FinanceLooker

Excrept from filing document 2024-06-30

As of December 31 2023 the aggregate market value of the Common Stock held by non affiliates of the Registrant was 12 1 billion based upon the closing sale price as reported on The Nasdaq Stock Market 77 16 per share 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
Certain statements included or incorporated by reference in this Annual Report in other documents we file with or furnish to the Securities and Exchange Commission SEC in our press releases webcasts conference calls materials delivered to shareholders and other communications are forward looking statements within the meaning of the U S federal securities laws All statements other than historical factual information are forward looking statements including without limitation statements regarding projections of revenue expenses profit profit margins pricing tax rates tax provisions cash flows our liquidity position or other projected financial measures management s plans and strategies for future operations including statements relating to anticipated operating performance cost reductions new product and service developments competitive strengths or market position acquisitions and the integration thereof strategic opportunities dividends and executive compensation growth declines and other trends in markets we sell into new or modified laws regulations and accounting pronouncements future regulatory approvals and the timing and conditionality thereof outstanding claims legal proceedings tax audits and assessments and other contingent liabilities future foreign currency exchange rates and fluctuations in those rates general economic and capital markets conditions the anticipated timing of any of the foregoing assumptions underlying any of the foregoing and any other statements that address events or developments that Bio Techne intends or believes will or may occur in the future Terminology such as believe anticipate should could intend will plan expect estimate project target may possible potential forecast and positioned and similar references to future periods are intended to identify forward looking statements although not all forward looking statements are accompanied by such words Forward looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends current conditions expected future developments and other factors they believe to be appropriate These forward looking statements are subject to a number of risks and uncertainties including but not limited to the risks and uncertainties set forth below and under Item 1A Risk Factors in this Annual Report
Forward looking statements are not guaranties of future performance and actual results may differ materially from the results developments and business decisions contemplated by our forward looking statements Accordingly you should not place undue reliance on any such forward looking statements Forward looking statements speak only as of the date of the report document press release webcast call materials or other communication in which they are made Except to the extent required by applicable law we do not assume any obligation to update or revise any forward looking statement whether as a result of new information future events and developments or otherwise
Investment in our securities involves risk and uncertainty and you should carefully consider all information in this Annual Report on Form 10 K prior to making an investment decision regarding our securities Below is a summary of material risks and uncertainties we face which are discussed more fully in Item 1A Risk Factors
Bio Techne and its subsidiaries collectively doing business as Bio Techne Corporation Bio Techne we our us or the Company develop manufacture and sell life science reagents instruments and services for the research diagnostics and bioprocessing markets worldwide With our broad product portfolio and application expertise we sell integral components of scientific investigations into biological processes and molecular diagnostics revealing the nature diagnosis etiology and progression of specific diseases Our products aid in drug discovery efforts and provide the means for accurate clinical tests and diagnoses
We manage the business in two operating segments our Protein Sciences segment and our Diagnostics and Genomics segment Our Protein Sciences segment is a leading developer and manufacturer of high quality biological reagents used in all aspects of life science research diagnostics and cell and gene therapy This segment also includes proteomic analytical tools both manual and automated that offer researchers and pharmaceutical manufacturers efficient and streamlined options for protein analysis automated western blot and multiplexed ELISA workflows Our Diagnostics and Genomics segment develops and manufactures diagnostic products including controls calibrators and diagnostic assays for the regulated diagnostics market exosome based molecular diagnostic assays advanced tissue based in situ hybridization assays for spatial genomic and tissue biopsy analysis and genetic and oncology kits for research and clinical applications
We are a Minnesota corporation with our global headquarters in Minneapolis Minnesota We were founded in 1976 as Research and Diagnostic Systems Inc We became a publicly traded company in 1985 through a merger with Techne Corporation now Bio Techne Corporation Our common stock is listed on the NASDAQ under the symbol TECH We operate globally with offices in many locations throughout North America Europe and Asia Today our product lines include hundreds of thousands of diverse products most of which we manufacture ourselves in multiple locations in North America as well as a location each in the U K and China
Our historical focus was on providing high quality proteins antibodies and immunoassays to the life science research market and hematology controls to the diagnostics market Since 2013 we have been implementing a disciplined strategy to accelerate growth in part by acquiring businesses and product portfolios that leveraged and diversified our existing product lines filled portfolio gaps with differentiated high growth businesses and expanded our geographic scope From fiscal years 2013 through 2024 we have acquired agreed to acquire or made investments in twenty companies that have expanded the product offerings and geographic footprint of both operating segments including the acquisition of Lunaphore SA Lunaphore at the beginning of fiscal year 2024 We also completed a 19 9 investment in Wilson Wolf Corporation Wilson Wolf in fiscal year 2023 and will acquire the remaining ownership in Wilson Wolf by the end of calendar year 2027 if not earlier due to its achievement of revenue or earnings before interest taxes depreciation and amortization EBITDA targets Additionally subsequent to fiscal 2024 we made an investment in Spear Bio which is a leader in the development and manufacturing of ultra sensitive immunoassays capable of measuring protein biomarkers at attomolar level from sub microliter sample volume Recognizing the importance of an integrated global approach to meeting our mission and accomplishing our strategies we have maintained many of the brands of the companies we have acquired but unified under a single global brand Bio Techne
We are committed to providing the life sciences community with innovative high quality scientific tools that allow our customers to make extraordinary discoveries and treat and diagnose diseases 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 strategic pillars include
Grow Leverage the Core 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
Market Expansion Through Innovation Acquisition We will leverage our existing portfolio to expand our product offerings into novel research fields and further penetrate diagnostics and therapeutics markets Acquisitions have and will likely continue to play an important role in our efforts to expand our portfolio of innovative tools and bioactive reagents and support our initiatives to enter adjacent markets
Deliver Best in Class Customer Experience 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 We strive for every interaction to be seamless personalized and exceeding expectations We aim to deeply understand customers wants and needs while simultaneously offering high quality service at every touchpoint
Develop People Through a Transofrmative Culture As we continue to grow both organically and through acquisition we are intentionally fostering an EPIC culture based on the ideals of Empowerment Passion Innovation and Collaboration We strive to recruit train and retain the most talented staff who share these EPIC ideals to effectively implement our global strategies
The Reagent Solutions division consists of specialized proteins such as cytokines and growth factors antibodies small molecules tissue culture sera and cell selection technologies traditionally used by researchers to further their life science experimental activities and by companies developing next generation diagnostics and therapeutics including companies developing cell and gene based therapeutics We believe we are the world leader in providing high quality proteins both for research use and under current Good Manufacturing Practices or cGMP Key product brands include R D Systems Tocris Biosciences and Novus Biologicals Our combined chemical and biological reagents portfolio provides high quality tools that customers can use in solving complex biological pathways and glean knowledge that may lead to a more complete understanding of biological processes and ultimately to the development of novel therapeutic strategies to address different pathologies In recent years we have made several acquisitions and investments that have expanded our product offerings for the cell and gene therapy market These include a significant investment in state of the art facilities for production of both proteins and small molecules in large quantities manufactured in accordance with cGMP as well as a 19 9 investment in and eventual acquisition of Wilson Wolf which is a leading provider of cell culture devices for cell based therapies Through a collaborative marketing venture with Wilson Wolf and another company we have leveraged the products we have or are developing to provide a more complete offering for the cell and gene therapy market
The Analytical Solutions division includes manual and automated protein analysis instruments and immunoassays that are used in quantifying proteins in a variety of biological fluids Products in this division include traditional manual plate based immunoassays fully automated multiplex immunoassays on various instrument platforms and automated western blotting and isoelectric focusing analysis of complex protein samples Key product brands include R D Systems and ProteinSimple A number of our products have been demonstrated to have the potential to serve as predictive biomarkers and therapeutic targets for a variety of human diseases and conditions including cancer autoimmunity diabetes hypertension obesity inflammation neurological disorders and kidney failure Immunoassays can also be useful in clinical diagnostics In fact we have received Food and Drug Administration FDA marketing clearance for a few of our immunoassays for use as in vitro diagnostic devices
Our customers for this segment include researchers in academia and industry chiefly pharmaceutical and biotech companies as well as contract research organizations This segment also sells to diagnostic companion diagnostic and therapeutic customers especially customers engaged in the development of cell and gene based therapies Our biologics line of products in the Analytical Solutions division is used chiefly by production and quality control departments at biotech and pharmaceutical companies We sell our products directly to customers who are primarily located in North America Europe and China as well as through a distribution agreement with Thermo Fisher Scientific We also sell through third party distributors in China Japan certain eastern European countries and the rest of the world Our sales are widely distributed and no single end user customer accounted for more than 10 of the Protein Sciences segment s net sales during fiscal 2024 2023 or 2022
The Spatial Biology division products sold under the Advanced Cell Diagnostics or ACD brand are novel in situ hybridization ISH assays for transcriptome DNA copy and structural variation analysis within intact cells providing highly sensitive and specific spatial information at single cell resolution Since these products preserve spatial context they are particularly useful for complex tissue profiling In the first quarter of fiscal year 2024 we closed on the acquisition of Lunaphore a leading developer of fully automated spatial biology solutions using precision microfluidic technology capable of revealing hyperplex proteomic and transcriptomic biomarkers in tumors and other tissues at single cell and subcellular resolution Lunaphore s COMET instrument automates ACD s RNAscope assays and utilizies antibodies to enable simultaneous hyperplex detection of protein and RNA biomarkers on the same slide at single cell resolution
The Molecular Diagnostics division markets and sells products and services under the Exosome Diagnostics and Asuragen brands The Exosome Diagnostics brand is based on exosome based liquid biopsy techniques that analyze genes or their transcripts It includes the ExoDx Prostate test which is a urine based assay for early detection of high grade prostate cancer used as an aid in deciding the need for biopsy in men with grey zone prostate specific antigen PSA scores ExoDX Prostate is offered by Exosome Diagnostics as a lab developed test We have also licensed exclusively the ExoTRU kidney transplant rejection test to Thermo Fisher Scientific We also sell products for genetic carrier screening oncology diagnostics molecular controls and research under the Asuragen brand
The Diagnostic Reagents division consists of regulated products traditionally used as calibrators and controls in the clinical setting Also included are instrument and process control products for hematology blood chemistry blood gases coagulation controls and reagents used in various diagnostic applications We often manufacture these reagents on a custom basis tailored to a customer s specific diagnostic assay technology We supply these reagents in various formats including liquid frozen or in lyophilized form Most of these products are sold on an Original Equipment Manufacturer OEM basis to instrument manufacturers with most products being FDA cleared
The customers for the Spatial Biology division include researchers in academia as well as investigators in pharmaceutical and biotech companies We sell our products directly to those customers who are primarily located in North America Europe and China and through distributors elsewhere In addition to being useful research tools our DNA and RNA in situ hybridization ISH assays have diagnostics applications as well and several are cleared or currently under review by the FDA in partnership with diagnostics instrument manufacturers and pharmaceutical companies
In the United States we offer the ExosomeDx Prostate test to physicians using our lab developed non invasive urine based assay for prostate cancer detection Our diagnostic laboratory is certified under and regulated by the State of Massachusetts pursuant to the Clinical Laboratory Improvement Amendments or CLIA We reach our customers through physicians prescribing such tests for their patients This test is also available in Europe as a CE marked product The Asuragen
Our manufacturing operations use a wide variety of raw materials and components including electronic components chemicals and biological materials No single supplier is material although for some components that require particular specifications or regulatory or other qualifications there may be a single supplier or a limited number of suppliers that can readily provide such components We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain which in certain cases includes the use of safety stock alternative materials and qualification of multiple supply sources
The majority of our products are shipped within one day of receipt of the customers orders other than our instruments and related cartridges which are typically shipped within one to two weeks of receipt of an order There was no significant backlog of orders for our products as of the date of this Annual Report on Form 10 K or as of a comparable date For additional discussion of risks relating to supply chain and manufacturing refer to Item 1A Risk Factors
Although our segments both generally operate in highly competitive markets it is difficult to determine our competitive position either in the aggregate or by segment since none of our competitors offer all of the same product and service lines or serve all of the same markets as the Company or any of its segments does Because of the range of the products and services we sell we encounter a wide variety of competitors including a number of large global companies or divisions of such companies with substantial capabilities and resources as well a number of smaller niche competitors with specialized product offerings We have seen increased competition in a number of our markets as a result of the entry of new companies into certain markets the entry of competitors based in low cost manufacturing locations and increasing consolidation in particular markets The number of competitors varies by product line Key competitive factors vary among the Company s businesses but include the specific factors noted above with respect to each particular business and typically also include price quality and safety performance delivery speed application expertise service and support technology and innovation distribution network breadth of product service and software offerings and brand name recognition We believe our competitive position is strong due to the unique aspects of many of our products and our product quality For a discussion of risks related to competition refer to Item 1A Risk Factors
There is also some seasonality for the ExosomeDx Prostate test as patients tend to avoid scheduling medical appointments during the summer and other holidays A majority of Diagnostics Reagents division products are manufactured in large bulk lots and sold on a schedule set by the customer Consequently sales for that division can be unpredictable and not necessarily based on seasonality As a result we can experience material and sometimes unpredictable fluctuations in our revenue from the Diagnostics and Genomics segment
Although the Company transacts business with various government entities no government contract is of such magnitude that renegotiation of profits or termination of the contract at the election of the government entity would have a material adverse effect on the Company s financial results As a party to these contracts Bio Techne does have to comply with
We believe that our future success depends to a large extent on our ability to keep pace with changing technologies and market needs Bio Techne is engaged in continuous research and development in all of our major product lines We also carry out research to develop new products that build upon and expand the technologies we acquire through our acquisition strategy In fiscal 2024 we introduced over 800 new products While this is an area of focus for the Company there is no assurance that any of the products in the research and development phases can be successfully completed or if completed can be successfully introduced into the marketplace
Through its subsidiaries Bio Techne employed approximately 3 100 full time and part time employees as of June 30 2024 of whom approximately 2 300 were employed in the United States and approximately 800 outside the United States None of the United States employees are unionized Outside the United States the Company has government mandated collective bargaining arrangements or work councils in certain countries
Bio Techne is committed to attracting developing engaging and retaining the best people possible from around the world to sustain and grow our leadership position in life sciences tools and diagnostics We strive to create an employee experience that allows each to achieve their life s best work This is demonstrated by leading with our EPIC values of Empowerment Passion Innovation and Collaboration We continuously build on our people first culture led by uncompromising integrity hosting a place of belonging granting access to innovation and respecting human rights around the globe
Our four EPIC values of Empowerment Passion Innovation and Collaboration are the backbone for the way we approach the leadership and direction of our work force Employees are empowered to realize their potential Our culture supports and encourages a collaborative approach to working with each other and with our customers We encourage innovation to continually improve our products services and processes and our passions for science and the missions of our customers are our guiding lights
Bio Techne s Board of Directors reviews management succession planning at least annually and its Compensation Committee reviews the Company s talent management strategy periodically in connection with significant initiatives and acquisitions as well as part of its oversight of our executive and equity compensation programs At the management level our Chief Human Resources Officer who reports directly to our President and CEO is responsible for the development and execution of the Company s talent management strategy
Our engagement strategy focuses on developing the best workplace and best people leaders to meet our employees needs We believe that strong employee engagement helps enable higher retention and better business performance We assess our engagement performance through regular consultation with our managers We also engage more formally via an annual engagement survey that assesses our employees overall experience In 2024 74 of our global workforce participated and 77 of those who responded provided favorable feedback While these responses were quite positive our management used the responses to inform and shape our future employee focused initiatives These initiatives in the past have resulted in changes in programs and policies including expansion of our management and leadership development programs addition of a parental leave program expansion of our incentive programs to include annual cash
bonuses to all employees introduction of flexible working addition of an internal communications function leadership engagement focused on transparency and stronger feedback follow up and expansion of the breadth and resources of our Employee Resource Groups ERGs In fiscal year 2024 we empowered work life integration through hybrid work models wherever feasible continued to cultivate belonging and inclusion through deepened investment of resources to our ERGs and paved the path for career growth through the personalized development and implementation of individual action plans
