BIO-TECHNE Corp 10-Q

tech20211231_10q.htm     Table of Contents   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, 2021 , 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 3, 2022, 39,288,254 shares of the Company's Common Stock (par value $0.01) were outstanding.     Table of Contents       TABLE OF CONTENTS       Page PART I. FINANCIAL INFORMATION       Item 1. Condensed Consolidated Financial Statements (Unaudited) 1       Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17       Item 3. Quantitative and Qualitative Disclosures about Market Risk 23       Item 4. Controls and Procedures 24       PART II: OTHER INFORMATION       Item 1. Legal Proceedings 25       Item 1A. Risk Factors 25       Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26       Item 3. Defaults Upon Senior Securities 26       Item 4. Mine Safety Disclosures 26       Item 5. Other Information 26       Item 6. Exh ibits 27         SIGNATURES 29     Table of Contents       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 December 31,     Six Months Ended December 31,       2021     2020     2021     2020   Net sales   $ 269,276     $ 224,253     $ 526,995     $ 428,452   Cost of sales     85,585       73,353       172,307       139,821   Gross margin     183,691       150,900       354,688       288,631   Operating expenses:                                 Selling, general and administrative     100,693       83,116       186,868       155,714   Research and development     20,650       16,789       42,250       32,830   Total operating expenses     121,343       99,905       229,118       188,544                                     Operating income     62,348       50,995       125,570       100,087   Other income (expense)     23,831       5,373       27,992       ( 4,381 ) Earnings before income taxes     86,179       56,368       153,562       95,706   Income taxes (benefit)     14,120       10,224       12,522       16,168   Net earnings, including noncontrolling interest     72,059       46,144       141,040       79,538   Net earnings (loss) attributable to noncontrolling interest     ( 8,114 )     ( 130 )     ( 8,748 )     ( 130 ) Net earnings attributable to Bio-Techne   $ 80,173     $ 46,274     $ 149,788     $ 79,668   Other comprehensive income (loss):                                 Foreign currency translation adjustments     1,924       16,928       ( 6,722 )     28,842   Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts disclosed in Note 8     2,884       2,059       4,566       4,202   Other comprehensive income (loss)     4,808       18,987       ( 2,156 )     33,044   Other comprehensive income (loss) attributable to noncontrolling interest     66       83       27       83   Other comprehensive income (loss) attributable to Bio-Techne     4,742       18,904       ( 2,183 )     32,961   Comprehensive income attributable to Bio-Techne   $ 84,915     $ 65,178     $ 147,605     $ 112,629                                     Earnings per share attributable to Bio-Techne:                                 Basic   $ 2.04     $ 1.20     $ 3.82     $ 2.06   Diluted   $  1.94     $ 1.15     $ 3.64     $ 1.98                                     Weighted average common shares outstanding:                                 Basic     39,310       38,691       39,202       38,614   Diluted     41,207       40,257       41,159       40,135     See Notes to Condensed Consolidated Financial Statements.     1 Table of Contents     CONDENSED CONSOLIDATED BALANCE SHEETS Bio-Techne Corporation and Subsidiaries (in thousands, except share and per share data)       December 31, 2021 (unaudited)     June 30, 2021   ASSETS                 Current assets:                 Cash and cash equivalents   $ 211,845     $ 199,091   Short-term available-for-sale investments     67,135       32,463   Accounts receivable, less allowance for doubtful accounts of $1,334  and $1,229 , respectively     152,896       145,385   Inventories     121,858       116,748   Other current assets     36,496       16,919   Total current assets     590,230       510,606                     Property and equipment, net     211,814       207,907   Right of use asset     64,293       73,834   Goodwill     832,056       843,067   Intangible assets, net     569,347       615,968   Other assets     37,106       11,575   Total assets   $ 2,304,846     $ 2,262,957                     LIABILITIES AND SHAREHOLDERS' EQUITY                 Current liabilities:                 Trade accounts payable   $ 26,756     $ 29,384   Salaries, wages and related accruals     43,921       51,294   Accrued expenses     18,991       15,282   Contract liabilities     19,081       18,995   Income taxes payable     14,284       5,336   Operating lease liabilities - current     11,809       11,602   Contingent consideration payable     2,000       4,000   Current portion of long-term debt obligations     12,500       12,500   Other current liabilities     5,467       3,891   Total current liabilities     154,809       152,284                     Deferred income taxes     101,423       93,125   Long-term debt obligations     269,618       328,827   Long-term contingent consideration payable     7,000       25,400   Operating lease liabilities     57,718       67,625   Other long-term liabilities     11,747       24,462                     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 100,000,000 ; issued and outstanding 39,319,766  and 38,955,484 , respectively     393       390   Additional paid-in capital     616,429       534,411   Retained earnings     1,145,641       1,085,461   Accumulated other comprehensive loss     ( 59,474 )     ( 57,291 ) Total Bio-Techne’s shareholders' equity     1,702,989       1,562,971   Noncontrolling interest     ( 458 )     8,263   Total shareholders’ equity     1,702,531       1,571,234   Total liabilities and shareholders’ equity   $ 2,304,846     $ 2,262,957     See Notes to Condensed Consolidated Financial Statements.   2 Table of Contents     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Bio-Techne Corporation and Subsidiaries (in thousands) (unaudited)       Six Months Ended       December 31,       2021     2020   CASH FLOWS FROM OPERATING ACTIVITIES:                 Net earnings, including noncontrolling interest   $ 141,040     $ 79,538   Adjustments to reconcile net earnings to net cash provided by operating activities:                 Depreciation and amortization     49,836       41,972   Costs recognized on sale of acquired inventory     1,596       23   Deferred income taxes     7,233       216   Stock-based compensation expense     25,706       28,531   Contingent consideration payments     ( 3,300 )     ( 155 ) Fair value adjustment to contingent consideration payable     ( 16,400 )     4,600   Fair value adjustment on available for sale investments     ( 33,672 )     ( 6,356 ) Asset impairment restructuring     546       -   Eminence impairment     18,715       -   Leases, net     ( 501 )     113   Other operating activity     383       324   Change in operating assets and operating liabilities, net of acquisition:                 Trade accounts and other receivables, net     ( 9,347 )     ( 2,327 ) Inventories     ( 8,700 )     ( 586 ) Prepaid expenses     ( 7,025 )     ( 1,508 ) Trade accounts payable, accrued expenses, contract liabilities, and other     ( 175 )     8,624   Salaries, wages and related accruals     ( 10,408 )     ( 1,713 ) Income taxes payable     ( 6,100 )     3,982   Net cash provided by (used in) operating activities     149,427       155,278                     CASH FLOWS FROM INVESTING ACTIVITIES:                 Proceeds from maturities of available-for-sale investments     12,450       43,146   Purchases of available-for-sale investments     ( 13,500 )     ( 27,184 ) Additions to property and equipment     ( 16,238 )     ( 22,383 ) Acquisitions, net of cash acquired     -       ( 9,765 ) Investment of forward purchase contract     ( 25,000 )     -   Other investing activity     -       ( 556 ) Net cash provided by (used in) investing activities     ( 42,288 )     ( 16,742 )                   CASH FLOWS FROM FINANCING ACTIVITIES:                 Cash dividends     ( 25,069 )     ( 24,728 ) Proceeds from stock option exercises     56,500       32,337   Re-purchases of common stock     ( 41,294 )     -   Borrowings under line-of-credit agreement     50,000       -   Repayments of long-term debt     ( 109,250 )     (125,250 ) Contingent consideration payments     ( 700 )     -   Other financing activity     ( 23,247 )     ( 7,371 ) Net cash provided by (used in) financing activities     ( 93,060 )     ( 125,012 )                   Effect of exchange rate changes on cash and cash equivalents     ( 1,325 )     5,377   Net change in cash and cash equivalents     12,754       18,901   Cash and cash equivalents at beginning of period     199,091       146,625   Cash and cash equivalents at end of period   $ 211,845     $ 165,526                     Supplemental disclosure of cash flow information:                 Cash paid for income taxes   $ 15,368     $ 11,007   Cash paid for interest   $ 6,144     $ 7,779     See Notes to Condensed Consolidated Financial Statements.   3 Table of Contents   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, 2021, included in the Company's Annual Report on Form 10 -K for fiscal 2021. A summary of significant accounting policies followed by the Company is detailed in the Company's Annual Report on Form 10 -K for fiscal 2021. The Company follows these policies in preparation of the interim unaudited condensed consolidated financial statements.   During the six months ended December 31, 2021, 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 2021.     Goodwill: In the second quarter of fiscal 2022, Changzhou Eminence Biotechnology Co., Ltd. (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 in the second quarter of fiscal 2022 and performed impairment testing. 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. 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 impact on net income attributable to Bio-Techne was approximately $ 8 million, after taking into effect non-controlling interest holders. The remaining net tangible assets of Eminence included in our Consolidated Balance Sheet were approximately $ 4  million and primarily consisted of fixed assets and related deposits of $ 3.7  million, inventory of $ 0.9 million, receivables of $ 0.6 million, and other current assets of $ 0.2  million. The Company also had $ 1.6 million related to current liabilities. The Company holds a financial interest of approximately 57.4 % in those tangible assets in the liquidation process.      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 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 annual earnings before interest, taxes, depreciation, and amortization (EBITDA) at any point prior to December 31, 2027. Once triggered, the Company is required to make an additional investment of $ 231 million in exchange for a 19.9 % ownership stake. If Wilson Wolf doesn’t achieve the revenue and EBITDA targets by December 31, 2027, the agreement will expire.    