gas-based controls attributable to close relationships with our OEM customers.
In fiscal 2015, the new Protein Platforms segment generated net sales of $66.2 million. At this time, the segment included product
lines associated with the acquisitions of ProteinSimple in July, 2014 and CyVek in November, 2014.
27
Gross Margins
Consolidated gross margins were 68%, 68% and 70% in fiscal 2016, 2015 and 2014, respectively. GAAP reported consolidated gross
margins were negatively impacted as a result of purchase accounting related to inventory and intangible assets acquired during fiscal
2016, 2015, 2014 and prior years. Under purchase accounting, inventory is valued at fair value less expected selling and marketing
costs, resulting in reduced margins in future periods as the inventory is sold. Excluding the impact of acquired inventory sold and
amortization of intangibles, adjusted gross margins were 71%, 72% and 74% in fiscal 2016, 2015 and 2014, respectively.
A reconciliation of the reported consolidated gross margin percentages, adjusted for acquired inventory sold and intangible
amortization included in cost of sales, is as follows:
Consolidated gross margin percentage
Identified adjustments:
Costs recognized upon sale of acquired inventory
Amortization of intangibles
Adjusted gross margin percentage
Year Ended June 30,
2015
2016
67.5%
1.1%
2.2%
70.8%
67.9%
1.5%
2.1%
71.6%
2014
70.3%
2.1%
1.1%
73.5%
Fluctuations in adjusted gross margins, as a percentage of net sales, have primarily resulted from changes in foreign currency
exchange rates and changes in product mix. In fiscal 2016, the biggest impact to gross margin, as compared to fiscal 2015, was the
change in product mix associated with the aquisition of Cliniqa. In fiscal 2015, the biggest impact to gross margin, as compared to
fiscal 2014, was the change in product mix associated with the acquisitions of Novus, ProteinSimple, and CyVek.We expect that, in
the future, gross margins will continue to be impacted by the mix of our portfolio growing at different rates as well as future
acquisitions.
Segment gross margins, as a percentage of net sales, were as follows:
Biotechnology
Clinical Controls
Protein Platforms
Consolidated
Year Ended June 30,
2015
2016
78.3%
41.4%
61.1%
67.5%
76.9%
40.4%
57.8%
67.9%
2014
78.0%
39.8%
70.3%
The Biotechnology segment gross margin percentage for fiscal 2016 improved when compared to fiscal 2015 primarily due to less
costs associated with the fair value inventory adjustment associated with acquisition accounting of prior acquisitions.
The Clinical Controls segment gross margin percentage for fiscal 2016 and 2015 was negatively impacted by purchase accounting and
intangible asset amortization related to the acquisition of Bionostics in July 2013 and Cliniqa in July 2015. Gross margin percentage
improvements in fiscal 2016 when compared to fiscal 2015 was mostly driven by operational productivity.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $21.5 million (18%) and $58.7 million (97%) in fiscal 2016 and 2015,
respectively.
The increase in fiscal 2016 was primarily the result of $5.4 million added as a result of the Cliniqa acquisition, including $3.4 million
of increased costs associated with stock based compensation. The remaining increase in selling, general and administrative expenses
in fiscal 2016 included investments made in global commercial resources, administrative infrastructure, non-cash stock based
compensation, and annual wage, salary and benefits increases.
Selling, general and administrative expenses increased $58.7 million (97%) in fiscal 2015. The increase in fiscal 2015 was mainly the
result of the acquisitions of Novus, ProteinSimple, and CyVek including $37.1 million of selling, general and administrative expenses
28
by the acquired companies and an increase of $10.5 million of intangible amortization compared to fiscal 2014. Selling, general and
administrative expenses in fiscal 2015 also included $4.5 million of acquisition related professional fees. The remaining increase in
selling, general and administrative expenses in fiscal 2015 included investments made in global commercial resources, administrative
infrastructure, non-cash stock based compensation, and annual wage, salary and benefits increases.
29
Consolidated selling, general and administrative expenses were composed of the following (in thousands):
Biotechnology
Clinical Controls
Protein Platforms
Unallocated corporate expenses
Research and Development Expenses
Year Ended June 30,
2015
2016
$
$
63,474 $
18,697
42,229
16,479
140,879 $
57,899 $
11,738
39,144
10,620
119,401 $
2014
41,403
11,225
0
8,088
60,716
Research and development expenses increased $4.3 million (11%) and $9.9 million (32%) in fiscal 2016 and 2015, respectively, as
compared to prior-year periods. Included in research and development expense in fiscal 2016 and 2015 was $1.9 million and $11.0
million of expenses by the companies acquired during fiscal 2016 and 2015, respectively. The timing of the fiscal 2015 acquisitions
also impacted comparatives. The remaining increase in expenditures for fiscal 2016 were primarily related to the development of new
products associated with our Protein Platforms segment.
Biotechnology
Clinical Controls
Protein Platforms
Net Interest Income (Expense)
Year Ended June 30,
2015
2016
$
$
26,981 $
3,596
14,610
45,187 $
28,001 $
1,828
11,023
40,852 $
2014
29,189
1,756
0
30,945
Net interest income/(expense) for fiscal 2016, 2015 and 2014 was $(1.5) million, $(0.9) million, and $2.7 million respectively. Net
interest expense in fiscal 2016 and 2015 resulted from the opening of a debt facility in July 2014 to partially fund the acquisitions of
Novus Biologicals, ProteinSimple, CyVek, and Cliniqa.
30
Other Non-operating Expense, Net
Other non-operating expense, net, consists of foreign currency transaction gains and losses, rental income, building expenses related
to rental property and the Company’s share of gains and losses from equity method investees as follows (in thousands):
Foreign currency (losses) gains
Rental income
Real estate taxes, depreciation and utilities
Net gain (loss) from equity method investees
Year Ended June 30,
2016
2015
(1,869) $
1,020
(2,263)
0
(3,112) $
372 $
1,014
(2,547)
8,300
7,139 $
2014
(128)
1,026
(1,940)
0
(1,042)
$
$
Other non-operating expenses, net, for the twelve months ended June 30, 2015 included a non-taxable gain of $8.3 million on the
Company’s previous investment in CyVek discussed above.
Income Taxes
Income taxes for fiscal 2016, 2015 and 2014 were provided at rates of 29.2%, 30.1%, and 31.3%, respectively, of consolidated
earnings before income taxes. The effective rate for June 30, 2016 decreased by 0.9% compared to the prior year. The rate decrease
was primarily driven by additional R&D credit benefit due to the retroactive reinstatement of the credit under the Protecting
Americans from Tax Hikes Act of 2015, an increase in the foreign rate benefit due to the reduction in the UK income tax rate and a
reduction in state tax related to the prior year. These decreases were partially offset by less of a foreign tax credit benefit than in the
prior year and the non recurrence of a non-taxable gain.
U.S. federal taxes have been reduced by the manufacturer’s deduction provided for under the American Jobs Creation Act of 2004 and
the U.S. federal credit for research and development. Foreign income taxes have been provided at rates which approximate the tax
rates in the countries in which the Company has operations.
Net Earnings
Adjusted consolidated net earnings are as follows (in thousands):
Net earnings
Identified adjustments:
Costs recognized upon sale of acquired inventory
Amortization of intangibles
Professional and other acquisition related costs
Stock based compensation
Gain in investment in CyVek
Tax impact of above adjustments
Tax impact of research and development credit
Tax impact of deemed dividend and state and foreign adjustments
Adjusted net earnings
Adjusted net earnings growth
LIQUIDITY AND CAPITAL RESOURCES
31
Year Ended June 30,
2015
2016
2014
$
104,476 $
107,735 $
110,948
5,431
29,395
2,761
9,430
0
(14,551)
(724)
(1,914)
134,305 $
6,952
26,169
4,519
5,957
(8,300)
(13,645)
(910)
2,321
130,798 $
3%
2%
7,479
10,267
2,247
3,523
0
(6,240)
(476)
165
127,913
$
Cash, cash equivalents and available-for-sale investments at June 30, 2016 were $95.8 million compared to $110.9 million at June 30,
2015. Included in available-for-sale investments at June 30, 2016 and June 30, 2015 was the fair value of the Company’s investment
in CCXI of $28.6 million and 52.3 million, respectively.
At June 30, 2016, approximately 27% of the Company’s cash and equivalent account balances of $64 million were located in the U.S.
with the remainder located in Canada, China, the U.K. and other European countries.
32
At June 30, 2016, approximately 91% of the Company’s available-for-sale investment accounts are located in the U.S., with the
remaining 9% in China.
The Company has either paid U.S. taxes on its undistributed foreign earnings or intends to indefinitely reinvest the undistributed
earnings in the foreign operations or expects the earnings will be remitted in a tax neutral transaction. Management of the Company
expects to be able to meet its cash and working capital requirements for operations, facility expansion, capital additions, and cash
dividends for the foreseeable future, and at least the next 12 months, through currently available funds including funds available
through our line-of-credit and cash generated from operations.
During fiscal 2016, the Company acquired Cliniqa and Zephyrus for approximately $83 million and $11.5 million, respectively. These
acquisitions were financed with a combination of cash on hand and our revolving line of credit facility. The Zephyrus acquisition
consisted of a net cash payment of $8 million and certain future contingent payments of up to $7 million, with a current fair value of
$3.5 million.
During fiscal 2015, the Company acquired Novus Biologicals, ProteinSimple, and CyVek for approximately $60 million, $300 million
and $95 million, respectively. The Novus acquisition was financed through cash on hand. The purchases of ProteinSimple and CyVek
were financed through cash on hand and our revolving line of credit facility.
Our $150 million line of credit facility was opened in July 2014. The senior unsecured revolving credit facility has a term of five years
with an adjustable interest rate equal to the greater of (i) the prime commercial rate, (ii) the per annum federal funds rate plus 0.5%, or
(iii) LIBOR + 1.00% - 1.75% depending on the existing total leverage ratio of Debt to EBITDA (as defined in the Credit Agreement
governing the revolving credit facility). The financial covenants of the revolving credit facility require the Company to maintain a
minimum Interest Coverage Ratio, defined as the ratio of EBIT to cash interest expense, of 4.0x and a maximum total leverage ratio of
3.5x. The annualized fee for any unused portion of the credit facility is 15 basis points.
In connection with the acquisition of Advanced Cell Diagnostics on August 1, 2016, the Company entered into a new revolving credit
facility, governed by a Credit Agreement dated July 28, 2016. The Credit Agreement provides for a revolving credit facility of $400
million. Borrowings under the Credit Agreement bear interest at a variable rate.
Future acquisition strategies may or may not require additional borrowings under the line of credit facility or other outside sources of
funding.
Cash Flows From Operating Activities
The Company generated cash from operations of $144 million, $139 million, and $137 million in fiscal 2016, 2015 and 2014,
respectively. The increase in cash generated from operating activities in fiscal 2016 as compared to fiscal 2015 and in fiscal 2015
compared to fiscal 2014 was mainly the result of increase in net earnings after adjustment for non-cash expenses related to
depreciation, amortization, costs recognized on sale of acquired inventory, and stock based compensation expense.
Cash Flows From Investing Activities
On March 14, 2016, the Company acquired Zephyrus for a net cash payment of $8 million and certain future contingent payments of
approximately $7 million. The cash paid at the acquisition date was financed through cash on hand.
On July 8, 2015, the Company acquired Cliniqa for a net cash payment of $83 million. The cash paid at the acquisition date was
financed through cash on hand and a revolving line-of-credit facility.
On November 3, 2014, the Company acquired CyVek for a net cash payment of $60 million on the date of acquisition and certain
future contingent payments of approximately $35 million. The cash paid at the acquisition date was financed through cash on hand
and a revolving line-of-credit facility.
On July 31, 2014, the Company acquired ProteinSimple for a net purchase price of approximately $300 million. The transaction was
financed through cash on hand and a revolving line-of-credit facility.
On July 2, 2014, the Company acquired, for a net purchase price of approximately $60 million cash, all of the issued and outstanding
equity interests of Novus Holdings LLC (Novus), including its subsidiary, Novus Biologicals, LLC. The acquisition was financed
through cash and cash equivalents on hand.
33
On July 22, 2013, the Company acquired for cash all of the outstanding shares of Bionostics for a net purchase price of approximately
$103 million. The acquisition was financed through cash and cash equivalents on hand. On April 30, 2014, the Company acquired all
of the ownership interest of PrimeGene for a net purchase price of approximately $18.8 million. The Company paid approximately
$6.0 million at closing, with the remaining purchase price payable over fiscal years 2015 to 2017. The acquisition cash payment was
financed through cash and cash equivalents on hand and sale of certain short-term available-for-sale investments.
34
The Company’s net proceeds from the purchase, sale and maturity of available-for-sale investments in fiscal 2016, 2015, and 2014
were $1 million, $13 million, and $184 million, respectively. Most of the Company’s available-for-sale investments in the U.S. (other
than its investment in CCXI) were liquidated by fiscal 2014 year-end to prepare for the July purchase of Novus Biologicals and
ProteinSimple. The Company’s investment policy is to place excess cash in municipal and corporate bonds with the objective of
obtaining the highest possible return while minimizing risk and keeping the funds accessible.
Capital additions consisted of the following (in thousands):
Laboratory, manufacturing, and computer equipment
Construction/renovation
Year Ended June 30,
2015
2016
7,604 $
9,294
16,898 $
9,213 $
10,691
19,904 $
$
2014
6,626
7,195
13,821
Construction/renovation for fiscal 2015 included $3.8 million related to the relocation and expansion of the Company’s Tocris
facilities in the U.K. Construction and renovation for fiscal 2014 included $6.5 million related to the renovation of a building on the
Company’s Minneapolis campus which was completed in fiscal 2014. Capital additions planned for fiscal 2017 are approximately $20
million and are expected to be financed through currently available cash and cash generated from operations.
Cash Flows From Financing Activities
In fiscal 2016, 2015, and 2014, the Company paid cash dividends of $47.6 million $47.1 million, and $45.4 million, respectively. The
Board of Directors periodically considers the payment of cash dividends.
The Company received $5.4 million, $9.7 million, and $8.3 million, for the exercise of options for 69,000, 241,000, and 141,000,
shares of common stock in fiscal 2016, 2015 and 2014, respectively. The Company recognized excess tax benefits from stock option
exercises of $0.6 million $0.6 million, $0.3 million, in fiscal 2016, 2015 and 2014, respectively.
During fiscal 2016, the Company drew $77 million under its revolving line-of-credit facility to partially fund its acquisitions of
Cliniqa. The Company made payments on the line-of-credit and other debt of $59 million.
During fiscal 2015, the Company drew $163 million under its revolving line-of-credit facility to partially fund its acquisitions of
ProteinSimple and CyVek. The Company made payments on the line-of-credit and other debt of $95 million.
