SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2005, or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to___________
__________________
Commission file number 0-17272
__________________
TECHNE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1427402
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
614 MCKINLEY PLACE N.E. (612) 379-8854
MINNEAPOLIS, MN 55413 (Registrant's telephone number,
(Address of principal including area code)
executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes (X) No ( )
Indicate by check mark whether the Registrant is a shell company (as defined
in Exchange Act Rule 12b-2). ( ) Yes (X) No
At February 3, 2006, 39,329,426 shares of the Company's Common Stock (par
value $.01) were outstanding.
TECHNE CORPORATION
FORM 10-Q
DECEMBER 31, 2005
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Consolidated Balance Sheets as of December 31, 2005
and June 30, 2005 3
Consolidated Statements of Earnings for the Quarter
and Six Months Ended December 31, 2005 and 2004 4
Consolidated Statements of Cash Flows for the Six
Months Ended December 31, 2005 and 2004 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 18
ITEM 4. CONTROLS AND PROCEDURES 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS 20
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS 20
SIGNATURES 20
2
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TECHNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
12/31/05 6/30/05
-------- --------
ASSETS
Cash and cash equivalents $ 68,728 $ 80,344
Short-term available-for-sale investments 24,532 16,790
Trade accounts receivable, net 21,020 22,041
Other receivables 588 1,681
Inventories 9,950 7,758
Deferred income taxes 5,580 5,467
Prepaid expenses 772 900
-------- --------
Total current assets 131,170 134,981
Available-for-sale investments 44,152 41,871
Property and equipment, net 88,265 89,036
Goodwill, net 25,316 12,540
Intangible assets, net 7,697 1,598
Deferred income taxes 5,146 6,524
Investments 7,877 8,096
Other long-term assets 490 617
-------- --------
$310,113 $295,263
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $ 3,696 $ 2,715
Salaries, wages and related accruals 3,498 4,895
Other accounts payable and accrued expenses 2,278 1,360
Income taxes payable 3,122 3,808
Current portion of long-term debt 1,221 1,238
-------- --------
Total current liabilities 13,815 14,016
-------- --------
Long-term debt, less current portion 12,797 13,378
-------- --------
Total liabilities 26,612 27,394
-------- --------
Commitments and contingencies
Common stock, par value $.01 per share;
authorized 100,000,000; issued and outstanding
38,883,986 and 38,636,658, respectively 389 386
Additional paid-in capital 89,438 78,804
Retained earnings 192,583 185,049
Accumulated other comprehensive income 1,091 3,630
-------- --------
Total stockholders' equity 283,501 267,869
-------- --------
$310,113 $295,263
======== ========
See notes to consolidated financial statements (unaudited).
3
TECHNE CORPORATION AND SUBSIDIARIES
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, net 281 416 492 882
-------- -------- -------- --------
Total other 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
See notes to consolidated financial statements (unaudited).
4
TECHNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
SIX MONTHS ENDED
-------------------
12/31/05 12/31/04
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 33,515 $ 29,126
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 3,450 3,044
Deferred income taxes (915) 218
Stock-based compensation expense 1,376 --
Losses by equity method investee 164 147
Other 126 77
Change in operating assets and operating
liabilities, net of acquisitions:
Trade accounts and other receivables 1,524 1,831
Inventories 77 (547)
Prepaid expenses 129 (7)
Trade, other accounts payable and
accrued expenses 365 583
Salaries, wages and related accruals (70) 53
Income taxes payable (576) (751)
-------- --------
Net cash provided by operating activities 39,165 33,774
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,628) (1,001)
Purchase of available-for-sale investments (26,910) (93,840)
Proceeds from sales of available-for-sale
investments 12,100 51,805
Proceeds from maturities of available-for-sale
investments 6,080 23,231
Acquisitions, net of cash acquired (19,587) --
-------- --------
Net cash used in investing activities (29,945) (19,805)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 7,520 2,501
Tax benefit from stock option exercises 1,741 131
Purchase of common stock for stock bonus plans (1,292) (260)
Repurchase of common stock (25,981) --
Payments on long-term debt (598) (628)
-------- --------
Net cash (used in) provided by
financing activities (18,610) 1,744
-------- --------
Effect of exchange rate changes on cash (2,226) 2,712
-------- --------
Net (decrease) increase in cash and cash equivalents (11,616) 18,425
Cash and cash equivalents at beginning of period 80,344 51,201
-------- --------
Cash and cash equivalents at end of period $ 68,728 $ 69,626
======== ========
See notes to consolidated financial statements (unaudited).