Once the first part of the forward contract is 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. 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 approximate multiple for total expected payments of the second forward contract is 4.4 times the annual revenue of Wilson Wolf. The Company has elected to apply the measurement alternative as detailed under ASC 321 - 10 - 35 - 2 for the Wilson Wolf investment. The Company recorded the $ 25 million payment as a cost basis investment within Other long-term assets on the Consolidated Balance Sheet.     4     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 impairment and disposal charges include right of use assets, leasehold improvements, and other asset write-downs associated with combining operations and disposal of assets.   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 closure of the site is expected to be completed in the third quarter of fiscal 2022. As a result of the restructuring activities, an estimated pre-tax charge of $ 1.2 million was recorded within our Diagnostics and Genomics segment during the first quarter of fiscal 2022. Additional charges of approximately $ 0.5 million were recorded in the quarter ended December 31, 2021. These additional charges related to the refinement of our estimated close down costs as well as miscellaneous shut-down costs incurred during the quarter. Total restructuring charges for the closure of the Exosome Diagnostics Germany facility for the six months ended December 31, 2021 were recorded within operating income on the income statement as follows (in thousands):       Employee Severance     Asset Impairment and other     Total   Selling, general and administrative   $ 940     $ 750     $ 1,690     Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):       Employee Severance     Other     Total   Accrued restructuring action balances as of September 31, 2021 (1)   $ 639     $ 364     $ 1,003   Incremental expense incurred in the second quarter of fiscal 2022     -       242       242   Cash payments      ( 370 )     ( 242 )     ( 612 ) Adjustments     301       ( 37 )     264   Accrued restructuring actions balances as of December 31, 2021   $ 570     $ 327     $ 897     ( 1 ) The expense recorded for the three months ended September 31, 2021 of $ 1.2 million included $ 0.2 million related to the non-cash impairment of fixed assets.   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 charge is recorded within Other current liabilities as of December 31, 2021. There were no cash payments related to this restructuring during the period ended December 31, 2021.   Recently Adopted Accounting Pronouncements   There were no accounting pronouncements adopted in the first and second quarter of fiscal 2022. Refer to the Form 10 -K for accounting pronouncements adopted prior to June 30, 2021.    5 Table of Contents     Note 2. Revenue Recognition:   Consumables revenues consist of single-use products and are 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. Prior to fiscal 2021,  the Company has  not  recognized revenue upon completion of the performance obligation for laboratory services, but rather upon cash receipt, which was subsequent to the performance obligation being satisfied. The Company accounted for these services based on cash receipts as we did  not  have significant historical experience collecting payments from Medicare or other insurance providers and considered the variable consideration for such services to be constrained as it would  not  be probable that a significant amount of revenue would  not  need to be reversed in future periods for the services provided. Given Medicare coverage for our laboratory services became effective on  December 1, 2019,  the Company considered it to have sufficient data to estimate variable consideration as of  July 1, 2020  for laboratory services that are reimbursed by Medicare. The amount of cash received in fiscal 2021  for laboratory services reimbursed by Medicare that were performed prior to  July 1, 2020  was approximately $ 0.5  million. The Company continues to record revenue based on cash receipts for laboratory services  not  reimbursed by Medicare, as the variable consideration remains constrained. 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 were not material as of December 31, 2021.   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 th e 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, 2021  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, 2021  and June 30, 2021  were appro ximately $ 20.8  m illion and $ 20.0  million, respectively. Contract liabilities as of June 30, 2021  subsequently recognized as revenue during the quarter and six month period ended December 31, 2021  were approxim ately $ 3.6  million and $ 13.3  million, resp ectively. 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.   The following tables present our disaggregated revenue for the periods presented.   Revenue by type is as follows:       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Consumables   $ 212,706     $ 177,464     $ 418,397     $ 344,091   Instruments     33,353       26,529       63,222       46,101   Services     17,354       15,175       33,611       30,639   Total product and services revenue, net   $ 263,413     $ 219,168     $ 515,230     $ 420,831   Royalty revenues     5,863       5,085       11,765       7,621   Total revenues, net   $ 269,276     $ 224,253     $ 526,995     $ 428,452     Revenue by geography is as follows:       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   United States   $ 142,367     $ 114,439     $ 283,069     $ 228,001   EMEA, excluding United Kingdom     57,159       49,936       108,702       93,070   United Kingdom     11,842       9,852       24,320       18,386   APAC, excluding Greater China     19,603       18,008       37,104       33,742   Greater China     31,009       25,165       59,442       43,218   Rest of World     7,296       6,853       14,358       12,035   Net Sales   $ 269,276     $ 224,253     $ 526,995     $ 428,452     6 Table of Contents     Note 3. Selected Balance Sheet Data:   Inventories:   Inventories consist of (in thousands):       December 31,     June 30,       2021     2021   Raw materials   $ 61,624     $ 55,096   Finished goods (1)     65,620       67,108   Inventories, net   $ 127,244     $ 122,204     ( 1 ) Finished goods inventory of $ 5,386  and $ 5,456  included within other long-term assets in the respective December 31, 2021 and June 30, 2021, 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,       2021     2021   Land   $ 8,587     $ 8,612   Buildings and improvements     225,501       190,661   Machinery and equipment     161,431       149,410   Construction in progress     17,386       49,073   Property and equipment, cost     412,905       397,756   Accumulated depreciation and amortization     (201,091 )     (189,849 ) Property and equipment, net   $ 211,814     $ 207,907     Intangible Assets:   Intangible assets consist of (in thousands):       December 31,     June 30,       2021     2021   Developed technology   $ 544,388     $ 552,160   Trade names     147,327       147,640   Customer relationships     228,419       232,493   Patents     3,116       2,926   Other intangibles     6,309       6,316   Definite-lived intangible assets     929,559       941,535   Accumulated amortization     ( 382,912 )     ( 348,267 ) Definite-lived intangibles assets, net     546,647       593,268   In process research and development     22,700       22,700   Total intangible assets, net   $ 569,347     $ 615,968     7 Table of Contents   Changes to the carrying amount of net intangible assets for the quarter ended December 31, 2021 consist of (in thousands):   Beginning balance   $ 615,968   Acquisitions     -   Other additions     171   Amortization expense     ( 37,258 ) Currency translation     ( 971 ) Eminence impairment (1)     ( 8,563 ) Ending balance   $ 569,347     The estimated future amortization expense for intangible assets as of December 31, 2021 is as follows (in thousands):   2022 remainder   $ 36,927   2023     71,669   2024     68,818   2025     65,579   2026     61,819   Thereafter     241,835   Total   $ 546,647     ( 1 ) As disclosed in Note 1, the Company recorded an impairment charge of $ 8.6 million related to Eminence in Q2 of FY'22.   Goodwill:   Changes to the carrying amount of goodwill for the quarter ended December 31, 2021 consist of (in thousands):       Protein Sciences     Diagnostics and Genomics     Total   Beginning balance   $ 392,717     $ 450,350     $ 843,067   Acquisitions     -       -       -   Eminence impairment     ( 8,275 )     -       ( 8,275 ) Currency translation     ( 2,610 )     ( 126 )     ( 2,736 ) Ending balance   $ 381,832     $ 450,224     $ 832,056     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 quantitative goodwill impairment assessment for all of its reporting units during the fourth quarter of fiscal 2021. No indicators of impairment were identified as part of our assessment.   During the quarter ended  September 30, 2021,  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.   As disclosed in Note 1, the Company identified a triggering event and a goodwill impairment charge of $ 8.3 million in the quarter ended December 31, 2021. No additional triggering events or items beyond the upcoming Eminence liquidation were identified during the quarter ended December 31, 2021. The impairment of the Eminence goodwill is the only impairment of goodwill recorded since the adoption of Financial Accounting Standards Board ("FASB") ASC 350 guidance for goodwill and other intangibles on July 1, 2002.   8 Table of Contents     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 comprehensive income from their respective dates of acquisitions. Acquisition costs are recorded in selling, general and administrative expenses as incurred.   2021  Acquisitions   Asuragen, Inc.   On April 6, 2021, the Company acquired all of the ownership interests of Asuragen, Inc. (Asuragen) for approximately $ 216  million, net of cash acquired, plus contingent consideration of up to $ 105.0 million, subject to certain revenue thresholds. The Asuragen acquisition adds a leading portfolio of best in-class molecular diagnostic and research products, including genetic screening, oncology testing kits, molecular controls, a GMP compliant manufacturing facility, and a CLIA-certified laboratory. 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’ 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 fourth quarter of fiscal 2021.     Purchase accounting remained open as of December 31, 2021 for our income tax assessment of acquired net operating losses with the completion of the stub period tax returns and the corresponding goodwill impact. The Company expects to finalize the allocation of purchase price in the third quarter of fiscal 2022.  Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations for the quarter ended December 31, 2021  were approximately $ 8.8  million and $ 0.4  million, respectively. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations for the six months ended December 31, 2021  were approximately $ 16.4  million and $ 3.6  million, respectively. The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date and at December 31, 2021 are as follows (in thousands):       Preliminary allocation at acquisition date and at December 31, 2021   Current assets, net of cash   $ 10,422   Equipment and other long-term assets     3,762   Intangible assets:         Developed technology     107,000   In-process research and development     22,700   Customer relationships     11,700   Trade names     2,000   Non-competition agreement     1,000   Goodwill     94,970   Total assets acquired     253,554             Liabilities     4,003   Deferred income taxes, net     15,664   Net assets acquired   $ 233,887             Cash paid, net of cash acquired     215,587   Contingent consideration payable     18,300   Net assets acquired   $ 233,887     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, in-process research and development, 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 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 16  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 Condensed Consolidated Statement of Earnings and Comprehensive Income. The amortization period for trade names and the non-competition agreement is estimated to be 5 years and 3 years, respectively. 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.   9       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.   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 Inputs Considered as       December 31, 2021     Level 1     Level 2     Level 3   Assets                                 Equity securities (1)   $ 53,635     $ 50,525     $ 3,110     $ -   Certificates of deposit (2)     13,500       13,500       -       -   Derivative instruments – cash flow hedges     2,254       -       2,254       -   Total assets   $ 69,389     $ 64,025     $ 5,364     $ -                                     Liabilities                                 Contingent consideration   $ 9,000     $ -     $ -     $ 9,000   Derivative instruments - cash flow hedges     4,382       -       4,382       -   Total liabilities   $ 13,382     $ -     $ 4,382     $ 9,000         Total carrying value as of     Fair Value Measurements Using Inputs Considered as       June 30, 2021     Level 1     Level 2     Level 3   Assets                                 Equity securities (1)   $ 19,963     $ 18,581     $ 1,382     $ -   Certificates of deposit (2)     12,500       12,500       -       -   Derivative instruments – cash flow hedges     275       -       275       -   Total assets   $ 32,738     $ 31,081     $ 1,657     $ -                                     Liabilities                                 Contingent consideration   $ 29,400     $ -     $ -     $ 29,400   Derivative instruments - cash flow hedges     8,376       -       8,376       -   Total liabilities   $ 37,776     $ -     $ 8,376     $ 29,400     ( 1 ) Included in available-for-sale investments on the balance sheet. The cost basis in the Company's investment in ChemoCentryx Inc (CCXI) was $ 6.6 million at both December 31, 2021 and June 30, 2021. The Company has a warrant to purchase additional CCXI equity shares which was valued at $ 3.1 million and $ 1.4 million as of December 31, 2021  and  June 30, 2021, respectively. ( 2 ) Included in available-for-sale investments on the balance sheet. The certificates of deposit have contractual maturity dates within one year.   10 Table of Contents   Fair value measurements of available for sale securities Our available for sale securities are measured at fair value using quoted market prices in active markets for identical assets and are therefore classified as Level 1 assets. The Company's warrant to purchase additional shares at a specified future price was valued using a Black-Scholes model with observable inputs in active markets and therefore was classified as a Level  2  asset.    Fair value measurements of derivative instruments In  October 2018,  the Company entered into forward starting swaps designated as cash flow hedges on outstanding 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 long-term debt described in Note  6  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 an initial $ 380  million of notional principal amount. The notional amount decreased by $ 100  million in  October  2020,  $ 80  million in October 2021  and will further decrease by $ 200  million in  October 2022.  In  June 2020,  the Company de-designated $ 80  million of the notional amount set to expire in  October 2020.  The net loss associated with the  June 2020  de-designated portion of the derivative instrument was  not  reclassified into earnings based on the amount of probable variable interest payments to occur within a  two -month time period of the forecasted hedged transaction. In  December 2020,  the Company de-designated an additional $ 80  million of notional amount set to expire in  October 2021.  The net loss associated with the December 2020 de-designated portion of the derivative instrument was recorded as a loss in other non-operating income related to variable interest debt payments in certain months on a portion of the de-designated derivative that was not  expected to occur. The fair value of the designated derivative instrument is $ 4.4  million and is recorded within short-term liabilities on the Consolidated Balance Sheet as of December 31, 2021. The fair value of the designated derivative instrument was $ 7.6  million as of June 30, 2021 and was recorded within other long-term liabilities on the Consolidated Balance Sheet.    In  May 2021,  the Company entered into a new forward starting swap designated as a cash flow hedge on forecasted debt. The forward starting swap reduces 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 swap, the Company exchanges, at specified intervals, the difference between floating and fixed interest amounts based on $ 200  million of notional principal amount. The effective date of the swap is  November 2022  with the full swap maturing in  November 2025.  The fair value of the derivative instrument was $ 2.3  million and $ 0.3  million as of  December 31, 2021  and  June 30, 2021,  respectively, which is recorded within other long-term assets on the Consolidated Balance Sheet.   Changes in the fair value of the designated hedged instruments are reported as a component of other comprehensive income and reclassified into interest expense over the corresponding term of the cash flow hedge. The Company reclassified $ 3.8  million to interest expense and related tax benefits of $ 0.9  million during the  six months ended  December 31, 2021.  The Company reclassified $ 5.0 million to interest expense, $ 0.5 million to non-operating income for the portion of de-designated variable payments considered probable to not occur, and related tax benefits of $ 1.3 million during the six months ended December 31, 2020.The instruments were valued using observable market inputs in active markets and therefore are classified as Level  2  liabilities.   Fair value measurements of contingent consideration The Company has $ 9  million in contingent consideration recorded as of December 31, 2021, which is the fair value of contingent consideration related to the Asuragen and B-MoGen Biotechnologies Inc ("B-MoGen") acquisitions. The Company is required to make contingent consideration payments of up to $ 105.0  million and $ 38.0  million, respectively, as part of these acquisition agreements. The contingent agreement for Asuragen is based on achieving certain revenue thresholds. The opening balance sheet fair value of the liabilities for the Asuragen acquisition was $ 18.3  million, as discussed in Note  4.  The contingent agreement for B-MoGen is based on meeting certain product development milestones and revenue thresholds. The fair value amount recorded on the opening balance sheet of the revenue milestone payments 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 ultimate settlement of contingent consideration liabilities for the Asuragen and B-Mogen acquisitions could deviate from current estimates based on the actual results of the financial measures described above. This liability is considered to be a Level  3  financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for these acquisitions is included in general and administrative expense.   During the  first  quarter of fiscal 2022 ,  the Company made a $ 4.0  million payment on the QT Holdings Corporation contingent consideration agreement relating to certain product development milestones. The cash paid was consistent with the related accrual as of  June 30, 2021 .     The following table presents a reconciliation of the liability measured at fair value on a recurring basis using significant unobservable inputs (Level  3 ) (in thousands):       Quarter Ended     Six Months Ended       December 31, 2021     December 31, 2021   Fair value at the beginning of period   $ 22,600     $ 29,400   Change in fair value of contingent consideration     ( 13,600 )     ( 16,400 ) Payments     -       ( 4,000 ) Fair value at the end of period   $ 9,000     $ 9,000     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.    Fair value measurements of other financial instruments – The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate fair value.   Cash and cash equivalents, certificates of deposit, accounts receivable, and accounts payable – The carrying amounts reported in the consolidated balance sheets approximate fair value because of the short-term nature of these items.   Long-term debt – The carrying amounts reported in the consolidated balance sheets for the amount drawn on our line-of-credit facility and long-term debt approximates fair value because our interest rate is variable and reflects current market rates.   11     Note 6. Debt and Other Financing Arrangements:   On August 1, 2018, the Company entered into a new revolving line-of-credit and term loan governed by a Credit Agreement (the Credit Agreement). The Credit Agreement provides for a revolving credit facility of $ 600.0 million, which can be increased by an additional $ 200.0 million subject to certain conditions, and a term loan of $ 250.0 million. 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 Eurodollar Loans term for which the interest rate is calculated as the sum of LIBOR 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 12.5  basis points.   The Credit Agreement matures on August 1, 2023 and contains customary restrictive and financial covenants and customary events of default. As of December 31, 2021, the outstanding balance under the Credit Agreement was $ 282.3  million.     