0001558370-24-000862.txt : 20240207 0001558370-24-000862.hdr.sgml : 20240207 20240207163156 ACCESSION NUMBER: 0001558370-24-000862 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 85 CONFORMED PERIOD OF REPORT: 20231231 FILED AS OF DATE: 20240207 DATE AS OF CHANGE: 20240207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIO-TECHNE Corp CENTRAL INDEX KEY: 0000842023 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] ORGANIZATION NAME: 03 Life Sciences IRS NUMBER: 411427402 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17272 FILM NUMBER: 24604770 BUSINESS ADDRESS: STREET 1: 614 MCKINLEY PL N E CITY: MINNEAPOLIS STATE: MN ZIP: 55413 BUSINESS PHONE: 6123798854 MAIL ADDRESS: STREET 1: 614 MCKINLEY PLACE NE CITY: MINNEAPOLIS STATE: MN ZIP: 55413 FORMER COMPANY: FORMER CONFORMED NAME: TECHNE CORP /MN/ DATE OF NAME CHANGE: 19920703 10-Q 1 tmb-20231231x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023, or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission file number 0-17272

BIO-TECHNE CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota

41-1427402

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

614 McKinley Place N.E.

Minneapolis, MN 55413

(612) 379-8854

(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

TECH

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b- 2).      Yes      No

At February 2, 2024, 157,191,685 shares of the Company's Common Stock (par value $0.01) were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

Bio-Techne Corporation and Subsidiaries

(in thousands, except per share data)

(unaudited)

    

Quarter Ended

Six Months Ended

December 31, 

December 31, 

2023

2022

2023

2022

Net sales

$

272,598

$

271,581

$

549,533

$

541,236

Cost of sales

 

96,011

 

88,221

 

187,755

 

178,280

Gross margin

 

176,587

 

183,360

 

361,778

 

362,956

Operating expenses:

 

 

  

Selling, general and administrative

 

115,667

 

93,010

 

220,998

 

192,386

Research and development

 

22,916

 

22,459

 

46,914

 

46,362

Total operating expenses

 

138,583

 

115,469

 

267,912

 

238,748

Operating income

 

38,004

 

67,891

 

93,866

 

124,208

Other income (expense)

 

(4,617)

(1,462)

(10,921)

45,938

Earnings before income taxes

 

33,387

 

66,429

 

82,945

 

170,146

Income taxes (benefit)

 

5,922

 

16,424

 

4,486

 

30,407

Net earnings, including noncontrolling interest

 

27,465

 

50,005

 

78,459

 

139,739

Net earnings attributable to noncontrolling interest

 

 

 

 

179

Net earnings attributable to Bio-Techne

$

27,465

$

50,005

$

78,459

$

139,560

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Foreign currency translation income (loss)

 

18,025

 

17,370

 

6,423

 

(4,087)

Foreign currency translation reclassified to earnings with Eminence deconsolidation

119

Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts disclosed in Note 8

 

(3,670)

 

(685)

 

(4,020)

 

4,010

Other comprehensive income (loss)

 

14,355

 

16,685

 

2,403

 

42

Other comprehensive income (loss) attributable to noncontrolling interest

 

 

 

 

(33)

Other comprehensive income (loss) attributable to Bio-Techne

 

14,355

 

16,685

 

2,403

 

75

Comprehensive income attributable to Bio-Techne

$

41,820

$

66,690

$

80,862

$

139,635

Earnings per share attributable to Bio-Techne:

 

Basic

$

0.17

$

0.32

$

0.50

$

0.89

Diluted

$

0.17

$

0.31

$

0.49

$

0.86

Weighted average common shares outstanding:

 

 

  

 

  

 

  

Basic

 

157,533

 

157,011

 

157,826

 

156,887

Diluted

 

160,060

 

161,750

 

161,001

 

161,766

See Notes to Condensed Consolidated Financial Statements.

1

CONDENSED CONSOLIDATED BALANCE SHEETS

Bio-Techne Corporation and Subsidiaries

(in thousands, except share and per share data)

    

December 31, 

2023

June 30, 

(unaudited)

2023

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

130,132

$

180,571

Short-term available-for-sale investments

 

5,520

 

23,739

Accounts receivable, less allowance for doubtful accounts of $3,502 and $4,738, respectively

 

207,451

 

218,468

Inventories

 

180,839

 

171,638

Current assets held-for-sale

26,647

Other current assets

 

40,051

 

27,066

Total current assets

 

590,640

 

621,482

Property and equipment, net

 

234,204

 

226,200

Right-of-use assets

 

100,863

 