In April 2009, the Board of Directors authorized a plan for the repurchase and retirement of $60 million of its common stock. In
October 2012, the Board of Directors increased the amount authorized under the plan by $100 million. The plan does not have an
expiration date. In fiscal 2013, the Company purchased and retired 28,000 and shares of common stock at market values of $1.8
million. There were no stock repurchases in fiscal 2016, 2015 or 2014. At June 30, 2016, approximately $125 million remained
available for purchase under the above authorizations. There were no share repurchase activity by the Company in fiscal 2016.
35
CONTRACTUAL OBLIGATIONS
The following table summarizes the Company’s contractual obligations and commercial commitments as of June 30, 2016 (in
thousands):
Operating leases
Minimum royalty payments
CyVek acquisition (1)
Zephyrus acquisition (1)
Payments Due by Period
Total
45,633 $
160
35,000
7,000
87,793 $
Less than
1 Year
6,326 $
160
0
0
6,486 $
1-2
Years
10,611 $
0
35,000
3,500
49,111 $
3-4
Years
9,576 $
0
0
3,500
13,076 $
After
5 Years
19,120
0
0
0
19,120
$
$
(1) Amounts represent the maximum potential contingent liability under the CyVek Merger Agreement and the Zephyrus merger
agreement. In addition, the Company will pay CyVek’s other stockholders up to 50% of the amount, if any, by which revenues of
CyVek’s products and related products exceeds $100 million in calendar year 2020.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is not a party to any off-balance sheet transactions, arrangements or obligations that have, or are reasonably likely to
have, a current or future material effect on the Company’s financial condition, changes in the financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s
Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP). The preparation of these financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, management evaluates its estimates. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
The Company has identified the policies outlined below as critical to its business operations and an understanding of results of
operations. The listing is not intended to be a comprehensive list of all accounting policies; investors should also refer to Note A to the
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K .
Valuation of Available-For-Sale Investments
The Company considers all of its marketable securities available-for-sale and reports them at fair market value. Fair market values are
based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.
Unrealized gains and losses on available-for-sale investments are excluded from income, but are included, net of taxes, in other
comprehensive income. If an “other-than-temporary” impairment is determined to exist, the difference between the value of the
investment recorded in the financial statements and the Company’s current estimate of fair value is recognized as a charge to earnings
in the period in which the impairment is determined. Net unrealized losses on available-for-sale investments at June 30, 2016 were
$5.5 million.
Valuation of Inventory
Inventories are stated at the lower of cost (first-in, first-out method) or market. The Company regularly reviews inventory on hand for
slow-moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration.
36
To meet strict customer quality standards, the Company has established a highly controlled manufacturing process for proteins,
antibodies and its chemically-based products. These products require the initial manufacture of multiple batches to determine if
quality standards can be consistently met. In addition, the Company will produce larger batches of established products than current
sales requirements due to economies of scale. The manufacturing process for these products, therefore, has and will continue to
produce quantities in excess of forecasted usage. The Company values its manufactured protein and antibody inventory based on a
two-year forecast and its chemically-based products on a five-year forecast. The establishment of a two-year or five-year forecast
requires considerable judgment. Inventory quantities in excess of the forecast are not valued due to uncertainty over salability. The
value of protein, antibody and chemically-based product inventory not valued at June 30, 2016 was $24 million.
37
The fair value of inventory purchased through acquisitions was determined based on quantities acquired, selling prices at the date of
acquisition and management’s assumptions regarding inventory having future value and the costs to sell such inventories. Inventory
purchased in fiscal 2016 through the acquisition of Cliniqa was increased $0.9 million
Inventory purchased in fiscal 2015 through the acquisitions of Novus Biologicals, ProteinSimple, and CyVek was increased $4.1
million, $1.4 million and $0.1 million respectively. The increase in value of the fiscal 2015 acquired inventory remaining at June 30,
2015 was $2.3 million for Novus Biologicals. Substantially all of ProteinSimple and CyVek acquired inventory was sold as of June
30, 2015.
Inventory purchased in fiscal 2014 through the acquisition of Bionostics and PrimeGene was increased $1.7 million to $5.7 million
and $0.8 million to $1.0 million, respectively. Substantially all of Bionostics and PrimeGene acquired inventory was sold as of June
30, 2015.
Valuation of Intangible Assets and Goodwill
When a business is acquired, the purchase price is allocated, as applicable, between tangible assets, identifiable intangible assets and
goodwill. Determining the portion of the purchase price allocated to intangible assets requires significant estimates. The fair value of
intangible assets acquired, including developed technologies, trade names, customer relationships and non-compete agreements, were
based on management’s forecasted cash inflows and outflows using a relief-from-royalty and multi-period excess earnings method
with consideration to other factors including an independent valuation of management’s assumptions. Intangible assets are being
amortized over their estimated useful lives, ranging from 3 to 20 years. The Company reviews the carrying amount of intangible assets
for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Intangible assets, net of accumulated amortization, were $311 million at June 30, 2016.
Goodwill recognized in connection with a business acquisition represents the excess of the aggregate purchase price over the fair
value of net assets acquired. Goodwill is tested for impairment annually or more frequently if changes in circumstance or the
occurrence of events suggest impairment exists. Assessing the impairment of goodwill requires the Company to make judgments
regarding the fair value of the net assets of its reporting units and the allocation of the carrying amount of shared assets to the
reporting units. The Company’s annual assessment included a qualitative assessment of whether it is more-likely-than-not that a
reporting unit’s fair value is less than its carrying value. A significant change in the Company’s market capitalization or in the
carrying amount of net assets of a reporting unit could result in an impairment charge in future periods. The Company completed its
annual impairment testing of goodwill and concluded that no impairment existed as of June 30, 2016, as the fair values of the
Company’s reporting units exceeded their carrying values. Goodwill at June 30, 2016 was $431 million.
Valuation of Investments
The Company has made equity investments in several start-up and early development stage companies, including CyVek in fiscal
2014. The accounting treatment of each investment (cost method or equity method) is dependent upon a number of factors, including,
but not limited to, the Company’s share in the equity of the investee and the Company’s ability to exercise significant influence over
the operating and financial policies of the investee. In determining which accounting treatment to apply, the Company must make
judgments based upon the quantitative and qualitative aspects of the investment.
The Company periodically assesses its equity investments for impairment. Development stage companies of the type the Company has
invested in are dependent on their ability to raise additional funds to continue research and development efforts and on receiving
patent protection and/or FDA clearance to market their products. If such funding were unavailable or inadequate to fund operations or
if patent protection or FDA clearance were not received, the Company would potentially recognize an impairment loss to the extent of
its remaining net investment.
38
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company operates internationally, and thus is subject to potentially adverse movements in foreign currency exchange rates.
Approximately 24% of the Company’s consolidated net sales in fiscal 2016 were made in foreign currencies, including 7% in euro,
6% in British pound sterling, 6% in Chinese yuan and the remaining 5% in other European and Asian currencies. As a result, the
Company is exposed to market risk mainly from foreign exchange rate fluctuations of the euro, British pound sterling, and the Chinese
yuan as compared to the U.S. dollar as the financial position and operating results of the Company’s foreign operations are translated
into U.S. dollars for consolidation. In fiscal 2016, for example, the average exchange rate between the British Pound and the US dollar
changed by 10% on, resulting in consolidated net sales that were lower in fiscal 2016 compared to fiscal 2015.
Month-end exchange rates between the British pound sterling, euro and Chinese yuan and the U.S. dollar, which have not been
weighted for actual sales volume in the applicable months in the periods, were as follows:
British pound sterling:
High
Low
Average
Euro:
High
Low
Average
Chinese yuan:
High
Low
Average
$
$
$
Year Ended June 30,
2015
2016
1.48 $
1.33
1.42
1.13 $
1.10
1.12
.152 $
.150
.152
1.69 $
1.48
1.57
1.34 $
1.08
1.19
.164 $
.162
.163
2014
1.71
1.52
1.64
1.39
1.32
1.36
.165
.160
.163
The Company’s exposure to foreign exchange rate fluctuations also arises from trade receivables and intercompany payables
denominated in one currency in the financial statements, but receivable or payable in another currency.
The Company does not enter into foreign currency forward contracts to reduce its exposure to foreign currency rate changes on
forecasted intercompany sales transactions or on intercompany foreign currency denominated balance sheet positions. Foreign
currency transaction gains and losses are included in “Other non-operating expense, net” in the Consolidated Statement of Earnings
and Comprehensive Income. The effect of translating net assets of foreign subsidiaries into U.S. dollars are recorded on the
Consolidated Balance Sheet as part of “Accumulated other comprehensive income (loss).”
The effects of a hypothetical simultaneous 10% appreciation in the U.S. dollar from June 30, 2016 levels against the euro, British
pound sterling and Chinese yuan are as follows (in thousands):
Decrease in translation of 2016 earnings into U.S. dollars
Decrease in translation of net assets of foreign subsidiaries
Additional transaction losses
$
2,391
12,445
2,301
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Bio-Techne Corporation and Subsidiaries
(in thousands, except per share data)
Net sales
Cost of sales
Gross margin
Operating expenses:
Selling, general and administrative
Research and development
Total operating expenses
Operating income
Other income (expense):
Interest expense
Interest income
Other non-operating income (expense), net
Total other income (expense)
Earnings before income taxes
Income taxes
Net earnings
Other comprehensive income (loss):
Foreign currency translation adjustments
Unrealized (losses) gains on available-for-sale investments, net of tax
of ($3,794), $3,895, and ($17,110) respectively
Other comprehensive (loss) income
Comprehensive income
Earnings per share:
Basic
Diluted
Cash dividends per common share:
Weighted average common shares outstanding:
Basic
Diluted
Year Ended June 30,
2016
2015
2014
$
499,023 $
162,364
336,659
452,246 $
144,969
307,277
140,879
45,187
186,066
150,593
(1,748)
249
(1,613)
(3,112)
147,481
43,005
104,476
119,401
40,853
160,254
147,023
(1,544)
634
8,049
7,139
154,162
46,427
107,735
$
$
$
$
(19,932)
(36,513)
(19,924)
(39,812)
64,664 $
11,308
(25,205)
82,530 $
2.81 $
2.80 $
1.28 $
37,194
37,326
2.90 $
2.89 $
1.27 $
37,096
37,231
357,763
106,352
251,411
60,716
30,945
91,661
159,750
0
2,684
(1,042)
1,642
161,392
50,444
110,948
15,819
(35,760)
(19,941)
91,007
3.01
3.00
1.23
36,890
37,005
See Notes to Consolidated Financial Statements.
40
CONSOLIDATED BALANCE SHEETS
Bio-Techne Corporation and Subsidiaries
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term available-for-sale investments
Accounts receivable, less allowance for doubtful accounts of $555 and $487, respectively
Deferred income taxes
Inventories
Other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Other assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
Salaries, wages and related accruals
Accrued expenses
Deferred revenue
Income taxes payable
Related party note payable, current
Total current liabilities
Deferred income taxes
Long-term debt obligations
Contingent consideration payable
Other long-term liabilities
Shareholders’ equity:
$
$
$
Undesignated capital stock, no par; authorized 5,000,000 shares; none issued or outstanding
Common stock, par value $.01 a share; authorized 100,000,000 shares; issued and outstanding
37,253,771 and 37,152,979 shares, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Total shareholders’ equity
See Notes to Consolidated Financial Statements.
$
June 30,
2016
64,237 $
31,598
93,393
0
57,102
7,561
253,891
132,362
430,882
310,524
1,922
1,129,581 $
20,653 $
14,868
8,371
4,717
1,779
3,759
54,147
62,837
91,500
38,500
3,317
2015
54,532
56,389
70,034
11,511
49,577
6,240
248,283
129,749
390,638
292,839
1,851
1,063,360
13,443
10,344
6,604
3,380
1,972
4,024
39,768
61,429
73,000
39,024
3,204
0
0
372
178,760
770,553
(70,405)
879,280
1,129,581 $
371
163,306
713,851
(30,593)
846,935
1,063,360
41
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Bio-Techne Corporation and Subsidiaries
(in thousands)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Balances at June 30, 2013
36,835
368
134,895
Net earnings
Other comprehensive loss
Surrender and retirement of stock to
exercise options
Common stock issued for exercise
of options
Common stock issued for restricted
stock awards
Cash dividends
Stock-based compensation expense
Tax benefit from exercise of stock
options
(1)
142
26
(0)
2
0
Balances at June 30, 2014
37,002
370
Net earnings
Other comprehensive loss
Surrender and retirement of stock to
exercise options
Common stock issued for exercise
of options
Common stock issued for restricted
stock awards
Cash dividends
Stock-based compensation expense
Tax benefit from exercise of stock
options
Employee stock purchase plan
expense
(0)
141
10
(0)
1
0
Balances at June 30, 2015
37,153 $
371 $
(56)
8,380
3,523
262
147,004
(31)
9,761
5,918
615
Accumulated
Other
Compre-
Retained
hensive
Earnings Income(Loss)
587,725
110,948
14,553
(19,941)
(5,388)
(25,205)
(45,394)
653,279
107,735
(57)
(47,106)
Net earnings
Other comprehensive loss
Surrender and retirement of stock to
exercise options
Common stock issued for exercise
of options
Common stock issued for restricted
stock awards
Cash dividends
Stock-based compensation expense
Tax benefit from exercise of stock
options
Common stock issued to employee
stock purchase plan
Employee stock purchase plan
expense
39
163,306 $
713,851 $
104,476
(30,593)
(39,812)
(0)
69
23
9
(0)
1
0
(31)
4,796
9,287
566
692
(167)
(47,607)
Balances at June 30, 2016
37,254 $
372 $
42
144
178,760 $
770,553 $
(70,405)
Total
737,541
110,948
(19,941)
(56)
8,382
(0)
(45,394)
3,523
262
795,265
107,735
(25,205)
(31)
9,762
(57
(47,106)
5,918
615
39
846,935
104,476
(39,812)
(31)
4,797
(167)
(47,607)
9,287
566
692
144
879,280
CONSOLIDATED STATEMENTS OF CASH FLOWS
Bio-Techne Corporation and Subsidiaries
(in thousands)
Year Ended June 30,
2016
2015
2014
$
104,476 $
107,735 $
110,948
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization
Costs recognized on sale of acquired inventory
Deferred income taxes
Stock-based compensation expense
Gain on sale of CyVek
Excess tax benefit from stock option exercises
Other
Change in operating assets and liabilities, net of acquisitions:
Trade accounts and other receivables
Inventories
Prepaid expenses
Trade accounts payable and accrued expenses
Salaries, wages and related accruals
Income taxes payable
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of available-for-sale investments
Proceeds from sale and maturities of available-for-sale investments
Additions to property and equipment
Acquisitions, net of cash acquired
Investment in unconsolidated entity
Other
Net cash used in investing activities
Cash flows from financing activities:
Cash dividends
Proceeds from stock option exercises
Excess tax benefit from stock option exercises
Borrowings under line-of-credit agreement
Payment on line-of-credit and other
Net cash used in financing activities
42,764
5,431
(2,624)
9,430
0
(566)
0
(22,981)
(6,626)
(381)
8,924
5,725
298
143,870
0
776
(16,898)
(91,423)
0
(25)
(107,570)
(47,607)
5,458
566
77,000
(58,500)
(23,083)
37,226
6,961
1,304
5,957
(8,300)
(615)
458
(11,747)
(4,714)
(620)
2,154
1,679
1,881
139,359
0
13,466
(19,905)
(420,102)
0
48
(426,493)
(47,107)
9,731
615
163,000
(94,964)
(31,276)
19,175
7,480
(2,853)
3,523
0
(262)
592
1,145
(2,895)
(554)
1,368
1,034
(1,939)
136,762
(106,746)
289,410
(13,821)
(109,180)
(10,000)
25
49,688
(45,394)
8,326
262
0
0
(36,806)
5,138
154,782
163,786
318,568
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(3,512)
9,705
54,532
64,237 $
(8,178)
(264,036)
318,568
54,532 $
$
See Notes to Consolidated Financial Statements.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Techne Corporation and Subsidiaries
Years ended June 30, 2016, 2015 and 2014
Note 1. Description of Business and Summary of Significant Accounting Policies:
Description of business: Bio-Techne Corporation and subsidiaries, collectively doing business as Bio-Techne (the Company) develop,
manufacture and sell biotechnology products and clinical diagnostic controls worldwide. 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.
Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts
of revenues and expenses during the reporting period. These estimates include the valuation of accounts receivable, available-for-sale
investments, inventory, intangible assets, stock based compensation and income taxes. Actual results could differ from these
estimates.
Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated.
Translation of foreign financial statements: Assets and liabilities of the Company’s foreign operations are translated at year-end rates
of exchange and the resulting gains and losses arising from the translation of net assets located outside the U.S. are recorded as other
comprehensive income (loss) on the consolidated statement of earnings and comprehensive income. The cumulative translation
adjustment is a component of accumulated other comprehensive income (loss) on the consolidated balance sheets. Foreign statements
of earnings are translated at the average rate of exchange for the year. Foreign currency transaction gains and losses are included in
other non-operating expense in the consolidated statements of earnings.
Revenue recognition: The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Payment terms for shipments
to end-users are generally net 30 days. Payment terms for distributor shipments may range from 30 to 90 days. Freight charges billed
to end-users are included in net sales and freight costs are included in cost of sales. Freight charges on shipments to distributors are
paid directly by the distributor. Any claims for credit or return of goods must be made within 10 days of receipt. Revenues are reduced
to reflect estimated credits and returns. Sales, use, value-added and other excise taxes are not included in revenue.
Research and development: Research and development expenditures are expensed as incurred. Development activities generally relate
to creating new products, improving or creating variations of existing products, or modifying existing products to meet new
applications.
Advertising costs: Advertising expenses (including production and communication costs) were $5.2 million $4.1 million, and $3.4
million for fiscal 2016, 2015, and 2014 respectively. The Company expenses advertising expenses as incurred.
Share-based compensation: The cost of employee services received in exchange for the award of equity instruments is based on the
fair value of the award at the date of grant. Separate groups of employees that have similar historical exercise behavior with regard to
option exercise timing and forfeiture rates are considered separately in determining option fair value. Compensation cost is recognized
using a straight-line method over the vesting period and is net of estimated forfeitures. Stock option exercises and stock awards are
satisfied through the issuance of new shares.
44
Income taxes: The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are
recognized to record the income tax effect of temporary differences between the tax basis and financial reporting basis of assets and
liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date. Tax positions taken or expected to be taken in a tax
return are recognized in the financial statements when it is more likely than not that the position would be sustained upon examination
by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of
being realized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in income
tax expense.
In November 2015, the FASB issued ASU 2015-17, "Income Taxes: Balance Sheet Classification of Deferred Taxes." ASU 2015-17
requires that deferred income tax liabilities and assets be classified as non-current in a statement of financial position. The Company
elected early adoption of this guidance during the quarter ended March 31, 2016, on a prospective basis. The adoption of this ASU
allows the Company to simplify its presentation of deferred income tax liabilities and assets. Prior periods were not retrospectively
adjusted.
Financial instruments not measured at fair value: Certain of the Company’s financial instruments are not measured at fair value but
nevertheless are recorded at carrying amounts approximating fair value, based on their short-term nature. These financial instruments
include cash and cash equivalents, accounts receivable, accounts payable and other current liabilities.
Cash and equivalents: Cash and cash equivalents include cash on hand and highly-liquid investments with original maturities of three
months or less.
Available-for-sale investments: Available-for-sale investments consist of debt instruments with original maturities of generally three
months to three years and equity securities. Available-for-sale investments are recorded based on trade-date. The Company considers
all of its marketable securities available-for-sale and reports them at fair value. The Company utilizes valuation techniques for
determining fair market value which maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability
in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the
following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the
following levels:
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at
the measurement date.
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are
not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at
measurement date.
Unrealized gains and losses on available-for-sale securities are excluded from income, but are included, net of taxes, in other
comprehensive income. If an “other-than-temporary” impairment is determined to exist, the difference between the value of the
investment security recorded in the financial statements and the Company’s current estimate of the fair value is recognized as a charge
to earnings in the period in which the impairment is determined.
Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or market. The Company regularly reviews inventory
on hand for slow-moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration.
To meet strict customer quality standards, the Company has established a highly controlled manufacturing process for proteins,
antibodies and its chemically-based products. These products require the initial manufacture of multiple batches to determine if
quality standards can be consistently met. In addition, the Company will produce larger batches of established products than current
sales requirements due to economies of scale. The manufacturing process for these products, therefore, has and will continue to
produce quantities in excess of forecasted usage. The Company values its manufactured protein and antibody inventory based on a
two-year forecast and its chemically-based products on a five-year forecast. Inventory quantities in excess of the forecast are not
valued due to uncertainty over salability.
45
Property and equipment: Property and equipment are recorded at cost. Equipment is depreciated using the straight-line method over
an estimated useful life of five years. Buildings, building improvements and leasehold improvements are amortized over estimated
useful lives of 5 to 40 years. 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.
Goodwill: At June 30, 2016 and 2015, the Company had recorded goodwill of $430.9 million and $390.6 million respectively. The
Company tests goodwill at least annually for impairment. The Company completed its annual impairment testing of goodwill and
concluded that no impairment existed as of June 30, 2016.
Intangible assets: Intangible assets are being amortized over their estimated useful lives. 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.
Investments in unconsolidated entities: The Company periodically invests in the equity of start-up and early development stage
companies. The accounting treatment of each investment (cost method or equity method) is dependent upon a number of factors,
including, but not limited to, the Company’s share in the equity of the investee and the Company’s ability to exercise significant
influence over the operating and financial policies of the investee.
Note 2. Acquisitions:
Zephyrus Biosciences, Inc.
On March 14, 2016, the Company acquired Zephyrus Biosciences, Inc. (Zephyrus) for $8 million in cash and up to $7 million in
contingent consideration. Zephyrus provides research tools to enable protein analysis at the single cell level. Addressing the
burgeoning single cell analysis market, Zephyrus's first product, Milo™, enables western blotting on individual cells for the first time.
The acquisition was funded with cash on hand. The purchase price of Zephyrus exceeded the preliminary estimated fair value of the
identifiable net assets and, accordingly, the difference was allocated to goodwill, substantially all of which is not tax deductible.
Zephryus is included in the Company's Protein Platforms segment.
In connection with the Zephyrus acquisition, the Company recorded $7.4 million of in process research and development which is not
amortized until it is converted to developed technology which occurs once a sale of its product is completed. The intangible asset
amortization for the developed technology is not deductible for income tax purposes. Of further note the purchase accounting for this
acquisition is still open and has not been finalized.
The Company will pay Zephyrus former shareholders and additional $3.5 million if and when 10 instruments are sold prior to the 3
year anniversary of the closing date (March 14, 2019). In addition, the Company will pay Zephyrus former shareholders an additional
$3.5 million if and when $3 million in cumulative sales are generated within 4.5 yrs of the closing date (September 14, 2020). We
have established an initial estimate of the fair value of these contingent consideration payments to be $3.5 million in total. The
Company is still in the process of finalizing the purchase accounting related to this acquisition.
The goodwill recorded as a result of the Zephyrus 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 goodwill is not
deductible for income tax purposes.
Cliniqa Corporation
On July 8, 2015, the Company acquired Cliniqa Corporation (Cliniqa) for approximately $83 million. Cliniqa specializes in the
manufacturing and ommercialization of blood chemistry quality controls and calibrators as well as bulk reagents used for the clinical
diagnostic market to further expand and complement our Clinical Controls solutions. The acquisition was funded with a cash on hand
and with funds obtained from our revolving credit facility. The purchase price of Cliniqa exceeded the fair value of the identifiable net
assets and, accordingly, the difference was allocated to goodwill. Cliniqa is included in the Company’s Clinical Controls segment.
In connection with the Cliniqa acquisition, the Company recorded $18 million of developed technology intangible assets that have an
estimated useful life of 14 years, $27 million of customer relationship intangible assets that have an estimated useful life of 13 years,
and $1.1 million related to trade mark and trade names with a useful life of 4 years. The intangible asset amortization is not deductible
for income tax purposes.
46
The goodwill recorded as a result of the Cliniqa 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 goodwill is not
deductible for income tax purposes.
CyVek Inc
On November 3, 2014, the Company acquired CyVek, Inc. (CyVek) through a merger. CyVek has developed a transformative
immunoassay technology which integrates an innovatively designed microfluidic cartridge with a state-of-the-art analyzer to deliver
the most advanced and efficient bench top immunoassay system. In fiscal 2014, the Company entered into an Agreement of
Investment and Merger (the Agreement) with CyVek. Pursuant to the terms of the Agreement, the Company invested $10.0 million in
CyVek and received shares of Common Stock representing approximately 19.9% of the outstanding voting stock of CyVek. Between
the time of the Company’s initial investment and November 3, 2014, CyVek met certain commercial milestones related to the sale of
its products, which obligated the Company to acquire CyVek through a merger, with CyVek surviving as a wholly-owned subsidiary
of the Company.
The Company made an initial payment of approximately $62.0 million to the other stockholders of CyVek on November 3, 2014.
Such purchase price was adjusted after closing based on the final levels of cash, indebtedness and transaction expenses of CyVek as of
the closing. The Company will also pay CyVek’s previous stockholders up to $35.0 million based on the revenue generated by
CyVek’s products before December 31, 2017. The Company will also pay CyVek’s previous stockholders 50% of the amount, if any,
by which the revenue from CyVek’s products and related products exceeds $100 million in calendar year 2020. The Company has
recorded the present value of these contingent payments as a long-term liability of $35.0 million at June 30, 2016 and 2015. In
addition, at November 3, 2014, the Company remeasured its previous investment in CyVek to acquisition-date fair value, resulting in
a gain on the investment of $8.3 million which is included in Other income on the Condensed Consolidated Statements of Earnings
and Comprehensive Income. The purchase price of CyVek exceeded the fair value of the identifiable net assets and, accordingly, the
difference was allocated to goodwill, substantially all of which is not tax deductible. CyVek is included in the Company’s Protein
Platforms segment.
In connection with the CyVek acquisition, the Company recorded $20.2 million of developed technology intangible assets that have
an estimated useful life of 15 years, $0.1 million of trade name intangible assets that have an estimated useful life of 1.5 years, and
$0.6 million related to customer relationships that have an estimated useful life of 10 years. The intangible asset amortization is not
deductible for income tax purposes.
The goodwill recorded as a result of the CyVek 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 goodwill is not
deductible for income tax purposes.
Transaction costs of $0.1 million were included in the Company’s selling, general and administrative costs during fiscal 2015 related
to the CyVek acquisition.
ProteinSimple
On July 31, 2014, the Company acquired ProteinSimple. ProteinSimple expands the Company’s solutions that it can offer its
customers by developing and commercializing proprietary systems and consumables for protein analysis. The Company opened a
line-of-credit (Note 7) to partially fund the acquisition. The purchase price of ProteinSimple exceeded the fair value of the identifiable
net assets and, accordingly, the difference was allocated to goodwill. ProteinSimple is included in the Company’s Protein Platform
segment.
In connection with the ProteinSimple acquisition, the Company recorded $39.2 million of developed technology intangible assets that
have an estimated useful lives of 9-10 years, $36.1 million of trade name intangible assets that have an estimated useful lives of 18-20
years, $101.6 million related to customer relationships that have estimated useful lives of 14-16 years, and $0.2 million related to non-
compete agreements that have an estimated useful life of 3 years. The intangible asset amortization is not deductible for income tax
purposes.
The goodwill recorded as a result of the ProteinSimple 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 goodwill is not
deductible for income tax purposes.
Transaction costs of $0.8 million were included in the Company’s selling, general and administrative costs during fiscal 2015 related
to the ProteinSimple acquisition.
47
Novus Holdings LLC
On July 2, 2014, the Company acquired all of the issued and outstanding equity interests of Novus Holdings LLC (Novus). Novus
broadens the Company’s antibody offerings by being a supplier of a large portfolio of both outsourced and in-house developed
antibodies and other reagents for life science research. Novus is included in the Company’s Biotechnology segment.
In connection with the Novus acquisition, the Company recorded $5.0 million of developed technology intangible assets that have
estimated useful lives of 4-12 years, $5.3 million of trade name intangible assets that have an estimated useful life of 20 years, and
$14.4 million related to customer relationships that have an estimated useful life of 15 years. The majority of the intangible asset
amortization is not deductible for income tax purposes.
The goodwill recorded as a result of the Novus 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 majority of the
goodwill is not deductible for income tax purposes.
Transaction costs of $0.1 million were included in the Company’s selling, general and administrative costs during fiscal 2015 related
to the Novus acquisition.
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.
In connection with the PrimeGene acquisition, the Company recorded $2.2 million of developed technology intangible assets that
have an estimated useful life of 9 years, $3.0 million of trade name intangible assets that have an estimated useful life of 11 years,
$0.3 million related to non-compete agreements that have an estimated useful life of 3 years, and $9.1 million related to customer
relationships that have an estimated useful life of 9 years. The intangible asset amortization is not deductible for income tax purposes.
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 goodwill is not
deductible for income tax purposes.
Transaction costs of $0.4 million were included in the Company’s selling, general and administrative costs during fiscal 2014, related
to the PrimeGene acquisition.
