TECHNE CORPORATION RELEASES UNAUDITED SECOND QUARTER
RESULTS FOR FISCAL YEAR 2005
Minneapolis/February 1, 2005/--For the quarter ended December 31, 2004,
Techne Corporation's consolidated net earnings were a record $14.9 million or
$.36 per share (diluted) compared with $12.4 million or $.30 per share
(diluted) for the quarter ended December 31, 2003. Net earnings as a
percentage of sales improved from 32.3% in the second quarter of last year to
35.3% for the quarter ended December 31, 2004. For the six months ended
December 31, 2004, Techne's consolidated net earnings were $29.1 million or
$.70 per share (diluted) compared with $24.9 million or $.60 per share
(diluted) for the six months ended December 31, 2003. Net earnings as a
percentage of sales improved from 32.7% in the first six months of last year
to 35.0% for the six months ended December 31, 2004.
Consolidated net sales for the quarter and six months ended December 31, 2004
were $42.2 million and $83.2 million, respectively. This was an increase of
10% and 9% from the second quarter and first six months of last year.
Excluding the effect of changes in foreign currency exchange rates,
consolidated net sales increased 7% and 6% for the quarter and six months
ended December 31, 2004, respectively. R&D Systems' Biotechnology Division
net sales for the quarter and six months ended December 31, 2004 were $24.9
million and $50.8 million, increases of 9% and 8%, respectively. R&D
Europe's net sales for the quarter and six months were $12.9 million and
$23.9 million, increases of 17% and 15%, respectively. In British pound
sterling, R&D Europe's net sales increased 7% and 4% for the quarter and six
months ended December 31, 2004, respectively. R&D Systems' Hematology
Division net sales for the quarter were $4.5 million, an increase of 1%,
while net sales for the six months ended December 31, 2004 were $8.5 million,
a decrease of 2% from the prior year.
Selling, general and administrative expenses for the quarter and six months
ended December 31, 2004 increased $771,000 (14%) and $1.3 million (12%),
respectively. The majority of the increase for the quarter and six months
was a result of increased personnel costs, including additional sales and
marketing personnel. Foreign currency exchange rate changes also increased
selling, general and administrative expenses by approximately $200,000 and
$400,000 for the quarter and six-month period, respectively. Second quarter
expenses are higher than first quarter costs because of seasonal advertising
and promotion expenses.
Research and development expenses for the quarter and six months ended
December 31, 2004 decreased $831,000 (15%) and $1.1 million (11%),
respectively. Included in research and development expenses for the prior
year periods 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 losses by these companies included in Techne
results for the quarter and six months ended December 31, 2003 were $953,000
and $1.6 million, respectively. In the fourth quarter of fiscal 2004, the
Company wrote off its investment in DGI as an impairment loss. The Company
also converted from the equity method to the cost method for accounting for
its investment in CCX in the fourth quarter of fiscal 2004. Excluding the
losses by CCX and DGI, research and development expenses increased $122,000
(3%) and $455,000 (5%) for the quarter and six months ended December 31,
2004, respectively, mainly as a result of increased personnel.
Other non-operating expenses increased $396,000 and $784,000 for the quarter
and six months ended December 31, 2004, respectively, mainly as a result of
non-operating building expenses.
Fiscal 2005 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 approximately $300,000 and $620,000
for the quarter and six months ended December 31, 2004.
During the second quarter of fiscal 2005 a large OEM customer notified the
Hematology Division that they will be changing to a new primary vendor for
certain controls and calibrators. Although the Hematology Division will
continue to manufacture products for this customer as a secondary supplier,
it is anticipated that the effect on revenues will be a reduction of
approximately $450,000 and $850,000 in the third and fourth quarters of
fiscal 2005, respectively. The reduction in Hematology Division revenues is
not expected to have a significant impact on consolidated earnings and
revenues.
Statements in this earnings release and elsewhere, which look forward in
time, including anticipated lower revenues in the Hematology Division,
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: Greg Melsen, Chief Financial Officer
Kathy Backes, Controller
(612) 379-8854
TECHNE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
------------------ ------------------
12/31/04 12/31/03 12/31/04 12/31/03
-------- -------- -------- --------
Net sales $ 42,247 $ 38,264 $ 83,166 $ 76,257
Cost of sales 8,941 8,441 17,828 17,104
-------- -------- -------- --------
Gross margin 33,306 29,823 65,338 59,153
Operating expenses:
Selling, general and administrative 6,290 5,519 11,924 10,602
Research and development 4,619 5,450 9,307 10,413
Amortization of intangible assets 306 399 611 799
-------- -------- -------- --------
Total operating expenses 11,215 11,368 21,842 21,814
-------- -------- -------- --------
Operating income 22,091 18,455 43,496 37,339
Other expense (income):
Interest expense 178 172 423 347
Interest income (1,189) (762) (2,242) (1,488)
Other non-operating expense
(income), net 416 20 882 98
-------- -------- -------- --------
Total other income (595) (570) (937) (1,043)
-------- -------- -------- --------
Earnings before income taxes 22,686 19,025 44,433 38,382
Income taxes 7,752 6,655 15,307 13,440
-------- -------- -------- --------
Net earnings $ 14,934 $ 12,370 $ 29,126 $ 24,942
======== ======== ======== ========
Earnings per share:
Basic $ 0.36 $ 0.30 $ 0.71 $ 0.61
Diluted $ 0.36 $ 0.30 $ 0.70 $ 0.60
Weighted average common
shares outstanding:
Basic 41,279 41,035 41,224 41,000
Diluted 41,681 41,653 41,678 41,627
TECHNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
12/31/04 6/30/04
-------- --------
ASSETS
Cash and equivalents $ 69,626 $ 51,201
Short-term available-for-sale investments 47,104 42,534
Trade accounts receivable 18,801 20,262
Interest receivable 944 837
Inventory 8,079 7,457
Other current assets 6,017 5,774
-------- --------
Current assets 150,571 128,065
-------- --------
Available-for-sale investments 97,033 82,858
Property and equipment, net 79,119 80,504
Goodwill and intangible assets, net 14,748 15,359
Other non-current assets 18,016 18,674
-------- --------
Total assets $359,487 $325,460
======== ========
LIABILITIES
Current liabilities $ 13,214 $ 13,459
Long-term debt 13,958 14,576
Stockholders' equity 332,315 297,425
-------- --------
Total liabilities and equity $359,487 $325,460
======== ========