TECHNE CORPORATION RELEASES UNAUDITED FOURTH QUARTER
RESULTS FOR FISCAL YEAR 2004
Minneapolis/August 10, 2004/--For the quarter ended June 30, 2004, Techne
Corporation's consolidated net earnings were $13.4 million or 32 cents per
share (diluted), including the effect of a one-time $1.5 million write-down
(4 cents per share) of the Company's investment in Discovery Genomics, Inc.
(DGI). This compares with $12.7 million or 31 cents per share (diluted) for
the quarter ended June 30, 2003. For the fiscal year ended June 30, 2004,
Techne's consolidated net earnings were $52.9 million or $1.27 per share
(diluted), (including the effect of the 4 cents per share DGI write-down),
compared with $45.4 million or $1.08 per share (diluted) for the fiscal year
ended June 30, 2003. Fiscal 2004 results were favorably effected by the
strength of the British pound as compared to the U.S. dollar. The impact on
consolidated net earnings of the change in exchange rates used to convert R&D
Europe results from British pounds to U.S. dollars was $226,000 and $1.1
million for the quarter and year ended June 30, 2004, respectively.
Consolidated net sales for the quarter and fiscal year ended June 30, 2004
were $42.5 million and $161.3 million, respectively, an increase of 8% and
11%, respectively. R&D Systems' Biotechnology Division net sales for the
quarter and fiscal year ended June 30, 2004 were a record $26.5 million and
$99.4 million, respectively, increases of 9% for both periods. R&D Europe's
net sales for the quarter and fiscal year were $11.3 million and $44.4
million, increases of 12% and 19%, respectively. In British pound sterling,
R&D Europe's net sales increased 1% for the quarter and 8% for the fiscal
year ended June 30, 2004, respectively. R&D Systems' Hematology Division net
sales for the quarter ended June 30, 2004, decreased 5%, but increased 5% for
the fiscal year.
Gross margins, as a percentage of net sales, increased from 75.7% in the
fourth quarter of fiscal 2003 to 79.2% in the fourth quarter of fiscal 2004.
For the fiscal year ended June 30, 2004, gross margins, as a percentage of
net sales, increased from 75.6% to 78.4%. The majority of the increase in
margin percentage was the result of R&D Europe's gross margins increasing
from 43.3% in the fourth quarter of fiscal 2003 to 51.6% in the fourth
quarter of fiscal 2004. R&D Europe's gross margins for the fiscal year ended
June 30, 2004 increased from 41.8% to 51.4%. These increases were 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 $498,000 and $1,838,000, respectively, in the
quarter and fiscal year ended June 30, 2003 under this agreement.
Selling, general and administrative expenses for the quarter and fiscal year
ended June 30, 2004 increased $849,000 (18%) and $2,349,000 (12%),
respectively. R&D Systems' selling, general and administrative expenses
increased $727,000 (24%) and $1,126,000 (9%) for the quarter and fiscal year
ended June 30, 2004, respectively. The majority of the increase for the
quarter and fiscal year was a result of an increase in profit sharing accrual
in the third and fourth quarters of fiscal 2004. In addition, Techne's
corporate expenses increased $383,000 for the fiscal year ended June 30,
2004. This increase was the result of higher audit and related fees,
directors' and officers' liability insurance premium increases and consulting
fees associated with compliance with Sarbanes-Oxley. R&D Europe's selling,
general and administrative expenses increased $163,000 (10%) and $839,000
(13%) for the quarter and fiscal year. Most of this increase was the result
of the change in 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 decreased 2% for the quarter and increased 3% for
the fiscal year.
Research and development expenses for the quarter ended June 30, 2004
decreased $206,000 (4%), but increased $191,000 (1%) for the fiscal year
ended June 30, 2004. 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 and the Company's share of losses by Hemerus Medical, LLC in
which the Company invested on January 1, 2004. The portion of the losses by
these companies included in Techne results for the quarter and fiscal year
ended June 30, 2004 were $703,000 and $2,853,000, respectively, compared to
$908,000 and $3,188,000 for the quarter and fiscal year ended June 30, 2003,
respectively. R&D Systems' internal research and development expenses were
flat for the quarter ended June 30, 2004, but increased $526,000 (3%) for
fiscal year 2004.
In fiscal 2002 Techne invested $3 million in DGI. Currently, DGI has cash
available for approximately three months of operation and has been
unsuccessful to-date in raising additional equity. As a result, during the
fourth quarter of fiscal 2004, Techne determined that its investment in DGI
is other than temporarily impaired and has written off the remaining net
investment of $1.5 million as a one-time charge in the fourth quarter of
fiscal 2004. The write-off of the DGI investment is not currently deductible
for tax purposes, however, the total $3 million capital loss may be used to
offset future taxable capital gains on other investments.
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
6/30/04
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED FISCAL YEAR ENDED
------------------ ------------------
6/30/04 6/30/03 6/30/04 6/30/03
-------- -------- -------- --------
Net sales $ 42,459 $ 39,426 $161,257 $145,011
Cost of sales 8,837 9,579 34,887 35,396
-------- -------- -------- --------
Gross margin 33,622 29,847 126,370 109,615
Operating expenses:
Selling, general and
administrative 5,667 4,819 21,725 19,377
Research and development 5,278 5,483 20,773 20,581
Amortization of intangible assets 400 485 1,599 1,939
Interest expense 164 177 678 974
Interest income (910) (707) (3,251) (2,933)
Impairment loss on equity investment 1,523 -- 1,523 --
Other non-operating expense
(income), net 269 48 782 122
-------- -------- -------- --------
12,391 10,305 43,829 40,060
-------- -------- -------- --------
Earnings before income taxes 21,231 19,542 82,541 69,555
Income taxes 7,864 6,866 29,613 24,159
-------- -------- -------- --------
Net earnings $ 13,367 $ 12,676 $ 52,928 $ 45,396
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Earnings per share:
Basic $ 0.33 $ 0.31 $ 1.29 $ 1.10
Diluted $ 0.32 $ 0.31 $ 1.27 $ 1.08
Weighted average common shares
outstanding:
Basic 41,114 40,807 41,046 41,237
Diluted 41,785 41,496 41,697 42,031
6/30/04 6/30/03
-------- --------
ASSETS
Cash and equivalents $ 51,201 $ 39,371
Short-term investments 125,392 79,392
Trade accounts receivable 20,262 18,387
Interest receivable 837 792
Inventory 7,457 6,332
Other current assets 5,774 5,241
Property and equipment, net 80,504 81,166
Goodwill, net 12,540 12,540
Intangible assets, net 2,819 4,418
Other non-current assets 18,674 15,638
-------- --------
Total assets $325,460 $263,277
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LIABILITIES
Current liabilities $ 13,459 $ 10,808
Long-term debt 14,576 15,852
Stockholders' equity 297,425 236,617
-------- --------
Total liabilities and equity $325,460 $263,277
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