Bionostics Holdings, Ltd
On July 22, 2013, the Company acquired for cash all of the outstanding shares of Bionostics Holdings, Ltd. (Bionostics) and its U.S.
operating subsidiary, Bionostics, Inc. Bionostics is a global leader in the development, manufacture and distribution of control
solutions that verify the proper operation of in-vitro diagnostic devices primarily utilized in point of care blood glucose and blood gas
testing. Bionostics is included in the Company’s Clinical Controls segment.
In connection with the Bionostics acquisition, the Company recorded $14.4 million of developed technology intangible assets that
have an estimated useful life of 9 years, $2.7 million of trade name intangible assets that have an estimated useful life of 5 years, $2.4
million related to non-compete agreements that have an estimated useful life of 3 years, and $41.0 million related to customer
relationships that have an estimated useful life of 14 years. The intangible asset amortization is not deductible for income tax
purposes.
The goodwill recorded as a result of the Bionostics 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 goodwill is not
deductible for income tax purposes.
Transaction costs of $0.5 million and $0.6 million were included in the Company’s selling, general and administrative costs during
fiscal 2014 and 2013, respectively, related to the Bionostics acquisition.
48
The aggregate purchase price of the acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated
fair values at the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities
assumed as a result of the acquisitions (in thousands):
Current assets
Equipment
Other long-term assets
Intangible Assets:
In process research and development
Developed technology
Trade name
Customer relationships
Non-compete agreements
Goodwill
Total assets acquired
Liabilities
Deferred income taxes, net
Net assets
Less fair-value of previous investment
Net assets acquired
Zephyrus
Cliniqa
Novus
Protein
Simple
CyVek
Bionostics PrimeGene
$
86 $
32
11,926 $
1,436
58
10,739 $
1,266
40
19,660 $
1,983
554
1,206 $
971
19
9,605 $
2,180
1,272
546
7,400
-
-
-
-
6,878
14,396
54
2,812
11,530
-
11,530
-
18,000
1,100
27,000
-
42,669
102,189
1,508
17,793
82,888 $
-
82,888
82,888 $
0
-
82,888 $
-
5,010
5,300
14,400
-
28,408
65,163
2,166
2,875
-
39,200
36,100
101,600
200
134,074
333,371
11,644
21,674
-
20,200
100
600
-
91,658
114,754
-
14,400
2,700
41,000
2,400
56,349
128,634
1,965
(438)
3,007
22,478
60,122 $ 300,053 $ 113,227 $ 103,149 $
-
60,122
-
300,053
18,300
94,927
-
103,149
60,122 $ 300,053 $ 59,927 $ 103,149 $
0
-
0
-
0
35,000
0
-
60,122 $ 300,053 $ 94,927 $ 103,149 $
-
2,200
3,000
9,100
322
5.518
21,958
887
2,310
18,761
-
18,761
6,031
12,730
-
18,761
Cash paid, net of cash acquired
Note Payable
Contingent consideration payable
Net purchase price
$
8,030 $
0
3,500
$ 11,530 $
Tangible assets acquired, net of liabilities assumed, were stated at fair value at the date of acquisition based on management’s
assessment. The purchase price allocated to developed technology, trade names, non-compete agreements and customer relationships
was based on management’s forecasted cash inflows and outflows and using a relief-from-royalty and a multi-period excess earnings
method to calculate the fair value of assets purchased. The developed technology is being amortized with the expense reflected in cost
of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. Amortization expense related to trade names,
the non-compete agreement and customer relationships is reflected in selling, general and administrative expenses in the Consolidated
Statement of Earnings and Comprehensive Income. The deferred income tax liability represents the estimated future impact of
adjustments for the cost to be recognized upon the sale of acquired inventory that was written up to fair value and intangible asset
amortization, of which are not deductible for income tax purposes, and the future tax benefit of net operating loss and tax credit
carryforwards which will be deductible by the Company in future periods.
Note 3. Available-For-Sale Investments:
At June 30, 2016 and 2015, the cost and market value of the Company’s available-for-sale securities by major security type were as
follows (in thousands):
Certificates of deposit
Equity securities
2016
Cost
3,016 $
29,472
32,488 $
$
$
June 30,
Market
3,017 $
28,581
31,598 $
2015
Cost
4,089 $
29,472
33,561 $
Market
4,089
52,300
56,389
At June 30, 2016 and 2015, all of the Company’s equity securities which relates to our investment in CCXI stock and warrants, were
valued using Level 1 inputs. Certificates of deposit are carried at cost and are not subject to the fair value hierarchy. There were no
49
transfers between Level 1 and Level 2 securities during fiscal 2016. Gross unrealized gains (losses) on available-for-sale investments
were $(0.9) million and $22.8 million at June 30, 2016, and June 30, 2015, respectively.
The unrealized loss on available-for-sale investments for the twelve months ended June 30, 2016 includes $0.9 million of unrealized
gross losses related to our investment in CCXI. As of June 30, 2016, the stock price of CCXI was $4.49 per share compared to our
cost basis of $4.73 per share. Based upon our analysis, we believe there is insufficient information to conclude that the impairment of
our investment in CCXI is other-than-temporary. As such, we have concluded that the impairment is temporary and have classified the
impairment within other comprehensive income.
Note 4. Inventories:
Inventories consist of (in thousands):
Raw materials
Finished goods
June 30,
2016
22,963 $
34,139
57,102 $
2015
15,892
33,685
49,577
$
$
At June 30, 2016 and 2015, the Company had $23.4 million and $24.0 million, respectively, of excess protein, antibody and
chemically-based inventory on hand which was not valued.
Note 5. Property and Equipment:
Property and equipment consist of (in thousands):
Cost:
Land
Buildings and improvements
Machinery, equipment and other
Accumulated depreciation and amortization
Note 6. Intangible Assets and Goodwill:
Intangible assets and goodwill consist of (in thousands):
Developed technology
Trade names
Customer relationships
Non-compete agreement
Accumulated amortization
Total amortizeable intagibles
In process research and development
Total intangible assets
Goodwill
June 30,
2016
6,270 $
157,963
82,018
246,251
(113,889)
132,362 $
2015
7,370
156,965
74,385
238,720
(108,967)
129,749
$
$
Useful Life
(years)
8 -15 $
5 -16
8 -16
3 - 5
$
$
June 30,
2016
120,611 $
63,706
191,118
3,284
378,719
(75,595)
303,124 $
7,400
310,524
2015
108,887
63,867
167,494
3,298
343,546
(50,707)
292,839
0
292,839
430,882 $
390,638
50
Changes to the carrying amount of goodwill consists of (in thousands):
Beginning balance
Acquisitions
Currency translation
Ending balance
Changes to the carrying amount of net intangible assets consists of (in thousands):
Beginning balance
Acquisitions
Amortization expense
Currency translation
Ending balance
Year Ended June 30,
2016
2015
$
$
390,638 $
49,648
(9,404)
430,882 $
151,473
254,140
(14,975)
390,638
Year Ended June 30,
2016
2015
292,839 $
53,500
(29,395)
(6,420)
310,524 $
108,776
222,710
(26,170)
(12,777)
292,839
$
$
Amortization expense related to technologies included in cost of sales was $11.1 million $9.5 million, and $4.2 million in fiscal 2016,
2015, and 2014, respectively. Amortization expense related to trade names, customer relationships, and the non-compete agreement
included in selling, general and administrative expense was $18.3 million, $16.7 million, and $6.1 million, in fiscal 2016, 2015, and
2014 respectively.
The estimated future amortization expense for intangible assets as of June 30, 2016 is as follows (in thousands):
Year Ending June 30:
2017
2018
2019
2020
2021
Thereafter
28,326
28,140
27,527
26,898
26,534
165,699
303,124
$
Note 7. Debt and Other Financing Arrangements:
On July 28, 2014, the Company entered into a revolving line-of-credit facility governed by a Credit Agreement (the Credit
Agreement). The Credit Agreement provides for a revolving credit facility of $150 million, which can be increased by an additional
$150 million subject to certain conditions. Borrowings under the Credit Agreement may be used for working capital and expenditures
of the Company and its subsidiaries, including financing permitted acquisitions. Borrowings under the Credit Agreement for base rate
loans bear interest at a variable rate equal to the greater of (i) the prime commercial rate, (ii) the per annum federal funds rate plus
0.5%, or (iii) LIBOR + 1.00% - 1.75% depending on the existing total leverage ratio of Debt to Earnings Before Interest, Taxes,
Depreciation and Amortization (as defined in the Credit Agreement). The annualized fee for any unused portion of the credit facility is
15 basis points.
The Credit Agreement would have matured on July 31, 2019 and contains customary restrictive and financial covenants and
customary events of default. As of June 30, 2016, the outstanding balance under the Credit Agreement was $91.5 million.
In connection with the acquisition of Advanced Cell Diagnostics on August 1, 2016, the Company entered into a new revolving credit
facility governed by a Credit Agreement dated July 28, 2016. This facility replaced the revolving line-of-credit facility mentioned
above. This new Credit Agreement provides for a revolving credit facility of $400 million. Borrowings under the Credit Agreement
bear interest at a variable rate.
51
Note 8. Commitments and Contingencies:
The Company leases office and warehouse space, vehicles and various office equipment under operating leases. At June 30, 2016,
aggregate net minimum rental commitments under non-cancelable leases having an initial or remaining term of more than one year are
payable as follows (in thousands):
Year Ending June 30:
2017
2018
2019
2020
2021
Thereafter
6,326
5,801
4,810
4,761
4,815
19,120
45,633
$
Total rent expense was approximately $8.1 million, $4.9 million, and $1.6 million for the years ended June 30, 2016, 2015, and 2014,
respectively.
The Company is routinely subject to claims and involved in legal actions which are incidental to the business of the Company.
Although it is difficult to predict the ultimate outcome of these matters, management believes that any ultimate liability will not
materially affect the consolidated financial position or results of operations of the Company.
Note 9. Share-based Compensation and Other Benefit Plans:
Equity incentive plan: The Company’s Amended and Restated 2010 Equity Incentive Plan (the A&R 2010 Plan) provides for the
granting of incentive and nonqualified stock options, restricted stock, restricted stock units, performance shares, performance units
and stock appreciation rights. There are 3.8 million shares of common stock authorized for grant under the A&R 2010 Plan. At June
30, 2016, there were 1.8 million shares of common stock available for grant under the A&R 2010 Plan. The maximum term of
incentive options granted under the A&R 2010 Plan is ten years. The A&R 2010 amends and restates the Company's 2010 Equity
Incentive Plan (the 2010 Plan). The 2010 A&R Plan, the 2010 Plan replaced the Company’s 1998 Nonqualified Stock Option Plan
(the 1998 Plan) and 1997 Incentive Stock Option Plan (the 1997 Plan). The A&R 2010 Plan, the 1998 Plan and the 1997 Plan
(collectively, the Plans) are administered by the Board of Directors and its Compensation Committee, which determine the persons
who are to receive awards under the Plans, the number of shares subject to each award and the term and exercise price of each award.
The number of shares of common stock subject to outstanding awards at June 30, 2016 under the A&R 2010 Plan, the 1998 Plan and
the 1997 Plan were 1.8 million, 98,000, and 9,000, respectively.
52
Stock option activity under the Plans for the three years ended June 30, 2016, consists of the following (shares in thousands):
Outstanding at June 30, 2013
Granted
Forfeited
Exercised
Outstanding at June 30, 2014
Granted
Forfeited
Exercised
Outstanding at June 30, 2015
Granted
Forfeited
Exercised
Outstanding at June 30, 2016
Exercisable at June 30:
2014
2015
2016
Weighted
Average
Exercise
Price
Weighted
Avg.
Contractual
Life (Yrs.)
Aggregate
Intrinsic
Value
(millions)
66.70
80.88
76.23
59.07
72.11
93.98
92.85
69.31
81.57
105.16
99.68
69.82
91.91
5.3 $
37.9
Shares
728
251
(26)
(142)
811
600
(133)
(141)
1,137
805
(54)
(69)
1,819 $
534 $
547
596
69.49
72.72
75.74
4.2 $
22.1
53
The fair values of options granted under the Plans were estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions used:
Year Ended June 30,
2016
2015
2014
Dividend yield
Expected volatility
Risk-free interest rates
Expected lives (years)
1.2%
1.3%
20% - 23% 18% - 21% 18% - 22%
1.2% - 1.9% 1.3% - 2.2% 1.4% - 2.1%
5
1.5%
6
5
The dividend yield is based on the Company’s historical annual cash dividend divided by the market value of the Company’s common
stock. The expected annualized volatility is based on the Company’s historical stock price over a period equivalent to the expected life
of the option granted. The risk-free interest rate is based on U.S. Treasury constant maturity interest rates with a term consistent with
the expected life of the options granted.
The weighted average fair value of options granted during fiscal 2016, 2015 and 2014 was $18.50, $15.01 and $14.77 respectively.
The total intrinsic value of options exercised during fiscal 2016, 2015 and 2014 were $2.4 million, $3.5 million, and $3.7 million
respectively. The total fair value of options vested during fiscal 2016, 2015 and 2014 were $1.6 million, $2.3 million, and $2.2 million
respectively.
In fiscal 2016, 2015 and fiscal 2014, 19,994, 9,000, and 26,355 restricted common stock shares were granted at weighted average
grant date fair values of $99.53, $91.78, and $86.60 per share, respectively. Non-vested restricted common stock shares at June 30,
2016, 2015 and 2014 were 22,545, 19,102, and 36,355 respectively.
In fiscal 2016, 2015 and 2014, 35,083, 36,192, and 5,000 restricted stock units were granted at a weighted average grant date fair
value of $105.01 and $94.13, respectively. The restricted stock units vest over a three year period. In fiscal 2016, 10,000 restricted
stock units were forfeited.
Stock-based compensation cost of $9.4 million, $5.9 million and $3.5 million was included in selling, general and administrative
expense in fiscal 2016, 2015 and 2014, respectively. As of June 30, 2016, there was $15.9 million of unrecognized compensation cost
related to non-vested stock options, non-vested restricted stock units and non-vested restricted stock which will be expensed in fiscal
2017 through 2020. The weighted average period over which the compensation cost is expected to be recognized is 1.2 years.
Employee stock purchase plan: In fiscal year 2015, the Company established the Bio-Techne Corporation 2014 Employee Stock
Purchase Plan (ESPP), which was approved by the Company’s shareholders on October 30, 2014, and which is designed to comply
with IRS provisions governing employee stock purchase plans. Two hundred thousand shares were allocated to the ESPP. The initial
participation period for the ESPP began March 1, 2015 and ended on August 31, 2016. The Company recorded $144,000 expense for
the ESPP in fiscal year 2016.
