TECHNE CORPORATION RELEASES UNAUDITED SECOND QUARTER
RESULTS FOR FISCAL YEAR 2004
Minneapolis/January 27, 2004/--For the quarter ended December 31, 2003,
Techne Corporation's consolidated net earnings were $12,370,000 or 30 cents
per share (diluted), compared with $9,881,000 or 23 cents per share (diluted)
for the quarter ended December 31, 2002. For the six months ended December
31, 2003, Techne's consolidated net earnings were $24,942,000 or 60 cents per
share (diluted), compared with $20,326,000 or 48 cents per share (diluted)
for the six months ended December 31, 2002. The improvement in profitability
was the result of increased net sales and improved gross margins.
Consolidated net sales for the quarter and six months ended December 31, 2003
were $38,264,000 and $76,257,000, respectively. This was an increase of
$4,964,000 or 15% and $8,409,000 or 12% from the second quarter and first six
months of last year. R&D Systems' Biotechnology Division net sales for the
quarter and six months increased $2,345,000 (11%) and $3,890,000 (9%). R&D
Systems' Hematology Division net sales for the quarter and six months
increased $468,000 (12%) and $975,000 (13%), respectively. The higher than
usual growth in Hematology was primarily due to a new distributor added in
January 2003 and growth in OEM business. R&D Europe's net sales for the
quarter and six months increased $2,151,000 (24%) and $3,544,000 (21%),
respectively. In British pound sterling, R&D Europe's net sales increased
13% for both the quarter and six months ended December 31, 2003.
Gross margins, as a percentage of net sales, increased from 74.9% in the
second quarter of fiscal 2003 to 77.9% in the second quarter of fiscal 2004.
For the six months ended December 31, 2003, gross margins, as a percentage of
net sales, increased from 74.9% to 77.6%. The majority of the increase in
margin percentage was the result of R&D Europe's gross margins increasing
from 40.3% in the second quarter of fiscal 2003 to 50.4% in the second
quarter of fiscal 2004. R&D Europe's gross margins for the six months ended
December 31, 2003 increased from 40.1% to 49.8%. This increase was due to
favorable exchange rates as a result of a weaker U.S. dollar to the British
pound sterling and the expiration, on June 30, 2003, of a royalty agreement
associated with the purchase of Genzyme, Inc's reagent business in fiscal
1999. R&D Europe expensed $436,000 and $844,000, respectively, in the
quarter and six months ended December 31, 2002 under this agreement.
Selling, general and administrative expenses for the quarter and six months
ended December 31, 2003 increased $618,000 (13%) and $750,000 (8%),
respectively. R&D Europe's selling, general and administrative expenses
increased $328,000 (21%) and $415,000 (13%) for the quarter and six months.
Most of this increase was the result of higher exchange rates used to convert
R&D Europe's expenses from pounds to dollars. In British pound sterling, R&D
Europe's selling, general and administrative expenses increased 10% and 6%,
respectively. In addition, Techne's corporate expenses increased $165,000
and $280,000, respectively, for the quarter and six months ended December 31,
2003. This increase was the result of higher audit and related fees,
directors' and officers' insurance premium increases and consulting fees
associated with compliance with Sarbanes-Oxley.
Research and development expenses for the quarter and six months ended
December 31, 2003 increased $471,000 (9%) and $601,000 (6%), respectively.
Included in research and development expenses for each period were the
Company's share of losses by ChemoCentryx, Inc. (CCX) and Discovery Genomics,
Inc. (DGI), development stage companies in which Techne has invested. The
portion of the losses by these two companies included in Techne results for
the quarter and six months ended December 31, 2003 were $953,000 and
$1,561,000, respectively, compared to $659,000 and $1,356,000 for the quarter
and six months ended December 31, 2002, respectively. R&D Systems' internal
research and development expenses for the quarter and six months ended
December 31, 2003 increased $177,000 (4%) and $396,000 (5%), respectively,
from the quarter and six months ended December 31, 2002.