Note 7. Leases:     As a lessee, the company leases offices, labs, and manufacturing facilities, as well as vehicles, copiers, and other equipment. The Company adopted ASU No. 2016 - 02 and related standards (collectively ASC 842, Leases ), which replaced previous lease accounting guidance, on July 1, 2019.    The Company recognizes operating lease expense on a straight-line basis over the lease term. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is Bio-Techne’s incremental borrowing rate or, if available, the rate implicit in the lease. Bio-Techne determines the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region. During the six months ended December 31, 2021, the Company recogni zed $ 2.1  m illion in variable lease expense and $ 7.3  million relating to fixed lease expense in the Condensed Consolidated Statements of Earnings and Comprehensive Income.    The following table summarizes the balance sheet classification of the Company’s operating leases and amounts of right of use assets and lease liabilities and the weighted average remaining lease term and weighted average discount rate for the Company’s operating leases (asset and liability amounts are in thousands):     Balance Sheet Classification   As of: December 31, 2021   Operating leases:           Operating lease right of use assets Right of Use Asset   $ 64,293               Current operating lease liabilities Operating lease liabilities current   $ 11,809   Noncurrent operating lease liabilities Operating lease liabilities     57,718   Total operating lease liabilities     $ 69,527               Weighted average remaining lease term (in years):       7.25               Weighted average discount rate:       3.87 %   The following table summarizes the cash paid for amounts included in the measurement of operating lease liabilities and right of use assets obtained in exchange for new operating lease liabilities for the six months ended (in thousands):       Six months ended December 31, 2021   Cash amounts paid on operating lease liabilities   $ 7,504             Right of use assets obtained in exchange for lease liabilities     575     The following table summarizes the fair value of the lease liability by payment date for the Company’s operating leases by fiscal year (in thousands):       Operating Leases   Remainder of fiscal 2022   $ 7,176   2023     13,191   2024     11,511   2025     10,353   2026     9,628   Thereafter     27,902   Total   $ 79,761   Less: Amounts representing interest     10,234   Total Lease obligations   $ 69,527     Certain leases include one or more options to renew, with terms that extend the lease term up to five years. Bio-Techne includes the 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, Bio-Techne is not reasonably certain to exercise such options.   12 Table of Contents     Note 8.   Supplemental Equity and Accumulated Other Comprehensive Income (Loss):   Supplemental Equity   The Company has declared cash dividends per share of $ 0.32 and $ 0.64 in both the three and six  months ended December 31, 2021 and 2020, respectively.    Consolidated Changes in Equity (amounts in thousands)       Bio-Techne Shareholders                                                       Accumulated                                       Additional             Other                       Common Stock     Paid-in     Retained     Comprehensive     Noncontrolling               Shares     Amount     Capital     Earnings     Income(Loss)     Interest     Total   Balances at June 30, 2021     38,955     $ 390     $ 534,411     $ 1,085,461     $ ( 57,291 )   $ 8,263     $ 1,571,234   Net earnings                             69,615               ( 634 )     68,981   Other comprehensive income (loss)                                     ( 6,925 )     ( 39 )     ( 6,964 ) Share repurchases                                                         Common stock issued for exercise of options     295       3       36,345       ( 13,481 )                     22,867   Common stock issued for restricted stock awards     20       0       0       ( 9,765 )                     ( 9,765 ) Cash dividends                             ( 12,493 )                     ( 12,493 ) Stock-based compensation expense                     11,396                               11,396   Common stock issued to employee stock purchase plan     3       0       1,358                               1,358   Employee stock purchase plan expense                     341                               341   Balances at September 30, 2021     39,273     $ 393     $ 583,851     $ 1,119,337     $ ( 64,216 )   $ 7,590     $ 1,646,955   Net earnings                             80,173             ( 8,114 )     72,059   Other comprehensive income (loss)                                     4,742       66       4,808   Share repurchases     ( 89 )     ( 1 )             ( 41,293 )                     ( 41,294 ) Common stock issued for exercise of options     134       1       18,604                               18,605   Common stock issued for restricted stock awards     1                                                   Cash dividends                             ( 12,576 )                     ( 12,576 ) Stock-based compensation expense                     13,701                               13,701   Common stock issued to employee stock purchase plan                     6                               6   Employee stock purchase plan expense                     267                               267   Balances at December 31, 2021     39,319       393       616,429       1,145,641       ( 59,474 )     ( 458 )     1,702,531         Bio-Techne Shareholders                                                       Accumulated                                       Additional             Other                       Common Stock     Paid-in     Retained     Comprehensive     Noncontrolling               Shares     Amount     Capital     Earnings     Income(Loss)     Interest     Total   Balances at June 30, 2020     38,453     $ 385     $ 420,536     $ 1,057,470     $ ( 97,199 )   $ -     $ 1,381,192   Cumulative effect adjustments due to adoption of new accounting standards                             ( 276 )                     ( 276 ) Net earnings                             33,395                       33,395   Other comprehensive income (loss)                                     14,057               14,057   Common stock issued for exercise of options     117       1       13,727                               13,728   Common stock issued for restricted stock awards     25       0       ( 0 )     ( 4,890 )                     ( 4,890 ) Cash dividends                             ( 12,336 )                     ( 12,336 ) Stock-based compensation expense                     12,667                               12,667   Common stock issued to employee stock purchase plan     6       0       1,463                               1,463   Employee stock purchase plan expense                     286                               286   Balances at September 30, 2020     38,601     $ 386     $ 448,679     $ 1,073,362     $ ( 83,142 )   $ -     $ 1,439,285   Non-controlling interest in Eminence                                             8,985       8,985   Net earnings                             46,274             ( 130 )     46,144   Other comprehensive income (loss)                                     18,904       83       18,987   Common stock issued for exercise of options     161       2       16,748       ( 2,482 )                     14,268   Common stock issued for restricted stock awards     3       0       ( 0 )     0                       0   Cash dividends                             ( 12,392 )                     ( 12,392 ) Stock-based compensation expense                     15,471                               15,471   Employee stock purchase plan expense                     106                               106   Balances at December 31, 2020     38,765     $ 388     $ 481,004     $ 1,104,762     $ ( 64,238 )   $ 8,938     $ 1,530,854     13 Table of Contents   Accumulated Other Comprehensive Income   The components of other comprehensive income (loss) consist of changes in foreign currency translation adjustments and changes in net unrealized gains (losses) on derivative instruments designated as cash flow hedges. The Company reclassified $ 2.9  million, net of taxes, from accumulated other comprehensive income (loss) to earnings during the six  months ended December 31, 2021. The Company reclassified $ 4.2 million, net of taxes, from accumulated other comprehensive income (loss) to earnings during the six months ended December 31, 2020.   The accumulated balances related to each component of other comprehensive income (loss) attributable to Bio-Techne, net of tax, are summarized as follows:       Unrealized Gains (Losses) on Derivative Instruments     Foreign Currency Translation Adjustments     Total   Balance as of June 30, 2021   $ ( 6,193 )   $ ( 51,098 )   $ ( 57,291 ) Other comprehensive income (loss) before reclassifications, net of taxes, attributable to Bio-Techne     1,682       ( 6,750 )     ( 5,068 ) Reclassification from loss on derivatives to interest expense, net of taxes, attributable to Bio-Techne (1)     2,884     $ -     $ 2,884   Balance as of December 31, 2021 (2)   $ ( 1,626 )     ( 57,848 )     ( 59,474 )         Unrealized Gains (Losses) on Derivative Instruments     Foreign Currency Translation Adjustments     Total   Balance as of June 30, 2020 attributable to Bio-Techne   $ ( 13,253 )   $ ( 83,946 )   $ ( 97,199 ) Other comprehensive income (loss), net of tax before reclassifications, attributable to Bio-Techne     ( 47 )     28,759       28,712   Reclassification from loss on derivatives to interest expense, net of taxes, attributable to Bio-Techne (3)     4,249       -       4,249   Balance as of December 31, 2020 (2)   $ ( 9,051 )   $ ( 55,187 )   $ ( 64,238 )     ( 1 ) Gains (losses) on the interest swap are reclassified into interest expense as payments on the derivative agreement are made. The Company reclassified $ 3,777  to interest expense and a related tax benefit of $ 892  during the six months ended December 31, 2021.     ( 2 ) The Company had net deferred tax benefits of $ 502  and $ 2,886  included in the accumulated other comprehensive income loss as of  December 31, 2021 and 2020,  respectively.     ( 3 ) Gains (losses) on the interest swap are reclassified into interest expense as payments on the derivative agreement are made. The Company reclassified $ 5,026 to interest expense and $ 512 to non-operating income relating to variable interest payments that were probable  not  to occur in the  six  months ended  December 31, 2020.  The Company also recorded a related tax benefit of $ 1,289  during the  six  months ended  December 31, 2020.   