Profit sharing and savings plans: The Company has profit sharing and savings plans for its U.S. employees, which conform to IRS
provisions for 401(k) plans. The Company may makes matching contributions to the Plan. The Company has recorded an expense for
contributions to the plans of $1.2 million, $1.1 million, and $0.7 million for the years ended June 30, 2016, 2015, and 2014,
respectively. The Company operates defined contribution pension plans for its U.K. employees. The Company has recorded an
expense for contributions to the plans of $0.8, $0.7 million, and $0.6 million for the years ended June 30, 2016, 2015 and 2014,
respectively.
Performance incentive programs: In fiscal 2016, under certain employment agreements and a Management Incentive Plan available
to executives officers and certain management personnel, the Company recorded cash bonuses of $4.2 million and granted options
for 621,000 shares of common stock and issued 26,583 restricted stock units and issued 11,522 common stock shares. The Company
recorded cash bonuses of $1.9 and $0.9 million and granted options for 322,000 and 216,000 shares of common stock for the years
ended June 30, 2015 and 2014, respectively. In addition, 5,000 restricted stock units and 17,855 shares of restricted common stock
were issued in fiscal 2014.
54
Note 10. Income Taxes:
The provisions for income taxes consist of the following (in thousands):
Earnings before income taxes consist of:
Domestic
Foreign
Taxes on income consist of:
Currently payable:
Federal
State
Foreign
Net deferred:
Federal
State
Foreign
Year Ended June 30,
2016
2015
2014
120,154 $
27,327
147,481 $
121,765 $
32,397
154,162 $
127,681
33,711
161,392
34,805 $
2,958
7,579
1,906
(428)
(3,815)
43,005 $
28,220 $
6,165
10,704
4,401
292
(3,355)
46,427 $
40,967
1,709
10,668
(1,137)
(41)
(1,722)
50,444
$
$
$
$
The following is a reconciliation of the federal tax calculated at the statutory rate of 35% to the actual income taxes provided
(in thousands):
Computed expected federal income tax expense
State income taxes, net of federal benefit
Qualified production activity deduction
Non-taxable gain on investment
Research and development tax credit
Tax-exempt interest
Foreign tax rate differences
Other
Year Ended June 30,
2015
2016
51,618 $
1,852
(3,932)
0
(1,550)
0
(4,639)
(344)
43,005 $
53,957 $
4,762
(3,140)
(2,905)
(912)
0
(4,059)
(1,276)
46,427 $
2014
56,487
1,048
(3,823)
0
(476)
(654)
(2,857)
719
50,444
$
$
The effective rate for June 30, 2016 decreased by 0.9% compared to the prior year. The rate decrease was primarily driven by
additional R&D credit benefit due to the retroactive reinstatement of the credit under the Protecting Americans from Tax Hikes Act of
2015, an increase in the foreign rate benefit due to the reduction in the UK income tax rate and a reduction in state tax related to the
prior year. These decreases were partially offset by less of a foreign tax credit benefit than in the prior year and the non recurrence of a
non-taxable gain.
In the year ended June 30, 2015, as a result of the recent acquisitions, the rate reflects an increase for state tax expense as well as a
resulting provision to return true up from fiscal 2014. This increase is offset by the non-taxable gain which was a result of purchasing
the remaining interest in CyVek. In addition the Company‘s R&D Europe subsidiary declared and paid a dividend of £46.6 million
which resulted in a tax benefit of approximately $1.7 million.
55
Temporary differences comprising deferred taxes on the Consolidated Balance Sheets are as follows (in thousands):
Inventory
Net operating loss carryovers
Tax credit carryovers
Excess tax basis in equity investments
Deferred compensation
Net unrealized loss on available for sale investment
Other
Valuation allowance
Net deferred tax assets
Net unrealized gain on available-for-sale investments
Intangible asset amortization
Depreciation
Other
Deferred tax liabilities
Net deferred tax liabilities
June 30
2016
9,768 $
26,556
3,197
4,544
5,912
329
7,421
(7,201)
50,526
0
(107,200)
(5,132)
(1,031)
(113,363)
(62,837) $
2015
8,753
34,767
3,872
4,496
3,747
0
4,712
(2,558)
57,789
(8,446)
(96,401)
(2,394)
(466)
(107,707)
(49,918)
$
$
A deferred tax valuation allowance is required when it is more likely than not that all or a portion of deferred tax assets will not be
realized. At June 30, 2016, a valuation allowance for potential capital loss carryovers on equity investments was $5.0 million.
Approximately $2.0 million of the valuation allowance at June 30, 2016 is for certain foreign and state tax net operating loss and state
credit carryforwards that existed at the date the Company acquired Novus, ProteinSimple, and CyVek. The remainder of the valuation
allowance is for certain state tax credit carryovers generated in fiscal 2016 and 2015. The Company believes it is more likely than not
that these tax carryovers will not be realized. At June 30, 2015, a valuation allowance for potential capital loss carryovers on equity
investments was zero. Approximately $2.4 million of the valuation allowance at June 30, 2015 was for acquisition related foreign and
state tax net operating loss and state credit carryforwards. The remainder of the valuation allowance was for certain state tax credit
carryovers generated in fiscal 2015.
The valuation allowance as of June 30, 2016 was $7.2 million which is an increase of $4.7 million over prior year. This increase
included a $5.0 million change related to an investment and was recorded through other comprehensive income and was partially
offset by a decrease of $0.3 million primarily related to the utilization of expiation of state net operating loss carry forwards and
research and development credits.
At June 30, 2016, the Company has federal and state net operating loss carryforwards of approximately $63.9 million and $71.6
million, respectively, from its fiscal 2015 acquisitions of ProteinSimple and CyVek, which are not limited under IRC Section 382. At
June 30, 2016, the Company has foreign net operating loss carryforwards of $2.1 million from its fiscal 2015 acquisition of Novus.
The net operating loss carryforwards expire between fiscal 2017 and 2034. The Company has a deferred tax asset of $24.9 million, net
of the valuation allowance discussed above, related to the net operating loss carryovers. At June 30, 2016, the Company has federal
and state tax credit carryforwards of $1.7 million and $1.3 million, respectively. The federal tax credit carryforwards expire between
2018 and 2035. The state credit carryforwards have no expiry date. The Company has a deferred tax asset of $3.6 million, net of the
valuation allowance discussed above, related to the tax credit carryovers.
The Company has not recognized a deferred tax liability for unremitted earnings of approximately $57.6 million from its foreign
operations because its subsidiaries have invested or will invest the undistributed earnings indefinitely, or the earnings will be remitted
in a tax-neutral transaction. Generally, such amounts become subject to United States taxation upon the remittance of dividends and
under other circumstances. It is not practical to estimate the amount of the deferred income tax liabilities related to investments in
these foreign subsidiaries.
The Company’s unrecognized tax benefits at June 30, 2016, 2015 and 2014, including accrued interest and penalties, were not
material. The Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly
increase in the next twelve months. The Company files income tax returns in the U.S federal and certain state tax jurisdictions, and
56
several jurisdictions outside the U.S. The Company’s federal returns are subject to tax assessment for 2013 and subsequent years.
State and foreign income tax returns are generally subject to examination for a period of three to five years after filing of the
respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one
year after formal notification to the states.
Note 11. Earnings Per Share:
The number of shares used to calculate earnings per share are as follows (in thousands, except per share data):
Year Ended June 30,
2015
2016
2014
Net earnings used for basic and diluted earnings per share
$
104,476 $
107,735 $
110,948
Weighted average shares used in basic computation
Dilutive stock options
Weighted average shares used in diluted computation
37,194
132
37,326
37,096
135
37,231
Basic EPS
Diluted EPS
$
$
2.81 $
2.80 $
2.90 $
2.89 $
36,890
115
37,005
3.01
3.00
The dilutive effect of stock options in the above table excludes all options for which the aggregate exercise proceeds exceeded the
average market price for the period. The number of potentially dilutive option shares excluded from the calculation was 1.2 million,
516,000 and 196,000 at June 30, 2016, 2015 and 2014, respectively.
Note 12. Segment Information:
The Company has three reportable segments based on the nature of its products; they are Biotechnology, Clinical Controls, and
Protein Platforms.
The Company’s Biotechnology reporting segment develops, manufactures and sells biotechnology research and diagnostic products
world-wide. No customer in the Biotechnology segment accounted for more than 10% of the segments' net sales for the years ended
June 30, 2016, 2015, and 2014,.
The Company’s Clinical Controls reporting segment develops and manufactures controls and calibrators for sale world-wide. One
customer accounted for approximately, 13%, and 14% of Clinical Controls’ net sales during fiscal 2015, and 2014 respectively. One
customer did not account for net sales over 10% during 2016.
The Company’s Protein Platforms segment develops and commercializes proprietary systems and consumables for protein analysis.
This segment was formed from the fiscal 2015 acquisitions of ProteinSimple and CyVek. No customer in the Protein Platforms
segment accounted for more than 10% of the segments net sales for the years ended June 30, 2016 and 2015.
There are no concentrations of business transacted with a particular customer or supplier or concentrations of revenue from a
particular product or geographic area that would severely impact the Company in the near term.
Following is financial information relating to the operating segments (in thousands):
External sales
Biotechnology
Clinical Controls
Protein Platforms
Inter segment
Consolidated net sales
Year Ended June 30,
2015
2016
317,340 $
104,484
77,324
(125)
499,023 $
308,437 $
77,866
66,249
(306)
452,246 $
2014
285,142
72,621
0
0
357,763
$
$
57
Operating Income
Biotechnology
Clinical Controls
Protein Platforms
Segment operating income
Costs recognized upon sale of acquired inventory
Amortization of intangibles
Stock based compensation
Acquisition related expenses
Corporate general, selling and administrative expenses
Consolidated operating income
Goodwill
Biotechnology
Clinical Controls
Protein Platforms
Consolidated goodwill
Intangible assets, net
Biotechnology
Clinical Controls
Protein Platforms
Consolidated intangible assets, net
Assets
Biotechnology
Clinical Controls
Protein Platforms
Segment assets
Corporate cash and available- for- sale investments
Corporate property and equipment
Corporate, other
Consolidated assets
Depreciation and amortization
Biotechnology
Clinical Controls
Protein Platforms
Segment depreciation and amortization
Corporate
Consolidated depreciation and amortization
Capital purchases
Biotechnology
Clinical Controls
Protein Platforms
Segment capital purchases
Corporate
Consolidated capital purchases
Year Ended June 30,
2016
2015
2014
$
$
$
$
$
$
$
$
$
$
$
$
168,613 $
30,412
3,592
202,617
(5,431)
(29,395)
(9,430)
(2,761)
(5,007)
150,593 $
105,380 $
106,692
218,810
430,882 $
57,199 $
86,736
166,589
310,524 $
165,226 $
23,981
4,469
193,676
(6,952)
(26,169)
(5,957)
(4,519)
(3,056)
147,023 $
115,198 $
60,601
214,839
390,638 $
68,777 $
49,130
174,932
292,839 $
387,470 $
212,649
440,343
1,040,462
31,255
56,195
1,669
1,129,581 $
430,524 $
74,954
444,899
950,378
52,800
58,270
1,912
1,063,360 $
14,196 $
10,462
16,027
40,685
2,079
42,764 $
14,295 $
1,780
823
16,898
0
16,898 $
13,820 $
7,963
13,364
35,147
2,079
37,226 $
9,794 $
1,932
8,179
19,905
0
19,905 $
162,621
22,976
0
185,597
(7,480)
(10,276)
(3,523)
(2,247)
(2,321)
159,750
90,872
60,601
0
151,473
53,778
54,998
0
108,776
674,854
66,072
0
740,917
60,142
60,350
1,082
862,491
10,879
7,205
0
18,084
1,091
19,175
4,157
5,687
9,844
3,977
13,821
The other reconciling items include the results of unallocated corporate expenses and the Company’s share of gain (losses) from its
equity method investees.
58
Following is financial information relating to geographic areas (in thousands):
External sales
United States
U.K.
Other Europe
China
Other Asia
Rest of world
Total external sales
Long-lived assets
United States and Canada
Europe
China
Total long-lived assets
Year Ended June 30,
2015
2016
$
$
$
$
283,270 $
88,680
51,047
27,205
24,809
24,012
499,023 $
118,027 $
14,423
1,109
133,559 $
245,217 $
68,055
66,022
26,105
23,806
23,041
452,246 $
119,075 $
11,239
1,286
131,600 $
2014
190,359
55,144
42,013
18,878
32,704
18,665
357,763
109,790
8,340
678
118,808
External sales are attributed to countries based on the location of the customer or distributor. Long-lived assets are comprised of land,
buildings and improvements and equipment, net of accumulated depreciation and other assets.
Note 13. Supplemental Disclosures of Cash Flow Information and Noncash Investing and Financing Activities:
In fiscal 2016, the Company acquired Cliniqa and Zephyrus for approximately $83 million and $11.5 million, respectively. Zephyrus
was acquired for approximately $8 million in cash plus additional contingent consideration with a fair value of $3.5 million.
In fiscal 2015, the Company acquired Novus, ProteinSimple, and CyVek for approximately $60 million, $300 million and $95
million, respectively. CyVek was acquired for approximately $62 million in cash and the Company will also pay CyVek’s previous
stockholders up to $35.0 million based on the revenue generated by CyVek’s products before May 3, 2017 (30 months from the
closing of the Merger).
In fiscal 2014, the Company acquired Bionostics for approximately $103 million. PrimeGene was acquired for approximately $18.7
million. Approximately $6.0 million was paid at closing with approximately $12.7 million payable over fiscal years 2015 through
2017.
In fiscal 2015, 2014 and 2013, the Company paid cash for income taxes of $42.6 million, $55.2 million and $51.6 million,
respectively.
In fiscal 2016, stock options for 494 shares of common stock were exercised by the surrender of 306 shares of common stock at fair
market value of $31,000. In fiscal 2015, stock options for 385 shares of common stock were exercised by the surrender of 309 shares
of common stock at fair market value of $31,000. In fiscal 2014, stock options for 1,077 shares of common stock were exercised by
the surrender of 733 shares of common stock at fair market value of $56,000.
(cid:3)(cid:6)
Note 14. Accumulated Other Comprehensive Income:
Changes in accumulated other comprehensive income (loss), net of tax, for the year ended June 30, 2016 consists of (in thousands):
Beginning balance
Other comprehensive income (loss)
Ending balance
Unrealized Gains
(Losses) on
Available-for-
Sale Investments
Foreign
Currency
Translation
Adjustments
$
$
14,382
(19,924)
(5,542)
(44,975) $
(19,932)
(64,907)
Total
(30,593)
(39,812)
(70,405)
6(cid:7)
Note 15. Subsequent Events:
On July 1, 2016 Bio-Techne acquired Space Import-Export Srl (Space) of Milan, Italy for approximately $11 million. Space is a long
and trusted partner of Bio-Techne, distributing its products since 1985 and creating a very effective and visible presence in the Italian
market. Space’s Mr. Luca Cicchetti, will remain with Bio-Techne as Managing Director and lead the Company’s southern European
commercial operations.
