TECHNE CORPORATION RELEASES UNAUDITED FOURTH QUARTER
RESULTS FOR FISCAL YEAR 2005
Minneapolis/August 16, 2005/--Techne Corporation's (NASDAQ: TECH)
consolidated net earnings increased 39% to $18.6 million or $.47 per diluted
share for the quarter ended June 30, 2005 compared with $13.4 million or $.32
per diluted share for the quarter ended June 30, 2004. Net earnings as a
percentage of sales improved from 31.5% in the fourth quarter of last year to
39.0% for the quarter ended June 30, 2005. For the fiscal year ended June
30, 2005, Techne's consolidated net earnings were $66.1 million or $1.62 per
diluted share compared with $52.9 million or $1.27 per diluted share for the
fiscal year ended June 30, 2004. Net earnings as a percentage of sales
improved from 32.8% last year to 37.0% for fiscal 2005.
Consolidated net sales for the quarter and fiscal year ended June 30, 2005
were $47.6 million and $178.7 million, respectively. This was an increase of
12% and 11% from the fourth quarter and fiscal year ended June 30, 2004,
respectively. R&D Systems' Biotechnology Division net sales for the quarter
and fiscal year ended June 30, 2005 were $29.7 million and $111.2 million,
increases of 12% for each period. R&D Europe's net sales for the quarter and
fiscal year were $13.9 million and $51.3 million, increases of 23% and 16%,
respectively. In British pound sterling, R&D Europe's net sales increased
21% and 9% for the quarter and fiscal year ended June 30, 2005, respectively.
Compared to the prior year, R&D Systems Europe had two extra shipping days in
the quarter ended June 30, 2005 due to the timing of the European Easter
holiday. R&D Systems' Hematology Division net sales for the quarter and
fiscal year were $4.0 million and $16.2 million, decreases of 14% and 7%,
respectively.
Fiscal 2005 net sales and earnings were favorably affected by the strength of
the British pound as compared to the U.S. dollar. Excluding the effect of
changes in foreign currency exchange rates, consolidated net sales increased
11% and 9% for the quarter and fiscal year ended June 30, 2005, respectively.
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 $133,000 (insignificant per diluted share) and $868,000 ($.02
per diluted share) for the quarter and fiscal year ended June 30, 2005,
respectively.
Fourth quarter and fiscal year ended June 30, 2004 results also included the
effect of a one-time $1.5 million write-down of the Company's investment in
Discovery Genomics, Inc. (DGI), equivalent to 4 cents per diluted share.
This charge impacted operating margins by 3.6% and 0.9% in the fourth quarter
and fiscal year ended June 30, 2004, respectively.
During the second quarter of fiscal 2005 a large OEM customer notified the
Hematology Division that they would be changing to a new primary vendor for
certain controls and calibrators. Sales to this customer in the quarter and
fiscal year ended June 30, 2005 decreased $842,000 and $1.4 million from the
prior year. 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 first six months of fiscal 2006 will be a
reduction of approximately $1.4 million. The reduction in Hematology Division
revenues is not expected to have a significant impact on consolidated
earnings and revenues.
Gross margins were 79.3% and 79.2% in the fourth quarter of fiscal 2005 and
2004 and 79.4% and 78.4% for the fiscal years 2005 and 2004, respectively.
The improvement resulted from higher margins in Europe due to favorable
exchange rates and from sales growth in the Biotechnology Division as
compared to sales declines in the Hematology Division. Fourth quarter fiscal
2005 margins were lower than in the third quarter of fiscal 2005 mainly due
to changes in product mix and a strengthening U.S. dollar versus the British
pound sterling.
Selling, general and administrative expenses for the quarter and fiscal year
ended June 30, 2005 increased $506,000 (9%) and $2.8 million (13%),
respectively. Fourth quarter spending includes increased professional fees of
about $200,000, primarily related to Sarbanes-Oxley compliance. The fiscal
year expense increase resulted from the change in foreign currency exchange
rates and increases in personnel and benefit costs, profit sharing and
professional fee expenses.
Research and development expenses for the quarter and fiscal year ended June
30, 2005 decreased $837,000 (16%) and $2.4 million (12%), 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 fiscal year ended June 30, 2004 were $674,000 and $2.8 million,
respectively. The Company 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 CCX and DGI losses in fiscal 2004, R&D Systems research
and development expenses decreased $133,000 (3%) and increased $459,000 (3%)
for the quarter and fiscal year ended June 30, 2005, respectively.