98,326

Goodwill

 

980,082

 

872,737

Intangible assets, net

 

550,605

 

534,645

Other assets

 

274,359

 

285,302

Total assets

$

2,730,753

$

2,638,692

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Trade accounts payable

$

31,514

$

25,679

Salaries, wages and related accruals

 

32,995

 

36,747

Accrued expenses

 

17,159

 

14,880

Contract liabilities

 

28,427

 

23,069

Income taxes payable

 

6,646

 

12,022

Operating lease liabilities - current

 

12,672

 

11,199

Contingent consideration payable

 

 

3,500

Current liabilities held-for-sale

 

1,593

 

Other current liabilities

 

4,225

 

1,413

Total current liabilities

 

135,231

 

128,509

Deferred income taxes

 

71,575

 

88,982

Long-term debt obligations

 

447,000

 

350,000

Operating lease liabilities

 

96,027

 

93,766

Other long-term liabilities

 

17,361

 

10,919

 

  

 

  

Bio-Techne’s Shareholders’ equity:

Undesignated capital stock, no par; authorized 5,000,000 shares; none issued or outstanding

 

 

Common stock, par value $.01 per share; authorized 400,000,000; issued and outstanding 157,142,004 and 157,641,914 respectively

 

1,571

 

1,576

Additional paid-in capital

 

764,273

 

721,543

Retained earnings

 

1,261,376

 

1,309,461

Accumulated other comprehensive loss

 

(63,661)

 

(66,064)

Total Bio-Techne’s shareholders’ equity

 

1,963,559

 

1,966,516

Total liabilities and shareholders’ equity

$

2,730,753

$

2,638,692

See Notes to Condensed Consolidated Financial Statements.

2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Bio-Techne Corporation and Subsidiaries

(in thousands)

(unaudited)

    

Six Months Ended

December 31, 

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net earnings, including noncontrolling interest

$

78,459

$

139,739

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

  

 

  

Depreciation and amortization

 

56,343

 

53,344

Costs recognized on sale of acquired inventory

 

364

 

400

Deferred income taxes

 

(22,314)

 

(6,365)

Stock-based compensation expense

 

22,846

 

31,205

Fair value adjustment to contingent consideration payable

 

(3,500)

 

(8,600)

Gain on sale of CCXI investment

 

 

(37,176)

Fair value adjustment on available-for-sale investments

 

(283)

 

(839)

(Gain) loss on equity method investment

4,295

Gain on sale of Eminence

(11,682)

Leases, net

 

1,196

 

640

Impairment of assets held-for-sale

6,038

Other operating activity

 

256

 

112

Change in operating assets and operating liabilities, net of acquisition:

 

  

 

  

Trade accounts and other receivables, net

 

20,333

 

11,425

Inventories

 

(9,577)

 

(18,362)

Prepaid expenses

 

(3,149)

 

(2,005)

Trade accounts payable, accrued expenses, contract liabilities, and other

 

5,382

 

(11,541)

Salaries, wages and related accruals

 

(4,305)

 

(33,265)

Income taxes payable

 

(9,885)

 

13,435

Net cash provided by (used in) operating activities

 

142,499

 

120,465

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Proceeds from sale of available-for-sale investments

 

23,759

 

26,509

Purchases of available-for-sale investments

 

(5,526)

 

(20,500)

Proceeds from sale of CCXI investment

73,219

Additions to property and equipment

 

(28,456)

 

(15,665)

Acquisitions, net of cash acquired

 

(169,707)

 

(101,184)

Distributions from (Investments in) Wilson Wolf

2,149

Proceeds from sale of Eminence

 

 

17,824

Net cash provided by (used in) investing activities

 

(177,781)

 

(19,797)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Cash dividends

 

(25,213)

 

(25,106)

Proceeds from stock option exercises

 

19,670

 

16,977

Re-purchases of common stock

 

(80,042)

 

(19,562)

Borrowings under line-of-credit agreement

 

225,000

 

449,661

Repayments of long-term debt

 

(128,000)

 

(505,661)

Taxes paid on RSUs and net share settlements

(21,302)

(17,853)

Other financing activity

 

 

(2,457)

Net cash provided by (used in) financing activities

 

(9,887)

 

(104,001)

Effect of exchange rate changes on cash and cash equivalents

 

(5,270)

 

(4,552)

Net change in cash and cash equivalents

 

(50,439)

 

(7,885)

Cash and cash equivalents at beginning of period

 

180,571

 

172,567

Cash and cash equivalents at end of period

$

130,132

$

164,682

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

37,645

$

26,411

Cash paid for interest

$

8,586

$

5,619

See Notes to Condensed Consolidated Financial Statements.