5
TECHNE CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
A. BASIS OF PRESENTATION:
The unaudited consolidated financial statements of Techne Corporation and
Subsidiaries (the Company) have been prepared in accordance with accounting
principles generally accepted in the United States of America and with
instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying
unaudited consolidated financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair presentation of the
results for the interim periods presented. All such adjustments are of a
normal recurring nature.
A summary of significant accounting policies followed by the Company is
detailed in the Company's Annual Report on Form 10-K for fiscal 2005. The
Company follows these policies in preparation of the interim unaudited
consolidated financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted. These unaudited consolidated financial
statements should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto for the fiscal year ended June 30,
2005 included in the Company's Annual Report to Shareholders for fiscal 2005.
Effective July 1, 2005, the Company, through its R&D Systems subsidiary,
acquired Fortron Bio Science, Inc., a developer and manufacturer of
monoclonal and polyclonal antibodies, antigens and other biological reagents
located in Morrisville, North Carolina. R&D Systems simultaneously acquired
BiosPacific, Inc., a worldwide supplier of biologics to manufacturers of in
vitro diagnostic systems (IVDs) and immunodiagnostic kits, located in
Emeryville, California. BiosPacific is the primary distributor of Fortron
products. Fortron and BiosPacific had shared a unique strategic relationship
since 1992 that combined Fortron's development and manufacturing excellence
with BiosPacific's marketing and sales expertise. Fortron and BiosPacific
generated combined revenues of approximately $8.7 million in calendar 2004.
The acquisitions will enhance R&D Systems' ability to serve the diagnostics
industry. All of the shares of privately-held Fortron and substantially all
of the assets of privately-held BiosPacific were acquired for an aggregate
$20.0 million in cash. R&D Systems also assumed certain liabilities of
BiosPacific, and incurred transaction expenses. The acquisition was accounted
for under the purchase method. The fair value of tangible assets acquired,
net of liabilities assumed, was approximately $141,000. The Company
allocated approximately $12.8 million of the purchase price to goodwill and
$7.1 million to other intangible assets.
Recent Accounting Pronouncements:
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards No. 123 (Revised 2004) (SFAS No. 123R),
Share-Based Payment. SFAS No. 123R is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation and supersedes Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees and its
related implementation guidance. The Statement focuses primarily on
accounting for transactions in which an entity obtains employee services
through stock-based payment transactions. The Company adopted the standard as
of July 1, 2005 (see Note D).
6
In November 2004, the FASB issued SFAS No. 151, Inventory Costs. The
Statement amends Accounting Research Bulletin No. 43 to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and spoilage. The Statement also requires the allocation of fixed
production overheads to inventory be based on normal production capacity.
The Company adopted the standard as of July 1, 2005. The adoption did not
have an impact on the Company's consolidated financial statements.
In December 2004, the FASB issued Staff Position No. 109-1, Application of
FASB Statement No. 109 (SFAS 109), Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004 (FSP 109-1). FSP 109-1 clarifies that the manufacturer's
deduction provided for under the American Jobs Creation Act of 2004 (AJCA)
should be accounted for as a special deduction in accordance with SFAS 109
and not as a tax rate reduction. The Company accounted for the manufacturer's
deduction for the quarter and six months ended December 31, 2005 as provided
for in FSP 109-1. The deduction reduced income tax expense approximately
$195,000 and $395,000 for the quarter and six months ended December 31, 2005,
respectively.
The FASB also issued Staff Position No. 109-2, Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American
Jobs Creation Act of 2004 (FSP 109-2). The AJCA introduces a special one-time
dividends received deduction on the repatriation of certain foreign earnings
to a U.S. taxpayer provided certain criteria are met. The Company
periodically evaluates the possibility of repatriating foreign earnings. At
the present time, deferred taxes have not been recorded on undistributed
earnings of foreign subsidiaries as the amounts are considered permanently
invested. If the Company decides to repatriate foreign earnings, a one-time
charge may be recorded for the deferred taxes.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections. The Statement replaces APB Opinion No. 20, Accounting Changes
and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements.
SFAS No. 154 requires companies to apply voluntary changes in accounting
principles retrospectively whenever practicable. The requirements are
effective for the Company beginning in fiscal 2007. Adoption of the Statement
is not expected to have a significant impact on the Company's consolidated
financial statements.
Reclassifications:
Certain reclassifications have been made to the prior year consolidated
financials statements to conform to the current year presentation. These
reclassifications had no impact on net earnings or stockholders' equity as
previously reported.
