TECHNE CORPORATION RELEASES UNAUDITED SECOND QUARTER
RESULTS FOR FISCAL YEAR 2006
Minneapolis/January 31, 2006/--Techne Corporation's (NASDAQ: TECH)
consolidated net earnings increased 10.6% to $16.5 million or $.42 per
diluted share for the quarter ended December 31, 2005 compared with $14.9
million or $.36 per diluted share for the quarter ended December 31, 2004.
For the six months ended December 31, 2005, Techne's consolidated net
earnings increased 15.1% to $33.5 million or $.84 per diluted share compared
with $29.1 million or $.70 per diluted share for the six months ended
December 31, 2004.
Consolidated net earnings and diluted earnings per share were negatively
impacted by the decline in exchange rates used to covert R&D Europe results
from British pounds to U.S. dollars and stock option related compensation
expense from the adoption of Financial Accounting Standards Board (FASB)
Statement of Accounting Standards No. 123 (Revised 2004), Share-Based
Payments (SFAS No. 123R). The acquisitions of Fortron Bio Science, Inc. and
BiosPacific, Inc. on July 1, 2005 and an accelerated stock buyback
transaction ("ASB") on March 1, 2005 had positive impacts. The impact of
these items on comparable earnings and diluted earnings per share is
summarized as follows:
Periods Ended December 31, 2005
---------------------------------------------------
Second Quarter Fiscal Year to Date
------------------------- -------------------------
Net % of Net Diluted Net % of Net Diluted
Earnings Sales EPS Earnings Sales EPS
-------- -------- ------- -------- -------- -------
($000's) ($000's)
Net Earnings
as Reported $16,514 34.4% $0.42 $33,515 35.0% $0.84
Stock Option Expense(1) 737 1.5% 0.02 949 1.0% 0.03
Foreign Exchange (1) 285 0.6% -- 353 0.4% 0.01
Earnings from
Acquisitions (1) (100) (0.2%) -- (283) (0.3%) (0.01)
ASB (0.03) (0.05)
-------- -------- ------- -------- -------- -------
$17,436 36.3% $0.41 $34,534 36.1% $0.82
Periods ended 12/31/04 $14,934 35.3% $0.36 $29,126 35.0% $0.70
Change 16.8% 13.9% 18.6% 12.9%
(1) Net of income taxes
Consolidated net sales for the three and six months ended December 31, 2005
were $48.0 million and $95.7 million, respectively. This was an increase of
13.7% and 15.1% from the three and six months ended December 31, 2004,
respectively. R&D Systems' Biotechnology Division net sales for the three
and six months ended December 31, 2005 were $29.0 million and $58.7 million,
increases of 16.5% and 15.6%, respectively. R&D Europe's net sales for the
three and six months ended December 31, 2005 were $13.1 million and $25.0
million, increases of 1.9% and 4.6%, respectively. In British pound
sterling, R&D Europe's net sales increased 10.6% and 10.3% for the three and
six months ended December 31, 2005, respectively. R&D Systems' Hematology
Division net sales for the quarter were $3.8 million, a decrease of 16.3%,
mainly as a result of a large OEM customer changing to a new primary vendor
in January 2005. Included in net sales for the three and six months ended
December 31, 2005 was $2.2 million and $4.8 million, respectively, of net
sales from Fortron Bio Science, Inc. and BiosPacific, Inc., which were
acquired effective July 1, 2005.