3

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Bio-Techne Corporation and Subsidiaries

(unaudited)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies:

The interim consolidated financial statements of Bio-Techne Corporation and subsidiaries, (the Company) presented here have been prepared by the Company and are unaudited. They have been prepared in accordance with accounting principles generally accepted in the United States of America and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These interim unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto for the fiscal year ended June 30, 2023, included in the Company's Annual Report on Form 10-K for fiscal 2023. A summary of significant accounting policies followed by the Company is detailed in the Company's Annual Report on Form 10-K for fiscal 2023. The Company follows these policies in preparation of the interim unaudited Condensed Consolidated Financial Statements.

During the quarter ended December 31, 2023, the Company operated under two operating segments, Protein Sciences and Diagnostics and Genomics. The operating segments the Company operated under were consistent with the Company's operating segments disclosed in the Company's Annual Report on Form 10-K for fiscal 2023.

Partially-owned consolidated subsidiary: On September 1, 2022, the Company completed the sale of its equity shares of Changzhou Eminence Biotechnology Co., Ltd. (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. 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 Condensed Consolidated Statement of Earnings.

Investments: 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 is 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.

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 in annual revenue or $136 million in annual EBITDA. If the second milestone is achieved, the forward contract requires the Company to pay approximately $1 billion plus potential consideration for revenue in excess of the revenue milestone.

The investment in Wilson Wolf is accounted for as an equity method investment under ASC 323. 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. There was $1.9 million and $4.3 million of loss for the quarter and six months ended December 31, 2023, respectively, recorded on the Company’s Consolidated Statement of Earnings and Comprehensive Income related to the investment. The Company’s total investment of $250 million is included within Other long-term assets on the Consolidated Balance Sheet.

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

4

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.

Fiscal Year 2024 Restructuring Actions:

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. The Company is expecting to incur costs related to these actions through the first half of fiscal 2025, which will be recorded when specified criteria are met.

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, including $1.4 million of goodwill allocated to the disposal group on a relative fair value basis. As a result of an impairment test performed over the disposal group, an impairment charge of $6.0 million which includes the allocated goodwill, was recorded in the Selling, general and administrative line in the Condensed Consolidated Statements of Earnings for the three and six months ended December 31, 2023. As of December 31, 2023, the assets remaining within the disposal group primarily include inventory of $11.3 million, property and equipment of $5.6 million, intangibles of $14.3 million, and current liabilities of $1.6 million. These assets are actively marketed and we believe their sale will be completed within the next 12 months. The held-for-sale assets and liabilities are recorded in Current assets held-for-sale and Current liabilities held-for-sale in our Condensed Consolidated Balance sheet as of December 31, 2023.

The restructuring and restructuring-related charges, including the impairment of assets held-for-sale, for periods presented were recorded in the Condensed Consolidated Statements of Earnings as follows (in thousands):

Quarter Ended

Six Months Ended

December 31, 

December 31, 

2023

2023

Cost of sales

$

1,174

$

1,174

Selling, general and administrative(1)

10,250

10,250

Total

$

11,424

$

11,424

(1) Restructuring actions impacting research and development are not material to separately disclose and have been included within Selling, general and administrative costs.


Restructuring and restructuring-related costs by segment are as follows (in thousands):

Employee

Asset-related

Impairment of

severance

and other

assets held-for-sale

Total

Protein Sciences

$

2,950

$

472

$

6,038

$

9,460

Diagnostics and Genomics

739

739

Corporate

1,193

32

1,225

Total

$

4,882

$

504

$

6,038

$

11,424


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):

Employee

Asset-related

Impairment of

severance(1)

and other(2)

assets held-for-sale

Total

Expense incurred in the second quarter of 2024

$

4,882

$

504

$

6,038

$

11,424

Cash payments

(1,257)

(177)

(1,434)

Non-cash adjustments

(191)

(6,038)

(6,229)

Accrued restructuring actions balance as of December 31, 2023

$

3,625

$

136

$

$

3,761

5

(1) Relates to impacted employees’ final paycheck, separation payments, outplacement services, legal fees, and retention packages related to the closure or sale of certain distribution and manufacturing sites.

(2) Primarily relates to impairment of right-of-use assets, lease termination fees, consulting fees, and expenses for changes to supporting IT systems that are enabling the Company to complete the restructuring initiatives.