We believe a diverse workforce and culture of belonging is central to drive innovation fuel growth and help ensure our technologies and products effectively serve a global customer base The Company s executive sponsored Belonging initiative is focused on providing a welcoming working environment for all employees continued education broadening our candidate pools and implementing and sustaining programs One of the centerpieces of our talent development strategy is our ERGs coordinated under the guidance of our executive sponsored Employee Resource Group Council they offer mentorship support and engagement to help our employees including those from underrepresented groups succeed and thrive As of June 30 2024 we had 10 ERGs operating globally
Bio Techne believes that sustaining its profitable growth will require a continued focus on recruiting and retaining top diverse talent We engage in a variety of recruiting strategies intended to locate and identify qualified candidates and create a talent pipeline The Company offers competitive pay and benefits from flexible work to financial planning resources to an employee stock purchase plan In recent years we bolstered our recruitment and retention efforts by expanding eligibility to receive stock options deeper into the organization and expanded our Long Term Incentive program strategy to include a combination of stock options and restricted stock units instead of exclusively stock options Bio Techne continues to offer a referral bonus with the understanding that this is one of our most successful sourcing methods
In addition to pay and benefits Bio Techne believes that the ability to retain employees requires an environment where they can work productively and where there are opportunities to grow and advance The Company therefore seeks to cultivate a culture of empowerment and collaboration where employees can observe the impact of their efforts and where they see opportunities both laterally and vertically
The last fiscal year continued to see considerable employee mobility across all industries including the biotechnology industry but we nonetheless significantly reduced our attrition rate to maintain durable stability across our enterprise We believe that Bio Techne s sustained efforts on recruitment and retention will fortify our resilience in the face of increased employee mobility and economic challenges
Bio Techne invests in people development in the belief that growing and promoting employees from within the Company creates a more sustainable organization High potential employees are identified through our annual talent review strategy as well as through leadership development programs designed to cultivate future leaders Employees identified as high potential are elevated to the attention of senior management for consideration for additional development growth opportunities and career advancement
Our global Learning and Development program delivers a wide range of initiatives including a validated suite of compliance training and soft technical business interpersonal and career skills Bio Techne also encourages and supports employees who wish to supplement their growth through external training and education As a company that regularly acquires other businesses we believe it is important for employees to be trained in the skills and mindsets that enable them to respond positively to change This initiative allows individuals to deal with change easily and reduces the need to run large scale change management programs
The Company is committed to protecting the physical health safety and psychological well being of our employees by providing a safe work environment and permitting hybrid work schedules wherever feasible We actively monitor and adjust our crisis management plan and response protocol to protect our employees Bio Techne trains all employees on foundational safety principles and requires more rigorous safety and hazard awareness training where appropriate based on function role or team At Bio Techne all employees are empowered and encouraged to maintain and create a safe workplace In addition we offer internal and external resources to provide for the psychological and emotional security of employees including employee resource programs mental health benefit coverage and flexible work for many roles
The Company believes in giving back and in supporting the local communities in which we live and work The Company and its employees donate financially and by giving their time and energy Most sites or departments engage in local charitable causes and activities In some of our sites employees are encouraged to give through regular payroll deductions and through the annual campaign week where employee contributions are matched by the Company Some charitable causes are identified and promoted by our ERGs In addition United States employees receive a paid day off to participate in local opportunities to give back to the community as part of our volunteer time off benefit
Our success depends 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 in our terms and conditions and other sales related documentation
As of June 30 2024 we had rights to approximately 710 granted patents and approximately 330 pending patent applications Products in the Analytical Solutions and the Spatial Biology divisions are protected primarily through pending patent applications and issued patents In addition certain of our products are covered by licenses from third parties to supplement our own patent portfolio Patent protection if granted generally has a life of 20 years from the date of the patent application or patent grant We cannot provide assurance that 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
In addition to pursuing patents on our products we also preserve much of our innovation as trade secrets particularly in the Reagent Solutions division of our Protein Sciences segment Where appropriate we use trademarks or registered trademarks in connection with our products We have taken steps to protect our intellectual property and proprietary technology in part by entering into confidentiality agreements and intellectual property assignment agreements with our employees consultants corporate partners and when needed our advisors See the description of risks associated with the Company s intellectual property in Item 1A Risk Factors
We can give no assurance that Bio Techne s products do not infringe upon patents or proprietary rights owned or claimed by others 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 typically 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 and or diagnostics markets
All trademarks trade names product names graphics and logos of Bio Techne contained herein are trademarks and registered trademarks of Bio Techne or its subsidiaries as applicable in the United States and or other countries Solely for convenience we may refer to trademarks in this Annual Report on Form 10 K without the or symbols Such references are not intended to indicate that we will not assert our full rights to our trademarks
Our operations and some of the products we offer are subject to a number of complex laws and regulations governing the production marketing handling transportation and distribution of our products and services The following sections describe certain significant regulations pertinent to the Company These are not the only laws and regulations applicable
A number of our products are classified as medical devices and are subject to restrictions under domestic and foreign laws rules regulations self regulatory codes and orders including but not limited to the U S Food Drug and Cosmetic Act the FDCA The FDCA requires these products when sold in the United States to be safe and effective for their intended uses and to comply with the regulations administered by the U S Food and Drug Administration FDA The FDA regulates the design development testing manufacture advertising labeling packaging marketing distribution import and export and record keeping for such products Many medical device products are also regulated by comparable agencies in non U S countries in which they are produced or sold
Any medical devices we manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state and non U S agencies As a medical device manufacturer our manufacturing facilities are subject to inspection on a routine basis by the FDA We are required to adhere to the Current Good Manufacturing Practices cGMP requirements as set forth in the Quality Systems Regulation QSR which require manufacturers including third party manufacturers to follow stringent design testing control documentation and other quality assurance procedures during all phases of the design and manufacturing process
We must also comply with post market surveillance regulations including medical device reporting MDR requirements which require that we review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury it if were to recur
Labeling and promotional activities are subject to scrutiny by the FDA and in certain circumstances by the Federal Trade Commission Medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses otherwise known as off label promotion The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses
In the European Union EU our products are subject to the medical device laws of the various member states which are currently based on a Directive of the European Commission Additionally the EU has adopted the In Vitro Diagnostic Regulation the EU IVDR which imposes stricter requirements for the marketing and sale of in vitro diagnostic medical devices including in the area of clinical evaluation requirements quality systems and post market surveillance Manufacturers of in vitro diagnostics medical devices that have been marketed and sold under the prior regulatory regime now have to comply with some of the new EU IVDR requirements while the effective date of other requirements have been delayed Complying with EU IVDR may require material modifications to our quality management systems additional resources in certain functions updates to technical files and additional clinical data in some cases among other changes
One of our products under our Exosome Diagnostics brand is offered as a test by a certified laboratory under CLIA Our Asuragen business also maintains a CLIA certification Consequently we must comply with state licensing regulations applicable to laboratories regulated under CLIA governing laboratory practices and procedures
As a global organization we are subject to data privacy and security laws regulations and customer imposed controls in numerous jurisdictions as a result of having access to and processing confidential personal and or sensitive data in the course of our business In addition to the U S HIPAA privacy and security rules mentioned above which impact some parts of our business individual states also regulate data breach and security requirements and multiple governmental bodies assert authority over aspects of the protection of personal privacy In particular a broad privacy law in California the California Consumer Privacy Act CCPA came into effect in January 2020 The CCPA has some of the same features as the GDPR discussed below and has already prompted several other states to follow with similar laws The EU General Data Protection Regulation that became effective in May 2018 GDPR has imposed significantly stricter requirements in how we collect transmit process and retain personal data including among other things in certain circumstances a requirement for almost immediate notice of data breaches to supervisory authorities and prompt notice to data subjects with significant fines for non compliance Several other countries in which we do business have passed and other countries are considering passing laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions For a discussion of risks related to improper disclosure of private information particularly as a result of cyber security incidents please refer to section entitled Item 1A Risk Factors
We are also subject to various environmental health and safety laws and regulations both within and outside the U S Like other companies in our industry our manufacturing and research activities involve the use and transportation of substances regulated under environmental health and safety laws including those relating to the transportation of hazardous materials
We are subject to the U S Foreign Corrupt Practices Act and various other similar anti corruption and anti bribery acts which are particularly relevant to our operations in countries where the customers are government entities or are controlled by government officials Both directly and indirectly through our distributors we must comply with such laws when interacting with those entities
As Bio Techne s businesses also include export and import activities we are subject to pertinent laws enforced by the U S Departments of Commerce State and Treasury Other nations governments have implemented similar export import control and economic sanction regulations which may affect the Company s operations or transactions subject to their jurisdictions
In addition under U S laws and regulations U S companies and their subsidiaries and affiliates outside the United States are prohibited from participating or agreeing to participate in unsanctioned foreign boycotts in connection with certain business activities including the sale purchase transfer shipping or financing of goods or services within the United States or between the United States and countries outside of the United States If we or certain third parties through which we sell or provide goods or services violate anti boycott laws and regulations we may be subject to civil or criminal enforcement action and varying degrees of liability
We are subject to laws and regulations governing government contracts and failure to address these laws and regulations or comply with government contracts could harm our business by a reduction in revenue associated with these customers We have agreements relating to the sale of our products to government entities and as a result we are subject to various statutes and regulations that apply to companies doing business with the government We are also subject to investigation for compliance with the regulations governing government contracts A failure to comply with these regulations could result in suspension of these contracts criminal civil and administrative penalties or debarment
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 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 https investors 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
Kim Kelderman was promoted to President and Chief Executive Officer of the Company on February 1 2024 and has been an executive officer of the company since joining the company in 2018 Prior to joining the Company he served as an executive at Thermo Fisher Scientific and as a Senior Segment Leader at Becton Dickinson
James 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 and as Vice President Finance at Thermo Fisher Scientific and in financial roles at Honeywell International Mr Hippel started his career with KPMG LLP
Shane Bohnen was promoted to General Counsel and Corporate Secretary on March 3 2023 and has been an attorney on the Company s legal team since July 2019 Prior to joining Bio Techne Mr Bohnen spent 10 years in private practice as a life sciences litigator followed by seven years as in house corporate counsel with an expansive breadth of responsibility and global scope
Set forth below are risks and uncertainties we believe are material to our investors You should refer to the explanation of the qualifications and limitations on forward looking statements in the section titled Information Relating to Forward Looking Statements at the beginning of this Annual Report on Form 10 K
Our business is sensitive to global economic conditions Slower economic growth in the domestic or international markets inflation recession volatility in the credit and currency markets high levels of unemployment or underemployment labor availability constraints public health crises changes or anticipation of potential changes in government trade fiscal tax or monetary policies government budget dynamics particularly in the healthcare and scientific research areas and other challenges in the global economy have in the past adversely affected and may in the future adversely affect the Company and its distributors customers and suppliers
If growth in the global economy or in any of the markets we serve slows for a significant period if there is significant deterioration in the global economy or such markets or if improvements in the global economy do not benefit the markets we serve our business and financial results can be adversely affected
We engage in business globally with approximately 43 of our sales revenue in fiscal 2024 coming from outside the U S Changes potential changes or uncertainties in social political regulatory and economic conditions or laws and policies governing foreign trade manufacturing and development and investment in the territories and countries where we or our customers operate or governing the health care system can adversely affect our business and financial results For example Congress and the U S administration have sought to impose changes to healthcare in the United States including government negotiation regulation of drug prices paid by government programs Such impacts could negatively impact certain markets we serve resulting in an adverse impact on our sales revenue
Political and military conflicts may disrupt our business or negatively impact global economic or business conditions For example Russia s military invasion of Ukraine and the response by the US and European countries to that invasion have caused severe political humanitarian and economic crises not only in Europe but globally Restrictions on trade particularly involving certain foods and energy supplies have increased prices led to widespread inflation and otherwise aggravated economic challenges While we have not historically had significant business in either Russia Ukraine or Israel the broader impact of the conflict could negatively impact our operations and financial results
One of our strategies is to expand geographically particularly in China India and in developing countries both through distribution and through direct operations This subjects us 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 our control including terrorism war natural disasters climate change and diseases In addition geopolitical tensions with these countries could exacerbate these risks
The application of laws and regulations impacting global transactions is often unclear and may at times conflict Compliance with these laws and regulations may involve significant costs or require changes in our 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 our reputation We incur additional legal compliance costs associated with our global operations and could become subject to legal penalties in foreign countries if we do not comply with local laws and regulations which may be substantially different from those in the U S
We continue to expand our operations in countries with developing economies where 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 we implement policies and procedures designed to ensure compliance with these laws there can be no assurance that all of our employees contractors and agents as well as those companies to which we outsource certain aspects of our business operations including those based in foreign countries where practices which violate such U S laws may be customary will comply with our internal policies Any such non compliance even if prohibited by our internal policies could have an adverse effect on our business and result in significant fines or penalties
Our Protein Sciences segment products are sold primarily to research scientists at pharmaceutical and biotechnology companies and at university and government research institutions Research and development spending by our 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
Our Diagnostics and Genomics segment products include applications in 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 us directly or our customers and correspondingly our sales to them For example our Exosome Diagnostics business develops and sells novel exosome based diagnostic tests While we received public payer coverage for certain uses we are currently seeking expanded coverage from public payors as well as coverage decisions regarding reimbursement from additional private payers However the process and timeline for obtaining coverage decisions is uncertain and difficult to predict Further reimbursement reductions due to changes in policy regarding coverage of tests or other requirements for payment such as prior authorization diagnosis code and other claims edits or a physician or qualified practitioner s signature on test requisitions may be implemented from time to time Additionally the U S government s plans to manage prescription drug prices as well as its recently announced intention to regulate lab developed tests may impact the customers and industries we serve by increasing the cost of commercializing and or limiting the profitability of commercialized products All of these payor actions and changes may have a material adverse effect on revenue and earnings associated with our diagnostics products
One of our key strategies is growth through acquisition of other businesses and assets Our ability to grow revenues earnings and cash flow at or above our historic rates depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and realize anticipated synergies and to make appropriate investments that support our long term strategy We may not be able to consummate acquisitions at rates similar to the past which could adversely impact our growth rate and our stock price Promising acquisitions and investments are difficult to identify and complete for a number of reasons including high valuations competition among prospective buyers or investors the availability of affordable funding in the capital markets and the need to satisfy applicable closing conditions and obtain applicable antitrust and other regulatory approvals on acceptable terms Changes in accounting or regulatory requirements or instability in the credit markets could also adversely impact our ability to consummate acquisitions and investments
As part of our business strategy we acquire businesses make investments and enter into joint ventures and other strategic relationships in the ordinary course of business and we also from time to time complete more significant transactions At the beginning of this fiscal year we completed the acquisition of Lunaphore SA a leading developer of fully automated spatial biology solutions Bio Techne also obtained a 19 9 ownership stake in Wilson Wolf and will acquire the remaining ownership no later than the end of calendar year 2027 We have also continued participating in our collaborative marketing venture ScaleReady LLC with Wilson Wolf and another partner which addresses the needs of the rapidly expanding cell and gene therapy market While we believe these business ventures will advance our business strategies and support our growth plans we may not be successful in managing or integrating them into our company Acquisitions investments joint ventures and strategic relationships involve a number of additional financial accounting managerial operational legal compliance and other risks and challenges including but not limited to the following any of which could adversely affect our business and our financial results