Periods Ended December 31
---------------------------------------------------
($000's) Second Quarter Fiscal Year to Date
------------------------ ------------------------
2006 2005 Change 2006 2005 Change
------- ------- ------ ------- ------- ------
Net Sales as Reported $48,029 $42,247 13.7% $95,738 $83,166 15.1%
Foreign Exchange 1,110 2.7% 1,355 1.6%
Acquisitions (2,180) (5.2%) (4,780) (5.7%)
------- ------- ------ ------- ------- ------
$46,959 $42,247 11.2% $92,313 $83,166 11.0%
Consolidated gross margins were 77.7% in the second quarter of fiscal 2006 as
compared to 76.7% in the first quarter of fiscal 2006. For the six months
ended December 31, 2005, consolidated gross margins were 77.2%. Excluding
Fortron and BiosPacific, gross margins were 79.8% compared to 78.8% in the
second quarter of fiscal 2005 and 79.5% compared to the 78.6% in the six
months ended December 31, 2004. This increase was the result of a favorable
mix of higher margin Biotechnology Division sales as compared to Hematology
and R&D Europe sales. Gross margins for Fortron and BiosPacific operations of
34.5% and 35.0% for the quarter and six months ended December 31, 2005,
respectively were negatively affected by purchase accounting related to
inventory acquired.
Selling, general and administrative expenses as a percent of net sales
increased to 16.6% and 15.1% for the three and six month periods ended
December 31, 2005, respectively, primarily because the adoption of SFAS No.
123R related to stock option compensation added $1.1 million of expense for
the three months ended December 31, 2005. Excluding the impact of adopting
SFAS No. 123R, selling, general and administrative expense as a percent of
net sales decreased to 14.3% from 14.9% for the three months ended December
31, 2005 and 2004, respectively, and to 13.6% from 14.3% in the six month
periods ended December 31, 2005 and 2004, respectively.
Stock compensation expense during the three months ended December 31, 2005
primarily resulted from stock options granted to the Company's non-employee
members of the Board of Directors upon their annual reelection, which
occurred at the Company's October annual meeting, or their initial
appointment. As a result of adopting SFAS No. 123R, estimated total
compensation expense of approximately $1.7 million or $.04 per diluted share
is anticipated for fiscal 2006 of which approximately $300,000 remains to be
expensed in the last six months of the fiscal year.
The dollar increases in selling, general and administrative expenses were
also impacted by the acquisitions of Fortron and BiosPacifc.
Periods Ended December 31
--------------------------------------------------
($000's) Second Quarter Fiscal Year to Date
------------------------ ------------------------
2006 2005 Change 2006 2005 Change
------- ------- ------ ------- ------- ------
S,G&A as Reported $7,980 $6,290 26.9% $14,434 $11,924 21.0%
Stock Option Expense (1,106) (17.6%) (1,376) (11.5%)
Acquisitions (308) (4.9%) (674) (5.6%)
------- ------- ------ ------- ------- ------
$6,566 $6,290 4.4% $12,384 $11,924 3.9%
Second quarter expenses are also higher than in the first quarter mainly
because of costs associated with production and printing of the R&D Systems'
2006 catalog.
The Company allocated approximately $12.8 million to goodwill and $7.1
million to other intangible assets arising from the acquisition of Fortron
and BiosPacific. The intangible assets, mainly trade names and customer and
supplier relationships, are being amortized over lives of one to eight years
and amortization expense of $272,000 and $543,000 was recorded for the
quarter and six months ended December 31, 2005, respectively, related to
these assets.
In March 2005, the Company repurchased approximately 2.9 million shares of
its common stock under an ASB for an initial value of approximately $100
million. The ASB agreement was subject to a market price adjustment
provision that was settled on December 30, 2005 for $26.0 million based on
the volume weighted average price during the nine-month period ended in
December 23, 2005.
Forward Looking Statements:
This earnings release contains forward-looking statements within the meaning
of the Private Litigation Reform Act. These statements, including our
expectations as to the estimated compensation expense resulting from stock
option expensing, 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
integration of the recent acquisitions, 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.
Use of Non-GAAP Financial Measures:
The non-GAAP financial measures used in this press release quantify the
impact of adopting Financial Accounting Standards Board (FASB) Statement of
Accounting Standards No. 123 (Revised 2004), Share-Based Payments (SFAS No.