Certain consolidated balance sheet captions appearing in this interim report
are as follows (in thousands):
12/31/05 6/30/05
-------- --------
TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable $ 21,136 $ 22,159
Less allowance for doubtful accounts 116 118
-------- --------
NET TRADE ACCOUNTS RECEIVABLE $ 21,020 $ 22,041
======== ========
INVENTORIES
Raw materials $ 3,249 $ 3,127
Supplies 114 135
Finished goods 6,587 4,496
-------- --------
TOTAL INVENTORIES $ 9,950 $ 7,758
======== ========
7
12/31/05 6/30/05
-------- --------
PROPERTY AND EQUIPMENT
Land $ 4,214 $ 4,214
Buildings and improvements 88,455 87,232
Building construction in progress 8,532 9,195
Laboratory equipment 18,854 17,926
Office equipment 3,626 3,545
Leasehold improvements 750 711
-------- --------
124,431 122,823
Less accumulated depreciation and amortization 36,166 33,787
-------- --------
NET PROPERTY AND EQUIPMENT $ 88,265 $ 89,036
======== ========
GOODWILL $ 51,622 $ 38,846
Less accumulated amortization 26,306 26,306
-------- --------
NET GOODWILL $ 25,316 $ 12,540
======== ========
INTANGIBLE ASSETS
Customer relationships $ 23,683 $ 18,010
Technology licensing agreements 730 730
Trade names and trademarks 1,396 --
Supplier relationships 14 --
-------- --------
25,823 18,740
Less accumulated amortization 18,126 17,142
-------- --------
NET INTANGIBLE ASSETS $ 7,697 $ 1,598
======== ========
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustments $ 1,613 $ 3,983
Unrealized losses on available-for-sale investments (522) (353)
-------- --------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME $ 1,091 $ 3,630
======== ========
B. EARNINGS PER SHARE:
Shares used in the earnings per share computations are as follows (in
thousands):
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Weighted average common shares
outstanding-basic 38,877 41,279 38,815 41,224
Dilutive effect of forward contract
(see Note E) 474 -- 497 --
Dilutive effect of stock options
and warrants 410 402 418 454
-------- -------- -------- --------
Weighted average common shares
outstanding-diluted 39,761 41,681 39,730 41,678
======== ======== ======== ========
The dilutive effect of stock options and warrants in the above table excludes
all options for which the exercise price was higher than the average market
price for the period. The number of potentially dilutive option shares
excluded from the calculation was 1,000 and 6,000 for the quarter and six
months ended December 31, 2005, respectively, and 74,000 and 80,000,
respectively, for the same prior-year periods.
8
C. SEGMENT INFORMATION:
The Company has three reportable operating segments based on the nature of
products and geographic location: biotechnology, R&D Systems Europe and
hematology. The biotechnology segment consists of R&D Systems' Biotechnology
Division, Fortron Bio Science, Inc. and BiosPacific, Inc., which develop,
manufacture and sell biotechnology research and diagnostic products world-
wide. R&D Systems Europe distributes Biotechnology Division products
throughout Europe. The hematology segment develops and manufactures
hematology controls and calibrators for sale world-wide.
Following is financial information relating to the Company's operating
segments (in thousands):
QUARTER ENDED SIX MONTHS ENDED
----------------- -----------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
External sales
Biotechnology $ 31,142 $ 24,868 $ 63,442 $ 50,755
R&D Systems Europe 13,106 12,864 24,981 23,883
Hematology 3,781 4,515 7,315 8,528
-------- -------- -------- --------
Total external sales 48,029 42,247 95,738 83,166
Intersegment sales - Biotechnology 6,555 5,204 11,854 10,008
-------- -------- -------- --------
Total sales 54,584 47,451 107,592 93,174
Less intersegment sales (6,555) (5,204) (11,854) (10,008)
-------- -------- -------- --------
Total consolidated net sales $ 48,029 $ 42,247 $ 95,738 $ 83,166
======== ======== ======== ========
Earnings before income taxes
Biotechnology $ 20,418 $ 16,421 $ 41,176 $ 33,589
R&D Systems Europe 5,019 5,331 9,819 9,729
Hematology 1,103 1,804 2,000 3,056
Corporate and other (1,641) (870) (2,606) (1,941)
-------- -------- -------- --------
Total earnings before income taxes $ 24,899 $ 22,686 $ 50,389 $ 44,433
======== ======== ======== ========
D. STOCK OPTIONS:
As permitted through June 30, 2005 by SFAS No. 123, the Company elected to
continue following the guidance of APB Opinion No. 25 for measurement and
recognition of stock-based transactions with employees. Through June 30,
2005, no compensation cost had been recognized for stock options granted to
employees under the plans because the exercise price of all options granted
was at least equal to the fair value of the common stock at the date of
grant. In December 2004, the FASB issued SFAS No. 123R which is a revision of
SFAS No. 123 and supersedes APB Opinion No. 25 and its related implementation
guidance. The Statement focuses primarily on accounting for transactions in
which an entity obtains employee services through stock-based payment
transactions. SFAS No. 123R requires a public entity to measure the cost of
employee services received in exchange for the award of equity instruments
based on the fair value of the award at the date of grant. The cost will be
recognized over the period during which an employee is required to provide
services in exchange for the award.
