Techne Corporation's (Nasdaq: TECH) consolidated net earnings for the quarter ended September 30, 2010 decreased 1.5% to $26.4 million or $.71 per diluted share compared with $26.8 million or $.72 per diluted share for the quarter ended September 30, 2009. The decrease in consolidated net earnings for the quarter was primarily due to lower gross margins as a result of changes in the exchange rates used to convert sales in foreign currencies (primarily British pound sterling and euro) into U.S. dollars, changes in product mix and increased royalty expense.
Consolidated net sales for the quarter ended September 30, 2010 were $67.9 million or a 2.1% increase from the quarter ended September 30, 2009. Consolidated net sales for the quarter were negatively affected by a stronger U.S. dollar as compared to foreign currencies for the quarter ended September 30, 2009. Excluding the effect of changes in foreign currency exchange rates, consolidated net sales increased 4.0% for the quarter ended September 30, 2010 from the quarter ended September 30, 2009.
Biotechnology net sales, which include sales by R&D Systems' Biotechnology Division, R&D Systems China and BiosPacific, were $46.7 million for the quarter ended September 30, 2010, an increase of 6.0% from $44.0 million for the quarter ended September 30, 2009. North American biotechnology sales to industrial pharmaceutical and biotechnology customers increased 3.1% during the first quarter of fiscal 2011 as compared to the first quarter of fiscal 2010. Biotechnology sales to academic customers, Pacific Rim distributors and sales in China grew 9.9%, 9.0% and 13.5%, respectively, in the first quarter of fiscal 2011 as compared to the first quarter of fiscal 2010.
R&D Europe's net sales for the quarter ended September 30, 2010 were $16.4 million, a decrease of 8.1% from the same prior-year period. R&D Europe's net sales decreased 1.2% for the quarter ended September 30, 2010 when measured at currency rates in effect in the comparable prior-year period. Hematology net sales for the quarter ended September 30, 2010 were $4.9 million, an increase of 5.1% from the comparable prior-year period.
Consolidated gross margin for the quarter ended September 30, 2010 decreased $929,000 from the quarter ended September 30, 2009. Biotechnology gross margin increased $797,000 for the quarter ended September 30, 2010 as a result of increased net sales partially offset by a decrease in gross margin percentage. R&D Europe gross margin decreased $1.8 million compared to the quarter ended September 30, 2009. Approximately $1.2 million of the decrease in R&D Europe gross margin was the result of changes in exchange rates used to translate sales in foreign currencies into U.S. dollars. Approximately 13.9% and 6.3% of consolidated net sales for the quarter ended September 30, 2010 were made in euro and British pound sterling, respectively. The average euro exchange rate declined 9.0% against the U.S. dollar for the quarter ended September 30, 2010 (euro:$1.31) compared to the same prior-year period (euro:$1.44). The average British pound sterling exchange rate declined 4.3% against the U.S. dollar for the quarter ended September 30, 2010 (British pound sterling:$1.56) compared to the same prior-year period (British pound sterling:$1.63). The remainder of R&D Europe's decrease in gross margin was the result of decreased net sales and changes in product mix.
Consolidated gross margin, as a percentage of net sales, was 77.6% for the quarter ended September 30, 2010, compared to 80.6% for the quarter ended September 30, 2009. R&D Europe gross margin percentage for the quarter ended September 30, 2010 was 47.4% compared to 53.5%, mainly as a result of the effect of exchange rate changes on net sales discussed above. Biotechnology gross margin percentage was 78.4% for the quarter ended September 30, 2010 compared to 80.9% for the quarter ended September 30, 2009. The decrease in the Biotechnology gross margin percentage was mainly the result of changes in product mix and $220,000 additional royalty expense and royalty initiation fees related to new licensing agreements.
Selling, general and administrative expenses for the quarter ended September 30, 2010 decreased $486,000 (6.1%) from the quarter ended September 30, 2009. The decrease in selling, general and administrative expense for the quarter resulted primarily from decreased legal expenses of $108,000, lower profit sharing expense of $224,000 and the effect of the change in exchange rates used to convert foreign expenses to U.S. dollars of $134,000.
Research and development expenses for the quarter ended September 30, 2010 increased $465,000 (7.6%) from the quarter ended September 30, 2009. The increase in research and development expenses is mainly due to increases in personnel and supply costs associated with the continuous development and release of new high-quality biotechnology products.
The effective tax rate for the quarter ended September 30, 2010 was 32.3% as compared to 32.6% for the same prior-year period. The improvement in the effective tax rate in the first quarter of fiscal 2011 was the result of an increase in the deduction for qualified production activities partially offset by the expiration of the U.S. credit for research and development expenses on December 31, 2009.
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