We are required under generally accepted accounting principles to test goodwill for impairment at least annually and to review our goodwill amortizable intangible assets 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 amortizable intangible assets and other 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 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
Recruiting and retaining qualified scientific production sales and marketing and management personnel representing diverse backgrounds experiences and skill sets are critical to our success The market for highly skilled workers and leaders in our businesses particularly in the areas of science and technology is extremely competitive While retention improved in fiscal 2024 a number of our businesses and departments continued to face recruitment and retention challenges and faced labor availability constraints and inflationary costs Our growth by acquisition also creates challenges in retaining employees As we integrate past and future acquisitions and evolve our corporate culture to incorporate new workforces some employees may not find such integration or cultural changes appealing The failure to attract and retain such personnel could adversely affect our business
We generally sell our products and services in industries that are characterized by rapid technological change frequent new product introductions and new market entrants and competitors If we do not develop innovative new and enhanced products and services on a timely basis our offerings will become obsolete over time and our business and financial results will suffer Our success will depend on several factors including our ability to
If we fail to accurately predict future customer needs and preferences or fail to produce viable technologies we may invest heavily in research and development of products that do not lead to significant revenue which would adversely affect our business and financial results Even when we successfully innovate and develop new and enhanced products we often incur substantial costs in doing so and our profitability may suffer
We face intense competition across most of our product lines 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 us In addition consolidation trends in the pharmaceutical 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 us 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 countries in Asia and other low cost manufacturing locations is also creating increased pricing and competitive pressures particularly in developing markets In order to compete effectively we must retain longstanding relationships with major customers and continue to grow our business by establishing relationships with new customers continually developing new products and services to maintain and expand our brand recognition and leadership position in various product and service categories and penetrating new markets including high growth markets Our ability to compete can also be impacted by changing customer preferences and requirements for example increased demand for more environmentally friendly products and supplier practices Our failure to compete effectively and or pricing pressures resulting from competition may adversely impact our business and financial results and our expansion into new markets may result in greater than expected risks liabilities and expenses
The integrity and protection of our own data and that of our customers and employees is critical to our business We rely on information technology systems some of which are provided and or managed by third parties to process transmit and store electronic information including sensitive data such as confidential business information and personally identifiable data relating to employees customers other business partners and patients and to manage or support a variety of critical business processes and activities such as receiving and fulfilling orders billing collecting and making payments shipping products providing services and support to customers and fulfilling contractual obligations These systems products and services including those we acquire through business acquisitions can be damaged disrupted or shut down due to attacks by computer hackers computer viruses ransomware human error or malfeasance power outages hardware failures telecommunication or utility failures catastrophes or other unforeseen events and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate Attacks can also target hardware software and information installed stored or transmitted in our products after such products have been purchased and incorporated into third party products facilities or infrastructure Security breaches of systems provided or enabled by us regardless of whether the breach is attributable to a vulnerability in our products or services or security breaches of third party systems we rely on to process store or transmit electronic information can result in the misappropriation destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees partners customers patients or suppliers These attacks breaches misappropriations and other disruptions and damage can interrupt our operations or the operations of our customers and partners delay production and shipments result in theft of our and our customers intellectual property and trade secrets result in disclosure of personally identifiable information damage customer patient business partner and employee relationships and our reputation and result in defective products or services legal claims and proceedings liability and penalties under privacy laws and increased costs for security and remediation in each case resulting in an adverse effect on our business and financial results
In addition our information technology systems require an ongoing commitment of significant resources to maintain and enhance existing systems and develop or integrate new systems to keep pace with continuing changes in information processing technology evolving legal and regulatory standards evolving customer expectations changes in the techniques used to obtain unauthorized access to data and information systems and the information technology needs associated with our changing products and services There can be no assurance that we will be able to successfully maintain enhance and upgrade our systems as necessary to effectively address these requirements
If we are unable to maintain reliable information technology systems or appropriate controls with respect to global data privacy and security requirements and prevent data breaches we may suffer regulatory consequences in addition to business consequences As a global organization we are subject to data privacy and security laws regulations and customer imposed controls in numerous jurisdictions as a result of having access to and processing confidential personal and or sensitive data in the course of our business For example in the United States a small number of our businesses are subject to HIPAA Entities that violate HIPAA due to a breach of unsecured patient health information or that arise from a complaint about privacy practices or an audit by the HHS may be subject to significant civil criminal and administrative fines and penalties and or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non compliance Individual states regulate data breach and security requirements and multiple governmental bodies assert authority over aspects of the protection of personal privacy Most notably in the last several years some states including California Virginia Utah Colorado and Connecticut have passed broad privacy legislation that could result in more material impacts as implementing regulations are issued European laws require us to have an approved legal mechanism to transfer personal data out of Europe Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states may result in fines of up to 20 million or up to 4 of the total worldwide annual turnover of the preceding financial year whichever is higher and other administrative penalties Several other countries such as China and Russia have passed and other countries are considering passing laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions Government enforcement actions can be costly and interrupt the regular operation of our business and data breaches or violations of data privacy laws can result in fines reputational damage and civil lawsuits any of which may adversely affect our business reputation and financial results
Our supply chains distribution systems and information technology systems may be subject to catastrophic loss due to fire flood earthquake hurricane power shortage or outage public health crisis including epidemics and pandemics and the reaction thereto war terrorism riot or other man made or natural disasters If any of these supply chains or systems were to experience a catastrophic loss it could disrupt our operations delay production and shipments result in defective products or services diminish demand damage customer relationships and our reputation and result in legal exposure and significant repair or replacement expenses The third party insurance coverage that we maintain varies from time to time in both type and amount depending on cost availability and our decisions regarding risk retention and may be unavailable or insufficient to protect us against such losses
The manufacture of many of our products is a complex process due in part to strict regulatory requirements for some of our products Problems can arise during manufacturing for a variety of reasons including equipment malfunction failure to follow specific protocols and procedures problems with reliable sourcing of raw materials or components natural disasters and environmental factors and if not discovered before the product is released to market can result in recalls and product liability exposure Because of the quality requirements of some of our customers as well as stringent regulations of the FDA and similar agencies regarding the manufacture of certain of our products alternative manufacturing or sourcing is not always available on a timely basis to replace such production capacity Any of these manufacturing problems could result in significant adverse impacts to our business and financial results
If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions or customer demand our business and financial results may suffer In addition our reliance upon sole or limited sources of supply for certain materials components and services can cause production interruptions delays and inefficiencies
We purchase materials components and equipment from third parties for use in many of our manufacturing operations Our profitability could be adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market fluctuations including those caused by seasonality or cyclicality During a market upturn suppliers from time to time extend lead times limit supplies or increase prices If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet increasing demand we may not be able to satisfy market demand product shipments may be delayed our costs may increase or we may breach our contractual commitments and incur liabilities Conversely in order to secure supplies for the production of products we sometimes enter into noncancelable purchase commitments with vendors which can impact our ability to adjust our inventory to reflect declining market demands If demand for our products is less than we expect we may experience additional excess and obsolete inventories and be forced to incur additional charges and our business and financial results may suffer
In addition some of our businesses purchase certain materials from sole or limited source suppliers for reasons of quality assurance regulatory requirements cost effectiveness availability or uniqueness of design If these or other suppliers encounter financial operating or other difficulties or if our relationship with them changes we might not be able to quickly establish or qualify replacement sources of supply The supply chains for our businesses can also be disrupted by supplier capacity constraints bankruptcy or exiting of the business for other reasons decreased availability of key raw materials or commodities and external events such as natural disasters pandemic health issues war terrorist actions governmental actions such as trade protectionism and legislative or regulatory changes Any of these factors can result in production interruptions delays extended lead times and inefficiencies Because we cannot always immediately adapt our production capacity and related cost structures to changing market conditions at times our manufacturing capacity may exceed or fall short of our production requirements Any or all of these problems can result in the loss of customers provide an opportunity for competing products to gain market acceptance and otherwise adversely affect our business and financial results
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 FDA 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 could adversely affect sales and customer relationships and therefore adversely affect the business While we have taken certain steps to manage these operational risks the Company s future sales growth and earnings may be adversely affected by perceived disruption risks or actual disruptions
We rely upon our manufacturing operations to produce many of the products we sell and our warehouse facilities to store products pending sale Any significant disruption of those operations for any reason such as strikes or other labor unrest power interruptions fire hurricanes or other events beyond our control could adversely affect our sales and customer relationships and therefore adversely affect our business We have significant operations in California near major earthquake faults which make us susceptible to earthquake risk Although most of our raw materials are available from a number of potential suppliers our operations also depend upon our ability to obtain raw materials at reasonable prices If we are unable to obtain the materials we need at a reasonable price we may not be able to produce certain of our products or we may not be able to produce certain of these products at a marketable price which could have an adverse effect on our results of operations
Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations For example we have significant operations in California where serious drought has made water less available and more costly and has increased the risk of wildfires Changes in climate patterns leading to extreme heat waves or unusual cold weather at some of our locations can lead to increased energy usage and costs or otherwise adversely impact our facilities and operations and disrupt our supply chains and distribution systems Concern over climate change can also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions or mitigate the effects of climate change on the environment Any such new or additional legal or regulatory requirements may increase the costs associated with or disrupt sourcing manufacturing and distribution of our products which may adversely affect our business and financial results In addition any failure to adequately address stakeholder expectations with respect to environmental social and governance ESG matters may result in the loss of business adverse reputational impacts diluted market valuations and challenges in attracting and retaining customers and talented employees In addition our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability
Certain of our products and services are sold for use in diagnostics For those products and services in particular manufacturing or design defects in unanticipated use of safety or quality issues or the perception of such issues with respect to off label use of or inadequate disclosure of risks relating to the use of products and services that we make or sell including items that we source from third parties can lead to personal injury death and or property damage and adversely affect our business and financial results These events can lead to recalls or safety alerts result in the removal of a product or service from the market and result in product liability or similar claims being brought against us Recalls removals and product liability and similar claims regardless of their validity or ultimate outcome result in significant costs as well as negative publicity and damage to our reputation that could reduce demand for our products and services Our business can also be affected by studies of the utilization safety and efficacy of medical device products and components that are conducted by industry participants government agencies and others Any of the above can result in the discontinuation of marketing of such products in one or more countries and give rise to claims for damages from persons who believe they have been injured as a result of product issues including claims by individuals or groups seeking to represent a class
Most of our reagent products need to be stored and shipped at certain cold temperatures Consequently we ship a significant portion of our products to our customers by express mail or air delivery through package delivery companies such as FedEx in the U S and DHL in Europe If one or more of these third party package delivery providers were to experience a major work stoppage preventing our products from being delivered in a timely fashion or causing us to incur additional shipping costs we could not pass on to our customers our costs could increase and our relationships with certain of our customers could be adversely affected In addition if one or more of these third party package delivery providers were to increase prices and we were not able to find comparable alternatives or make adjustments in our delivery network our profitability could be adversely affected
Many of the markets we serve are technology driven and as a result intellectual property rights play a significant role in product development and differentiation We own numerous patents trademarks copyrights trade secrets and other intellectual property and licenses to intellectual property owned by others which in aggregate are important to our business The intellectual property rights that we obtain however are not always sufficiently broad and do not always provide us a significant competitive advantage and patents may not be issued for pending or future patent applications owned by or licensed to us In addition the steps that we and our licensors have taken to maintain and protect our intellectual property do not always prevent it from being challenged invalidated circumvented designed around or becoming subject to compulsory licensing In some circumstances enforcement is not available to us because an infringer has a dominant intellectual property position or for other business reasons We also rely on nondisclosure and noncompetition agreements with employees consultants and other parties to protect in part trade secrets and other proprietary rights There can be no assurance that these agreements adequately protect our trade secrets and other proprietary rights and will not be breached that we will have adequate remedies for any breach that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights
These risks are particularly pronounced in countries in which we do business that do not have levels of protection of corporate proprietary information intellectual property technology and other assets comparable to the United States We operate globally with manufacturing operations in China and the UK and approximately 43 of our revenue in fiscal 2024 was from outside the United States The laws regulations and enforcement mechanisms in other countries may in some cases be less protective of our intellectual property rights Our failure to obtain or maintain intellectual property rights that convey competitive advantage adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property and the cost of enforcing our intellectual property rights can adversely impact our business and financial results
Our success depends in part on our ability to operate without infringing the proprietary rights of others and to obtain licenses where necessary or appropriate We have obtained and continue to negotiate licenses to produce a number of products claimed to be owned by others Since we have not conducted a patent infringement study for each of our products it is possible that some of our products may unintentionally infringe patents of third parties
We have been and may in the future be sued by third parties alleging that we are infringing their intellectual property rights These lawsuits are expensive take significant time and divert management s focus from other business concerns If we are found to be infringing the intellectual property of others we could be required to cease certain activities alter
our products or processes or pay licensing fees This could cause unexpected costs and delays which may have a material adverse effect on us If we are unable to obtain a required license on acceptable terms or unable to design around any third party patent we may be unable to sell some of our products and services which could result in reduced revenue In addition if we do 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 our earnings
We currently have a Credit Agreement that provides for a revolving credit facility of 1 billion which can be increased by an additional 400 million subject to certain conditions Borrowings under the Credit Agreement bear interest at a variable rate As of August 16 2024 the Company had drawn 313 million under the Credit Agreement
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
International markets contribute a substantial portion of our revenues and we intend to continue expanding our presence in these regions The exposure to fluctuations in currency exchange rates takes on different forms International revenues and costs are subject to the risk that fluctuations in exchange rates could adversely affect our reported revenues and profitability when translated into U S dollars for financial reporting purposes These fluctuations could also adversely affect the demand for products and services provided by us As a multinational corporation our businesses occasionally invoice third party customers in currencies other than the one in which they primarily do business the functional currency Movements in the invoiced currency relative to the functional currency could adversely impact our cash flows and our results of operations As our international sales grow exposure to fluctuations in currency exchange rates could have a larger effect on our financial results In fiscal 2024 currency translation had a favorable effect of approximately 6 million on revenues due to the value of the U S dollar relative to other currencies in which the company sells products and services