On August 1, 2016, Bio-Techne closed on the acquisition of Advanced Cell Diagnostics (ACD) for $250 million in cash plus
contingent consideration of $75 million due upon the achievement of certain milestones. The transaction was financed through a
combination of cash on hand and a revolving line of credit facility that Bio-Techne obtained prior to the closing of the acquisition.
In connection with the acquisition of Advanced Cell Diagnostics on August 1, 2016, the Company entered into a new revolving credit
facility, governed by a Credit Agreement dated July 28, 2016. The Credit Agreement provides for a revolving credit facility of $400
million. Borrowings under the Credit Agreement bear interest at a variable rate. As of August 26, 2016, the Company had drawn $250
million under the Credit Agreement.
6(cid:8)
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Bio-Techne Corporation:
We have audited the accompanying consolidated balance sheets of Bio-Techne Corporation and subsidiaries as of June 30, 2016 and
2015, and the related consolidated statements of earnings and comprehensive income, shareholders’ equity, and cash flows for each of
the years in the three-year period ended June 30, 2016. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Bio-Techne Corporation and subsidiaries as of June 30, 2016 and 2015, and the results of their operations and their cash flows for
each of the years in the three-year period ended June 30, 2016, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Bio-
Techne Corporation’s internal control over financial reporting as of June 30, 2016, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated August 29, 2016 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial
reporting.
/s/ KPMG LLP
Minneapolis, Minnesota
August 29, 2016
6(cid:9)
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Bio-Techne Corporation:
We have audited Bio-Techne Corporation’s internal control over financial reporting as of June 30, 2016, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Bio-Techne Corporation’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s 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 generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
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.
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. Material weaknesses related to an ineffective control environment and risk assessment, information and
communication, and monitoring processes as well as ineffective control activities over the completeness and accuracy of data used in
the financial reporting process, potentially impacting all financial statement accounts, have been identified and included in
management’s assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Bio-Techne Corporation and subsidiaries as of June 30, 2016 and 2015, and
the related consolidated statements of earnings and comprehensive income, shareholders’ equity, and cash flows for each of the fiscal
years in the three-year period ended June 30, 2016. These material weaknesses were considered in determining the nature, timing, and
extent of audit tests applied in our audit of the fiscal year 2016 consolidated financial statements, and this report does not affect our
report dated August 29, 2016, which expressed an unqualified opinion on those consolidated financial statements.
In our opinion, because of the effect of the aforementioned material weaknesses on the achievement of the objectives of the control
criteria, Bio-Techne Corporation has not maintained effective internal control over financial reporting as of June 30, 2016, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
The scope of management’s assessment of the effectiveness of internal control over financial reporting excluded the operations of
Cliniqa Corporation and Zephyrus Biosciences, which were acquired on July 8, 2015 and March 14, 2016, respectively. Cliniqa
Corporation and Zephyrus Biosciences represented 9.0% of Bio-Techne Corporation’s total assets and 5.3% of its total revenues as of
and for the year ended June 30, 2016. Our audit of internal control over financial reporting of Bio-Techne Corporation also excluded
an evaluation of the internal control over financial reporting of Cliniqa Corporation and Zephyrus Biosciences.
6(cid:10)
/s/ KPMG LLP
Minneapolis, Minnesota
August 29, 2016
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
(cid:11)(cid:12)(cid:13)(cid:14)
6(cid:2)
a. Evaluation of Disclosure Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) of the 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 effectiveness
of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that due to material weaknesses in our internal control over financial
reporting described below in Management’s Report on Internal Control over Financial Reporting, our disclosure controls and
procedures were not effective as of June 30, 2016.
Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this
Annual Report on Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows as
of and for the periods presented in accordance with U.S. generally accepted accounting principles.
b. Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-
15(f) under the Exchange Act). Management, including our Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of our internal control over financial reporting as of June 30, 2016. In making this assessment, our management used the
criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework (2013),” issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting for external purposes in accordance with U.S. generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.
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. Accordingly, even effective internal
control over financial reporting can only provide reasonable assurance of achieving its control objectives.
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 the Company's annual or interim financial statements will not be prevented or
detected on a timely basis.
We acquired Cliniqa on July 8, 2015 and Zephyrus on March 14, 2016. Cliniqa and Zephyrus represented approximately 9.0% of our
total assets and 5.3% of our total revenues as of and for the year ended June 30, 2016. We excluded from our assessment of the
effectiveness of our internal control over financial reporting as of June 30, 2016 internal control over financial reporting associated
with Cliniqa and Zephyrus.
Based on our assessment and those criteria, management has concluded that our internal control over financial reporting was not
effective as of June 30, 2016 due to the material weaknesses described as follows:
The Company did not maintain an effective control environment and effective risk assessment, information and
communication, and monitoring processes. Specifically, the Company did not have:
(cid:15)
(cid:15)
sufficient resources within the organization with assigned responsibility and accountability over the design and operation of
internal control
effective risk assessment processes to identify and analyze risks to our financial reporting objectives associated with
certain of our IT platforms
6(cid:3)
(cid:15)
effective processes to ascertain whether internal controls associated with certain of our IT platforms were present and/or
functioning.
As a consequence, the Company did not have effective control activities over the establishment of general information
technology controls (GITCs) for certain of its IT platforms, specifically program change controls and user access. Due to
the impact of these ineffective GITCs, automated controls and manual controls that rely on data produced by and
maintained within these IT system applications, including the general ledger, were also ineffective. Therefore, the
Company failed to maintain effective controls that were fully responsive to risks over the completeness and accuracy of
data used in the financial reporting process, potentially impacting all financial statement accounts.
Although no material misstatements were identified in our consolidated financial statements, these control deficiencies create a
reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a
timely basis. We have concluded that the deficiencies represent material weaknesses in our internal control over financial reporting
and our internal control over financial reporting was not effective as of June 30, 2016.
The Company’s internal control over financial reporting as of June 30, 2016 has been audited by KPMG LLP, an independent
registered public company accounting firm. KPMG LLP’s report contains an adverse opinion on the effectiveness of our internal
control over financial reporting, which is included in Item 8 in this Form 10-K.
c.
Remedial Measures
The Company is in the process of improving its procedures relating to the completeness and accuracy of system generated reports
utilized in the financial reporting process. On July 1, 2016, management implemented a new ERP system at its Minneapolis location.
With the implementation of the new ERP system, management expects to transition to a more automated control environment with
reduced dependency on manual controls. With this increased focus on automated application controls, management will also ensure it
has established and maintained effective GITCs.
The material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of
time and management has concluded, through testing, that these controls are operating effectively. We believe this remediation will
occur in fiscal 2017 and will strengthen our internal control over financial reporting and will prevent a reoccurrence of the material
weaknesses described above.
d. Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) 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.
6(cid:16)
Although no material misstatements were identified in our consolidated financial statements, these control deficiencies create a
reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a
timely basis. We have concluded that the deficiencies represent material weaknesses in our internal control over financial reporting
and our internal control over financial reporting was not effective as of June 30, 2016.
The Company’s internal control over financial reporting as of June 30, 2016 has been audited by KPMG LLP, an independent
registered public company accounting firm. KPMG LLP’s report contains an adverse opinion on the effectiveness of our internal
control over financial reporting, which is included in Item 8 in this Form 10-K.
c.
Remedial Measures
The Company is in the process of improving its procedures relating to the completeness and accuracy of system generated reports
utilized in the financial reporting process. On July 1, 2016, management implemented a new ERP system at its Minneapolis location.
With the implementation of the new ERP system, management expects to transition to a more automated control environment with
reduced dependency on manual controls. With this increased focus on automated application controls, management will also ensure it
has established and maintained effective GITCs.
The material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of
time and management has concluded, through testing, that these controls are operating effectively. We believe this remediation will
occur in fiscal 2017 and will strengthen our internal control over financial reporting and will prevent a reoccurrence of the material
weaknesses described above.
d. Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) 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.
6(cid:17)
None.
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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," "Principle Shareholders"
and "Additional Corporate Governance Matters" in the Company’s Proxy Statement for its 2016 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
The information required by Item 11 is incorporated herein by reference to the sections entitled “Election of Directors” and
"Executive Compensation" in the Company’s Proxy Statement for its 2016 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
OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The 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 2016 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.
6(cid:4)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference to the sections entitled "Election of Directors" and "Additional
Corporate Governance Matters" in the Company’s Proxy Statement for its 2016 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.
(cid:16)(cid:6)
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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 2016 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.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
A. (1) List of Financial Statements.
The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K:
Consolidated Statements of Earnings and Comprehensive Income for the Years Ended June 30, 2016, 2015, and 2014
Consolidated Balance Sheets as of June 30, 2016 and 2015
Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the Years Ended June 30, 2016, 2015 and 2014
Notes to Consolidated Financial Statements for the Years Ended June 30, 2016, 2015 and 2014
Report of Independent Registered Public Accounting Firm
A. (2) Financial Statement Schedules.
All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in
the Consolidated Financial Statements or Notes thereto.
A. (3) Exhibits.
See “Exhibit Index” immediately following signature page.
7(cid:7)
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: August 29, 2016
BIO-TECHNE CORPORATION
/s/ Charles Kummeth
By: Charles Kummeth
Its: President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Date
August 29, 2016
August 29, 2016
August 29, 2016
August 29, 2016
August 29, 2016
August 29, 2016
August 29, 2016
August 29, 2016
August 29, 2016
August 29, 2016
Signature and Title
/s/ Robert V. Baumgartner
Robert V. Baumgartner
Chairman of the Board and Director
/s/ Roger C. Lucas, Ph.D.
Dr. Roger C. Lucas
Vice Chairman and Director
/s/ Randolph C. Steer, Ph.D., M.D.
Dr. Randolph C. Steer, Director
/s/ Charles A. Dinarello, M.D.
Dr. Charles A. Dinarello, Director
/s/ Karen A. Holbrook, Ph.D.
Dr. Karen A. Holbrook, Director
/s/ John L. Higgins
John L. Higgins, Director
/s/ Roeland Nusse, Ph.D.
Dr. Roeland Nusse, Director
/s/ Harold J. Wiens
Harold J. Wiens, Director
/s/ Charles Kummeth
Charles Kummeth, Chief Executive Officer
(principal executive officer)
/s/ James Hippel
James Hippel, Chief Financial Officer
(principal financial officer and principal accounting officer)
7(cid:8)
EXHIBIT INDEX
for Form 10-K for the 2016 Fiscal Year
Exhibit
Number
3.1
Description
Amended and Restated Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.1 of the Company’s
10-Q dated February 9, 2015.*
3.2
Second Amended and Restated Bylaws of the Company—attached here to as Exhibit 3.2
10.1**
1997 Incentive Stock Option Plan--incorporated by reference to Exhibit 10.24 of the Company’s Form 10-K for the year ended
June 30, 1997.*
10.2**
Form of Stock Option Agreement for 1997 Incentive Stock Option Plan--incorporated by reference to Exhibit 10.25 of the
Company’s Form 10-K for the year ended June 30, 1997.*
10.3**
1998 Nonqualified Stock Option Plan--incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q for the quarter
ended September 30, 1998.*
10.4**
Form of Stock Option Agreement for 1998 Nonqualified Stock Option Plan--incorporated by reference to Exhibit 10.2 of the
Company’s Form 10-Q for the quarter ended September 30, 1998.*
10.5
Amended and Restated Investors Rights Agreement dated June 13, 2006 among ChemoCentryx, Inc. and the Company and
certain investors--incorporated by reference to Exhibit 10.31 of the Company’s 10-K for the year ended June 30, 2006.*
10.6** Management Incentive Plan by reference to Exhibit 10.13 of the Company’s 10-K for the year ended June 30, 2013.*
10.7** Amended and Restated 2010 Equity Incentive Plan – incorporated by reference to Exhibit 10.1 of the Company’s 8-K dated
October 30, 2015*
10.8**
Form of Restricted Stock Award Agreement for Amended and Restated 2010 Equity Incentive Plan – incorporated by
reference to Exhibit 10.2 of the Company’s 8-K dated October 30, 2015*
10.9**
Form of Restricted Stock Unit Award Agreement for Amended and Restated 2010 Equity Incentive Plan – incorporated by
reference to Exhibit 10.3 of the Company’s 8-K dated October 30, 2015*
10.10** Form of the Performance Unit Award Agreement for Amended and Restated 2010 Equity Incentive Plan – incorporated by
reference to Exhibit 10.4 of the Company’s 8-K dated October 30, 2015.*
10.11** Form of Incentive Stock Option Agreement for Amended and Restated 2010 Equity Incentive Plan – incorporated by reference
to Exhibit 10.5 of the Company’s 8-K dated October 30, 2015.*
10.12** Form of Employee Non-Qualified Stock Option Agreement for Amended and Restated 2010 Equity Incentive Plan –
incorporated by reference to Exhibit 10.6 of the Company’s 8-K dated October 30, 2015.*
10.13** Form of Director Non-Qualified Stock Option Agreement for Amended and Restated 2010 Equity Incentive Plan –
incorporated by reference to Exhibit 10.7 of the Company’s 8-K dated October 30, 2015.*
7(cid:9)
Description
Exhibit
Number
10.14** 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.*
10.15** Description of Non-employee Director Compensation Plan--incorporated by reference to Exhibit 10.25 of the Company’s 10-K
for the year ended June 30, 2013.*
10.16** First Amendment to Employment Agreement by and between the Company and Charles Kummeth, effective January 30, 2015-
-incorporated by reference to Exhibit 10.1 of the Company’s 10-Q dated February 9, 2015.*
10.17** First Amendment to Employment Agreement by and between the Company and James Hippel, effective January 30, 2015--
incorporated by reference to Exhibit 10.2 of the Company’s 10-Q dated February 9, 2015.*
10.18** Form of Employment Agreement by and between the Company and Executive Officers of the Company-- incorporated by
reference to Exhibit 10.4 of the Company’s 10-Q dated February 9, 2015.*
10.19** Compensation Arrangement for the Executive Officers for Fiscal Year 2014--incorporated by reference to Exhibit 10.28 of the
Company’s 10-K for the year ended June 30, 2013.*
10.20** Employment Agreement by and between the Company and Mr. James T. Hippel, dated February 5, 2014--incorporated by
reference to Exhibit 10.1 of the Company’s 8-K dated February 5, 2014.*
10.21
10.22
10.23
10.24
10.25
10.26
10.27
Agreement of Investment and Merger between the Company, Research and Diagnostics Systems, Inc., Cayenne Merger Sub,
Inc., CyVek, Inc. and Citron Capital Limited dated April 1, 2014--incorporated by reference to Exhibit 10.22 of the
Company’s 10-K dated August 29, 2014.*
Agreement and Plan of Merger by and among Techne Corporation, McLaren Merger Sub, Inc., ProteinSimple and Fortis
Advisors LLC, as the Securityholders’ Representative, dated June 16, 2014--incorporated by reference to Exhibit 2.1 of the
Company’s 8-K dated June 16, 2014.*
Unit Purchase Agreement by and among Techne Corporation, Novus Holdings, LLC, the Members of Novus Holdings, LLC,
and the Members’ Representative dated July 2, 2014 --incorporated by reference to Exhibit 10.24 of the Company’s 10-K
dated August 29, 2014.*
Credit Agreement by and among Bio-Techne Corporation, the Guarantors party thereto, the Lenders party thereto, and BMO
Harris Bank N.A., as Administrative Agent, Swing Line Lender and a lender dated July 28, 2016--incorporated by reference to
Exhibit 10.1 of the Company’s 8-K dated August 2, 2016.*
Form of Indemnification Agreement entered into with each director and executive officers of the Company--incorporated by
reference to Exhibit 10.27 of the Company’s 10-K dated August 29, 2014.*
Letter Agreement between the Company, ProteinSimple, McLaren Merger Sub, Inc. and Fortis Advisors LLC dated July 31,
2014--incorporated by reference to Exhibit 10.4 of the Company’s 10-Q dated November 10, 2014.*
Letter Agreement between the Company, Research and Diagnostics Systems, Inc., Cayenne Merger Sub, Inc., CyVek, Inc. and
Citron Capital Limited dated August 27, 2014--incorporated by reference to Exhibit 10.5 of the Company’s 10-Q dated
November 10, 2014.*
10.28** Employment Agreement by and between the Company and Mr. Robert Gavin dated November 25, 2014--incorporated by
reference to Exhibit 10.5 of the Company’s 10-Q dated February 9, 2015.*
10.29** First Amendment to Employment Agreement by and between the Company and Robert Gavin, effective January 30, 2015--
incorporated by reference to Exhibit 10.3 of the Company’s 10-Q dated February 9, 2015.*
10.30** Form of Amendment to Employment Agreement by and between Bio-Techne Corporation and Executive Officer dated
7(cid:10)
October 15, 2015 – incorporated by reference to Exhibit 10.1 of the Company’s 10-Q dated November 9, 2015.*
10.31** Employment Agreement by and between Bio-Techne Corporation and Executive Officer dated December 29, 2015 –
incorporated by reference to Exhibit 10.1 of the Company’s 10-Q dated February 9, 2016.*
10.32
Agreement and Plan of Merger by and among Bio-Techne Corporation, New Merger Sub Inc., Advanced Cell Diagnostics,
Inc. and Fortis Advisors, LLC as the security holders’ Representative, dated July 6, 2016 – incorporated by reference to
Exhibit 2.1 of the Company’s 8-k dated July 7, 2016.*
7(cid:2)
Exhibit
Number
3.2
21
23
Description
Second Amended and Restated Bylaws of the Bio-Techne Corporation.