14 Table of Contents     Note 9. Earnings Per Share:   The following table reflects the calculation of basic and diluted earnings per share (in thousands, except per share amounts):       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Earnings per share – basic:                                 Net earnings, including noncontrolling interest   $ 72,059     $ 46,144     $ 141,040     $ 79,538   Less net earnings (loss) attributable to noncontrolling interest     ( 8,114 )     ( 130 )     ( 8,748 )     ( 130 ) Net earnings attributable to Bio-Techne   $ 80,173     $ 46,274     $ 149,788     $ 79,668   Income allocated to participating securities     ( 34 )     (37 )     (70 )     (50 ) Income available to common shareholders   $ 80,139     $ 46,237     $ 149,718     $ 79,618   Weighted-average shares outstanding – basic     39,310       38,691       39,202       38,614   Earnings per share – basic   $ 2.04     $ 1.20     $ 3.82     $ 2.06                                     Earnings per share – diluted:                                 Net earnings, including noncontrolling interest   $ 72,059     $ 46,144     $ 141,040     $ 79,538   Less net earnings (loss) attributable to noncontrolling interest     ( 8,114 )     ( 130 )     ( 8,748 )     ( 130 ) Net earnings attributable to Bio-Techne   $ 80,173     $ 46,274     $ 149,788     $ 79,668   Income allocated to participating securities     ( 34 )     ( 37 )     ( 70 )     ( 50 ) Income available to common shareholders   $ 80,139     $ 46,237     $ 149,718     $ 79,618   Weighted-average shares outstanding – basic     39,310       38,691       39,202       38,614   Dilutive effect of stock options and restricted stock units     1,897       1,566       1,957       1,521   Weighted-average common shares outstanding – diluted     41,207       40,257       41,159       40,135   Earnings per share – diluted   $ 1.94     $ 1.15     $ 3.64     $ 1.98     The dilutive effect of stock options and restricted stock units 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 0.7  million and 1.6  million for the quarter ended December 31, 2021 and 2020, respectively and  0.5  million and 1.5 million for the six months ended December 31, 2021  and 2020  respectively.     Note 10. Share-based Compensation:   During the  six months ended December 31, 2021 and 2020, the Company granted  0.3  million and 0.7 million stock options at weighted average grant prices of $ 483.48  and $ 267.59 and weighted average fair values of $ 119.27  and $ 56.88 , respectively. During the six months ended December 31, 2021 and 2020, the Company granted 21,218 and 22,367  restricted stock units at a weighted average fair value of $ 485.94  and $ 267.87 , respectively. During the six months ended December 31, 2021  and 2020, the Company granted 6,896 and 11,803  shares of restricted common stock shares at a weighted average fair value of $ 489.34  and $ 264.73 .   Stock options for 470,942  and 293,262 shares of common stock with total intrinsic values of $ 170.7  million and $ 50.6  million were exercised during the six months ended December 31, 2021 and 2020, respectively.   Stock-based compensation expense, inclusive of payroll taxes, of $ 14.1  million and $ 15.6  million was included in selling, general and administrative expenses for the quarter ended December 31, 2021  and 2020, respectively. Stock-based compensation expenses, inclusive of payroll taxes, of $ 27.3 million and $ 28.5  million was included in selling, general, and administrative expenses for the six months ended December 31, 2021  and 2020, respectively. Additionally, the company recognized $ 0.4  million and $ 0.8  million of stock-based compensation costs in cost of goods sold in the quarter and six months ended December 31, 2021  respectively, compared to $ 0.6  million and $ 1  million in cost of goods sold in the comparative prior year periods. As of December 31, 2021, there was $ 54.1 million of unrecognized compensation cost related to non-vested stock options, non-vested restricted stock units and non-vested restricted stock. The weighted average period over which the compensation cost is expected to be recognized is  2.2  years.   In fiscal 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. 200,000 shares were allocated to the ESPP. The Company recorded expense of $ 0.3 million and $ 0.1 million for the ESPP for the quarter ended December 31, 2021 and 2020, respectively. The Company recorded expense of $ 0.6  million and $ 0.4  million for the ESPP for the six months ended December 31, 2021 and 2020, respectively.      Note 11. Other Income / (Expense):     The components of other income (expense) in the accompanying Statement of Earnings and Comprehensive Income are as follows:        Quarter Ended     Six Months       December 31,     December 31,       2021     2020     2021     2020   Interest expense   $ ( 2,902 )   $ ( 3,585 )   $ ( 6,311 )   $ ( 8,002 ) Interest income     245       78       438       192   Other non-operating income (expense), net (1)     26,488       8,880       33,865       3,429   Total other income (expense)   $ 23,831     $ 5,373     $ 27,992     $ ( 4,381 )   ( 1 ) Primarily due to a $ 28.4 million and $ 33.7 million gain in the fair value of our CCXI investment for the quarter and six months ended  December 31, 2021, respectively, as compared to a $ 10.7 million  and $ 6.4 million gain in the comparative periods.   15 Table of Contents     Note 12. Income Taxes:   The Company’s effective income tax rate for the second quarter of fiscal 2022 and 2021  wa s 16.4 % a nd 18.1 % of consolidated earnings before income taxes, and 8.2 % and 16.9 % for the first six months of fiscal 2022 and 2021, respectively. The change in the company’s tax rate for the quarter and six months ended December 31, 2021 compared to the quarter and six months ended December 3 1, 2020 was driven by discrete tax items.   The Company recognized total net benefits related to discrete tax item s of $ 7.6 million and $ 25.3 millio n during the quarter and six months ended December 31, 2021, respectively, compared to $ 3.7 million and $ 7.8 million during the quarter and six months ended December 31, 2020, respectively. Share-based compensation excess tax benefit cont ributed $ 6.1 million and $ 24.4 million in t he quarter and six months ended December 31, 2021, respectively, compared to $ 4.8  million and $ 8.0  million in the quarter and six months, ended December 31, 2020, respectively. The Company recognized total other immaterial net discrete tax benef it of $ 1.5  million and $ 0.9  million in the quarter and  six months ended December 31, 2021, respectively, compared to $ 1.1  million and $ 0.2 million of other immaterial net discrete tax expense in the quarter and six months ended December 31, 2020, respectively.     Note 13. Segment Information:   The Company's management evaluates segment operating performance based on operating income before certain charges to cost of sales and selling, general and administrative expenses, principally associated with the impact of partially owned consolidated subsidiaries as well as acquisition accounting related to inventory, amortization of acquisition-related intangible assets and other acquisition-related expenses. The Protein Sciences and Diagnostics and Genomics segments both include consumables, instruments, services and royalty revenue.   The following is financial information relating to the Company's reportable segments (in thousands):       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Net sales:                                 Protein Sciences   $ 204,971     $ 172,179     $ 402,156     $ 326,625   Diagnostics and Genomics     64,527       52,469       125,512       102,595   Intersegment     ( 222 )     ( 395 )     ( 673 )     ( 768 ) Consolidated net sales   $ 269,276     $ 224,253     $ 526,995     $ 428,452   Operating income:                                 Protein Sciences   $ 93,281     $ 80,453     $ 183,381     $ 150,803   Diagnostics and Genomics     10,880       8,107       18,344       16,781   Segment operating income   $ 104,161     $ 88,560     $ 201,725     $ 167,584   Costs recognized on sale of acquired inventory     (84 )     ( 23 )     ( 1,595 )     ( 23 ) Amortization of acquisition related intangible assets     ( 18,380 )     ( 15,027 )     ( 36,769 )     ( 30,528 ) Impact of partially owned consolidated subsidiaries (1)     ( 1,004 )     ( 207 )     ( 2,567 )     ( 207 ) Acquisition related expenses     13,262       ( 4,421 )     15,618       ( 4,558 ) Eminence impairment     ( 18,715 )     -       ( 18,715 )     -   Stock based compensation, inclusive of employer taxes     ( 14,815 )     ( 16,225 )     ( 28,675 )     ( 29,557 ) Restructuring costs     ( 743 )     ( 142 )     ( 1,928 )     ( 142 ) Corporate general, selling, and administrative expenses     ( 1,334 )     ( 1,520 )     ( 1,524 )     ( 2,482 ) Consolidated operating income   $ 62,348     $ 50,995     $ 125,570     $ 100,087     ( 1 )  Adjusted operating income for the second quarter and full year of fiscal 2021 have been updated for comparability to fiscal 2022 for the inclusion of the impact of partially owned consolidated subsidiaries on the Company’s adjusted operating income.        Note 14. Subsequent Events: None.   16 Table of Contents       ITEM   2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   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 both the unaudited condensed consolidated financial information and related notes included in this Form 10-Q, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended June 30, 2021. 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” and “Forward-Looking Information and Cautionary Statements” located at the end of Item 2 of this report.   OVERVIEW   Bio-Techne and its subsidiaries, collectively doing business as Bio-Techne Corporation (Bio-Techne, we, our, us or the Company) develop, manufacture and sell biotechnology 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.    Consistent with the prior year, we have operated with two segments – our Protein Sciences segment and our Diagnostics and Genomics segment – during the second quarter of fiscal 2022. Our Protein Sciences segment is a leading developer and manufacturer of high-quality purified proteins and reagent solutions, most notably cytokines and growth factors, antibodies, immunoassays, biologically active small molecule compounds, tissue culture reagents and T-Cell activation technologies. This segment also includes protein analysis solutions that offer researchers efficient and streamlined options for automated western blot and multiplexed ELISA workflow. Our Genomics and Diagnostics segment develops and manufactures diagnostic products, including FDA-regulated controls, calibrators, blood gas and clinical chemistry controls and other reagents for OEM and clinical customers, as well as a portfolio of clinical molecular diagnostic oncology assays, including the ExoDx®Prostate (IntelliScore) test (EPI) for prostate cancer diagnosis. This segment also manufactures and sells advanced tissue-based in-situ hybridization assays (ISH) for research and clinical use.   