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Foreign currency fluctuations and general economic conditions had anegative impact on consolidated net sales and earnings in the quarter endedDecember 31, 2008. The change in exchange rates used to convert foreigncurrencies (primarily British pound sterling and Euros) to U.S. dollarsreduced net earnings by $1.5 million ($.04 per diluted share) for the quarterand $1.8 million ($.05 per diluted share) for the six months ended December31, 2008, as compared to the same periods in last fiscal year.
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Consolidated net sales for the quarter and six months ended December 31,2008 were $61.9 million and $131.2 million, respectively. This was a 0.4%decrease and 9.2% increase from the quarter and six months ended December 31,2007, respectively. Consolidated net sales were negatively affected by thestrength of the U.S. dollar as compared to foreign currencies. Excluding theeffect of changes in foreign currency exchange rates, consolidated net salesincreased 5.0% and 11.5% for the quarter ended and six months ended December31, 2008, respectively, from the comparable prior-year periods.
Biotechnology net sales, which include sales by R&D Systems' BiotechnologyDivision, R&D Systems China and BiosPacific, were $40.3 million and $86.5million for the quarter and six months ended December 31, 2008, increases of3.0% and 10.8%, respectively, from the comparable prior-year periods. NorthAmerican biotechnology sales to industrial and academic customers grew at lessthan 2% during the second quarter of fiscal 2009. The Company attributes thelower second quarter sales growth rate to customer caution in a time ofeconomic uncertainty.
R&D Europe's net sales for the quarter and six months ended December 31,2008 were $17.3 million and $36.2 million, a decrease of 9.2% and an increaseof 5.1%, respectively, from the same prior-year periods. R&D Europe's netsales increased 8.6% for the quarter and 13.0% for the six months endedDecember 31, 2008 when measured at currency rates in effect in the comparableprior-year periods.
Hematology net sales for the quarter and six months ended December 31,2008 were $4.3 million and $8.5 million, increases of 7.2% and 11.5%,respectively, compared to the quarter and six months ended December 31, 2007.
Consolidated gross margins were 78.3% and 79.8% for the quarter and sixmonths ended December 31, 2008 respectively, compared to 79.5% and 79.3% forthe quarter and six months ended December 31, 2007. The decrease in grossmargins in the second quarter was primarily caused by lower gross margins inEurope resulting from unfavorable exchange rates.
Selling, general and administrative expenses for the quarter and sixmonths ended December 31, 2008 decreased $942,000 (8.9%) and $192,000 (1.0%),respectively from the quarter and six months ended December 31, 2007. Thedecrease in selling, general and administrative expenses from the comparableprior-year periods were the result of the following (in thousands):
Second quarter selling, general and administrative expense increased fromthe first quarter of fiscal 2009 due primarily to costs associated withproduction, printing and mailing of the annual catalog and additional expenseas a result of the annual grant of stock options to the Company's Board ofDirectors.
Research and development expenses increased $283,000 (5.1%) and $1.0million (9.4%), respectively, for the quarter and six months ended December31, 2008 from the comparable prior-year periods.
Interest income decreased $1.0 million and $1.2 million for the quarterand six months ended December 31, 2008, respectively, from the comparableprior-year periods, primarily as a result of lower rates of return on cash andavailable-for-sale investments and to a lesser extent to lower cash andavailable-for-sale investment balances.
The effective tax rate was 30.8% for the quarter and 32.3% for the sixmonths ended December 31, 2008 as compared to 33.6% for the quarter and sixmonths ended December 31, 2007. Income tax expense in the second quarter offiscal 2009 benefited from the renewal of the U.S. research and developmentcredit. The $695,000 research and development tax credit for the quarterended December 31, 2008, included credit for the January to June 2008 periodin addition to a credit for the current year six-month period. Withoutsignificant business developments, the Company expects its fiscal 2009effective income tax rate to range from approximately 32.5% to 33.5%.
In November 2007, the Company's Board of Directors authorized therepurchase and retirement of up to $150 million of the Company's common stock.The Company repurchased approximately 960,000 shares of its common stockduring the second quarter of fiscal 2009 for approximately $62.7 million.Approximately $20.0 million remains available for the repurchase of sharesunder this authorization.
Forward Looking Statements:
This earnings release contains forward-looking statements within themeaning of the Private Litigation Reform Act. These statements, including theCompany's expectations as to consolidated income tax rates, involve risks anduncertainties that may affect the actual results of operations. The followingimportant factors, among others, have affected and, in the future, couldaffect the Company's actual results: the introduction and acceptance of newbiotechnology and hematology products, the levels and particular directions ofresearch by the Company's customers, the impact of the growing number ofproducers of biotechnology research products and related price competition,general economic conditions, the retention of hematology OEM and proficiencysurvey business, the impact of currency exchange rate fluctuations, and thecosts and results of research and product development efforts of the Companyand of companies in which the Company has invested or with which it has formedstrategic relationships.
For additional information concerning such factors, see the Company'sannual report on Form 10-K and quarterly reports on Form 10-Q as filed withthe Securities and Exchange Commission. We undertake no obligation to updateor revise any forward-looking statements we make in this release due to newinformation or future events. Investors are cautioned not to place undueemphasis on these statements.
Techne Corporation has two operating subsidiaries: Research andDiagnostic Systems, Inc. (R&D Systems) of Minneapolis, Minnesota and R&DSystems Europe, Ltd. (R&D Europe) of Abingdon, England. R&D Systems is aspecialty manufacturer of biological products. R&D Systems has twosubsidiaries, BiosPacific, Inc. (BiosPacific), located in Emeryville,California and R&D Systems China Co. Ltd., (R&D China), located in Shanghai,China. BiosPacific is a worldwide supplier of biologics to manufacturers ofin vitro diagnostic systems and immunodiagnostic kits. R&D China and R&DEurope distribute biotechnology products.Quarter Six Months Change in exchange rates to convert foreign expenses to U.S. dollars $(685) $(887) Reduction in profit sharing expense (670) (617) Other, including annual wage, salary and benefits increases 413 1,312 $(942) $(192)
SOURCE Techne Corporation