Effective January 1, 2004, Techne purchased a 10% interest in Hemerus
Medical, LLC for $3 million. Hemerus Medical, LLC was formed in March 2001
and has acquired and is developing technology for the separation of
leukocytes from blood and blood components. Leukoreduced blood is important
in blood transfusion. Hemerus owns two patents and has several others
pending and is currently pursuing FDA approval to market its product in the
U.S. In parallel with this investment, R&D Systems entered into a Joint
Research Agreement with Hemerus. The research will involve joint projects to
explore the use of Hemerus' filter technology to applications within R&D
Systems' Hematology and Biotechnology Divisions. Such applications, if any,
may have commercial potential in other laboratory environments.
Statements in this earnings release and elsewhere which look forward in time
involve risks and uncertainties which 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: the
introduction and acceptance of new biotechnology and hematology products, the
levels and particular directions of research by the Company's customers, the
impact of the growing number of producers of biotechnology research products
and related price competition, the retention of hematology OEM and
proficiency survey business, the impact of currency exchange rate
fluctuations, and the costs and results of research and product development
efforts of the Company and of companies in which the Company has invested or
with which it has formed strategic relationships. For additional information
concerning such factors, see the Company's annual report on Form 10-K and
quarterly reports on Form 10-Q as filed with the Securities and Exchange
Commission.
* * * * * * * * * * * * * *
Techne Corporation has two operating subsidiaries: Research and Diagnostic
Systems, Inc. (R&D Systems) of Minneapolis, Minnesota and R&D Systems Europe,
Ltd. (R&D Europe) of Abingdon, England. R&D Systems is a specialty
manufacturer of biological products and R&D Europe is a distributor of
biotechnology products.
Contact: Kathy Backes, Controller (612) 379-8854
TECHNE CORPORATION
12/31/03
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
------------------ ------------------
12/31/03 12/31/02 12/31/03 12/31/02
-------- -------- -------- --------
Net sales $ 38,264 $ 33,300 $ 76,257 $ 67,848
Cost of sales 8,441 8,371 17,104 17,061
-------- -------- -------- --------
Gross margin 29,823 24,929 59,153 50,787
Operating expenses:
Selling, general and
administrative 5,519 4,901 10,602 9,852
Research and development 5,450 4,979 10,413 9,812
Amortization of intangible assets 399 485 799 969
Interest expense 172 296 347 619
Interest income (762) (704) (1,488) (1,494)
Other non-operating expense
(income), net 20 (16) 98 134
-------- -------- -------- --------
10,798 9,941 20,771 19,892
-------- -------- -------- --------
Earnings before income taxes 19,025 14,988 38,382 30,895
Income taxes 6,655 5,107 13,440 10,569
-------- -------- -------- --------
Net earnings $ 12,370 $ 9,881 $ 24,942 $ 20,326
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Earnings per share:
Basic $ 0.30 $ 0.24 $ 0.61 $ 0.49
Diluted $ 0.30 $ 0.23 $ 0.60 $ 0.48
Weighted average common shares
outstanding:
Basic 41,035 41,445 41,000 41,404
Diluted 41,653 42,316 41,627 42,300
12/31/03 6/30/03
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ASSETS
Cash and equivalents $ 47,972 $ 39,371
Short-term investments 102,347 78,130
Trade accounts receivable 16,950 18,387
Interest receivable 1,830 2,054
Inventory 7,144 6,332
Other current assets 5,651 5,241
Property and equipment, net 81,707 81,166
Goodwill, net 12,540 12,540
Intangible assets, net 3,619 4,418
Other non-current assets 14,021 15,638
-------- --------
Total assets $293,781 $263,277
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LIABILITIES
Current liabilities $ 12,572 $ 10,808
Long-term debt 15,219 15,852
Stockholders' equity 265,990 236,617
-------- --------
Total liabilities and equity $293,781 $263,277
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