RECENT ACQUISITIONS   A key component of the Company's strategy is to augment internal growth at existing businesses with complementary acquisitions. The Company did not make any acquisitions in the six months ended December 31, 2021. Refer to the prior year Annual Report on form 10-K for additional disclosure regarding the Company's recent acquisitions.   RESULTS OF OPERATIONS   Operational Update   Consolidated net sales increased 20% and 23% for the quarter and six months ended December 31, 2021, respectively, compared to the same prior year periods. Organic growth for the quarter ended December 31, 2021 was 17% compared to the prior year, with acquisitions contributing 3% to revenue growth and foreign currency exchange having an immaterial impact. Organic growth for the six months ended December 31, 2021 was 19% compared to the prior year same period with acquisitions contributing 4% to revenue growth and foreign currency exchange having an immaterial impact.   Consolidated net earnings attributable to Bio-Techne increased to $80.2 million and $149.8 million for the quarter and six months ended December 31, 2021, respectively, as compared to $46.3 million and $79.7 million in the same prior year period s.  The increase in net earnings attributable to Bio-Techne for the quarter and six months ended December 31, 2021 is primarily due to an increase in net sales and changes in the fair value of our ChemoCentryx investment.    Business Strategy Update   The Company’s key business strategies for long-term growth and profitability continue to be geographic expansion, core product innovation, acquisitions and talent retention and development. In fiscal 2022, the Company is also focused on evaluating how climate change impacts from our business operations might be measured and mitigated, with the plan of integrating consideration of greenhouse gas emissions and other climate variables into those key business strategies.   In response to the COVID-19 pandemic, the Company took additional steps to monitor and strengthen our supply chain to maintain an uninterrupted supply of our critical products and services. The Company has maintained these procedures while incorporating additional considerations regarding potential adverse weather events associated with climate change.     The financial impact of potential environmental regulations pertaining to carbon emissions or the integration of climate change impacts into our core business strategies are not expected to materially alter the Company’s near-term financial results. Additionally, the Company is creating a cross-functional internal council to evaluate potential long-term business impacts while driving long-term sustainability solutions.   17 Table of Contents   Net Sales   Consolidated net sales for the quarter and six months ended December 31, 2021 were $269.3 million and $527.0 million, respectively, an increase of 20% and 23% from the same prior year periods. Organic growth for the quarter ended December 31, 2021 was 17% compared to the prior year, with acquisitions contributing 3% to revenue growth and foreign currency exchange having an immaterial impact. Organic growth for the six months ended December 31, 2021 was 19% compared to the prior year same period with acquisitions contributing 4% to revenue growth and foreign currency exchange having an immaterial impact. Organic growth for the quarter and six months ended December 31, 2021 is primarily driven by strong biopharma demand, especially for products, services and solutions from the Protein Sciences segment and by overall execution of the Company's long-term growth strategy.   Gross Margins   Consolidated gross margins for the quarter and six months ended December 31, 2021 were 68.2% and 67.3% respectively, compared to 67.3% and 67.4% for the same prior year periods. Under purchase accounting, inventory is valued at fair value less expected selling and marketing costs, resulting in reduced margins in future periods as the inventory is sold. Excluding the impact of costs recognized upon the sale of acquired inventory, stock compensation expense, amortization of intangibles, and impact of partially owned consolidated subsidiaries, adjusted gross margins for the quarter and six months ended December 31, 2021 were 72.3% and 71.8%, respectively compared to 71.5% and 71.7% for the quarter and six months ended December 31, 2020, respectively. Both consolidated gross margin and non-GAAP adjusted gross margins were positively impacted by volume leverage and favorable product mix as compared to the prior year, partially offset by additional investments made in the business to support future growth for the quarter ended December 31, 2021. Consolidated gross margin for the six months ended December 31, 2021 was negatively impacted by product mix and additional investments made in the business to support future growth. Non-GAAP adjusted gross margin for the six months ended December 31, 2021 was positively impacted by volume leverage, partially offset by additional investments made in the business to support future growth.   A reconciliation of the reported consolidated gross margin percentages, adjusted for acquired inventory sold, intangible amortization, stock compensation expense, and impact of partially owned consolidated subsidiaries included in cost of sales, is as follows:       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Consolidated gross margin percentage     68.2 %     67.3 %     67.3 %     67.4 % Identified adjustments:                                 Costs recognized upon sale of acquired inventory     0.0 %     0.0 %     0.3 %     0.0 % Amortization of intangibles     3.8 %     3.9 %     3.9 %     4.0 % Stock compensation expense - COGS     0.2 %     0.3 %     0.1 %     0.3 % Impact of partially owned consolidated subsidiaries (1)     0.1 %     0.0 %     0.2 %     0.0 % Non-GAAP adjusted gross margin percentage     72.3 %     71.5 %     71.8 %     71.7 %   (1)  Adjusted gross margin percentages for the second quarter and full year of fiscal 2021 have been updated for comparability to fiscal 2022 for the inclusion of the impact of partially owned consolidated subsidiaries on the Company’s adjusted gross margin percentage.   Selling, General and Administrative Expenses   Selling, general and administrative expenses increased $17.6 million (21%) and $31.2 million (20%) for the quarter and six months ended December 31, 2021, respectively, from the same prior year periods. The increase in expense was due to strategic growth investments and the Asuragen acquisition in the fourth quarter of fiscal 2021.   Research and Development Expenses   Research and development expenses were $20.7 million and $42.3 million for the quarter and six months ended December 31, 2021, respectively, compared to $16.8 million and $32.8 million for the comparative prior year periods. The increase in expense was due to strategic growth investments and the Asuragen acquisition in the fourth quarter of fiscal 2021.     Segment Results   Protein Sciences       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Net sales (in thousands)   $ 204,971     $ 172,179     $ 402,156     $ 326,625   Operating margin percentage     45.5 %     46.7 %     45.6 %     46.2 %   Protein Science’s net sales for the quarter and six months ended December 31, 2021 were $205.0 million and $402.2 million, respectively, with reported growth of 19% and 23% compared to the same respective prior year periods. Organic growth for the quarter and six months ended December 31, 2021 was 19% and 23% , respectively, when compared to the prior year. Currency exchange had an immaterial impact for both the quarter and six months ended December 31, 2021. Segment growth was driven by strong BioPharma demand resulting in broad-based growth across our proteomic research reagents and analytical tools.    The operating margin was 45.5% and 45.6% for the quarter and six months ended December 31, 2021, respectively, compared to 46.7% and 46.2% for the quarter and six month periods, respectively, for the same prior year periods. The segment’s operating margin compared to the prior year was negatively impacted by strategic investments to support future growth.   18 Table of Contents   Diagnostics and Genomics       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Net sales (in thousands)   $ 64,527     $ 52,469     $ 125,512     $ 102,595   Operating margin percentage     16.9 %     15.5 %     14.6 %     16.4 %   Diagnostics and Genomics' net sales for the quarter and six months ended December 31, 2021 were $64.5 million and $125.5 million, respectively, with reported growth of 23% and 22% compared to the same respective prior year periods. Organic growth for the quarter and six months ended December 31, 2021 was 7% and 6%, respectively, when compared to the prior year. Acquisitions contributed 16% to revenue growth for both the quarter and six months ended December 31, 2021. Currency exchange had an immaterial impact for both the quarter and six months ended December 31, 2021. Segment growth was driven by the Asuragen acquisition in the fourth quarter of fiscal 2021. Organic growth was driven by continued strength in our diagnostic reagent product lines.    The operating margin for the segment was 16.9% and 14.6% for the quarter and six months ended December 31, 2021, respectively, compared to 15.5% and 16.4% in both comparative prior year periods. The segment’s operating margin was favorably impacted by volume leverage and product mix, which were partially offset by additional investments made in the business to support future growth for the quarter ended December 31, 2021. Operating margin for the six months ended December 31, 2021 was negatively impacted by acquisitions and strategic investments to support future growth.    Income Taxes   Income taxes were at an effective r ate of 16.4% and 8.2% of conso lidated earnings for the quarter and six month period ended December 31, 2021, respectively, compared to 18.1% and 16.9% for the same respective prior year periods. The change in the Company’s tax rate for the quarter and six months ended December 31, 2021 was driven by the composition and amount of net income across periods and the impact of discrete ta x items of $7.6 million and $25.3 million, respecti vely, compared to prior year discrete tax items of $3.7 million and $7.8 million as further discussed in Note 12.    The forecasted tax rate as of the second fiscal quarter of 2022 before discrete items is 24.6% compared to the prior year forecasted tax rate before discrete items of 25.1%. Excluding the impact of discrete items, the Company expects the consolidated income tax rate for the remainder of fiscal 2022 to range from 24% to 28%.   