Fiscal Year 2023 Restructuring Actions:

QT Holdings Corporation (Quad)

In August 2022, the Company informed employees of our decision to close our QT Holdings Corporation (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, a pre-tax charge of $2.2 million was recorded within our Protein Sciences segment. The related restructuring charges for the year ended June 30, 2023 were recorded in the income statement as follows (in thousands):

Employee

Asset

    

severance

    

impairment and other

    

Total

Selling, general and administrative

$

1,328

$

842

$

2,170

Employee

Asset

    

severance

    

impairment and other

    

Total

Expense incurred in the first quarter of 2023

$

1,328

$

842

$

2,170

Cash payments

(1,233)

(772)

(2,005)

Adjustments

(95)

(70)

(165)

Accrued restructuring actions balances as of June 30, 2023

$

$

$

Protein Sciences Realignment

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 are expected to be 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-tax charges for the quarter and six months ended December 31, 2023 were approximately $0.13 million and $0.22 million, respectively. Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):

Employee

severance

Expense incurred in fiscal year 2023

$

1,677

Fiscal year 2023 cash payments

(762)

Fiscal year 2023 adjustments

(18)

Accrued restructuring actions balances as of June 30, 2023

$

897

Fiscal year 2024 cash payments

(923)

Fiscal year 2024 adjustments(1)

221

Accrued restructuring actions balances as of December 31, 2023(2)

$

195

(1) Fiscal year 2024 adjustments relate to the refinement of the accrual recorded in fiscal year 2023.

(2) The remaining balance as of December 31, 2023 relates to employee severance that is paid out over a one-year period.

Recently Adopted Accounting Pronouncements

There were no accounting pronouncements adopted in the quarter ended December 31, 2023. Refer to the Form 10-K for accounting pronouncements adopted prior to June 30, 2023.

6

Note 2. Revenue Recognition:

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.

We recognize royalty revenues in the period the sales occur using third party evidence. The Company elected the "right to invoice" practical expedient based on the Company's right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.

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 December 31, 2023.

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 December 31, 2023 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 December 31, 2023 and June 30, 2023 were approximately $30.1 million and $24.6 million, respectively. Contract liabilities as of June 30, 2023 subsequently recognized as revenue during the quarter and six month period ended December 31, 2023 were approximately $7.1 million and $18.8 million, respectively. 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 and handling activities that occur after the customer has obtained control of a good as a fulfillment cost, and we accrue costs of shipping and handling when the related revenue is recognized.

7

The following tables present our disaggregated revenue for the periods presented.

Revenue by type is as follows (in thousands):

    

Quarter Ended

Six Months Ended

December 31, 

December 31, 

    

2023

    

2022

2023

    

2022

Consumables

$

211,126

$

217,330

$

435,673

$

433,760

Instruments

 

29,825

 

32,301

 

54,685

 

58,759

Services

 

24,129

 

15,852

 

45,583

 

37,297

Total product and services revenue, net

$

265,080

$

265,483

$

535,941

$

529,816

Royalty revenues

 

7,518

 

6,098

 

13,592

 

11,420

Total revenues, net

$

272,598

$

271,581

$

549,533

$

541,236

Revenue by geography is as follows (in thousands):

c

    

Quarter Ended

Six Months Ended

December 31, 

December 31, 

    

2023

    

2022

2023

    

2022

 

  

 

  

  

 

  

United States

$

147,793

$

149,005

$

306,898

$

304,436

EMEA, excluding United Kingdom

 

62,538

 

54,523

 

117,334

 

100,544

United Kingdom

 

10,675

 

10,872

 

23,126

 

22,574

APAC, excluding Greater China

 

19,042

 

17,968

 

36,392

 

35,433

Greater China

 

24,459

 

30,326

 

49,944

 

61,847

Rest of World

 

8,091

 

8,887

 

15,839

 

16,402

Net Sales

$

272,598

$

271,581

$

549,533

$

541,236

8

Note 3. Selected Balance Sheet Data:

Inventories:

Inventories consist of (in thousands):

    

December 31, 

June 30, 

    

2023

    

2023

Raw materials

$

83,247

$

84,551

Finished goods(1)

 

102,907

 

92,474

Inventories, net

$

186,154

$

177,025

(1) Finished goods inventory of $5,315 and $5,387 included within Other long-term assets in the respective December 31, 2023 and June 30, 2023, Consolidated Balance Sheet. The inventory is included in long-term assets as it is forecasted to be sold after the 12 months subsequent to the consolidated balance sheet date.