Subsidiaries of the Company.
Consent of KPMG LLP, Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
The following financial statements from the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016,
formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Earnings and
Comprehensive Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Shareholders’ Equity, (iv)
the Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements.
-------------
*
** Management contract or compensatory plan or arrangement
Incorporated by reference; SEC File No. 000-17272
Exhibits for Form 10-K have not been included in this report. Exhibits have been filed with the Securities and Exchange Commission.
Upon request to the Investor Relations Department, Bio-Techne Corporation will furnish, without charge, any such exhibits as well as
copies of periodic reports filed with the Securities and Exchange Commission.
7(cid:3)
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
BYLAWS
OF
BIO-TECHNE CORPORATION
Effective July 28, 2016
ARTICLE 1.
OFFICES
1.1) Offices. The principal office of the corporation shall be 614 McKinley Place N.E., Minneapolis, Minnesota 55413,
and the corporation may have offices at such other places within or without the State of Minnesota as the Board.
ARTICLE 2.
MEETINGS OF SHAREHOLDERS
2.1) Regular Meeting. Regular meetings of the shareholders of the corporation entitled to vote shall be held at the principal
office of the corporation or at such other place, within or without the State of Minnesota, as is designated by the Board of Directors, or
by written consent of all the shareholders entitled to vote thereat, at such time on such day of each year as shall be determined by the
Board of Directors or by the Chief Executive Officer. Regular meetings also may be held solely by any combination of means of
remote communication in accordance with Section 2.6 hereof, if designated by the Board of Directors, except that a meeting called by
or at the demand of a shareholder shall be held in the county where the principal executive office of the corporation is located. At each
regular meeting, the shareholders, voting as provided in the Articles of Incorporation, shall elect directors and shall transact such other
business as shall properly come before the meeting.
2.2) Special Meetings. Special meetings of the shareholders entitled to vote may be called at any time by the Chairman of
the Board, the Chief Executive Officer, the Chief Financial Officer, two (2) or more directors, or a shareholder or shareholders
holding ten percent (10%) or more of the voting power of all shares entitled to vote (except that a special meeting for the purpose of
considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise
affect the composition of the Board of Directors for that purpose, must be called by twenty-five percent (25%) or more of the voting
power of all shares of the corporation entitled to vote), who shall demand such special meeting by written notice given to the Chief
Executive Officer or the Chief Financial Officer of the corporation specifying the purposes of such meeting.
2.3) Notice of Meetings. Except as otherwise specified in Section 2.4 or required by law, written or, as permitted by law,
electronic notice of regular or special meetings of shareholders, shall be given not less than five (5) days prior to the date of the
meeting to each holder of shares entitled to vote. The notice shall set out the place (or participation instructions, if participation by
remote communication may occur in accordance with Section 2.6 hereof), date and time of such meeting. Notice of any special
meeting shall state the purpose or purposes of the proposed meeting, and business transacted at all special meetings shall be confined
to the purposes stated in the notice. A shareholder may waive notice of any meeting before, at or after the meeting, in writing, orally
or by attending or participating in the meeting in person, by proxy or by means of remote communication. Presence at a meeting by
any shareholder, whether in person, by proxy or by means of remote communication, is a waiver of notice of that meeting unless the
shareholder objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or
convened, or objects before a vote on an item of business because the item may not lawfully be considered at the meeting and does not
participate in the consideration of the item at that meeting.
7(cid:16)
2.4) Quorum and Adjourned Meeting. The holders of a majority of all shares outstanding and entitled to vote, represented
either in person or by proxy (including participation by means of remote communication), shall constitute a quorum for the transaction
of business at any regular or special meeting of shareholders. In case a quorum is not present at any meeting, those present shall have
the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite number
of voting shares shall be represented. At such adjourned meetings at which the required amount of voting shares shall be represented,
any business may be transacted which might have been transacted at the original meeting.
2.5) Voting. At each meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in
person or by proxy. A shareholder may cast or authorize the casting of a vote by (1) filing a written appointment of a proxy, signed by
the shareholder, with an officer of the corporation at or before the meeting at which the appointment is to be effective, or (2)
telephonic transmission or authenticated electronic communication, whether or not accompanied by written instructions of the
shareholder, of an appointment of a proxy with the corporation or the corporation’s duly authorized agent at or before the meeting at
which the appointment is to be effective, in compliance with Section 302A.449 of the Minnesota Statutes. Each shareholder shall have
one (1) vote for each share having voting power standing in his or her name on the books of the corporation except as may be
otherwise provided in the terms of the share. All elections shall be determined by a plurality vote, and all questions decided by a
majority vote, of the number of shares entitled to vote and represented at any meeting at which there is a quorum except in such cases
as shall otherwise be required by statute, the Articles of Incorporation or these Bylaws.
2.6) Remote Communications. The Board of Directors may determine that any regular or special meeting of shareholders
may be held solely by any combination of means of remote communication through which shareholders and proxies may participate,
if notice of the meeting is given to every holder of shares entitled to vote in compliance with Section 302A.436 of the Minnesota
Statutes, and if the number of shares held by the shareholders participating in the meeting (whether directly or by proxy) would be
sufficient to constitute a quorum at a meeting. Participation by that means constitutes presence of such shares at the meeting in person
for all purposes, or by proxy for all purposes if the requirements of Section 302A.449 of the Minnesota Statutes are met. The Board of
Directors may determine that shareholders and proxies not physically present at any regular or special meeting held at a designated
physical location may participate by any combination of means of remote communication. Participation by that means constitutes
presence of such shares at the meeting in person for all purposes, or by proxy for all purposes if the requirements of Section 302A.449
of the Minnesota Statutes are met.
2.7) Record Date. The Board of Directors may fix a time, not exceeding sixty (60) days preceding the date of any meeting
of shareholders, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting,
notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The Board of Directors may
close the books of the corporation against transfer of shares during the whole or any part of such period. In the absence of action by
the Board, only shareholders of record twenty (20) days prior to a meeting may vote at such meeting.
7(cid:17)
2.8) Advance Notice of Shareholder Proposals and Director Nominations. Nominations of persons for election to the
Board of Directors of the corporation and the proposal of other business to be considered by the shareholders may be made at a
regular meeting of shareholders only (A) pursuant to the corporation’s notice of meeting (or any supplement thereto), (B) by or at the
direction of the Board of Directors or a committee thereof, or (C) by any shareholder of the corporation (i) who was a shareholder of
record of the corporation (and with respect to any beneficial owner, if different, on whose behalf such nomination or proposal is made,
only if such beneficial owner was the beneficial owner of shares of the corporation) at the time the notice provided for in this Section
2.8 is delivered to the Secretary of the corporation and remains a shareholder of record (and, with respect to any beneficial owner,
remains a beneficial owner) through the time of the meeting, (ii) who is entitled to vote at the meeting and (iii) who complies with the
notice procedures set forth in this Section 2.8; clause (C) shall be the exclusive means for a shareholder to submit such business before
a regular meeting of shareholders (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) and included in the corporation’s notice of meeting).
For nominations or other business to be properly brought before a regular meeting by a shareholder pursuant to clause (C) of
the prior paragraph, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation and any such
proposed business (other than the nominations of persons for election to the Board of Directors) must constitute a proper matter for
shareholder action. To be timely, a shareholder’s notice shall be delivered to the Secretary at the principal executive offices of the
corporation not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year’s regular
meeting; provided, however, that in the event that the date of the regular meeting is advanced by more than thirty (30) days or delayed
by more than sixty (60) days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than
the 90th day prior to such regular meeting and not later than the close of business on the 60th day prior to such regular meeting or the
10th day following the day on which public announcement of the date of such meeting is first made. Such shareholder’s notice shall
set forth:
(a) as to each person whom the shareholder proposes to nominate for election as a director, all information
relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Exchange Act (including such person’s written consent to being
named in the proxy statement as a nominee and to serving as a director if elected);
(b) as to any business that the shareholder proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and
(c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (1) the name and address of such shareholder, as they appear on the corporation’s books, and of such
beneficial owner and (2) the class and number of shares of the corporation which are owned beneficially and of record by
each shareholder and such beneficial owner.
Only such persons who are nominated in accordance with the procedures set forth in this Section 2.8 shall be eligible to serve
as directors and only such business shall be conducted at a regular meeting of shareholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Section 2.8. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the regular meeting was made in accordance with the
procedures set forth herein and, if any proposed nomination or business is not in such compliance, to declare that such defective
proposal shall be disregarded.
7(cid:4)
2.9) Notwithstanding the foregoing provisions, a shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing herein shall be deemed to
affect any rights of shareholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under
the Exchange Act.
ARTICLE 3.
DIRECTORS
3.1) General Powers. The property, affairs and business of the corporation shall be managed by a Board of Directors,
which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws required to be exercised or done by the shareholders.
3.2) Number, Term and Qualifications. At each regular meeting of the shareholders, the shareholders shall determine the
number of directors, which shall not be less than the minimum required by law; provided, that between regular meetings the
authorized number of directors may be increased by the shareholders or by the Board of Directors or decreased by the shareholders.
Each director at each regular meeting of shareholders shall be elected for a term of one (1) year and shall hold office until his or her
successor is elected and qualified, or until his or her resignation or removal as provided by statute.
3.3) Vacancies. Vacancies on the Board of Directors shall be filled by the remaining members of the Board, though less
than a quorum; provided that newly created directorships resulting from an increase in the authorized number of directors shall be
filled by two-thirds (2/3) of the directors serving at the time of such increase. Persons so elected shall be directors until their
successors are elected by the shareholders, who may make such election at their next regular meeting or at any special meeting duly
called for that purpose.
3.4) Quorum and Voting. A majority of the whole Board of Directors shall constitute a quorum for the transaction of
business except that when a vacancy or vacancies exist, a majority of the remaining directors (provided such majority consists of not
less than two (2) directors) shall constitute a quorum. Except as otherwise provided in the Articles of Incorporation or these Bylaws,
the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors.
3.5) Regular Meetings. Regular meetings of the Board of Directors shall be held from time to time at such time and place
as may from time to time be fixed by resolution adopted by a majority of the entire Board of Directors. No notice need be given of any
regular meeting.
3.6) Special Meetings. Special meetings of the Board of Directors may be held at such time and place as may be
designated in the notice or the waiver of notice of the meeting. Special meetings of the Board of Directors may be called by the
Chairman or any member of the Board. Unless notice shall be waived by all directors, notice of such special meeting (including a
statement of the purposes thereof) shall be given to each director at least twenty-four (24) hours in advance of the meeting if oral or
two (2) days in advance of the meeting if by mail, electronic mail, facsimile or other written communication; provided, however, that
meetings may be held without waiver of notice from or giving notice to any director while he or she is in the armed forces of the
United States or outside the continental limits of the United States. Attendance at a meeting by any director, without objection in
writing by him, shall constitute a waiver of notice of such meeting.
(cid:17)(cid:6)
3.7) Compensation. Directors who are not salaried officers of the corporation shall be compensated as determined from
time to time by resolution of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving
this corporation in any other capacity and receiving proper compensation therefor.
3.8) Committees. The Board of Directors may, by resolution approved by affirmative vote of a majority of the Board,
establish committees, including but not limited to an Audit Committee, Nominations and Governance Committee, and Executive
Compensation Committee. Each such committee shall have the authority of the Board in the management of the business of the
corporation only to the extent provided in the resolution. Each such committee shall consist of one or more natural persons (who,
except otherwise required by law or corporation policies, need not be directors) appointed by the affirmative vote of a majority of the
directors present, and shall, other than special litigation committees that consider legal rights or remedies of the corporation and
whether those rights and remedies should be pursued, be subject at all times to the direction and control of the Board. Committees
shall be governed by the same rules regarding meetings, action without meetings, notice and waiver of notice, quorum, and voting
requirements as applied to the Board of Directors.