Net Earnings   Non-GAAP adjusted consolidated net earnings are as follows:       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Net earnings before taxes - GAAP   $ 86,179     $ 56,368     $ 153,562     $ 95,706   Identified adjustments attributable to Bio-Techne:                                 Costs recognized upon sale of acquired inventory     84       23       1,596       23   Amortization of intangibles     18,380       15,027       36,769       30,528   Acquisition related expenses     (13,168 )     4,514       (15,430 )     4,746   Eminence impairment     18,715       -       18,715       -   Stock based compensation, inclusive of employer taxes     14,815       16,225       28,675       29,558   Restructuring costs     743       142       1,928       142   Investment (gain) loss and other     (28,395 )     (10,197 )     (34,630 )     (5,846 ) Impact of partially owned subsidiaries (1)     1,004       207       2,567       207   Non-GAAP adjusted net earnings attributable to Bio-Techne (1)   $ 98,357     $ 82,309     $ 193,752     $ 155,064                                     Non-GAAP tax rate     21.4%       20.6 %     21.2 %     20.6 % Non-GAAP tax expense     21,048       16,956       41,076       31,969                                     Non-GAAP adjusted net earnings attributable to Bio-Techne (1)   $ 77,309     $ 65,353     $ 152,676     $ 123,095                                     Earnings per share – diluted - Adjusted   $ 1.88     $ 1.62     $ 3.71     $ 3.07   (1) Adjusted consolidated net earnings and earnings per share for the second quarter and full year of fiscal 2021 have been updated for comparability to fiscal 2022 for the inclusion of the impact of partially owned consolidated subsidiaries on the Company’s adjusted consolidated net earnings.      19 Table of Contents   Depending on the nature of discrete tax items, our reported tax rate may not be consistent on a period to period basis. The Company independently calculates a non-GAAP adjusted tax rate considering the impact of discrete items and jurisdictional mix of the identified non-GAAP adjustments. The following table summarizes the reported GAAP tax rate and the effective non-GAAP adjusted tax rate for the quarter and six months ended December 31, 2021 and December 31, 2020.         Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   GAAP effective tax rate   16.4 %   18.1 %   8.2 %   16.9 % Discrete items     7.5       6.5       16.4       8.2   Annual forecast update     0.7       0.5       -       -   Long-term GAAP tax rate     24.6 %     25.1 %     24.6 %     25.1 %                                   Rate impact items                                 Stock based compensation     (1.7 )     (4.2 )     (1.9 )     (4.2 ) Other      (1.5 )     (0.3 )     (1.5 )     (0.3 ) Total rate impact items     (3.2 )%     (4.5 )%     (3.4 )%     (4.5 )%                                   Non-GAAP adjusted tax rate (1)   21.4 %     20.6 %     21.2 %     20.6 %   (1) In our second quarter results of fiscal 2021, the Company re-casted our first quarter results using the non-GAAP tax rate for the first six months of fiscal 2021, which normalized the tax rate impact on adjusted earnings resulting from return to growth patterns seen prior to the onset of the COVID-19 pandemic.    The difference between the reported GAAP tax rate and non-GAAP tax rate applied to the identified non-GAAP adjustments for the quarter ended December 31, 2021 is primarily a result of discrete tax items, including the tax benefit of stock option exercises.   LIQUIDITY AND CAPITAL RESOURCES   Cash and cash equivalents and available-for-sale investments were $279.0 million as of December 31, 2021, compared to $231.6 million as of June 30, 2021. Included in available-for-sale-investments was the fair value of the Company's investment in ChemoCentryx, Inc. (CCXI) which was $53.6 million as of December 31, 2021 and $20.0 million as of June 30, 2021.   The Company has a line-of-credit and term loan governed by a Credit Agreement dated August 1, 2018. See Note 6 to the Condensed Consolidated Financial Statements for a description of the Credit Agreement.   The Company has remaining potential contingent consideration payments of up to $105 million and $38 million relating to the Asuragen and B-MoGen acquisitions as of December 31, 2021. The fair value of the remaining payments is $9.0 million as of December 31, 2021.   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 cash, cash generated from operations, and remaining credit available on its existing revolving line of credit.   Cash Flows From Operating Activities   The Company generated cash of $149.4 million from operating activities in the six months ended December 31, 2021 compared to $155.3 million in the six months ended December 31, 2020. The decrease from the prior year was primarily due to changes in the timing of cash payments on certain operating assets and liabilities, largely offset by an increase in year over year net earnings.    Cash Flows From Investing Activities   We continue to make investments in our business, including capital expenditures.   Capital expenditures for fixed assets for the six months ended December 31, 2021 and December 31, 2020 were $16.2 million and $22.4 million, respectively. Capital expenditures for the remainder of fiscal 2022 are expected to be approximately $45 m illion. Capital expenditures are expected to be financed through currently available funds and cash generated from operating activities. Expected additions in fiscal 2022 is related to increasing capacity to meet expected sales growth across the Company.   During the six months ended December 31, 2021, 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 Corporation (Wilson Wolf) if certain annual revenue or EBITDA thresholds are met. The Company is currently forecasting the first option payment of $231 million to occur in either fiscal 2023 or fiscal 2024 with the second option payment of approximately $1 billion plus potential contingent consideration occurring between fiscal 2026 and fiscal 2028.   20 Table of Contents   Cash Flows From Financing Activities   During the six months ended December 31, 2021 and December 31, 2020, the Company paid cash dividends of $25.1 million and $24.7 million, respectively, to all common shareholders. On February 1, 2022, the Company announced the payment of a $0.32 per share cash dividend, or approximately $12.6 million, will be payable February 25, 2022 to all common shareholders of record on February 11, 2022.   Cash of $56.5 million and $32.3 million was received during the six months ended December 31, 2021 and 2020, respectively, from the exercise of stock options.   During the six months ended December 31, 2021, and December 31, 2020, the Company made payments of $109.3 million and $125.3 million, respectively, towards the balance of its line-of-credit facility and term loan. During the six months ended December 31, 2021, the Company borrowed $50.0 million of its line-of-credit facility. There were no borrowings for the six months ended December 31, 2020.   During the six months ended December 31, 2021, the Company repurchased $41.3 million of common stock. There were no repurchases for the six months ended December 31, 2020.   During the six months ended December 31, 2021 and December 31, 2020, the Company made $23.2 million and $7.4 million in other financing payments, respectively, related to taxes paid on restricted stock units and stock options exercised through a net share settlement.   21 Table of Contents   CRITICAL ACCOUNTING POLICIES   The Company's significant accounting policies are discussed in the Company's Annual Report on Form 10-K for fiscal 2021 and are incorporated herein by reference. The application of certain of these policies requires judgments and estimates that can affect the results of operations and financial position of the Company. Judgments and estimates are used for, but not limited to, valuation of available-for-sale investments, inventory valuation and allowances, valuation of intangible assets and goodwill and valuation of investments in unconsolidated entities. There have been no significant changes in estimates in the quarter or six months ended December 31, 2021 that would require disclosure nor have there been any changes to the Company's policies.   NON-GAAP FINANCIAL MEASURES   This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 2, 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:     • Organic Growth   • Adjusted gross margin   • Adjusted net earnings   • Adjusted effective tax rate   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 growth represents revenue growth excluding revenue from acquisitions within the preceding 12 months, the impact of foreign currency, 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 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. Revenue from partially owned subsidiaries was $0.5 million and $0.9 million for the quarter and six months ended December, 31, 2021.    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, the costs recognized upon the sale of acquired inventory, amortization of acquisition intangibles, acquisition related expenses inclusive of the changes in fair value of contingent consideration, 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 legal settlements, 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. 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 in the calculation of our non-GAAP financial measures as the revenues and expenses are not fully attributable to the Company.    The Company’s non-GAAP adjusted operating margin and adjusted net earnings, in total and on a per share basis, also excludes stock-based compensation expense, which is inclusive of the employer portion of payroll taxes on those stock awards, restructuring, impairments of equity method investments, gain and losses from investments, and certain adjustments to income tax expense. Impairments of equity investments are excluded as they are not part of our day-to-day operating decisions. Additionally, gains and losses from other investments that are either isolated or cannot be expected to occur again with any predictability are excluded. Costs related to restructuring activities, including reducing overhead and consolidating facilities, are excluded because we believe they are not indicative of our normal operating costs. 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.   Readers are encouraged to review the reconciliations of the adjusted financial measures used in management's discussion and analysis of the financial condition of the Company to their most directly comparable GAAP financial measures provided within the Company's consolidated financial statements.   