The Company adopted SFAS No. 123R as of July 1, 2005 using the modified
prospective transition method. Under that transition method, compensation
cost recognized in the first six months of fiscal 2006 includes: (1)
compensation cost for all stock-based payments granted prior to, but not yet
vested as of June 30, 2005, based on the grant date fair value calculated in
accordance with the original provisions of SFAS No. 123, and (2) compensation
cost for all stock-based payments granted subsequent to June 30, 2005, based
on the grant-date fair value calculated in accordance with the provisions of
SFAS No. 123R. Results for prior periods have not been restated.
9
As a result of adopting SFAS No. 123R, the Company's earnings before income
taxes for the quarter and six months ended December 31, 2005 were $1.1
million and $1.4 million, respectively, less than if it had continued to
account for stock-based compensation under APB Opinion No. 25. Net earnings
for the quarter and six months ended December 31, 2005 were $737,000 and
$949,000, respectively, less than would have been reported under APB Opinion
No. 25. The adoption of SFAS No. 123R had a $0.02 negative impact on basic
and diluted earnings per share for the quarter ended December 31, 2005 and a
$0.03 negative impact on basic and diluted earnings per share for the six
months ended December 31, 2005. Estimated total compensation expense of
approximately $1.7 million or $.04 per diluted shares is anticipated for
fiscal 2006 of which approximately $300,000 remains to be expensed in the
last six months of the fiscal year. Stock option exercises are satisfied
through the issuance of new shares.
If compensation cost for employee options granted under the Company's stock
option plans had been determined based on the fair value at the grant dates,
consistent with the methods provided in SFAS No. 123 for periods prior to the
adoption of SFAS No. 123R, the Company's net earnings and earnings per share
would have been as follows (in thousands, except per share data):
SIX
QUARTER MONTHS
ENDED ENDED
12/31/04 12/31/04
-------- --------
Net earnings:
As reported $ 14,934 $ 29,126
Plus employee stock-based compensation
expense included in net earnings -- --
Less employee stock-based compensation,
net of tax effect 694 1,198
-------- --------
Pro forma $ 14,240 $ 27,928
======== ========
Basic earnings per share:
As reported $ 0.36 $ 0.71
Plus employee stock-based compensation
expense included in net earnings -- --
Less employee stock-based compensation,
net of tax effect 0.02 0.03
-------- --------
Pro forma $ 0.34 $ 0.68
======== ========
Diluted earnings per share:
As reported $ 0.36 $ 0.70
Plus employee stock-based compensation
expense included in net earnings -- --
Less employee stock-based compensation,
net of tax effect 0.02 0.03
-------- --------
Pro forma $ 0.34 $ 0.67
======== ========
The fair value of options granted under the Company's stock option plans were
estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions used:
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Dividend yield -- -- -- --
Expected annualized volatility 50% 52% 37%-53% 52%-56%
Risk free interest rates 4.3%-4.4% 3.7%-3.9% 4.0%-4.4% 3.2%-3.9%
Expected lives 7 years 7 years 6 years 6 years
Weighted average fair value
of options granted $30.35 $21.48 $30.03 $21.41
As of December 31, 2005, there was $523,000 of total unrecognized
compensation cost related to nonvested stock options of which approximately
$300,000 will be expensed in the second half of fiscal 2006. The remainder
will be expensed in fiscal 2007 and the first half of fiscal 2008.