The effective tax rates were 32.6% and 37.0% in the quarters ended June 30,
2005 and 2004 and 33.8% and 35.9% for the fiscal years then ended,
respectively. The decrease in the effective tax rates was due to the
reduction of non-deductible losses by CCX and DGI. U.S. federal taxes have
also been reduced by increased credits for research and development
expenditures and the benefit for extraterritorial income.
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. The ASB agreement is subject
to a market price adjustment provision based upon the volume weighted average
price during the nine-month period ending December 31, 2005. The market
price adjustment may be settled in cash or stock at the Company's option.
Based on the volume weighted average price per share through June 30, 2005,
the settlement amount for the contract would have been approximately $18.6
million or about 428,000 shares at June 30, 2005. The effect of the
reduction in outstanding shares on earnings per diluted share was $.03 and
$.04 for the quarter and fiscal year ended June 30, 2005.
In the first quarter of fiscal 2006, the Company will begin recognizing
compensation costs for equity instruments issued to employees and directors
based on the fair value at the date of grant. An estimated compensation
expense of about $1.2 million or $.03 per diluted share is anticipated for
fiscal 2006.
In July 2005, the Company acquired Fortron Bio Science, Inc. and BiosPacific,
Inc. for an aggregate $20 million in cash. Fortron develops and manufactures
antibodies and BiosPacific is a worldwide supplier of biologics to
manufacturers of in vitro diagnostic systems and immunodiagnostic kits. The
acquisitions will help the Company expand into the diagnostic market by
offering research reagents that may have future diagnostic application and/or
developing products specifically for diagnostic markets. Fortron and
BiosPacific generated combined revenues of approximately $8.7 million in
calendar 2004. The acquisitions are expected to be slightly accretive to the
Company's earnings per share in fiscal year 2006.
Forward Looking Statements:
This earnings release contains forward-looking statements within the meaning
of the Private Litigation Reform Act. These statements look forward in time,
and include our expectations as to anticipated lower revenues in the
Hematology Division, the contribution from the Fortron and BiosPacific
acquisitions and the expensing of stock options, 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: 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. We undertake no
obligation to update or revise any forward-looking statements we make in this
release due to new information or future events. Investors are cautioned not
to place undue emphasis on these statements.
* * * * * * * * * * * * * *
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 FISCAL YEAR ENDED
------------------ ------------------
6/30/05 6/30/04 6/30/05 6/30/04
-------- -------- -------- --------
Net sales $ 47,551 $ 42,459 $178,652 $161,257
Cost of sales 9,847 8,837 36,813 34,887
-------- -------- -------- --------
Gross margin 37,704 33,622 141,839 126,370
Operating expenses:
Selling, general and administrative 6,173 5,667 24,476 21,725
Research and development 4,441 5,278 18,379 20,773
Amortization of intangible assets 305 400 1,221 1,599
-------- -------- -------- --------
Total operating expenses 10,919 11,345 44,076 44,097
-------- -------- -------- --------
Operating income 26,785 22,277 97,763 82,273
Other expense (income):
Interest expense 206 164 822 678
Interest income (929) (910) (4,109) (3,251)
Impairment loss -- 1,523 -- 1,523
Other non-operating expense
(income), net (42) 269 1,163 782
-------- -------- -------- --------
Total other expense (income) (765) 1,046 (2,124) (268)
-------- -------- -------- --------
Earnings before income taxes 27,550 21,231 99,887 82,541
Income taxes 8,983 7,864 33,755 29,613
-------- -------- -------- --------
Net earnings $ 18,567 $ 13,367 $ 66,132 $ 52,928
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Earnings per share:
Basic $ 0.48 $ 0.33 $ 1.64 $ 1.29
Diluted $ 0.47 $ 0.32 $ 1.62 $ 1.27
Weighted average common
shares outstanding:
Basic 38,545 41,114 40,359 41,046
Diluted 39,396 41,785 40,920 41,697
TECHNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
6/30/05 6/30/04
-------- --------
ASSETS
Cash and equivalents $ 80,344 $ 51,201
Short-term available-for-sale investments 16,790 42,534
Trade accounts receivable 22,041 20,262
Other receivables 1,681 837
Inventory 7,758 7,457
Other current assets 6,367 5,774
-------- --------
Current assets 134,981 128,065
Available-for-sale investments 41,871 82,858
Property and equipment, net 89,036 80,504
Goodwill and intangible assets, net 14,138 15,359
Other non-current assets 15,237 18,674
-------- --------
Total assets $295,263 $325,460
======== ========
LIABILITIES
Current liabilities $ 14,016 $ 13,459
Long-term debt 13,378 14,576
Stockholders' equity 267,869 297,425
-------- --------
Total liabilities and equity $295,263 $325,460
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