FORWARD LOOKING INFORMATION AND CAUTIONARY STATEMENTS   This quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those regarding the Company's expectations as to the effect of changes to accounting policies, the amount of capital expenditures for the remainder of the fiscal year, the source of funding for capital expenditure requirements, the sufficiency of currently available funds for meeting the Company's needs, the impact of fluctuations in foreign currency exchange rates, and expectations regarding gross margin fluctuations, increasing research and development expenses, increasing selling, general and administrative expenses and income tax rates. These statements involve risks and uncertainties that may affect the actual results of operations. The following important factors, among others, have affected and, in the future, could affect the Company's actual results: integration of newly acquired businesses, the introduction and acceptance of new products, general national and international economic, political, regulatory, and other conditions, increased competition, the reliance on internal manufacturing and related operations, the impact of currency exchange rate fluctuations, the recruitment and retention of qualified personnel, the impact of governmental regulation, maintenance of intellectual property rights, credit risk and fluctuation in the market value of the Company's investment portfolio, and unseen delays and expenses related to facility construction and improvements. For additional information concerning such factors, see the Company's Annual Report on Form 10-K for fiscal 2021 as filed with the Securities and Exchange Commission and Part II. Item 1A below.    22 Table of Contents   ITEM   3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   As of December 31, 2021, the Company held an investment in the common stock of CCXI. The investment was included in short-term available-for-sale investments at its fair value of $53.6 million. As of December 31, 2021, the potential loss in fair value due to a 10% decrease in the market value of CCXI was $5.4 million.     The Company operates internationally, and thus is subject to potentially adverse movements in foreign currency exchange rates. For the quarter ended December 31, 2021, approximately 36% of consolidated net sales were made in foreign currencies, including 13% in euros, 5% in British pound sterling, 8% in Chinese yuan and the remaining 10% in other currencies. The Company is exposed to market risk mainly from foreign exchange rate fluctuations of the euro, British pound sterling, the Chinese yuan, and the Canadian dollar, 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.     Month-end average exchange rates between the British pound sterling, euro, Chinese yuan and Canadian dollar, which have not been weighted for actual sales volume in the applicable months in the periods, to the U.S. dollar were as follows:       Quarter Ended     Six Months Ended       December 31,     December 31,       2021     2020     2021     2020   Euro   $ 1.14     $ 1.19     $ 1.16     $ 1.19   British pound sterling     1.35       1.32       1.36       1.32   Chinese yuan     0.16       0.15       0.16       0.15   Canadian dollar     0.79       0.76       0.79       0.76     The Company's exposure to foreign exchange rate fluctuations also arises from trade receivables, trade payables and intercompany payables denominated in one currency in the financial statements, but receivable or payable in another currency. The effects of a hypothetical simultaneous 10% appreciation in the U.S. dollar from December 31, 2021 levels against the euro, British pound sterling, Chinese yuan and Canadian dollar are as follows (in thousands):   Decrease in translation of earnings of foreign subsidiaries (annualized)   $ 5,525   Decrease in translation of net assets of foreign subsidiaries     61,002   Additional transaction losses     3,002     23 Table of Contents   ITEM   4. CONTROLS AND PROCEDURES   (a) Evaluation of disclosure controls and procedures.   The Company maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). The Company's management has evaluated, with the participation of its Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered in this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls and procedures were effective.   (b) Changes in internal controls over financial reporting.   There were no changes in the Company's internal control over financial reporting during the second quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.     24 Table of Contents   PART II. OTHER INFORMATION   ITEM   1. LEGAL PROCEEDINGS   As of February 7, 2022, the Company is not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company's business, results of operations, financial condition or cash flows.   ITEM   1A. RISK FACTORS   During the quarter and six months ended December 31, 2021, there have been no material changes from the risk factors found in Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended June 30, 2021.    25 Table of Contents   ITEM   2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   The Company's repurchase plan approved by the Board for the period prior to February 2, 2022 granted management the discretion to mitigate the dilutive effect of stock option exercises for fiscal 2018, which then increases in each period subsequent to June 30, 2018 for additional dilutive impacts of stock option exercised in those future periods. As of February 2, 2022, the Company replaced the prior share repurchase plan with a new share repurchase plan that authorizes the Company to purchase up to $400 million in stock. The Company repurchased 89,238 shares in fiscal 2022 under the previous plan. No shares have yet been repurchased under the new share repurchase plan.   Period   Total Number of Shares Purchased    Average Price Paid per Share   Cash Paid (thousands) November 1-30, 2021   900   468.90   422 December 1-31, 2021   88,338   462.67   40,872       ITEM 3. DEFAULT ON SENIOR SECURITIES   None.   ITEM 4. MINE SAFETY DISCLOSURES   Not applicable.   ITEM 5. OTHER INFORMATION   None.   26 Table of Contents   ITEM   6. EXHIBITS   EXHIBIT INDEX TO FORM 10-Q   BIO-TECHNE CORPORATION   Exhibit Number    Description 3.1 Amended and Restated Articles of Incorporation of the Company--incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q dated February 9, 2015*     3.2 Third Amended and Restated Bylaws of the Company--incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K dated February 1, 2018*     4.1 Description of Capital Stock -- incorporated by reference to Exhibit 4.1 of the Company's Form 10-K dated August 25, 2021*     10.1** Management Incentive Plan--incorporated by reference to Exhibit 10.13 of the Company's Form 10-K for the year ended June 30, 2013*     10.2** Bio-Techne 2020 Equity Incentive Plan - incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated November 3, 2020*     10.3** Form of Time Vesting Restricted Stock Award Agreement - incorporated by reference to Exhibit 10.3 of the Company's Form 10-K dated August 25, 2021*     10.4** Form of Performance Vesting Restricted Stock Unit Award Agreement - incorporated by reference to Exhibit 10.4 of the Company's Form 10-K dated August 25, 2021*     10.5** Form of Time Vesting Restricted Stock Unit Award Agreement - incorporated by reference to Exhibit 10.5 of the Company's Form 10-K dated August 25, 2021*     10.6** Form of Performance Vesting Restricted Stock Unit Award Agreement - incorporated by reference to Exhibit 10.6 of the Company's Form 10-K dated August 25, 2021*     10.7** Form of the Time Vesting Performance Unit Award Agreement - incorporated by reference to Exhibit 10.7 of the Company's Form 10-K dated August 25, 2021*     10.8** Form of Performance Vesting Performance Unit Award Agreement - incorporated by reference to Exhibit 10.8 of the Company's Form 10-K dated August 25, 2021*     10.9** Form of Time Vesting Incentive Stock Option Agreement - incorporated by reference to Exhibit 10.9 of the Company's Form 10-K dated August 25, 2021*   27 Table of Contents   Exhibit Number   Description 10.10** Form of Performance Vesting Incentive Stock Option Agreement - incorporated by reference to Exhibit 10.10 of the Company's Form 10-K dated August 25, 2021*     10.11** Form of Employee Non-Qualified Stock Option Agreement - incorporated by reference to Exhibit 10.11 of the Company's Form 10-K dated August 25, 2021*     10.12** Form of Director Non-Qualified Stock Option Agreement for Second Amendment and Restated 2010 Equity Incentive Plan - incorporated by reference to Exhibit 10.2 of the Company's Form 8-K dated October 26, 2017*     10.13** Employment Agreement by and between the Company and Charles Kummeth - incorporated by reference to Exhibit 10.11 of the Company's Form-K dated September 7, 2017*     10.14** Form of Employment Agreement by and between the Company and Executive Officers of the Company other than the CEO --incorporated by reference to Exhibit 10.12 of the Company's Form 10-K dated September 7, 2017*     10.15** Form of Amendment No. 1 to Executive Employment Agreement – incorporated by reference to Exhibit 10.15 of the Company’s Form 10-Q dated May 11, 2020*      10.16 Credit Agreement by and among the Company, the Guarantors party thereto, the Lenders party thereto, and BMO Harris Bank N.A., as Administrative Agent, dated August 1, 2018--incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated August 2, 2018*     10.17** Form of Indemnification Agreement entered into with each director and executive officer of the Company - incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q dated February 8, 2018*     10.18** Employment Agreement by and between the Company and Mr. William Geist dated December 20, 2021     21 Subsidiaries of the Company - incorporated by reference to Exhibit 21 of the Company's Form 10-K dated August 25, 2021*     31.1 Certificate of Chief Executive Officer pursuant to section 302 of the Sarbanes Oxley Act of 2002     31.2 Certificate of Chief  Financial Officer pursuant to section 302 of the Sarbanes Oxley Act of 2002     32.1 Certification of Chief Executive Officer pursuant to section  906 of the Sarbanes Oxley Act of 2002     32.2 Certification of Chief Financial Officer pursuant to section  906 of the Sarbanes Oxley Act of 2002     101 The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter and six months ended December 31, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Earnings and Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to the Condensed Consolidated Financial Statements.     104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)   ------------- *     Incorporated by reference; SEC File No. 000-17272 **   Management contract or compensatory plan or arrangement   28 Table of Contents   SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.       BIO-TECHNE CORPORATION       (Company)           Date: February 7, 2022    /s/ Charles R. Kummeth            Charles R. Kummeth       Principal Executive Officer           Date: February 7, 2022     /s/ James Hippel            James Hippel       Principal Financial Officer     29