10
E. STOCK REPURCHASE:
In March 2005, the Company repurchased approximately 2.9 million shares of
its common stock under an accelerated stock buyback ("ASB") transaction 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 purchased the replacement shares in the open
market over a nine-month period beginning in March 2005. The ASB agreement
was subject to a market price adjustment provision based upon the volume
weighted average price during the nine-month period. Approximately 1.8
million of the shares repurchased were subject to a collar, which effectively
set a minimum and maximum price the Company was obligated to pay for such
shares. The collar was established in exchange for an up-front payment of
$3.5 million. The Company had the option to settle the ASB agreement in cash
or shares of the Company's common stock and, accordingly the contract was
classified as equity. The ASB agreement was settled in December 2005 for a
cash payment of $26.0 million, which resulted in a total price paid per share
of approximately $44.67.
The positive effect of the reduction in outstanding shares on earnings per
diluted share was $0.03 and $0.05 for the quarter and six months ended
December 31, 2005, respectively.
F. COMPREHENSIVE INCOME:
Comprehensive income and the components of other comprehensive income (loss)
were as follows (in thousands):
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Net earnings $ 16,514 $ 14,934 $ 33,515 $ 29,126
Other comprehensive gain
(loss), net of tax effect:
Foreign currency translation
Adjustments (1,481) 3,018 (2,370) 2,950
Unrealized gain (loss) on
available-for-sale investments (93) (301) (169) (126)
-------- -------- -------- --------
Comprehensive income $ 14,940 $ 17,651 $ 30,976 $ 31,950
======== ======== ======== ========
11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Quarter and Six Months
Ended December 31, 2005 and the Quarter and
Six Months Ended December 31, 2004
Overview
TECHNE Corporation (the Company) has two operating subsidiaries: Research and
Diagnostic Systems, Inc. (R&D Systems) and R&D Systems Europe Ltd. (R&D
Europe). R&D Systems, located in Minneapolis, Minnesota, has two divisions:
its Biotechnology Division and its Hematology Division. The Biotechnology
Division develops and manufactures purified cytokines (proteins), antibodies
and assay kits which are sold to biomedical researchers and clinical research
laboratories. The Hematology Division develops and manufactures whole blood
hematology controls and calibrators which are sold to hospitals and clinical
laboratories to check the performance of hematology instruments to assure the
accuracy of hematology test results. R&D Systems acquired two subsidiaries
effective July 1, 2005, Fortron Bio Science, Inc., (Fortron) a developer and
manufacturer of monoclonal and polyclonal antibodies, antigens and other
biological reagents, located in Morrisville, North Carolina and BiosPacific,
Inc., (BiosPacific) a worldwide supplier of biologics to manufacturers of in
vitro diagnostic systems (IVDs) and immunodiagnostic kits, located in
Emeryville, California. The operations of Fortron were transferred to the
Company's Minneapolis facility during the quarter ended September 30, 2005.
R&D Europe, located in Abingdon, England, is the European distributor of R&D
Systems' biotechnology products. R&D Europe has a sales subsidiary, R&D
Systems GmbH, in Germany and a sales office in France.
Overall Results
Consolidated net earnings increased 10.6% and 15.1% for the quarter and six
months ended December 31, 2005, respectively, compared to the quarter and six
months ended December 31, 2004. The primary reason for the increase was
increased net sales. Consolidated net sales for the quarter and six months
ended December 31, 2005, increased 13.7% and 15.1%, respectively, from the
same periods in the prior year. The acquisitions of Fortron and BiosPacific
on July 1, 2005 increased sales approximately $2.2 million and $4.8 million
for the quarter and six months ended December 31, 2005. The acquisitions impact
on net earnings was $100,000 and $283,000 for the quarter and six months ended
December 31, 2005, respectively. The unfavorable impact on consolidated net
sales of the change in exchange rates used to convert R&D Europe results from
British pounds to U.S. dollars was $1.1 million and $1.4 million for the quarter
and six months ended December 31, 2005, respectively. The unfavorable impact on
consolidated net earnings of the change in exchange rates was $285,000 and
$353,000 for the quarter and six months ended December 31, 2005,
respectively. The Company generated cash of $39.2 million from operating
activities in the first six months of fiscal 2006 and cash, cash equivalents
and available-for-sale investments were $137.4 million at December 31, 2005
compared to $139.0 million at June 30, 2005.
Net Sales
Consolidated net sales for the quarter ended December 31, 2005 were $48.0
million, an increase of $5.8 million (13.7%) from the quarter ended December
31, 2004. Consolidated net sales for the six months ended December 31, 2005
were $95.7 million, an increase of $12.6 million (15.1%) from the prior-year
period. Included in consolidated net sales for the quarter and six months
ended December 31, 2005 were $2.2 million and $4.8 million, respectively,
from Fortron and BiosPacific, which were acquired effective July 1, 2005.