As a global company we are subject to taxation in numerous countries states and other jurisdictions In particular we are affected by the impact of changes to tax laws or related authoritative interpretations in the United States including tax reform under the Tax Cuts and Jobs Act which became effective in late 2017 which included broad and complex changes
In preparing our financial results we record the amount of tax that is payable in each of the countries states and other jurisdictions in which we operate Our future effective tax rate however may be lower or higher than experienced in the past due to numerous factors including a change in the mix of our profitability from country to country changes in accounting for income taxes and recently enacted and future changes in tax laws in jurisdictions in which we operate Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations which could have an adverse effect on our business results of operations and cash flows
As referenced in more detail above we and our customers must comply with a wide array of federal state local and international regulations in such areas as medical device healthcare import and export anticorruption and privacy We develop configure and market our products to meet customer needs created by those regulations Any significant change in regulations could reduce demand for our products or increase our expenses For example many of our instruments are marketed to the pharmaceutical industry for use in discovering and developing drugs and diagnostic products Changes in the U S FDA s regulation of drug or medical device products such as managing the price of certain prescription drugs or potentially increasing regulatory scrutiny of lab developed tests could have an adverse effect on the demand for these products
We have agreements relating to the sale of our products to government entities in the U S and elsewhere and as a result we are subject to various statutes and regulations that apply to companies doing business with the government less than 3 of our fiscal 2024 sales were made to the U S federal government The laws governing government contracts differ from the laws governing private contracts and government contracts may contain pricing terms and conditions that are not applicable to private contracts We are also subject to investigation for compliance with the regulations governing government contracts A failure to comply with these regulations could result in suspension of these contracts criminal civil and administrative penalties or debarment
We are subject to various local state federal foreign and transnational laws and regulations which include the operating and security standards of the U S FDA the U S Drug Enforcement Agency the DEA the U S Department of Health and Human Services the DHHS and other comparable agencies and in the future any changes to such laws and regulations could adversely affect us In particular we are subject to laws and regulations concerning current good manufacturing practices Our subsidiaries may be required to register for permits and or licenses with and may be required to comply with the laws and regulations of the DEA the FDA the DHHS foreign agencies and or comparable state agencies as well as certain accrediting bodies depending upon the type of operations and location of product distribution manufacturing and sale The manufacture distribution and marketing of many of our products and services including medical devices and pharma services are subject to extensive ongoing regulation by the FDA the DEA and other equivalent local state federal and non U S regulatory authorities In addition we are subject to inspections by these regulatory authorities For example the EU has adopted the In Vitro Diagnostic Regulation the EU IVDR which imposes stricter requirements for the marketing and sale of in vitro diagnostic medical devices including in the area of clinical evaluation requirements quality systems and post market surveillance Manufacturers of in vitro diagnostics medical devices that have been marketed and sold under the prior regulatory regime now have to comply with some of the new EU IVDR requirements while the effective date of other requirements have been delayed Complying with EU IVDR the regulation applicable to the Company may require material modifications to our quality management systems additional resources in certain functions updates to technical files and additional clinical data in some cases among other
changes Failure by us or by our customers to comply with the requirements of the EU IVDR or other requirements imposed by these or similar regulatory authorities including without limitation remediating any inspectional observations to the satisfaction of these regulatory authorities could result in warning letters product recalls or seizures monetary sanctions injunctions to halt manufacture and distribution restrictions on our operations civil or criminal sanctions or withdrawal of existing or denial of pending approvals including those relating to products or facilities In addition such a failure could expose us to contractual or product liability claims contractual claims from our customers including claims for reimbursement for lost or damaged active pharmaceutical ingredients as well as ongoing remediation and increased compliance costs any or all of which could be significant We are the sole manufacturer of a number of products for many of our customers and a negative regulatory event could impact our customers ability to provide products to their customers
We are also subject to a variety of federal state local and international laws and regulations that govern among other things the importation and exportation of products the handling transportation and manufacture of substances that could be classified as hazardous and our business practices in the U S and abroad such as anti competition laws Any noncompliance by us with applicable laws and regulations or the failure to maintain renew or obtain necessary permits and licenses could result in criminal civil and administrative penalties and could have an adverse effect on our results of operations
Significant developments or changes in U S laws and policies including as a result of changes in party control of Congress or decisions from the U S Supreme Court such as laws and policies governing foreign trade manufacturing and development and investment in the territories and countries where we or our customers operate or governing the health care system and drug prices can adversely affect our business and financial results For example the previous U S administration increased tariffs on certain goods imported into the United States and trade tensions between the United States and China escalated with each country imposing significant additional tariffs on a wide range of goods imported from the other country That trade tension has not diminished under the current U S administration The U S and China could impose other types of restrictions such as limitations on government procurement or technology export restrictions which could affect our access to markets In addition changes to laws or regulations pertraining to laboratory developed tests may adversely affect our business and financial results These factors have adversely affected and in the future could further adversely affect our business and financial results
We cannot provide assurance that our internal controls and compliance systems including our Code of Ethics and Business Conduct protect us from unauthorized acts committed by employees agents or business partners of ours or of businesses we acquire or partner with that violate U S and or non U S laws including the laws governing payments to government officials bribery fraud kickbacks and false claims pricing sales and marketing practices conflicts of interest competition employment practices and workplace behavior export and import compliance economic and trade sanctions money laundering and data privacy In particular the U S Foreign Corrupt Practices Act the UK Bribery Act and similar anti bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business and we operate in many parts of the world that have experienced governmental corruption to some degree Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the United States and in other jurisdictions and related shareholder lawsuits could lead to substantial civil and criminal monetary and non monetary penalties and could cause us to incur significant legal and investigatory fees In addition the government may seek to hold us liable for violations committed by companies in which we invest or that we acquire We also rely on our suppliers to adhere to our supplier code of conduct and material violations of such code of conduct could occur that could have a material effect on our business and financial results
Certain of our businesses are subject to extensive regulation by the U S FDA and by comparable agencies of other countries as well as laws regulating fraud and abuse in the healthcare industry and the privacy and security of health information Failure to comply with those regulations could adversely affect our business and financial results
Certain of our products are medical devices diagnostics tests and other products that are subject to regulation by the U S FDA or state CLIA regulations by other federal and state governmental agencies by comparable agencies of other countries and regions and by regulations governing hazardous materials and drugs of abuse or the manufacture and sale of products containing any such materials The global regulatory environment has become increasingly stringent and unpredictable Several countries that did not have regulatory requirements for medical devices have established such requirements in recent years and other countries have expanded or plan to expand their existing regulations including implementation of IVDR regulations in Europe Failure to meet these requirements may adversely impact our business and financial results in the applicable geographies
Government authorities may conclude that our business practices do not comply with current or future statutes regulations agency guidance or case law Failure to obtain required regulatory clearances before marketing our products or before implementing modifications to or promoting additional indications or uses of our products other violations of laws or regulations failure to remediate inspectional observations to the satisfaction of these regulatory authorities real or perceived efficacy or safety concerns or trends of adverse events with respect to our products even after obtaining clearance for distribution and unfavorable or inconsistent clinical data from existing or future clinical trials can lead to FDA Form 483 Inspectional Observations warning letters notices to customers declining sales loss of customers loss of market share remediation and increased compliance costs recalls seizures of adulterated or misbranded products fines expenses injunctions civil penalties criminal penalties consent decrees administrative detentions refusals to permit importations partial or total shutdown of production facilities or the implementation of operating restrictions narrowing of permitted uses for a product refusal of the government to grant 510 k clearance suspension or withdrawal of approvals pre market notification rescissions and other adverse effects Further defending against any such actions can be costly and time consuming and may require significant personnel resources Therefore even if we are successful in defending against any such actions brought against us our business may be impaired Ensuring that our internal operations and business arrangements with third parties comply with applicable laws and regulations also involves substantial costs
More specifically as a healthcare provider the Company s Exosome Diagnostics ExoDx Prostate business is subject to extensive regulation at the federal state and local levels in the U S and other countries where it operates The Company s failure to meet governmental requirements under these regulations including those relating to billing practices and financial relationships with physicians hospitals and health systems could lead to civil and criminal penalties exclusion from participation in Medicare and Medicaid and possibly prohibitions or restrictions on the use of its laboratories While the Company believes that it is in material compliance with all statutory and regulatory requirements there is a risk that government authorities might take a contrary position Such occurrences regardless of their outcome could damage the Company s reputation and adversely affect important business relationships it has with third parties
Failure to comply with privacy and security laws and regulations could result in fines penalties and damage to the Company s reputation and have a material adverse effect upon the Company s business a risk that has been elevated with recent acquisitions that use protected health information and utilize healthcare providers for laboratory resting services
If the Company does not comply with existing or new laws and regulations related to protecting the privacy and security of personal or health information it could be subject to monetary fines civil penalties or criminal sanctions In the U S the Health Insurance Portability and Accountability Act of 1996 HIPAA privacy and security regulations including the expanded requirements under U S Health Information Technology for Economic and Clinical Health Act HITECH establish comprehensive standards with respect to the use and disclosure of protected health information PHI by covered entities in addition to setting standards to protect the confidentiality integrity and security of PHI HIPAA restricts the Company s ability to use or disclose PHI without patient authorization for purposes other than payment treatment or healthcare operations as defined by HIPAA except for disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations If the laboratory operations use or disclose PHI improperly under these privacy regulations they may incur significant fines and other penalties for wrongful use or disclosure of PHI in violation of the privacy and security regulations including potential civil and criminal fines and penalties
Bio Techne s cybersecurity program is led by the Company s Chief Information Security Officer CISO with day to day management and administration of our cybersecurity program performed by the IT Security Operations team The CISO reports to the Chief Information Officer CIO and the CIO reports to the Chief Executive Officer The CISO is supported by the Incident Response Team IRT a multi disciplinary management committee comprising senior members from the Security Operations Team legal finance internal audit and other functions The IRT supports the CISO and CIO in supporting and reviewing information security risks and in the event of a cybersecurity incident provides leadership with respect to incident response investigation mitigation and remediation
In addition to leadership and support within management we also work with security service providers to monitor for vulnerabilities and threats and which are reported to the Security Operations team All employees are trained and tested annually on cybersecurity risks and we continually perform simulated phishing exercises with a focus on roles and functions with access to sensitive company and financial information We also conduct periodic tabletop exercises for key personnel involved in cybersecurity risk management including the IRT
Our Board of Directors Board holds overall oversight responsibility for the Company s strategy and risk management including in relation to cybersecurity risks The Board exercises its oversight function through the Audit Committee which oversees the management of risk exposure across various areas including data security risks in accordance with its charter In addition the Audit Committee is specifically responsible for the review and approval of any cybersecurity incident disclosure as set forth in the Committee s charter In the event of a potentially significant cybersecurity incident the Audit Committee s charter requires that management promptly communicate and consult with the Audit Committee
Bio Techne s General Counsel updates the Audit Committee multiple times per year regarding Bio Techne s cybersecurity programs including regularly tracked metrics on incident response internal security testing and measures implemented to monitor and address cybersecurity risks and threats as appropriate The Audit Committee regularly updates the full Board on these matters In addition the CISO and or CIO provides the full Board with a thorough review of the Company s cybersecurity program including current status industry risks and exposure and future strategy
Based on the information we have as of the date of this Annual Report we do not believe any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect Bio Techne including our business strategy results of operations or financial condition However please see Item 1A Risk Factors A significant disruption in or breach of security of our information technology systems or data or violation of data privacy laws could result in damage to our reputation data integrity and or subject us to costs fines or lawsuits under data privacy or other laws or contractual requirements
Bio Techne s cybersecurity strategy is to maintain and fortify a secure actively monitored environment for our and our customers data that complies with legal requirements and industry best practice while supporting our and our customers business needs Our cybersecurity program follows industry standards and best practice for preventing detecting remediating and mitigating potential cybersecurity threats including regular processes to identify evaluate and manage potential risks
Our IT Security Operations team administers and monitors the prevention detection mitigation and remediation of potential cybersecurity risks This team leverages both Bio Techne s internal IT resources including its personnel as well as managed security service providers and other third party security software and technology services as well as through other means We also have implemented processes and technologies for network monitoring and data loss prevention procedures
We conduct periodic risk assessments including with support from external vendors to assess our cyber program identify areas of enhancement and develop strategies for the mitigation of cyber risks We also conduct regular security testing and have established a vulnerability management process supported by security testing for the treatment of identified security risks based on severity including risks arising from our use of third party providers software and service providers In addition to our evolving processes and systems we foster a culture of cybersecurity education training and testing Every year employees in sensitive job categories must take and pass rigorous information security and protection training
We partner with experienced external consultants to assess our cybersecurity program and to perform penetration testing as well as other testing programs designed to identify vulnerabilities and areas for fortification Also as part of our cybersecurity risk management program we maintain cyber insurance with coverage amounts and terms that are typical and appropriate for a company of our size and type This insurance may not be sufficient to cover us against all types of claims related to security breaches cyberattacks and other related breaches
The Minneapolis complex includes approximately 800 000 square feet of space in several adjoining buildings Bio Techne uses approximately 710 000 square feet of the complex for administrative research manufacturing shipping and warehousing activities The Company is currently leasing the remaining space in the complex as retail and office space The Company also owns a 61 000 square foot facility in Saint Paul Minnesota that is utilized for additional manufacturing capabilities and activities
As of August 16 2024 there were over 160 000 beneficial shareholders of the Company s common stock and over 110 shareholders of record The Company paid annual cash dividends totaling 50 4 million 50 3 million and 50 2 million in fiscal 2024 2023 and 2022 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
On August 31 2022 the Company entered into an amended and restated Credit Agreement that provides for a revolving credit facility of 1 billion which can be increased by an additional 400 million subject to certain conditions The credit facility is governed by a Credit Agreement dated August 31 2022 and matures on August 31 2027 The Credit Agreement that governs the revolving line of credit contains customary events of default and would prohibit payment of dividends to Company shareholders in the event of a default thereunder
The Company s repurchase plan approved by the Board on February 2 2022 granted management the discretion to mitigate the dilutive effect of stock option exercises The plan authorizes the Company to purchase up to 400 million in stock The table below sets forth certain information regarding our purchases of common stock in open market transactions during fiscal year 2024
The following chart compares the cumulative total shareholder return on the Company s common stock with the S P 500 Index and the S P 500 Life Sciences Tools and Services Index The comparison assumes 100 was invested on the last trading day before July 1 2018 in the Company s common stock and in each of the foregoing indices and assumes reinvestment of dividends The Company became part of the S P 500 Index during fiscal 2022
The following management discussion and analysis MD A provides information that we believe is useful in understanding our operating results cash flows and financial condition We provide quantitative information about the material sales drivers including the effect of acquisitions and changes in foreign currency at the corporate and segment level We also provide quantitative information about discrete tax items and other significant factors we believe are useful for understanding our results The MD A should be read in conjunction with the consolidated financial information and related notes included in this Form 10 K This discussion contains various Non GAAP Financial Measures and also contains various Forward Looking Statements within the meaning of the Private Securities Litigation Reform Act of 1995 We refer readers to the statements entitled Non GAAP Financial Measures located at the end of this MD A and Forward Looking Information and Cautionary Statements and Risk Factors within Items 1 and 1A of this Form 10 K
Bio Techne develops manufactures and sells life science reagents instruments and services for the research and clinical diagnostic markets worldwide With our deep product portfolio and application expertise we sell integral components of scientific investigations into biological processes and molecular diagnostics revealing the nature diagnosis etiology and progression of specific diseases Our products aid in drug discovery efforts and provide the means for accurate clinical tests and diagnoses
