TECHNE CORPORATION RELEASES UNAUDITED THIRD QUARTER
RESULTS FOR FISCAL YEAR 2005
Minneapolis/April 26, 2005/--Techne Corporation's (NASDAQ: TECH) consolidated
net earnings increased 26% to a record $18.4 million or $.45 per share
(diluted) for the quarter ended March 31, 2005 compared with $14.6 million or
$.35 per share (diluted) for the quarter ended March 31, 2004. Net earnings
as a percentage of sales improved from 34.4% in the third quarter of last
year to 38.5% for the quarter ended March 31, 2005. For the nine months
ended March 31, 2005, Techne's consolidated net earnings were $47.6 million
or $1.15 per share (diluted) compared with $39.6 million or $.95 per share
(diluted) for the nine months ended March 31, 2004. Net earnings as a
percentage of sales improved from 33.3% in the first nine months of last year
to 36.3% for the nine months ended March 31, 2005. 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 $115,000 and $735,000 for the quarter and nine
months ended March 31, 2005.
Consolidated net sales for the quarter and nine months ended March 31, 2005
were $47.9 million and $131.1 million, respectively. This was an increase of
13% and 10% from the third quarter and first nine months of last year.
Excluding the effect of changes in foreign currency exchange rates,
consolidated net sales increased 12% and 8% for the quarter and nine months
ended March 31, 2005, respectively. R&D Systems' Biotechnology Division net
sales for the quarter and nine months ended March 31, 2005 were $30.7 million
and $81.5 million, increases of 18% and 12%, respectively. R&D Europe's net
sales for the quarter and nine months were $13.5 million and $37.4 million,
increases of 9% and 13%, respectively. In British pound sterling, R&D
Europe's net sales increased 6% and 5% for the quarter and nine months ended
March 31, 2005, respectively. R&D Systems' Hematology Division net sales for
the quarter were $3.7 million and $12.2 million, decreases of 10% and 5%,
respectively.
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. Sales to this customer in the quarter ended
March 31, 2005 decreased $428,000 from the prior-year third quarter. Although
the Hematology Division will continue to manufacture products for this
customer as a secondary supplier, it is anticipated that the effect on
revenues in the fourth quarter of fiscal 2005 will be a reduction of
approximately $850,000. The reduction in Hematology Division revenues is not
expected to have a significant impact on consolidated earnings and revenues.
Selling, general and administrative expenses for the quarter and nine months
ended March 31, 2005 increased $923,000 (17%) and $2.2 million (14%),
respectively. The majority of the increase for the quarter and nine months
was a result of increased personnel costs, including additional sales and
marketing personnel and an increase in profit sharing accrual.
Research and development expenses for the quarter and nine months ended March
31, 2005 decreased $451,000 (9%) and $1.6 million (10%), 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 nine months ended March 31, 2004 were $589,000 and $2.2 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. R&D Systems research and development
expenses increased $138,000 (3%) and $593,000 (4%) for the quarter and nine
months ended March 31, 2005, respectively, mainly as a result of increased
personnel.
Other non-operating expenses decreased $92,000 for the quarter, but increased
$692,000 for the nine ended March 31, 2005. The decrease for the quarter was
mainly the result of increased rental income, while the increase in expense
for the nine months was mainly the result of increased depreciation and real
estate taxes on properties held for future expansion.
In March 2005, the Company repurchased approximately 2.9 million shares of
its common stock under an accelerated stock buyback transaction ("ASB") for
an initial value of approximately $100 million ($34.45 per share). The
transaction was completed under a privately negotiated contract with an
investment bank. The investment bank borrowed the 2.9 million shares to
complete the transaction and will purchase the replacement shares in the open
market over a nine-month period beginning in March 2005. The ASB agreement is
subject to a market price adjustment provision based upon the volume weighted
average price during the nine-month period. The effect of the reduction in
outstanding shares on earnings per share was $.01 for both the quarter and
nine months ended March 31, 2005.
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 NINE MONTHS ENDED
------------------ ------------------
3/31/05 3/31/04 3/31/05 3/31/04
-------- -------- -------- --------
Net sales $ 47,935 $ 42,541 $131,101 $118,798
Cost of sales 9,138 8,946 26,966 26,050
-------- -------- -------- --------
Gross margin 38,797 33,595 104,135 92,748
Operating expenses:
Selling, general and administrative 6,379 5,456 18,303 16,058
Research and development 4,631 5,082 13,938 15,495
Amortization of intangible assets 305 400 916 1,199
-------- -------- -------- --------
Total operating expenses 11,315 10,938 33,157 32,752
-------- -------- -------- --------
Operating income 27,482 22,657 70,978 59,996
Other expense (income):
Interest expense 193 167 616 514
Interest income (938) (853) (3,180) (2,341)
Other non-operating expense
(income), net 323 415 1,205 513
-------- -------- -------- --------
Total other income (422) (271) (1,359) (1,314)
-------- -------- -------- --------
Earnings before income taxes 27,904 22,928 72,337 61,310
Income taxes 9,465 8,309 24,772 21,749
-------- -------- -------- --------
Net earnings $ 18,439 $ 14,619 $ 47,565 $ 39,561
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Earnings per share:
Basic $ 0.46 $ 0.36 $ 1.16 $ 0.96
Diluted $ 0.45 $ 0.35 $ 1.15 $ 0.95
Weighted average common
shares outstanding:
Basic 40,423 41,072 40,961 41,024
Diluted 40,896 41,752 41,423 41,668
TECHNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
3/31/05 6/30/04
-------- --------
ASSETS
Cash and equivalents $ 59,752 $ 51,201
Short-term available-for-sale investments 12,674 42,534
Trade accounts receivable 23,023 20,262
Interest receivable 458 837
Inventory 8,229 7,457
Other current assets 6,138 5,774
-------- --------
Current assets 110,274 128,065
Available-for-sale investments 48,148 82,858
Property and equipment, net 89,148 80,504
Goodwill and intangible assets, net 14,443 15,359
Other non-current assets 15,975 18,674
-------- --------
Total assets $277,988 $325,460
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LIABILITIES
Current liabilities $ 18,080 $ 13,459
Long-term debt 13,661 14,576
Stockholders' equity 246,247 297,425
-------- --------
Total liabilities and equity $277,988 $325,460
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