ARTICLE 4.
OFFICERS
4.1) Number and Designation. The Board of Directors shall elect a Chief Executive Officer, a Secretary and a Chief
Financial Officer, and may elect or appoint a Chairman of the Board, one or more Vice Presidents, and such other officers and agents
as it may from time to time determine, each of whom shall have the powers, rights, duties and responsibilities as set forth in the
Minnesota Business Corporations Act or as determined by the Board from time to time. Any of the offices may be held by the same
person. Each officer shall hold office until his or her successor is appointed and qualified or until said officer’s earlier death,
resignation, or removal.
4.2) Election, Term of Office and Qualifications. At the first meeting of the Board of Directors following each election of
directors, the Board shall elect or appoint the officers provided for in Section 4.1 and such officers shall hold office until the next
election of officers or until their successors are elected or appointed and qualify; provided, however, that any officer may be removed
with or without cause by the affirmative vote of a majority of the entire Board of Directors (without prejudice, however, to any
contract rights of such officer).
4.3) Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the
Chairman, Chief Executive Officer or Secretary. The resignation shall take effect at the time specified in the notice and, unless
otherwise specified therein, acceptance of the resignation shall not be necessary to make it effective.
4.4) Vacancies in Office. If there be a vacancy in any office of the corporation, by reason of death, resignation, removal or
otherwise, such vacancy shall be filled for the unexpired term by the Board of Directors at any regular or special meeting.
8(cid:7)
ARTICLE 5.
INDEMNIFICATION
5.1) Indemnification of Directors and Officers. To the full extent permitted by Minnesota Statutes, Section 302A.521, as
amended from time to time, or by other provisions of law, each person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, wherever brought, whether civil, criminal, administrative or investigative,
by reason of the fact that such person is or was a director or officer of the corporation or by reason of the fact that such person is or
was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the corporation against expenses, including attorneys’ fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding.
The indemnification provided by this Section 5.1 shall continue as to a person who has ceased to be a director or officer of the
corporation and shall inure to the benefit of the heirs, executors and administrators of such person.
5.2) Indemnification of Employees. Each person who is not eligible for indemnification pursuant to Section 5.1 above and
who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, wherever
brought, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was an employee of the
corporation or by reason of the fact that such person is or was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified by the corporation by action
of the Board of Directors in accordance with the procedures described by Minnesota Statutes, Chapter 302A, as amended from time to
time, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement, actually and reasonably incurred by
such person in connection with such action, suit or proceeding; provided, however, no person covered by this Section 5.2 shall be
entitled to indemnification or advances for such person’s negligent, willful conduct or unlawful activity (regardless of action or
omission). The indemnification provided by this Section 5.2 shall continue as to a person who has ceased to be an employee and shall
inure to the benefit of the heirs, executors and administrators of such person.
5.3) Advance Payments. The corporation may pay in advance of final disposition expenses incurred in actions, suits and
proceedings specified in Sections 5.1 and 5.2 above and in accordance with the standards and procedures set forth in Section 5.1, with
respect to officers and directors, and Section 5.2, with respect to employees not covered by Section 5.1.
5.4) Insurance. To the full extent permitted by Minnesota Statutes, Section 302A.521, as amended from time to time, or by
other provisions of law, the corporation may purchase and maintain insurance on behalf of any indemnified party against any liability
asserted against such person and incurred by such person in such capacity.
ARTICLE 6.
SHARES AND THEIR TRANSFER
6.1) Certificated or Uncertificated Stock. Shares of the corporation may be certificated, uncertificated, or a combination
thereof. A certificate representing shares of the corporation shall be in such form as the Board of Directors may prescribe, certifying
the number of shares of stock of the corporation owned by such shareholder. The certificates for such stock shall be numbered
(separately for each class) in the order in which they are issued and shall, unless otherwise determined by the Board of Directors, be
signed by the Chairman and the Secretary or an Assistant Secretary of the corporation, if there be one.
8(cid:8)
6.2) Stock Record. As used in these Bylaws, the term “shareholder” shall mean the person, firm or corporation in whose
name outstanding shares of capital stock of the corporation are currently registered on the stock record books of the corporation. A
record shall be kept of the name of the person, firm or corporation owning the stock represented by such certificates respectively, the
respective dates thereof and, in the case of cancellation, the respective dates of cancellation. Every certificate surrendered to the
corporation for exchange or transfer shall be cancelled and no new certificate or certificates shall be issued in exchange for any
existing certificate until such existing certificate shall have been so cancelled (except as provided for in Section 6.5 of this Article 6).
6.3) Facsimile Signatures. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent, or (2) by a
transfer clerk acting on behalf of the corporation and a registrar, the signature of any such Chairman, Secretary or Assistant Secretary
may be a facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on any
such certificate or certificates shall cease to be such officer or officers of the corporation before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the corporation.
6.4) Transfer of Shares. Transfer of shares on the books of the corporation may be authorized only by the registered holder
of such shares (or the shareholder’s legal representative or duly authorized attorney in fact). In the case of shares represented by a
certificate, transfer of such shares shall only occur upon surrender of the certificate duly endorsed, while transfer of uncertificated
shares shall only occur upon a shareholder’s compliance with such procedures the corporation or its transfer agent may require.
6.5) Lost Certificate. Any shareholder claiming a certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact in such form as the Board of Directors may require, and shall, if the directors so require, give the corporation a
bond of indemnity in form and with one or more sureties satisfactory to the Board of at least double the value, as determined by the
Board, of the stock represented by such certificate in order to indemnify the corporation against any claim that may be made against it
on account of the alleged loss or destruction of such certificate, whereupon a new certificate may be issued in the same tenor and for
the same number of shares as the one alleged to have been destroyed or lost.
ARTICLE 7.
GENERAL PROVISIONS
7.1) Dividends. Subject to the provisions of the Articles of Incorporation and of these Bylaws, the Board of Directors may
declare dividends from the net earnings or net assets of the corporation available for dividends whenever and in such amounts as, in its
opinion, the condition of the affairs of the corporation shall render it advisable and to the extent permitted by law.
7.2) Surplus and Reserves. Subject to the provisions of the Articles of Incorporation and of these Bylaws, the Board of
Directors in its discretion may use and apply any of the net earnings or net assets of the corporation available for such purpose to
purchase or acquire any of the shares of the capital stock of the corporation in accordance with law, or any of its bonds, debentures,
notes, scrip or other securities or evidences of indebtedness, or from time to time may set aside from it net assets or net earnings such
sums as it, in its absolute discretion, may think proper as a reserve fund to meet contingencies, for the purpose of maintaining or
increasing the property or business of the corporation, or for any other purpose it may think conducive to the best interests of the
corporation.
8(cid:9)
7.3) Fiscal Year. The fiscal year of the corporation shall be established by the Board of Directors.
7.4) Seal. The corporation shall have such corporate seal or no corporate seal as the Board of Directors shall from time to
time determine.
7.5) Securities of Other Corporations.
(a) Voting Securities Held by the Corporation. Unless otherwise ordered by the Board of Directors, the Chief
Executive Officer shall have full power and authority on behalf of the corporation (i) to attend and to vote at any meeting of
security holders of other companies in which the corporation may hold securities; (ii) to execute any proxy for such meeting
on behalf of the corporation and (iii) to execute a written action in lieu of a meeting of such other company on behalf of this
corporation. At such meeting, by such proxy or by such writing in lieu of meeting, the Chief Executive Officer shall possess
and may exercise any and all rights and powers incident to the ownership of such securities that the corporation might have
possessed and exercised if it had been present. The Board of Directors may, from time to time, confer like powers upon any
other person or persons.
(b) Purchase and Sale of Securities. Unless otherwise ordered by the Board of Directors, the Chief Executive
Officer shall have full power and authority on behalf of the corporation to purchase, sell, transfer or encumber any and all
securities of any other company owned by the corporation and may execute and deliver such documents as may be necessary
to effectuate such purchase, sale, transfer or encumbrance. The Board of Directors may, from time to time, confer like
powers upon any other person or persons.
ARTICLE 8.
MEETINGS
8.1) Waiver of Notice. Whenever any notice whatsoever is required to be given by these Bylaws, the Articles of
Incorporation or any of the laws of the State of Minnesota, a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before, at or after the time stated therein, shall be deemed equivalent to the actual required notice.
8.2) Participation by Conference Telephone. Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board of Directors or of such committee by means of conference telephone,
videoconference, or similar communications equipment whereby all persons participating in the meeting can hear and communicate
with each other, and participation in a meeting pursuant to this Section 8.2 shall constitute presence in person at such meeting. The
place of the meeting shall be deemed to be the place of origination of the conference telephone call or similar communication
technique.
8.3) Authorization Without Meeting. Any action of the shareholders, the Board of Directors, or any lawfully constituted
committee of the corporation which may be taken at a meeting thereof, may be taken without a meeting if authorized by a writing
signed by all of the holders of shares who would be entitled to vote on that action, by all of the directors, or by all of the members of
such committee, as the case may be.
8(cid:10)
ARTICLE 9.
AMENDMENTS OF BYLAWS
9.1) Amendments. These Bylaws may be altered, amended, added to or repealed by the affirmative vote of a majority of
the members of the Board of Directors at any regular meeting of the Board or at any special meeting of the Board called for that
purpose, subject to (i) the power of the shareholders to change or repeal such Bylaws and (ii) any other limitations on the authority of
the Board, in each case as provided by the Minnesota Business Corporation Act.
8(cid:2)
Bio-Techne Corporation, a Minnesota corporation, had the material subsidiaries below as of the date of filing its Annual Report on
Form 10-K for the fiscal year ended June 30, 2016. Certain subsidiaries are not named because they were not significant individually
or in the aggregate as of such date. Bio-Techne Corporation is not a subsidiary of any other entity.
SUBSIDIARIES
Exhibit 21
Name
Research and Diagnostic Systems Inc. (R&D Systems)
State/Country of Incorporation
Minnesota
Bionostics, Inc.
Massachusetts
Shanghai PrimeGene Bio-Tech Co., Ltd.
ProteinSimple
ProteinSimple Ltd.
Novus Biologicals, LLC
Bio-Techne Ltd.
Tocris Cookson Limited
Cliniqa Corporation
China
Delaware
Canada
Delaware
United Kingdom
United Kingdom
California
8(cid:3)
Consent of Independent Registered Public Accounting Firm
Exhibit 23
The Board of Directors and Shareholders
Bio-Techne Corporation:
We consent to the incorporation by reference in the registration statements (No. 333-37263, 333-88885, 333-49962, 333-170576, 333-
199847, and 333-207710) on Form S-8 of Bio-Techne Corporation of our report dated August 29, 2016, with respect to the
consolidated balance sheets of Bio-Techne Corporation as of June 30, 2016 and 2015, and the related consolidated statements of
earnings and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30,
2016, and the effectiveness of internal control over financial reporting as of June 30, 2016, which reports appears in the June 30, 2016
annual report on Form 10-K of Bio-Techne Corporation.
Our report dated August 29, 2016, on the effectiveness of internal control over financial reporting as of June 30, 2016, expresses our
opinion that Bio-Techne Corporation did not maintain effective internal control over financial reporting as of June 30, 2016 because
of the effects of material weaknesses on the achievement of the objectives of the control criteria and contains an explanatory
paragraph that states that material weaknesses were identified related to an ineffective control environment and risk assessment,
information and communication, and monitoring processes as well as ineffective control activities over the completeness and accuracy
of data used in the financial reporting process.
Our report dated August 29, 2016, on the effectiveness of internal control over financial reporting as of June 30, 2016, contains an
explanatory paragraph that states that the scope of management assessment of the effectiveness of internal control over financial
reporting excluded the operations of Cliniqa Corporation and Zephyrus Biosciences, which were acquired on July 8, 2015 and March
14, 2016, respectively. Cliniqa Corporation and Zephyrus Biosciences represented 9.0% of Bio-Techne Corporation’s total assets and
5.3% of its total revenues as of and for the year ended June 30, 2016. Our audit of internal control over financial reporting of Bio-
Techne Corporation also excluded an evaluation of the internal control over financial reporting of Cliniqa Corporation and Zephyrus
Biosciences.
/s/ KPMG LLP
Minneapolis, Minnesota
August 29, 2016
8(cid:16)
Exhibit 31.1
I, Charles Kummeth, certify that:
1.
I have reviewed this annual report on Form 10-K of Bio-Techne Corporation;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report.
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonable likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent function):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: August 29, 2016
/s/ Charles Kummeth
Charles Kummeth
Chief Executive Officer
8(cid:17)
Exhibit 31.2
I, James T. Hippel, certify that:
1.
I have reviewed this annual report on Form 10-K of Bio-Techne Corporation;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report.
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonable likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent function):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: August 29, 2016
/s/ James T. Hippel
James T. Hippel
Chief Financial Officer
8(cid:4)
Exhibit 32.1
BIO-TECHNE CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Bio-Techne Corporation (the “Company”) on Form 10-K for the year ended June 30, 2016 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles Kummeth, Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Charles Kummeth
Charles Kummeth
Chief Executive Officer
August 29, 2016
(cid:4)9
Exhibit 32.2
BIO-TECHNE CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Bio-Techne Corporation (the “Company”) on Form 10-K for the year ended June 30, 2016 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James T. Hippel, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ James T. Hippel
James T. Hippel
Chief Financial Officer
August 29, 2016
9(cid:7)
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Board of Directors
Robert V. Baumgartner
Chairman of the Board and Director
Roger C. Lucas, Ph.D.
Vice Chairman and Director
Charles Kummeth
President, Chief Executive Officer and
Director
Charles A. Dinarello, M.D.
Director
John L. Higgins
Director
Karen A. Holbrook, Ph.D.
Director
Roeland Nusse, Ph.D.
Director
Randolph C. Steer, M.D., Ph.D.
Director
Harold J. Wiens
Director
Executive Officers
Charles Kummeth
President and Chief Executive Officer
James T. Hippel
Chief Financial Officer
J. Fernando Bazan, Ph.D.
Senior VP, Chief Technology Officer
David Eansor
Senior VP, Biotechnology Division
Brenda Furlow
Senior VP, General Counsel
Robert Gavin
Senior VP, Protein Platforms Division
Kevin Gould
Senior VP, Diagnostics Division
Annual Meeting
The annual meeting of shareholders of
Bio-Techne Corporation will be held via a live webcast available at
www.virtual shareholder meeting.com/TECH
Thursday, October 27, 2016, at 3:30 p.m. (Central Time).
TECH is Bio-Techne Corporation’s Nasdaq stock symbol, which is listed on the Nasdaq Global Select Market.
Bio-Techne Corporation
614 McKinley Place NE
Minneapolis, MN 55413-2610, USA
(612) 379-8854