We manage the business in two operating segments our Protein Sciences segment and our Diagnostics and Genomics segment Our Protein Sciences segment is a leading developer and manufacturer of high quality biological reagents used in all aspects of life science research diagnostics and cell and gene therapy This segment also includes proteomic analytical tools both manual and automated that offer researchers and pharmaceutical manufacturers efficient and streamlined options for automated western blot and multiplexed ELISA workflow Our Diagnostics and Genomics segment develops and manufactures diagnostic products including controls calibrators and diagnostic assays for the regulated diagnostics market exosome based molecular diagnostic assays advanced tissue based in situ hybridization assays for spatial genomic and tissue biopsy analysis and genetic and oncology kits for research and clinical applications
A key component of the Company s strategy is to augment internal growth at existing businesses with complementary acquisitions As disclosed in Note 4 the Company completed the acquisition of Lunaphore for 169 7 million in a cash free debt free acquisition We also purchased a 19 9 investment in Wilson Wolf in fiscal 2023 and as disclosed in Note 1 will acquire the remaining shares in Wilson Wolf by the end of calendar year 2027 or earlier depending on the achievement of certain future milestones
For fiscal 2024 consolidated net sales increased 2 to 1 2 billion as compared to fiscal 2023 Organic growth was 1 with acquisitions having a favorable impact of 1 Foreign currency translation and a business held for sale did not have a material impact Organic revenue growth was primarily driven by strong commercial execution in our Diagnostics and Genomics segment
Consolidated net earnings including non controlling interest decreased 41 compared to fiscal 2023 The decrease in earnings was driven by a non recurring gain on the sale of our ChemoCentryx investment a non recurring gain on the sale of our investment in Changzhou Eminence Biotechnology Co Ltd Eminence and a non recurring benefit related to the fair value of contingent consideration during fiscal 2023 The decrease in fiscal 2024 was also impacted by impairment of assets held for sale restructuring charges and CEO transition related charges After adjusting for cost recognized upon
sale of acquired inventory intangibles amortization acquisition related costs certain litigation charges gain on sale of investments stock based compensation restructuring and restructuring related costs impairment of assets held for sale impact of business held for sale and impact from partially owned consolidated subsidiaries adjusted net earnings attributable to Bio Techne decreased 11 in fiscal 2024 as compared to fiscal 2023 Adjusted net earnings attributable to Bio Techne was primarily impacted by the acquisition of Lunaphore and unfavorable volume leverage within Protein Sciences
For fiscal 2023 consolidated net sales increased 3 as compared to fiscal 2022 Organic growth was 5 with foreign currency translation having an unfavorable impact of 2 and acquisitions having an immaterial impact Organic revenue growth was primarily driven by consumable growth in both our Diagnostics and Genomics and Protein Sciences segments
Consolidated earnings including non controlling interest increased 8 compared to fiscal 2022 The increase in earnings was driven by a gain on the sale of our ChemoCentryx investment and a gain on the sale of our investment in Eminence After adjusting for acquisition related costs intangibles amortization stock based compensation restructuring costs gain on investments and impact from partially owned consolidated subsidiaries adjusted net earnings attributable to Bio Techne decreased 1 in fiscal 2023 as compared to fiscal 2022 Adjusted net earnings attributable to Bio Techne was primarily impacted by foreign currency exchange and strategic growth investments including the Namocell acquisition
Consolidated organic net sales exclude the impact of companies acquired during the first 12 months post acquisition and the effect of the change from the prior year in exchange rates used to convert sales in foreign currencies primarily the euro British pound sterling Chinese yuan and Swiss franc into U S dollars
In fiscal 2024 Diagnostics and Genomics segment net sales increased 12 compared to fiscal 2023 Organic growth for the segment was 6 with acquisitions having a 5 impact and foreign currency exchange having a favorable impact of 1 on revenue growth Segment growth was driven by broad based molecular diagnostics performance and Lunaphore
In fiscal 2023 Protein Sciences segment net sales increased 2 compared to fiscal 2022 Organic growth for the segment was 4 for the fiscal year with currency translation having an unfavorable impact of 2 on revenue and acquisitions having an immaterial impact on revenue growth Segment growth was driven by growth in consumable revenue to BioPharma especially those developing cell and gene therapies and Academic customers within the Americas and Europe
In fiscal 2023 Diagnostics and Genomics segment net sales increased 6 compared to fiscal 2022 Organic growth for the segment was 8 with currency translation having an unfavorable impact of 2 Segment growth was driven by growth in consumable revenue from our Spatial Biology platform and an increase in service revenue related to our ExoDx Prostate test
Consolidated gross margins were 66 4 67 7 and 68 4 in fiscal 2024 2023 and 2022 Consolidated gross margins were impacted by revenue Excluding the impact of acquired inventory sold amortization of intangibles stock compensation expense restructuring and restructuring related costs impact of business held for sale and the impact of partially owned consolidated subsidiaries adjusted gross margins were 71 0 71 7 and 72 5 in fiscal 2024 2023 and 2022 respectively Fiscal 2024 consolidated gross margin was impacted by the Lunaphore acquisition when compared to the prior period Fiscal 2023 consolidated gross margin was unfavorably impacted by foreign currency exchange and strategic growth investments including the Namocell acquisition when compared to fiscal 2022 Consolidated gross margins for fiscal 2022 were impacted as a result of volume leverage and product mix partially offset by additional investments made in the business to support future growth
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 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
The increase in the Protein Sciences segment s gross margin percentage for fiscal 2024 as compared to fiscal 2023 was primarily attributable to the exclusion of a business held for sale The change in the Protein Sciences segment s gross margin percentage for fiscal 2023 compared to fiscal 2022 was primarily attributable to mix of product sales within the segment
The change in the Diagnostics and Genomics segment s gross margin percentage for fiscal 2024 as compared to fiscal 2023 is due to the Lunaphore acquisition The change in the Diagnostics and Genomics segment s gross margin percentage for fiscal 2023 as compared to fiscal 2022 is due to fiscal 2022 revenue related to the ExoTru kidney transplant rejection agreement that did not reoccur in fiscal 2023 Fiscal 2023 compared to fiscal 2022 was also impacted by strategic investments to drive future growth that was partially offset by volume leverage
Selling general and administrative expenses increased 88 0 million 23 in fiscal 2024 when compared to fiscal 2023 Selling general and administrative expenses increased primarily due to the Lunaphore acquisition impairment of assets held for sale certain litigation charges restructuring and restructuring related charges and CEO transition charges
Research and development expenses increased 4 2 million 5 and 5 4 million 6 in fiscal 2024 and 2023 respectively as compared to prior year periods The increase in research and development expenses in fiscal 2024 and fiscal 2023 compared to the prior periods was primarily attributable to strategic growth investments including the acquisitions of Lunaphore and Namocell in fiscal 2024 and fiscal 2023 respectively
During fiscal 2023 the Company recognized gains of 37 2 million related to the sale of our ChemoCentryx Inc CCXI investment 11 7 million related to the sale of our Eminence investment and a gain of 0 4 million related to the change in fair value of our exchange traded bond funds Additionally the Company recognized losses of 1 1 million related to our equity method investment in Wilson Wolf
During fiscal 2022 the Company recognized gains of 16 1 million related to changes in fair value associated with changes in the stock price of our CCXI investment Additionally the Company recognized losses of 1 1 million related to changes in fair value associated with changes in the stock price of our exchange traded investment grade bond funds On August 4 2022 the Company sold all of its shares in CCXI
Income taxes for fiscal 2024 2023 and 2022 were at effective rates of 9 5 15 7 and 12 7 respectively of consolidated earnings before income taxes The change in the effective tax rate for fiscal 2024 compared to fiscal 2023 was driven by share based compensation as the number of stock option exercises increased compared to the prior year comparative period The Company had share based compensation excess tax benefits of 18 4 million in fiscal 2024 The Company s discrete tax benefits in fiscal 2023 primarily related to share based compensation excess tax benefits of 12 3 million The Company s discrete tax benefits in fiscal 2022 primarily related to share based compensation excess tax benefits of 29 3 million
Cash cash equivalents and available for sale investments at June 30 2024 were 152 9 million compared to 204 3 million at June 30 2023 Included in the available for sale investments was certificates of deposit that have contractual maturity dates within one year of 1 1 million as of June 30 2024 There were no certificiates of deposit in the prior comparable period As of June 30 2023 there was 23 7 million included in the available for sale investments related to the fair value of the Company s investment in exchange traded investment grade bond funds
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
The Company generated cash from operations of 299 0 million 254 4 million and 325 3 million in fiscal 2024 2023 and 2022 respectively The increase in cash generated from operating activities in fiscal 2024 as compared to fiscal 2023 was mainly a result of changes in the timing of cash payments on certain operating assets and liabilities The decrease in cash generated from operating activities in fiscal 2023 as compared to fiscal 2022 was mainly a result of changes in net earnings and changes in the timing of cash payments on certain operating assets and liabilities
The Company s net proceeds outflow from the purchase sale and maturity of available for sale investments in fiscal 2024 2023 and 2022 were 22 6 million 14 7 million and 26 9 million respectively During fiscal year 2024 the Company s proceeds in available for sale investments relates to the sale of our exchange traded investment grade bond funds The proceeds during fiscal year 2023 relates to the sale of excess cash in certificates of deposit that matured The outflow of cash in fiscal year 2022 compared to fiscal year 2024 and fiscal year 2023 was driven by the purchase of the exchange traded investment grade bond funds in fiscal year 2022 which had a cost basis of 25 0 million that did not reoccur in the comparative periods The Company s investment policy is to place excess cash in certificates of deposit with the objective of obtaining the highest possible return while minimizing risk and keeping the funds accessible
Capital additions in fiscal year 2024 2023 and 2022 were 62 9 million 38 2 million and 44 9 million Fiscal 2024 capital expenditures related to investments in new buildings machinery construction in progress and IT equipment Fiscal 2023 capital expenditures related to investments in new buildings machinery and IT equipment Capital additions planned for fiscal 2025 are approximately 48 million and are expected to be financed through currently available cash and cash generated from operations
During the year ended June 30 2022 the Company paid 25 million to enter into a two part forward contract which requires the Company to purchase the full equity interest in Wilson Wolf if certain annual revenue or EBITDA thresholds are met During fiscal year 2023 Wilson Wolf met the EBITDA target and the Company paid an additional 232 million to acquire 19 9 of Wilson Wolf Since the first part of the forward contract has been triggered the second part of the forward contract will automatically trigger which requires the Company to acquire the remaining 80 1 of Wilson Wolf on December 31 2027 The second part of the contract would be accelerated in advance of December 31 2027 if Wilson Wolf meets certain financial milestones As of June 30 2024 the second milestones have not been met The second option payment of approximately 1 billion plus potential contingent consideration is forecasted to occur between fiscal 2026 and fiscal 2028 During fiscal 2024 the Company received tax distributions from Wilson Wolf of 7 0 million
payments 0 7 million is classified as financing on the statement of cash flows The remaining 3 3 million was recorded as operating on the statement of cash flows as it represents the consideration liability that exceeds the amount of the contingent consideration liability recognized at the acquisition date
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 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10 K
We allocate the purchase price of acquired businesses to the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition The calculations used to determine the fair value of the long lived assets acquired primarily intangible assets can be complex and require significant judgment We weigh many factors when completing these estimates including but not limited to the nature of the acquired company s business its competitive position strengths and challenges its historical financial position and performance estimated customer retention rates discount rates and future plans for the combined entity We may also engage independent valuation specialists when necessary to assist in the fair value calculations for significant acquired long lived assets
The fair value of acquired technology is generally the primary asset identified and therefore estimated using the multi period excess earnings method The multi period excess earnings method model estimates revenues and cash flows derived from the primary asset and then deducts portions of the cash flow that can be attributed to supporting assets such as Trade Names and in process research and development that contributed to the generation of the cash flows The resulting cash flow which is attributable solely to the primary asset acquired is then discounted at a rate of return commensurate with the risk of the asset to calculate a present value The Trade Name is generally calculated using the relief from royalty method which calculates the cost savings associated with owning rather than licensing the technology Assumed royalty rates are applied to the projected revenues for the remaining useful life of the technology to estimate the royalty savings In process research and development assets are valued using the multi period excess earnings method when the cash flows from the in process research and development assets are separately identifiable from the primary asset In circumstances that Customer Relationship assets are identified that are not the primary asset they are valued using the distributor model income approach which isolates revenues and cash flow associated with the sales and distribution function of the entity and attributable to customer related assets which are then discounted at a rate of return commensurate with the risk of the asset to calculate a present value
We estimate the fair value of liabilities for contingent consideration by discounting to present value the probability weighted contingent payments expected to be made For potential payments related to financial performance based milestones projected revenue and or EBITDA amounts volatility and discount rates assumptions are included in the estimated amounts For potential payments related to product development milestones the fair value is based on the
We are also required to estimate the useful lives of the acquired intangible assets which determines the amount of acquisition related amortization expense we will record in future periods Each reporting period we evaluate the remaining useful lives of our amortizable intangibles to determine whether events or circumstances warrant a revision to the remaining period of amortization
While we use our best estimates and assumptions our fair value estimates are inherently uncertain and subject to refinement As a result during the measurement period which may be up to one year from the acquisition date we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill Any adjustments required after the measurement period are recorded in the consolidated statements of earnings
The judgments required in determining the estimated fair values and expected useful lives assigned to each class of assets and liabilities acquired can significantly affect net income For example different classes of assets will have useful lives that differ Consequently to the extent a longer lived asset is ascribed greater value than a shorter lived asset net income in a given period may be higher Additionally assigning a lower value to amortizable intangibles would result in a higher amount assigned to goodwill As goodwill is not amortized this would benefit net income in a given period although goodwill is subject to annual impairment analysis
To analyze goodwill for impairment we must assign our goodwill to individual reporting units Identification of reporting units includes an analysis of the components that comprise each of our operating segments which considers among other things the manner in which we operate our business and the availability of discrete financial information Components of an operating segment are aggregated to form one reporting unit if the components have similar economic characteristics We periodically review our reporting units to ensure that they continue to reflect the manner in which we operate our business
The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test The qualitative evaluation for goodwill is an assessment of factors including reporting unit specific operating results as well as industry and market conditions overall financial performance and other relevant events and factors to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount including goodwill The Company may elect to bypass the qualitative assessment for its reporting units and perform a quantitative test
The quantitative impairment test requires us to estimate the fair value of our reporting units based on the income approach The income approach is a valuation technique under which we estimate future cash flows using the reporting unit s financial forecast from the perspective of an unrelated market participant Using historical trending and internal forecasting techniques we project revenue and apply our fixed and variable cost experience rate to the projected revenue to arrive at the future cash flows A terminal value is then applied to the projected cash flow stream Future estimated cash flows are discounted to their present value to calculate the estimated fair value The discount rate used is the value weighted average of our estimated cost of capital derived using both known and estimated customary market metrics In determining the estimated fair value of a reporting unit we are required to estimate a number of factors including projected operating results terminal growth rates economic conditions anticipated future cash flows the discount rate and the allocation of shared or corporate items
For fiscal 2024 we elected to perform a qualitative analysis for all five reporting units The Company determined after performing the qualitative analysis there was no evidence that it is more likely than not that the fair value was less than the carrying amounts therefore it was not necessary to perform a quantitative impairment test in fiscal 2024 During the
second quarter of fiscal 2024 as part of restructuring actions certain assets and liabilities associated with a disposal group in our Protein Sciences segment were classified as held for sale as of December 31 2023 Given the upcoming divestiture the Company identified a triggering event and performed impairment testing during the second half of fiscal 2024 The impairment test resulted in a total impairment charge of 22 0 million which includes the allocated goodwill which we have further described within Note 1 The Company did not identify any triggering events after our annual goodwill impairment analysis through June 30 2024 the date of our consolidated balance sheet that would require an additional goodwill impairment assessment to be performed
For fiscal 2023 we elected to perform a qualitative analysis for all five reporting units The Company determined after performing the qualitative analysis there was no evidence that it was more likely than not that the fair value was less than the carrying amounts therefore it was not necessary to perform a quantitative impairment test in fiscal 2023 The Company did not identify any triggering events after our annual goodwill impairment analysis through June 30 2023 the date of our consolidated balance sheet that would require an additional goodwill impairment assessment to be performed
In the first quarter of fiscal 2022 the Company combined the management of the Exosome Diagnostics and Asuragen reporting units both of which were included in the Diagnostics and Genomics operating segment In conjunction with the combination of the reporting units a qualitative goodwill impairment assessment was performed The qualitative assessment identified no indicators of impairment
In the second quarter of fiscal 2022 Eminence notified the Company of its need for additional capital to execute its growth plan The Company first attempted to find outside equity financing support for the Eminence investment but was unable to do so The Company then reviewed the additional financing needs required to successfully ramp Eminence s business which ultimately did not meet the Company s return on capital requirements Therefore the Company did not provide additional funding to Eminence As a result of not obtaining additional financing Eminence notified the Company of its plans to cease operations and liquidate its business