123R) related to the expensing of stock option compensation, the decline in
exchange rates used to covert R&D Europe results from British pounds to U.S.
dollars, the acquisitions of Fortron Bio Science, Inc. and BiosPacific, Inc
on July 1, 2005 and an accelerated stock buyback transaction ("ASB") on March
1, 2005 on reported net sales, selling, general and administrative expenses,
net earnings and earnings per share for the three and six months ended
December 31, 2005 as compared to the reported amounts for the same periods
ended December 31, 2004. These non-GAAP financial measures are not prepared
in accordance with generally accepted accounting principles and may be
different from non-GAAP financial measures used by other companies. Non-GAAP
financial measures should not be considered as a substitute for, or superior
to, measures of financial performance prepared in accordance with GAAP. We
view these non-GAAP financial measures to be helpful in assessing the
Company's ongoing operating results. In addition, these non-GAAP financial
measures facilitate our internal comparisons to historical operating results
and comparisons to competitors' operating results. We include these non-GAAP
financial measures in our earnings announcement because we believe they are
useful to investors in allowing for greater transparency related to
supplemental information we use in our financial and operational analysis.
Investors are encouraged to review the reconciliations of the non-GAAP
financial measures used in this press release to their most directly
comparable GAAP financial measures as provided with the financial statements
attached to this press release.
* * * * * * * * * * * * * *
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. R&D Systems has two subsidiaries,
Fortron Bio Science, Inc. (Fortron), located in Minneapolis, and BiosPacific,
Inc. (BiosPacific), located in Emeryville, California. Fortron develops and
manufactures antibodies and BiosPacific is a worldwide supplier of biologics
to manufacturers of in vitro diagnostic systems and immunodiagnostic kits.
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
----------------- -----------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Net sales $48,029 $42,247 $95,738 $83,166
Cost of sales 10,695 8,941 21,791 17,828
-------- -------- -------- --------
Gross margin 37,334 33,306 73,947 65,338
Operating expenses:
Selling, general and administrative 7,980 6,290 14,434 11,924
Research and development 4,574 4,619 9,291 9,307
Amortization of intangible assets 492 306 984 611
-------- -------- -------- --------
Total operating expenses 13,046 11,215 24,709 21,842
-------- -------- -------- --------
Operating income 24,288 22,091 49,238 43,496
Other expense (income):
Interest expense 238 178 461 423
Interest income (1,130) (1,189) (2,104) (2,242)
Other non-operating
expense (income), net 281 416 492 882
-------- -------- -------- --------
Total other expense (income) (611) (595) (1,151) (937)
-------- -------- -------- --------
Earnings before income taxes 24,899 22,686 50,389 44,433
Income taxes 8,385 7,752 16,874 15,307
-------- -------- -------- --------
Net earnings $ 16,514 $ 14,934 $ 33,515 $ 29,126
======== ======== ======== ========
Earnings per share:
Basic $ 0.42 $ 0.36 $ 0.86 $ 0.71
Diluted $ 0.42 $ 0.36 $ 0.84 $ 0.70
Weighted average common
shares outstanding:
Basic 38,877 41,279 38,815 41,224
Diluted 39,761 41,681 39,730 41,678
TECHNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
12/31/05 6/30/05
-------- --------
Cash and equivalents $ 68,728 $ 80,344
Short-term available-for-sale investments 24,532 16,790
Trade accounts receivable 21,020 22,041
Other receivables 588 1,681
Inventory 9,950 7,758
Other current assets 6,352 6,367
-------- --------
Current assets 131,170 134,981
Available-for-sale investments 44,152 41,871
Property and equipment, net 88,265 89,036
Goodwill and intangible assets, net 33,013 14,138
Other non-current assets 13,513 15,237
-------- --------
Total assets $310,113 $295,263
======== ========
LIABILITIES
Current liabilities $ 13,815 $ 14,016
Long-term debt 12,797 13,378
Stockholders' equity 283,501 267,869
-------- --------
Total liabilities and equity $310,113 $295,263
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