Bio-Techne(TECH) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Unaudited condensed consolidated financial statements for Q3 2020, covering earnings, balance sheets, cash flows, and notes Condensed Consolidated Statements of Earnings and Comprehensive Income | Metric | Q3 2020 (in thousands) | Q3 2019 (in thousands) | YoY Change | | :----- | :--------------------- | :--------------------- | :--------- | | Net sales | $204,199 | $183,243 | +11.4% | | Gross margin | $137,731 | $118,414 | +16.3% | | Operating income | $49,092 | $33,327 | +47.3% | | Net earnings | $33,395 | $14,398 | +131.9% | | Basic EPS | $0.87 | $0.38 | +128.9% | | Diluted EPS | $0.83 | $0.37 | +124.3% | Condensed Consolidated Balance Sheets | Metric | Sep 30, 2020 (in thousands) | Jun 30, 2020 (in thousands) | Change | | :----- | :-------------------------- | :-------------------------- | :----- | | Total current assets | $541,893 | $520,920 | +$20,973 | | Total assets | $2,053,096 | $2,027,589 | +$25,507 | | Total current liabilities | $105,424 | $106,668 | -$1,244 | | Total shareholders' equity | $1,439,285 | $1,381,192 | +$58,093 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Q3 2020 (in thousands) | Q3 2019 (in thousands) | YoY Change | | :----------------- | :--------------------- | :--------------------- | :--------- | | Net cash provided by operating activities | $66,009 | $40,539 | +62.8% | | Net cash used in investing activities | $(8,138) | $(15,085) | -46.0% | | Net cash provided by (used in) financing activities | $(34,933) | $(24,269) | +44.0% | | Cash and cash equivalents at end of period | $169,404 | $99,891 | +69.6% | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Detailed disclosures and explanations for condensed consolidated financial statements, covering accounting policies, balance sheet items, and segment performance Note 1. Basis of Presentation and Summary of Significant Accounting Policies - The interim financial statements are unaudited and prepared in accordance with GAAP and Form 10-Q instructions, reflecting normal recurring adjustments[18] - The Company adopted ASU 2016-13 (Credit Losses) on July 1, 2020, with a $0.3 million cumulative impact to retained earnings, which was not material due to high collection rates on trade receivables[21] - The Company adopted ASU 2018-15 (Cloud Computing Arrangement Costs) on July 1, 2020, prospectively capitalizing eligible implementation costs[22] Note 2. Revenue Recognition - Revenue from consumables and instruments is recognized at a point in time upon transfer of control (generally shipment); service revenues are recognized over time or at a point in time for laboratory services[24] - As of July 1, 2020, the Company began estimating variable consideration for Medicare-reimbursed laboratory services due to sufficient historical data, recognizing approximately $0.5 million in Q1 FY2021 for prior services[24] | Revenue Type | Q3 2020 (in thousands) | Q3 2019 (in thousands) | YoY Change | | :----------- | :--------------------- | :--------------------- | :--------- | | Consumables | $166,627 | $151,445 | +10.0% | | Instruments | $19,572 | $16,993 | +15.2% | | Services | $15,464 | $10,623 | +45.6% | | Royalty revenues | $2,536 | $4,182 | -39.4% | | Total revenues, net | $204,199 | $183,243 | +11.4% | Note 3. Selected Balance Sheet Data | Inventory Component | Sep 30, 2020 (in thousands) | Jun 30, 2020 (in thousands) | Change | | :------------------ | :-------------------------- | :-------------------------- | :----- | | Raw materials | $52,808 | $51,530 | +$1,278 | | Finished goods | $57,887 | $56,268 | +$1,619 | | Inventories, net | $110,695 | $107,798 | +$2,897 | | Intangible Asset | Sep 30, 2020 (in thousands) | Jun 30, 2020 (in thousands) | Change | | :--------------- | :-------------------------- | :-------------------------- | :----- | | Developed technology | $435,761 | $434,653 | +$1,108 | | Trade names | $143,926 | $146,713 | -$2,787 | | Customer relationships | $213,769 | $211,750 | +$2,019 | | Patents and other intangibles | $8,138 | $2,475 | +$5,663 | | Intangible assets, net | $507,591 | $516,545 | -$8,954 | - Goodwill increased by $3.3 million to $731.6 million as of September 30, 2020, primarily due to currency translation, with no impairment indicators identified[39][40] Note 4. Fair Value Measurements - The Company measures financial instruments at fair value using a three-level hierarchy, maximizing observable inputs[42][43] | Financial Instrument | Sep 30, 2020 (in thousands) | Jun 30, 2020 (in thousands) | Level | | :------------------- | :-------------------------- | :-------------------------- | :---- | | Equity securities | $83,491 | $87,842 | Level 1/2 | | Certificates of deposit | $34,495 | $36,426 | Level 1 | | Contingent consideration | $5,987 | $6,137 | Level 3 | | Derivative instruments - cash flow hedges | $14,523 | $17,331 | Level 2 | - Contingent consideration liabilities, related to Quad and B-MoGen acquisitions, are Level 3 liabilities, re-measured each period, with a fair value of $5.987 million as of September 30, 2020[51][52] Note 5. Debt and Other Financing Arrangements - The Company has a $600.0 million revolving credit facility and a $250.0 million term loan, maturing August 1, 2023[55] - As of September 30, 2020, the outstanding balance under the Credit Agreement was $323.9 million[56] Note 6. Leases - The Company adopted ASC 842 (Leases) on July 1, 2019, recognizing operating lease right-of-use assets and liabilities based on the present value of lease payments[57][58] | Lease Metric | Sep 30, 2020 (in thousands) | | :----------- | :-------------------------- | | Operating lease right of use assets | $70,018 | | Current operating lease liabilities | $9,695 | | Noncurrent operating lease liabilities | $65,694 | | Total operating lease liabilities