Given the upcoming liquidation process to dispose of the Eminence assets the Company identified a triggering event and performed impairment testing during the second quarter of fiscal 2022 The impairment testing resulted in a full impairment of the Eminence goodwill and intangible assets which resulted in charges of 8 3 million and 8 6 million respectively for the year ended June 30 2022 The Company also recognized inventory and fixed asset impairment charges of 0 9 million and 0 9 million respectively The Company recorded the impairment charges within the General and Administrative line in the Consolidated Income Statement The impairment charges recorded within Net Earnings Attributable to Bio Techne were reduced by approximately 8 million recorded within Net Earnings Attributable to Noncontrolling Interests The remaining net tangible assets of Eminence included in our Consolidated Balance Sheet as of June 30 2022 were 4 3 million and primarily consisted of fixed assets and related deposits of 3 1 million inventory of 0 6 million receivables of 0 4 million and other current assets of 0 1 million The Company also had 4 5 million related to current liabilities The Company held a financial interest of approximately 57 4 in those tangible assets in the liquidation process As described in Note 1 in the fourth quarter of fiscal 2022 Eminence was able to secure cash deposits on future orders to provide funding for their operations This delay in liquidation allowed time for securing of additional investor financing which coincided with the sale of the Company s equity shares of Eminence in the first quarter of fiscal 2023
In the first quarter of fiscal 2022 the Company combined the management of the Exosome Diagnostics and Asuragen reporting units both of which are included in the Diagnostics and Genomics operating segment In conjunction with the combination of the reporting units a qualitative goodwill impairment assessment was performed The qualitative assessment identified no indicators of impairment
In our fiscal 2022 annual goodwill impairment analysis we elected to perform a quantitative assessment for all five of our reporting units The result of our quantitative assessment indicated that all of the reporting units had a substantial amount of headroom as of April 1 2022 The Company did not identify any triggering events after our annual goodwill impairment through June 30 2022 the date of our consolidated balance sheet that would require an additional goodwill impairment assessment to be performed
This Annual Report on Form 10 K including Management s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U S GAAP These non GAAP measures include
We provide these measures as additional information regarding our operating results We use these non GAAP measures internally to evaluate our performance and in making financial and operational decisions including with respect to incentive compensation We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period to period comparison of results
Our non GAAP financial measure of organic revenue represents revenue growth excluding revenue from acquisitions within the preceding 12 months the impact of foreign currency the impact of businesses held for sale as well as the impact of partially owned consolidated subsidiaries Excluding these measures provides more useful period to period comparison of revenue results as it excludes the impact of foreign currency exchange rates which can vary significantly from period to period and revenue from acquisitions that would not be included in the comparable prior period Revenues from businesses held for sale are excluded from our organic revenue calculation starting on the date they become held for sale as those revenues will not be comparative in future periods Revenues from partially owned subsidiaries consolidated in our financial statements are also excluded from our organic revenue calculation as those revenues are not fully attributable to the Company There was no revenue from partially owned consolidated subsidiaries in fiscal year 2024 due to the sale of Changzhou Eminence Biotechnology Co Ltd Eminence in the first quarter of fiscal 2023 Revenue from partially owned consolidated subsidiaries was 2 0 million for the year ended June 30 2023
Our non GAAP financial measures for adjusted gross margin adjusted operating margin and adjusted net earnings in total and on a per share basis exclude stock based compensation which is inclusive of the employer portion of payroll taxes on those stock awards the costs recognized upon the sale of acquired inventory amortization of acquisition intangibles restructuring and restructuring related costs and other non recurring items including non recurring costs goodwill and long lived asset impairments and gains Stock based compensation is excluded from non GAAP adjusted net earnings because of the nature of this charge specifically the varying available valuation methodologies subjection assumptions variety of award types and unpredictability of amount and timing of employer related tax obligations The Company excludes amortization of purchased intangible assets purchase accounting adjustments including costs recognized upon the sale of acquired inventory and acquisition related expenses inclusive of the changes in fair value contingent consideration and other non recurring items including gains or losses on goodwill and long lived asset impairment charges and one time assessments from this measure because they occur as a result of specific events and are not reflective of our internal investments the costs of developing producing supporting and selling our products and the other ongoing costs to support our operating structure We also exclude certain litigation charges which are facts and circumstances specific including costs to resolve litigation and legal settlement gains and losses In some cases these costs may be a result of litigation matters at acquired companies that were not probable inestimable or unresolved at the time of acquisition Costs related to restructuring and restructuring related activities including reducing overhead and consolidating facilities are excluded because we believe they are not indicative of our normal operating costs Additionally these amounts can vary significantly from period to period based on current activity The Company also excludes revenue and expense attributable to partially owned consolidated subsidiaries as well as revenue and expense attributable to businesses held for sale in the calculation of our non GAAP financial measures
The Company s non GAAP adjusted operating margin and adjusted net earnings in total and on a per share basis also excludes acquisition related expenses inclusive of the changes in fair value of contingent consideration gain and losses from investments as they are not part of our day to day operating decisions excluding our equity method investment in Wilson Wolf as it is certain to be acquired in the future certain adjustments to income tax expense and other non recurring items including certain costs related to the transition to a new CEO Additionally gains and losses from investments that are either isolated or cannot be expected to occur again with any predictability are excluded The Company independently calculates a non GAAP adjusted tax rate to be applied to the identified non GAAP adjustments considering the impact of discrete items on these adjustments and the jurisdictional mix of the adjustments In addition the tax impact of other discrete and non recurring charges which impact our reported GAAP tax rate are adjusted from net earnings We believe these tax items can significantly affect the period over period assessment of operating results and not necessarily reflect costs and or income associated with historical trends and future results
The Company periodically reassesses the components of our non GAAP adjustments for changes in how we evaluate our performance changes in how we make financial and operational decisions and considers the use of these measures by our competitors and peers to ensure the adjustments are still relevant and meaningful
The Company operates internationally and thus is subject to potentially adverse movements in foreign currency exchange rates Approximately 31 of the Company s consolidated net sales in fiscal 2024 were made in foreign currencies including 14 in euro 4 in British pound sterling 6 in Chinese yuan 3 in Canadian dollars 1 in Swiss francs and the remaining 3 in other currencies The Company is exposed to market risk primarily from foreign exchange rate fluctuations of the euro British pound sterling Chinese yuan Canadian dollar and Swiss franc 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
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
Description of business Bio Techne and its subsidiaries collectively doing business as Bio Techne Corporation the Company develop manufacture and sell life science reagents instruments and services for the research and clinical diagnostic markets worldwide With our deep product portfolio and application expertise we sell integral components of scientific investigations into biological processes and molecular diagnostics revealing the nature diagnosis etiology and progression of specific diseases Our products aid in drug discovery efforts and provide the means for accurate clinical tests and diagnoses
At the 2022 annual meeting of shareholders of the Company held on October 27 2022 the shareholders approved an amendment and restatement of the Company s articles of incorporation to increase the number of authorized shares of the Company s common stock from 100 000 000 to 400 000 000 On November 1 2022 the Company s board of directors approved and declared a four for one split of the Company s common stock in the form of a stock dividend Each stockholder of record on November 14 2022 received three additional shares of common stock for each then held share which were distributed after close of trading on November 29 2022 All share and per share amounts presented herein have been retroactively adjusted to reflect the impact of the stock split
Use of 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 contingent consideration 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 As Eminence met the criteria for consolidation the transaction was accounted for in accordance with ASC 805 Business Combinations In applying ASC 805 to the transaction the Company has elected to include Eminence in our consolidated financial statements on a one month lag As noted below Eminence was sold during the first fiscal quarter of 2023
Equity method investments The company accounts for its equity method investments in accordance with ASC 323 Investments Equity Method and Joint Ventures The Company initially records its equity method investments at the amount of the Company s investment and adjusts each period for the Company s share of the investee s income or loss and dividends paid Distributions from the equity method investee are accounted for using the cumulative earnings approach on the Consolidated Statement of Cash Flows
In December 2021 the Company paid 25 million to enter into a two part forward contract which requires the Company to make an initial ownership investment followed by purchase of full equity interest in Wilson Wolf Corporation Wilson Wolf if certain annual revenue or annual earnings before interest taxes depreciation and amortization EBITDA thresholds are met Wilson Wolf is a leading manufacturer of cell culture devices including the G Rex product line The first part of the forward contract was triggered upon Wilson Wolf achieving approximately 92 million in annual revenue or 55 million in EBITDA at any point prior to December 31 2027 During the quarter ended March 31 2023 the Company determined that Wilson Wolf had met the EBITDA target On March 31 2023 the Company paid an additional 232 million to acquire 19 9 of Wilson Wolf which is accounted for as an equity method investment
Since the first part of the forward contract has been triggered the second part of the forward contract will automatically trigger and requires the Company to acquire the remaining equity interest in Wilson Wolf on December 31 2027 based on a revenue multiple of approximately 4 4 times trailing twelve month revenue The second part of the contract would be accelerated in advance of December 31 2027 if Wilson Wolf meets its second milestone of approximately 226 million
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 statements of earnings and comprehensive income The cumulative translation adjustment is a component of accumulated other comprehensive 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 and comprehensive income
Revenue recognition ASC 606 provides revenue recognition guidance for any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non financial assets unless those contracts are within the scope of other accounting standards The core principle of ASC 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services Refer to Note 2 for additional information regarding our revenue recognition policy under ASC 606
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 Refer to Note 12 for additional information regarding income taxes
Comprehensive income Comprehensive income includes charges and credits to shareholders equity that are not the result of transactions with shareholders Our total comprehensive income consists of net income unrealized gains and losses on cash flow hedges and foreign currency translation adjustments The items of comprehensive income with the exception of net income are included in accumulated other comprehensive loss in the consolidated balance sheets and statements of shareholders equity Any tax effects if applicable associated with reclassifications of accumulated other comprehensive income to net income are reflected in the provision for income taxes
Available for sale investments Available for sale investments consist of debt instruments with original maturities of generally three months to less than one year 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 Unrealized gains and losses on our available for sale securities are included within other income expense
Trade accounts receivable and allowances Trade accounts receivable are initially recorded at the invoiced amount upon the sale of goods or services to customers and they do not bear interest They are stated net of allowances for doubtful accounts which represent estimated losses resulting from the inability of customers to make the required payments When determining the allowances for doubtful accounts we take several factors into consideration including the overall
composition of accounts receivable aging our prior history of accounts receivable write offs the type of customer and our day to day knowledge of specific customers Changes in the allowances for doubtful accounts are included in selling general and administrative SG A expense in our consolidated statements of earnings and comprehensive income The point at which uncollected accounts are written off varies by type of customer The Company does not have material long term customer receivables
For certain proteins antibodies and chemically based manufactured products the Company produces larger batches of established products than current sales requirements due to economies of scale through a highly controlled manufacturing process Accordingly the manufacturing process for these products has and will continue to produce quantities in excess of forecasted usage The Company forecasts usage for its products based on several factors including historical demand current market dynamics and technological advances The Company forecasts product usage on an individual product level for a period that is consistent with our ability to reasonably forecast inventory usage for that product There have been no material changes to the Company s estimates of the net realizable value for excess and obsolete inventory or other types of inventory reserves and inventory cost adjustments in the fiscal years presented Additionally current and historical reserves recorded to reduce the cost of inventory to its net realizable value become part of the new cost basis for the inventory item in accordance with ASC 330 Inventory
Contingencies The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated If the reasonable estimate of a known or probable loss is a range and no amount within the range is a better restimate than any other the minimum amount of the range is accrued If a loss is reasonably possible but not known or probable and the amount may be reasonably estimated the estimated loss or range of loss is disclosed
Contingent Consideration Contingent Consideration relates to the potential payment for an acquisition that is contingent upon the achievement of the acquired business meeting certain product development milestones and or certain financial performance milestones The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be transferred For potential payments related to financial performance milestones we use a real option model in calculating the fair value of the contingent consideration liabilities The assumptions utilized in the calculation based on financial performance milestones include projected revenue and or EBITDA amounts volatility and discount rates For potential payments related to product development milestones we estimated the fair value based on the probability of achievement of such milestones The assumptions utilized in the calculation of the acquisition date fair value include probability of success and the discount rates Contingent consideration involves certain assumptions requiring significant judgment and actual results may differ from assumed and estimated amounts Contingent consideration is remeasured each reporting period and subsequent changes in fair value including accretion for the passage of time are recognized within selling general and administrative in the consolidated statement of earnings and comprehensive income
Intangible assets Intangible assets are stated at historical cost less accumulated amortization Amortization expense is generally determined on the straight line basis over periods ranging from 1 year to 20 years Each reporting period we evaluate the remaining useful lives of our amortizable intangibles to determine whether events or circumstances warrant a revision to the remaining period of amortization If our estimate of an asset s remaining useful life is revised the remaining carrying amount of the asset is amortized prospectively over the revised remaining useful life
Impairment of long lived assets and amortizable intangibles We evaluate the recoverability of property plant equipment and amortizable intangibles whenever events or changes in circumstances indicate that an asset s carrying amount may not be recoverable Such circumstances could include but are not limited to 1 a significant decrease in the market value of an asset 2 a significant adverse change in the extent or manner in which an asset is used or in its physical condition
or 3 an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset We compare the carrying amount of the asset to the estimated undiscounted future cash flows associated with it If the sum of the expected future net cash flows is less than the carrying value of the asset being evaluated an impairment loss would be recognized The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds the fair value of the asset As quoted market prices are not available for the majority of our assets the estimate of fair value is based on various valuation techniques including the discounted value of estimated future cash flows
The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated These assumptions require significant judgment and actual results may differ from assumed and estimated amounts During the second quarter of fiscal year 2024 there was a triggering event for the assets and liabilities associated with a disposal group in our Protein Sciences segment that were classified as held for sale See the restructuring section of Note 1 below for additional details No other triggering events were identified and no other impairments were recorded for property plant and equipment or amortizable intangibles during fiscal years 2024 2023 and 2022
Impairment of goodwill and indefinite lived intangible assets We evaluate the carrying value of goodwill and indefinite lived intangible assets during the fourth quarter each year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment Such circumstances could include but are not limited to 1 a significant adverse change in legal factors or in business climate 2 unanticipated competition 3 an adverse action or assessment by a regulator or 4 an adverse change in market conditions that are indicative of a decline in the fair value of the assets
To analyze goodwill we must assign our goodwill to individual reporting units Identification of reporting units includes an analysis of the components that comprise each of our operating segments which considers among other things the manner in which we operate our business and the availability of discrete financial information Components of an operating segment are aggregated to form one reporting unit if the components have similar economic characteristics We periodically review our reporting units to ensure that they continue to reflect the manner in which we operate our business The Company had five reporting units for our 2024 2023 and 2022 goodwill impairment assessment performed on April 1 of each of the respective fiscal years the date of our annual goodwill impairment assessment
The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test The qualitative evaluation for goodwill is an assessment of factors including reporting unit specific operating results as well as industry and market conditions overall financial performance and other relevant events and factors to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying amount including goodwill The Company may elect to bypass the qualitative assessment for its reporting units and perform a quantitative test
The quantitative impairment test requires us to estimate the fair value of our reporting units based the income approach The income approach is a valuation technique under which we estimate future cash flows using the reporting unit s financial forecast from the perspective of an unrelated market participant Using historical trending and internal forecasting techniques we project revenue and apply our fixed and variable cost experience rate to the projected revenue to arrive at the future cash flows A terminal value is then applied to the projected cash flow stream Future estimated cash flows are discounted to their present value to calculate the estimated fair value The discount rate used is the value weighted average of our estimated cost of capital derived using both known and estimated customary market metrics In determining the estimated fair value of a reporting unit we are required to estimate a number of factors including projected operating results terminal growth rates economic conditions anticipated future cash flows the discount rate and the allocation of shared or corporate items
For fiscal 2024 we elected to perform a qualitative analysis for all five reporting units The Company determined after performing the qualitative analysis there was no evidence that it is more likely than not that the fair value was less than the carrying amounts therefore it was not necessary to perform a quantitative impairment test in fiscal 2024 There was a triggering event related to a business held for sale described later in this note leading to an impairment of allocated goodwill during the second half of fiscal 2024 The Company did not identify any triggering events after our annual goodwill impairment analysis through June 30 2024 the date of our consolidated balance sheet that would require an additional goodwill impairment assessment to be performed