Property and Equipment:

Property and equipment consist of (in thousands):

    

December 31, 

June 30, 

    

2023

    

2023

Land

$

8,180

$

9,100

Buildings and improvements

 

243,640

 

245,302

Machinery and equipment

199,533

190,019

Construction in progress

 

28,065

 

15,491

Property and equipment, cost

 

479,418

 

459,912

Accumulated depreciation and amortization

 

(245,214)

 

(233,712)

Property and equipment, net

$

234,204

$

226,200

Intangible Assets:

Intangible assets consist of (in thousands):

December 31, 

June 30, 

2023

2023

Developed technology

$

657,192

$

616,311

Trade names

 

152,206

 

146,945

Customer relationships

 

211,733

 

213,878

Patents

 

4,080

 

3,815

Other intangibles

 

11,865

 

11,566

Definite-lived intangible assets

 

1,037,076

 

992,515

Accumulated amortization

 

(509,171)

 

(480,570)

Definite-lived intangibles assets, net

 

527,905

 

511,945

In process research and development

 

22,700

 

22,700

Total intangible assets, net

$

550,605

$

534,645

9

Changes to the carrying amount of net intangible assets for the period ended December 31, 2023 consist of (in thousands):

Beginning balance

$

534,645

Acquisitions

 

66,400

Other additions

 

556

Held-for-sale intangibles(1)

(14,323)

Amortization expense

 

(40,383)

Currency translation

3,710

Ending balance

$

550,605

(1) Refer to Note 1 for further detail on held-for-sale intangibles.

The estimated future amortization expense for intangible assets as of December 31, 2023 is as follows (in thousands):

Remainder 2024

    

$

39,332

2025

 

75,553

2026

 

71,575

2027

 

61,394

2028

 

57,733

Thereafter

 

222,318

Total

$

527,905

Goodwill:

Changes to the carrying amount of goodwill for the period ended December 31, 2023 consist of (in thousands):

    

    

Diagnostics and

    

Protein Sciences

 Genomics

Total

June 30, 2023

$

427,027

$

445,710

$

872,737

Acquisitions

 

102,546

102,546

Held-for-sale goodwill(1)

(1,400)

(1,400)

Currency translation

 

318

5,881

6,199

December 31, 2023

$

425,945

$

554,137

$

980,082

(1)Refer to Note 1 for further detail on goodwill reclassified to current assets held-for-sale.

We evaluate the carrying value of goodwill in the fourth quarter of each fiscal year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. The Company performed a qualitative goodwill impairment assessment for all of its reporting units during the fourth quarter of fiscal 2023. No indicators of impairment were identified as part of our assessment.

Other Assets:

Other assets consist of (in thousands):

    

December 31, 

June 30, 

    

2023

2023

Investment in Wilson Wolf

$

249,730

$

255,857

Derivative instruments

11,589

16,857

Long-term inventory

5,315

5,387

Other

 

7,725

 

7,201

Other assets

$

274,359

$

285,302

10

Note 4. Acquisitions:

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 Earnings and Comprehensive Income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred.

Fiscal year 2024 Acquisitions

Lunaphore Technologies SA.

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 consideration related to Lunaphore is considered preliminary with provisional amounts primarily related to intangible assets, certain tax-related amounts, and goodwill. The Company expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales of this business included in Bio-Techne's consolidated results of operations for the quarter and six month period ended December 31, 2023 were $3.4 million and $5.5 million, respectively. Operating loss of this business included in Bio-Techne's consolidated results of operations for the quarter and six month period ended December 31, 2023 was $6.9 million and $14.2 million, respectively.

The preliminary estimated fair values of the assets acquired and liabilities assumed as of December 31, 2023 are as follows (in thousands):

Preliminary allocation at December 31, 2023

Current assets

$

12,155

Equipment and other long-term assets

 

1,470

Intangible assets:

Developed technologies

 

60,300

Tradenames

 

4,900

Customer relationships

 

1,200

Goodwill

 

102,546

Total assets acquired

 

182,571

Liabilities

 

7,096

Deferred income taxes, net

 

5,768

Net assets acquired

$

169,707

Cash paid

 

169,707

Net assets acquired

$

169,707

11

Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's preliminary assessment. The purchase price allocated to developed technology and customer relationships was based on management’s preliminary 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 preliminary 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 Condensed 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 Condensed 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 Condensed 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.

Note 5. Fair Value Measurements:

The Company’s financial instruments include cash and cash equivalents, available-for-sale investments, derivative instruments, accounts receivable, accounts payable, contingent consideration obligations, and long-term debt.

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.

12

The following tables provide information by level for financial assets and liabilities that are measured at fair value on a recurring basis (in thousands).

    

Total 

    

carrying 

value as of

Fair Value Measurements Using 

Balance Sheet Location

December 31, 

Inputs Considered as

2023

Level 1

Level 2

Level 3