For fiscal 2024 the Company also performed a qualitative assessment of the acquired in process research and development assets to determine whether changes in events circumstances or the probability of successful development and commercialization of the assets indicated that it is more likely than not that the fair value of the acquired assets are less than its carrying amount Based on the analysis the Company determined there was no indication of impairment of the indefinite lived intangible asset This in process research and development was placed into service during the fourth quarter of fiscal 2024 and will begin amortization over its expected useful life
In fiscal 2023 we elected to perform a qualitative analysis for all five reporting units The Company determined after performing the qualitative analysis there was no evidence that it is more likely than not that the fair value was less than the carrying amounts therefore it was not necessary to perform a quantitative impairment test in fiscal 2023 The Company did not identify any triggering events after our annual goodwill impairment analysis through June 30 2023 the date of our consolidated balance sheet that would require an additional goodwill impairment assessment to be performed
On September 1 2022 the Company completed the sale of its equity shares of Eminence for approximately 17 8 million to a third party Eminence was considered a variable interest entity that was fully consolidated in our financial statements Prior to the sale Eminence had revenue of 2 0 million for the first fiscal quarter of 2023 within our Protein Sciences segment Fiscal 2022 revenues were 4 6 million As a result of the sale of the business the Company recorded a gain of 11 7 million within the Other income expense line in the Consolidated Statement of Earnings Prior to the sale of Eminence a triggering event was identified in the second quarter of fiscal 2022 and impairment testing was performed as Eminence was forecasted to not have sufficient cash to execute on their growth plan combined with their inability to secure additional financing Our impairment testing resulted in a full impairment of the Eminence goodwill and intangibles assets for charges of 8 3 million and 8 6 million respectively for the year ended June 30 2022 The Company also recognized inventory and fixed asset impairment charges of 0 9 million and 0 9 million respectively These impairment charges were recorded within the General and Administrative line in the Consolidated Statement of Earnings for fiscal 2022 In the fourth quarter of fiscal 2022 Eminence was able to secure cash deposits on future orders to provide funding for their operations This delay in liquidation allowed time for securing of additional investor financing which coincided with the sale of the Company s investment
In the first quarter of fiscal 2022 the Company combined the management of the Exosome Diagnostics and Asuragen reporting units both of which are included in the Diagnostics and Genomics operating segment In conjunction with the combination of the reporting units a qualitative goodwill impairment assessment was performed The qualitative assessment identified no indicators of impairment
In our fiscal 2022 annual goodwill impairment analysis we elected to perform a quantitative assessment for all five of our reporting units The result of our quantitative assessment indicated that all of the reporting units had a substantial amount of headroom as of April 1 2022 The Company did not identify any triggering events after our annual goodwill impairment through June 30 2022 the date of our consolidated balance sheet that would require an additional goodwill impairment assessment to be performed
Restructuring actions Restructuring actions generally include significant actions involving employee related severance charges contract termination costs and impairments and disposals of assets associated with such actions Employee related severance charges are based upon distributed employment policies and substantive severance plans These charges are reflected in the quarter when the actions are probable and the amounts are estimable which typically is when management approves the associated actions Asset related and other charges include impairment of right of use assets leasehold improvements other asset write downs associated with combining operations disposal of assets and other exit costs Other costs also includes restructuring related charges which are incremental costs incurred directly supporting business transformation initiatives tied to the restructuring action
In the second quarter of fiscal 2024 the Company announced enterprise wide restructuring focused on recovering operating margins optimizing our distribution footprint and enhancing our organization efficiency These actions impacted approximately 4 of our global workforce These actions continued through the end of fiscal 2024 as we incurred charges relating to the condensing of certain distribution centers and optimizing efficiency The Company is expecting to
As part of these actions certain assets and liabilities associated with a disposal group in our Protein Sciences segment were classified as held for sale as of December 31 2023 including 1 4 million of goodwill allocated to the disposal group on a relative fair value basis As a result of impairment tests performed over the disposal group during fiscal 2024 a cumulative impairment charge of 22 0 million which includes the allocated goodwill was recorded in the Selling general and administrative line in the Consolidated Statements of Earnings for the year ended June 30 2024 As of June 30 2024 the assets remaining within the disposal group primarily include inventory and property and equipment of 9 8 million which is net of expected selling costs These assets are actively marketed and we believe their sale will be completed within 12 months of the held for sale classification date The held for sale assets are recorded in Current assets held for sale in our Consolidated Balance Sheet as of June 30 2024
The following table summarizes the changes in the Company s accrued restructuring balance which is included within Other current liabilities in the accompanying balance sheet Other amounts reported as restructuring and restructuring related costs in the accompanying statements of income have been summarized in the notes to the table in thousands
In August 2022 the Company informed employees of our decision to close our Quad facility as part of a realignment of activities within our Reagent Solutions division The closure of the site was completed in the fourth quarter of fiscal 2023 As a result of the restructuring activities an estimated pre tax charge of 2 2 million was recorded within our Protein Sciences segment for the year ended June 30 2023 The related restructuring charges for the year ended June 30 2023 were recorded in the income statement as follows in thousands
In December 2022 the Company informed employees it would undertake certain actions to strategically reallocate operations resources to high growth areas of the business Additional actions were taken in June 2023 primarily related to the sales organization The actions impacted a limited number of employees and were completed in the fourth quarter of fiscal 2024 As a result of the realignment a pre tax charge of 1 7 million related to employee severance was recorded in the Selling general and administrative line of operating income within our Protein Sciences segment during the year ended June 30 2023 Adjustments in fiscal year 2024 relate to the refinement of employee severance payouts Additional pre
In September 2021 the Company informed employees of our decision to close our Exosome Diagnostics Germany facility discontinuing lab and research occurring at the site as part of a realignment of activities within our Exosome Diagnostics business The restructuring activities were complete as of June 30 2022 As a result of the restructuring activities a pre tax charge of 1 4 million was recorded within our Diagnostics and Genomics segment during the year ended June 30 2022 Total restructuring charges for the closure of the Exosome Diagnostics Germany facility for the year ended June 30 2022 were recorded within operating income on the income statement as follows in thousands
During the second quarter of fiscal 2022 the Company also incurred a restructuring charge of 0 2 million related to employee severance for the relocation of a US plant This was completed during fiscal 2023 and there are no remaining liabilities related to this relocation as of June 30 2023 This charge was recorded within Other current liabilities as of June 30 2022 Fiscal 2023 cash payments did not materially differ from the charge recorded in fiscal 2022
Legal Matters The Company and its affiliates are involved in a number of legal actions from time to time involving product liability employment intellectual property and commercial disputes shareholder related matters environmental proceedings tax disputes and governmental proceedings and investigations With respect to governmental proceedings and investigations like other companies in our industry the Company is subject to extensive regulation by national state and local governmental agencies in the United States and in other jurisdictions in which the Company and its affiliates operate The Company s standard practice is to cooperate with regulators and investigators in responding to inquiries The outcomes of legal actions are not within the Company s complete control and may not be known for prolonged periods of time In some actions the enforcement agencies or private claimants seek damages as well as other remedies including injunctions barring the sale of products that are the subject of the proceeding that could require
The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated If the reasonable estimate of a known or probable loss is a range and no amount within the range is a better estimate than any other the minimum amount of the range is accrued If a loss is reasonably possible but not known or probable and may be reasonably estimated the estimated loss or range of loss is disclosed When determining the estimated loss or range of loss significant judgment is required Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict particularly when the matters are in early procedural stages with incomplete scientific facts or legal discovery involve unsubstantiated or indeterminate claims for damages potentially involve penalties fines or punitive damages or could result in a change in business practice The Company classifies certain specified litigation charges and gains related to significant legal matters as certain litigation charges in the consolidated statements of income
During fiscal year 2024 the Company recognized 3 5 million of certain litigation charges There was no comparable activity in the comparable periods As of each of the balance sheet dates presented there was no accrued litigation The ultimate cost to the Company with respect to accrued litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on the Company s consolidated earnings financial position and or cash flows The Company includes accrued litigation in other current liabilities and other liabilities on the consolidated balance sheets While it is not possible to predict the outcome for most of the legal matters discussed below the Company believes it is possible that the costs associated with these matters could have a material adverse impact on the Company s consolidated earnings financial position and or cash flows
Intellectual Property Matters At any given time the Company is involved in litigation relating to patents trademarks copyrights trade secrets and other intellectual property IP rights and licenses acquisitions or other agreements related to such rights This litigation includes but it not limited to alleged infringement or misappropriation of IP rights or breach of obligations related to IP rights or other claims asserted by competitors individuals or entities created specifically to fund IP litigation While the outcome of these litigation matters is inherently uncertain it is possible that the results of such litigation could require the Company to pay significant monetary damages
In November 2023 the FASB issued ASU 2023 07 Improvements to Reportable Segment Disclosures Topic 280 which requires incremental disclosures on reportable segments primarily through enhanced disclosures on significant segment expenses The Company will adopt this guidance beginning in the fourth quarter of fiscal year 2025 for our annual report and for interim periods starting in fiscal year 2026 We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures
Consumables revenues consist of specialized proteins immunoassays antibodies reagents blood chemistry and blood gas quality controls and hematology instrument controls that are typically single use products recognized at a point in time following the transfer of control of such products to the customer which generally occurs upon shipment Instruments revenues typically consist of longer lived assets that for the substantial majority of sales are recognized at a point in time in a manner similar to consumables Service revenues consist of extended warranty contracts post contract support and custom development projects that are recognized over time as either the customers receive and consume the benefits of such services simultaneously or the underlying asset being developed has no alternative use for the Company at contract inception and the Company has an enforceable right to payment for the portion of the performance completed Service revenues also include laboratory services recognized at point in time
The Company elected the exemption to not disclose the unfulfilled performance obligations for contracts with an original length of one year or less and the exemption to exclude future performance obligations that are accounted under the sales based or usage based royalty guidance The Company s unfulfilled performance obligations for contracts with an original length greater than one year were not material as of June 30 2024
Contracts with customers that contain instruments may include multiple performance obligations For these contracts the Company allocates the contract s transaction price to each performance obligation on a relative standalone selling price basis Allocation of the transaction price is determined at the contracts inception
Payment terms for shipments to end users are generally net 30 days Payment terms for distributor shipments may range from 30 to 90 days Service arrangements commonly call for payments in advance of performing the work e g extended warranty and service contracts upon completion of the service e g custom development manufacturing or a mix of both
Contract assets include revenues recognized in advance of billings Contract assets are included within other current assets in the accompanying balance sheet as the amount of time expected to lapse until the company s right to consideration becomes unconditional is less than one year We elected the practical expedient allowing us to expense contract costs that would otherwise be capitalized and amortized over a period of less than one year Contract assets as of June 30 2024 are not material Contract liabilities include billings in excess of revenues recognized such as those resulting from customer advances and deposits and unearned revenue on warranty contracts
Contract liabilities as of June 30 2024 and June 30 2023 were approximately 30 2 million and 24 6 million respectively Contract liabilities as of June 30 2023 subsequently recognized as revenue during the year ended June 30 2024 were approximately 20 9 million Contract liabilities as of June 30 2022 subsequently recognized as revenue during the year ended June 30 2023 were approximately 21 5 million Contract liabilities in excess of one year are included in Other long term liabilities on the consolidated balance sheet
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 Although the amounts recorded for these revenue deductions are dependent on estimates and assumptions historically our adjustments to actual results have not been material
Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue Amounts billed to customers for shipping and handling are included in revenue while the related shipping and handling costs are reflected in cost of products We elected the practical expedient that allows us to account for shipping
We periodically complete business combinations that align with our business strategy Acquisitions are accounted for using the acquisition method of accounting which requires among other things that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and that the results of operations of each acquired business be included in our consolidated statements of comprehensive income from their respective dates of acquisitions Acquisition costs are recorded in selling general and administrative expenses as incurred
On July 7 2023 the Company acquired all of the ownership interests of Lunaphore Technologies SA Lunaphore for 169 7 million in a cash free debt free acquisition Lunaphore is a leading developer of fully automated spatial biology solutions The Lunaphore acquisition adds spatial biology instruments to Bio Techne s portfolio to accelerate our leadership position in translational and clinical research markets The transaction was accounted for in accordance with ASC 805 Business Combinations The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company s product portfolio and the expected revenue growth from increased market penetration The goodwill is not deductible for income tax purposes The business became part of the Diagnostics and Genomics operating segment in the first quarter of fiscal year 2024
The allocation of purchase price consideration related to Lunaphore was completed in the fourth quarter of fiscal 2024 Net sales and operating loss of this business included in Bio Techne s consolidated results of operations for the year ended June 30 2024 were approximately 14 3 million and 24 0 million respectively The fair values of the assets acquired and liabilities assumed as of the acquisition date and the updated final amounts as of June 30 2024 are as follows in thousands
Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management s assessment The purchase price allocated to developed technology and customer relationships was based on management s forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased The purchase price allocated to trade names was based on management s forecasted cash inflows and outflows and using a relief from royalty method The amount recorded for developed technology is being amortized with the expense reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income The amortization period for developed technology is estimated to be 14 years Amortization expense related to customer relationships is reflected in
selling general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income The amortization period for customer relationships is estimated to be 8 years The amount recorded for trade names is being amortized with the expense reflected in selling general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income The amortization period for trade names ranges from 4 years to 8 years The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization which is not deductible for income tax purposes offset by the deferred tax asset for the preliminary calculation of acquired net operating losses
On July 1 2022 the Company acquired all of the ownership interests of Namocell Inc Namocell for 101 2 million net of cash acquired plus contingent consideration of up to 25 million upon the achievement of certain future revenue thresholds The Namocell acquisition adds easy to use single cell sorting and dispensing platforms that are gentle to cells and preserve cell viability and integrity The transaction was accounted for in accordance with ASC 805 Business Combinations The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company s product portfolio and the expected revenue growth from increased market penetration The goodwill is not deductible for income tax purposes The business became part of the Protein Sciences operating segment in the first quarter of fiscal year 2023
The allocation of purchase price consideration related to Namocell was completed in the fourth quarter of fiscal 2023 Net sales and operating loss of this business included in Bio Techne s consolidated results of operations for the twelve months ended June 30 2023 were approximately 6 4 million and 9 3 million respectively The fair values of the assets acquired and liabilities assumed as of the acquisition date and the updated final amounts as of June 30 2023 are as follows in thousands
Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management s assessment The purchase price allocated to developed technology was based on management s forecasted cash inflows and outflows and using a relief from royalty method to calculate the fair value of assets purchased The purchase price allocated to customer relationships and trade names was based on management s forecasted cash inflows and outflows and using a multiperiod excess earnings method The amount recorded for developed technology is being amortized with the expense reflected in Cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income The amortization period for developed technology is estimated to be 13 years Amortization expense related to customer relationships is reflected in Selling general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive
Income The amortization period for customer relationships is estimated to be 4 years The amount recorded for trade names and the non competition agreement is being amortized with the expense reflected in Selling general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income The amortization period for both trade names and the non competition agreement is estimated to be 3 years The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization which is not deductible for income tax purposes offset by the deferred tax asset for the preliminary calculation of acquired net operating losses
Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date This standard also establishes a hierarchy for inputs used in measuring fair value This standard maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available Observable inputs are inputs market participants would use in valuing the asset or liability based on market data obtained from independent sources Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available in the circumstances
The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement The hierarchy is broken down into three levels Level 1 inputs are quoted prices in active markets for identical assets or liabilities Level 2 inputs include quoted prices for similar assets or liabilities in active markets quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability either directly or indirectly Level 3 inputs are unobservable for the asset or liability and their fair values are determined using pricing models discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable Level 3 may also include certain investment securities for which there is limited market activity or a decrease in the observability of market pricing for the investments such that the determination of fair value requires significant judgment or estimation
The Company utilizes forward starting swaps designated as a cash flow hedge on forecasted debt The forward starting swaps reduce the variability of cash flow payments for the Company by converting the variable interest rate on the Company s forecasted variable interest long term debt to that of a fixed interest rate Accordingly as part of the forward starting swaps the Company exchanges at specified intervals the difference between floating and fixed interest amounts based on a notional principal amounts The Company also uses a cross currency swap contract to manage its exposure to foreign currency risk associated with the Company s net investment in its Swiss subsidiary
Gains or losses related to the net investment hedges are classified as foreign currency translation adjustments in the schedule of changes in Accumulated Other Comprehensive Income AOCI in Note 8 as these items are attributable to the Company s hedges of its net investment in foreign operations Gains or losses related to the cash flow hedges are classified as Unrealized gains losses on cash flow hedges in the schedule of changes in AOCI in Note 8
The Asuragen contingent agreement required the Company to make contingent consideration payments of up to 105 0 million if certain revenue thresholds were achieved by December 31 2023 The opening balance sheet fair value of the liabilities was 18 3 million which was determined using a Monte Carlo simulation based model discounted to present value Assumptions used in these calculations are units sold expected revenue expected expenses discount rate and various probability factors The contingent consideration related to Asuragen was 2 0 million as of June 30 2023
The Namocell contingent agreement required the Company to make contingent consideration payments of up to 25 0 million if certain revenue thresholds were achieved by December 31 2023 The opening balance sheet fair value of the liabilities was 10 6 million which was determined using a Monte Carlo simulation based model discounted to present value Assumptions used in these calculations are units sold expected revenue expected expenses discount rate and various probability factors The contingent consideration related to Namocell was 1 5 million as of June 30 2023
As of June 30 2023 the Company s obligation for potential contingent consideration payments related to the B Mogen acquisitions was relieved as the likelihood that the revenue thresholds and product milestones would be achieved in the timeframe established within the purchase agreement was remote As a result the Company reversed an accrual for the fair value of the contingent liabilities at the date of settlement during fiscal 2022
The use of different assumptions applying different judgment to matters that inherently are subjective and changes in future market conditions could result in different estimates of fair value of our securities or contingent consideration currently and in the future If market conditions deteriorate we may incur impairment charges for securities in our investment portfolio
On August 31 2022 the Company entered into a revolving line of credit and term loan by a Credit Agreement the Credit Agreement The Credit Agreement provides for a revolving credit facility of 1 billion which can be increased by an additional 400 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 bear interest at a variable rate The current outstanding debt is based on the one month Secured Overnight Financing Rate SOFR plus an applicable margin The applicable margin is determined from the total leverage ratio of the Company and updated on a quarterly basis The annualized fee for any unused portion of the credit facility is currently 10 basis points
As a lessee the company leases offices labs and manufacturing facilities as well as vehicles copiers and other equipment The Company determines whether a contract is a lease or contains a lease at inception date Upon commencement date operating lease right of use assets and liabilities are recognized based on the present value of lease payments over the lease term The discount rate used to calculate present value is the Company s incremental borrowing rate or if available the rate implicit in the lease The Company determines the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region The Company recognizes operating lease expense on a straight line basis over the lease term Further as part of our adoption of ASC 842 the Company also made the accounting policy elections to not capitalize short term leases defined as a lease with a lease term that is less than 12 months and to combine lease and non lease components for all asset classes in determining the lease payments
Variable lease payments primarily include payments for non lease components such as maintenance costs and payments for non components such as sales tax During fiscal year 2024 the Company recognized 5 0 million in variable lease expense in the Consolidated Statements of Earnings and Comprehensive Income During fiscal year 2024 the Company also recognized 18 2 million relating to fixed lease expense in the Consolidated Statements of Earnings and Comprehensive Income
The following table summarizes the balance sheet classification of the Company s operating leases amounts of right of use assets and lease liabilities the weighted average remaining lease term and the weighted average discount rate for the Company s operating leases asset and liability amounts are in thousands
Certain leases include one or more options to renew with terms that extend the lease term up to five years The Company includes option to renew the lease as part of the right of use lease asset and liability when it is reasonably certain the Company will exercise the option In addition certain leases contain fair value purchase and termination options with an associated penalty In general the Company is not reasonably certain to exercise such options
The Company has declared cash dividends per share of 0 32 in each of the full fiscal years ended June 30 2024 June 30 2023 and June 30 2022 During the years ended June 30 2024 June 30 2023 and June 30 2022 the Company repurchased 1 397 471 shares at an average share price of 57 28 222 000 shares at an average share price of 88 12 and 1 576 952 shares at an average share price of 102 06 respectively The Company s accounting policy is to record the portion of share repurchases in excess of the par value entirely in retained earnings During fiscal year 2024 2023 and 2022 the amounts within the Consolidated Statements of Shareholders Equity for the surrender and retirement of stock to exercise options due to net settlement stock options exercises and restricted stock units vesting were 21 9 million 28 9 million and 23 5 million respectively
Basic net income per common share is calculated based on the weighted average number of common shares outstanding during the period Diluted net income per common share is computed by dividing net income by the weighted average number of common and potentially dilutive common shares outstanding during the period Potentially dilutive common shares of our stock result from dilutive common stock options and restricted stock units We use the treasury stock method to calculate the weighted average shares used in the diluted earnings per share computation Under the treasury stock method the proceeds from exercise of an option the amount of compensation cost if any for future service that we have not yet recognized and the amount of estimated tax benefits that would be recorded in paid in capital if any when the option is exercised are assumed to be used to repurchase shares in the current period
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 3 9 million 4 5 million and 2 8 million for the fiscal years ended June 30 2024 2023 and 2022 respectively
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 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
Equity incentive plan The 2020 Equity Incentive Plan which replaced the Company s Second Amended and Restated 2010 Equity Incentive 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 were 36 2 million shares of common stock authorized for grant under the Plan The maximum aggregate number of shares of common stock reserved and available for awards under the Plan is 9 936 808 shares At June 30 2024 there were 6 3 million shares of common stock available for grant under the 2020 Equity Incentive Plan The maximum term of incentive options granted under the 2020 Equity Incentive Plan is ten years The 2020 Equity Incentive Plan replaced the Company s second A R 2010 Plan which had previously amended and restated the Company s Amended and Restated 2010 Equity Incentive Plan the A R 2010 Plan The 2020 Equity Incentive Plan and Second A R 2010 Plan collectively the Plans are administered by the Board of Directors and its Executive 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 as of June 30 2024 under the 2020 Equity Incentive Plan were 11 6 million
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 2024 2023 and 2022 was 27 27 29 53 and 29 78 respectively The total intrinsic value of options exercised during fiscal 2024 2023 and 2022 were 100 8 million 90 2 million and 209 3 million respectively The total fair value of options exercised during fiscal 2024 2023 and 2022 were 58 2 million 46 5 million and 82 3 million respectively The total fair value of options vested during fiscal 2024 2023 and 2022 were 31 6 million 31 0 million and 29 2 million respectively Stock options vest over a four year period
compensation costs inclusive of payroll taxes of 0 9 million 1 0 million and 1 4 million was included in cost of goods sold in 2024 2023 and 2022 respectively As of June 30 2024 there was 35 8 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 2025 through 2028 using a 4 5 forfeiture rate The weighted average period over which the compensation cost is expected to be recognized is 2 1 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 800 000 shares were allocated to the ESPP The Company recorded expense of 0 9 million 0 9 million and 1 0 million for the ESPP in fiscal 2024 2023 and 2022 respectively
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 makes matching contributions to the Plan The Company has recorded an expense for contributions to the plans of 5 8 million 4 9 million and 4 3 million for the years ended June 30 2024 2023 and 2022 respectively The Company operates defined contribution pension plans which consists of primarily our U K and China employees The Company s contribution to the defined pension contribution plan was 5 5 million 2 4 million and 2 3 million for the years ended June 30 2024 2023 and 2022 respectively
Performance incentive programs In fiscal 2024 under certain employment agreements a Management Incentive Plan and a business incentive plan available to executive officers certain management personnel and certain other professional employees the Company recorded cash bonuses of 13 5 million granted options for 1 060 126 shares of common stock issued 27 876 restricted common shares and 374 448 restricted stock units In fiscal 2023 and fiscal 2022 the Company recorded cash bonuses of 10 8 million and 26 5 million granted options for 2 350 980 and 1 390 436 shares of common stock issued 10 816 and 27 584 restricted common stock shares and 107 202 and 110 292 restricted stock units respectively
1 For the year ended June 30 2024 this is for a 0 3 million gain on the sale of our exchange trade investment grade bond funds For the year ended June 30 2023 this is for a 37 2 million gain on the sale of our CCXI investment a 11 7 million gain on the sale of Eminence and a gain of 0 4 million related to the change in fair value of our exchange traded bond funds For the year ended June 30 2022 this is for a 16 1 million gain in the fair value of our CCXI investment
As of June 30 2024 the 19 3 million valuation allowance relates to certain foreign and state tax net operating loss and state credit carryforwards that existed at the date the Company completed various previous acquisitions as well as immaterial amounts generated after the acquisitions The Company believes it is more likely than not that these tax carryovers will not be realized
As of June 30 2024 the Company has federal operating loss carryforwards of approximately 34 0 million and state operating loss carryforwards of 146 8 million from its previous acquisitions which are not limited under IRC Section 382 As of June 30 2024 the Company has foreign net operating loss carryforwards of 77 5 million Some of the net operating loss carryforwards expire between fiscal 2025 and 2036 Federal net operating loss carryforwards generated after December 31 2017 have an indefinite carryforward period but the Company expects to be fully utilize these attributes by June 30 2032 The Company has a deferred tax asset of 9 8 million net of the valuation allowance discussed above related to the net operating loss carryovers As of June 30 2024 the Company has federal and state tax credit carryforwards of 4 4 million and 5 6 million respectively The federal tax credit carryforwards expire between 2028 and 2040 The majority of the state credit carryforwards have no expiry date The state credit carryforwards that have expiry dates have a full valuation allowance The Company has a deferred tax asset of 5 5 million net of the valuation allowance discussed above related to the tax credit carryovers
As of June 30 2024 the Company has approximately 246 million of undistributed earnings in its foreign subsidiaries Approximately 108 million of these earnings are no longer considered permanently reinvested and the Company expects to be able to repatriate earnings on a tax neutral basis The Company has not provided deferred taxes on approximately 138 million of undistributed earnings from non U S subsidiaries as of June 30 2024 which are indefinitely reinvested in operations Because of the multiple entities as well as the complexities of laws and regulations by which to repatriate the earnings to minimize tax cost it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely A deferred tax liability will be recognized if the Company can no longer demonstrate that it plans to indefinitely reinvest the undistributed earnings
Included in the balance of unrecognized tax benefits at June 30 2024 are potential benefits of 5 3 million that if recognized would affect the effective tax rate on income from continuing operations The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes The Company had 0 6 million of accrued interest and penalties as of June 30 2024 The amount recorded for the periods ended June 30 2023 and June 30 2022 was 0 5 million and 0 3 million respectively in accrued interest and penalties 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 several jurisdictions outside the U S The Company s federal returns are subject to tax assessment for 2019 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
aspects of life science research diagnostics and cell and gene therapy This segment also includes proteomic analytical tools both manual and automated that offer researchers and pharmaceutical manufacturers efficient and streamlined options for automated western blot and multiplexed ELISA workflow No customer in the Protein Sciences segment accounted for more than 10 of the segment s net sales for the years ended June 30 2024 2023 and 2022
The Company s Diagnostics and Genomics segment is comprised of the diagnostics reagents division spatial biology divsion and molecular diagnostics division Our Diagnostics and Genomics segment develops and manufactures diagnostic products including controls calibrators and diagnostic assays for the regulated diagnostics market exosome based molecular diagnostic assays advanced tissue based in situ hybridization assays for spatial genomic and tissue biopsy analysis and genetic and oncology kits for research and clinical applications No customer in the Diagnostics and Genomics segment accounted for more than 10 of the segment s net sales for the fiscal years ended June 30 2024 2023 and 2022
The Company has some integrated facilities that serve both segments As such asset and capital expenditure information by operating segment has not been provided and is not available since the Company does not produce or utilize such information internally In addition although depreciation and amortization expense is a component of each operating segment s operating results it is not discretely identifiable
The Company has disclosed sales by geographic area based on the location of the customer or distributor in Note 2 The Company has disclosed dis aggregated product and service revenue by consumables instruments and services in Note 2 The Company considers total instrument and total service revenue to represent similar groups of products in the fiscal years presented The Company considers our consumables sold in the Protein Sciences and Diagnostics and Genomics segments to represent different groups of products and therefore have separately disclosed the related consumables revenue in thousands
We have audited the accompanying consolidated balance sheets of Bio Techne Corporation and subsidiaries the Company as of June 30 2024 and June 30 2023 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 2024 and the related notes collectively the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company as of June 30 2024 and June 30 2023 and the results of its operations and its cash flows for each of the years in the three year period ended June 30 2024 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 PCAOB the Company s internal control over financial reporting as of June 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 22 2024 expressed an unqualified opinion on the effectiveness of the Company s internal control over financial reporting
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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the consolidated financial statements and 2 involved our especially challenging subjective or complex judgments The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
We identified the assessment of the fair value measurement of the acquired developed technology as a critical audit matter There was a high degree of subjectivity in applying and evaluating certain key assumptions used to estimate the fair value of the acquired developed technology Specifically the revenue growth rates and the discount rate were challenging to test as they represented subjective determinations of future market and economic conditions Changes to those assumptions could have had a significant effect on the determination of the fair value measurement
The following are the primary procedures we performed to address this critical audit matter We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company s acquisition date valuation process including controls related to the development of the revenue growth rates and discount rate We performed sensitivity analyses over the revenue growth rates to assess the impact of changes in those assumptions on the Company s determination of the fair value of the developed technology We evaluated the reasonableness of the Company s forecasted revenue growth rates used to determine forecasted revenues by comparing them to historical results and industry related third party data In addition we involved valuation professionals with specialized skills and knowledge who assisted in
We have audited Bio Techne Corporation and subsidiaries the Company internal control over financial reporting as of June 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission In our opinion the Company maintained in all material respects effective internal control over financial reporting as of June 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of June 30 2024 and June 30 2023 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 2024 and the related notes collectively the consolidated financial statements and our report dated August 22 2024 expressed an unqualified opinion on those consolidated financial statements
The Company 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 Annual 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB 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 of internal control over financial reporting 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
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 The evaluation was based upon reports and certifications provided by a number of executives Based on that evaluation our Chief Executive Officer and Chief Financial Officer concluded that as of June 30 2024 our disclosure controls and procedures were effective
The 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 also includes those policies and procedures that
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
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
Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management including our Chief Executive Officer and Chief Financial Officer we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO Based on our assessment and those criteria our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of June 30 2024
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 2024 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
The Company has an insider trading policy which governs the purchase sale and or other dispositions of our securities or securities of certain other publicly traded companies by directors officers employees and other covered persons and is designed to promote compliance with insider trading laws rules and regulations and listing standards applicable to the Company A copy of our Insider Trading Policy is filed as Exhibit 19 to this Annual Report on Form 10 K
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 2024 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
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 2024 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
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 2024 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
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 2024 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
The following financial statements from the Company s Annual Report on Form 10 K for the fiscal year ended June 30 2024 formatted in Inline Extensible Business Reporting Language iXBRL 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
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

Company Name	BIO-TECHNE Corp Vist SEC web-site
Category	BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES)
Trading Symbol	TECH