12
R&D Systems' Biotechnology Division net sales increased $4.1 million (16.5%)
and $7.9 million (15.6%), respectively, for the quarter and six months ended
December 31, 2005. The Biotechnology Division sales increase for the quarter
and six months was mainly the result of $3.7 million and $6.3 million
increased U.S. retail sales volume. Sales for the quarter and six months to
pharmaceutical/biotechnology customers and academic customers, the two
largest segments of the U.S. market, showed the greatest revenue growth over
the prior year.
R&D Europe net sales increased $241,000 (1.9%) and $1.1 million (4.6%) for
the quarter and six months ended December 31, 2005, respectively. The effect
of changes in foreign currency exchange rates used to convert British pounds
to U.S. dollars reduced R&D Europe net sales approximately $1.1 million and
$1.4 million for the quarter and six months ended December 31, 2005. In
British pounds, R&D Europe net sales increased 10.6% and 10.3% for the
quarter and six months ended December 31, 2005, respectively.
R&D Systems' Hematology Division net sales decreased $734,000 (16.3%) and
$1.2 million (14.2%) for the quarter and six months ended December 31, 2005,
respectively. During the second quarter of fiscal 2005, a large OEM customer
notified the Hematology Division that they were changing to a new primary
vendor for certain controls and calibrators. Sales to this customer in the
quarter and six months ended December 31, 2005 decreased $843,000 and $1.4
million, respectively, from the same prior-year periods.
Cost of Sales
The manufacturing process for proteins and antibodies has and may continue to
produce quantities in excess of forecasted usage. The Company values its
manufactured protein and antibody inventory based on a two-year forecast.
Protein and antibody quantities in excess of the two-year usage forecast are
considered impaired and not included in the inventory value. The value of
protein and antibody inventory does not change significantly from quarter to
quarter. Protein and antibody production is generally for high-volume
products or for new products with limited initial sales. The Company
capitalizes protein and antibody costs each period in inventory, however
given the insignificant changes in these inventory balances each quarter,
substantially all manufacturing costs for proteins and antibodies, consisting
largely of wages, benefits, facility and equipment costs, are expensed each
quarter. A change in inventory value as a result of changes in the two-year
forecast is reflected in cost of sales in the period of change.
Manufacturing costs and changes in inventory value for proteins and
antibodies charged to cost of sales were $1.6 million for each of the
quarters ended December 31, 2005 and 2004 and $3.3 million for each of the
six-month periods ended December 31, 2005 and 2004.
Gross Margins
Gross margins, as a percentage of net sales, were as follows:
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Biotechnology 78.4% 79.8% 77.9% 80.0%
R&D Systems Europe 50.0% 54.0% 50.4% 53.0%
Hematology 43.6% 52.1% 42.1% 48.6%
Consolidated gross margin 77.7% 78.8% 77.2% 78.6%
13
Consolidated gross margins for the quarter and six months ended December 31,
2005 were lower than the prior-year periods mainly as a result of Fortron and
BiosPacific gross margins. The inclusion of Fortron and BiosPacific results
negatively impacted consolidated gross margins for the quarter and six months
ended December 31, 2005 by 2.1% and 2.3%, respectively. Biotechnology
Division gross margins were 81.1% compared to 79.8% for the quarter ended
December 31, 2004 and 80.8% compared to 80.0% for the six months ended
December 31, 2004. Higher gross margins by the Biotechnology Division for
the quarter and six months offset lower gross margins by R&D Europe as a
result of less favorable exchange rates and lower gross margins by the
Hematology Division as a result of lower incremental sales to offset fixed
costs. Gross margins for Fortron and BiosPacific for the quarter and six
months ended December 31, 2005 were 34.5% and 35.1%, respectively. Fortron
and BiosPacific gross margins were negatively affected by purchase accounting
related to inventory acquired. Under purchase accounting, inventory acquired
is valued at fair market value less expected selling and marketing costs. As
of the date of acquisition, the value of the acquired inventory was increased
$2.1 million. Included in Fortron and BiosPacific cost of sales for the
quarter and six months was approximately $281,000 and $856,000 related to the
write up of acquired inventory, representing a 12.9% and 18.0% reduction in
Fortron and BiosPacific gross margins for the quarter and six months,
respectively. The remaining inventory valuation adjustment of $1.3 million is
expected to be expensed as the acquired inventory is sold over approximately
the next 12 months.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the quarter and six months
ended December 31, 2005, increased $1.7 million (26.9%) and $2.5 million
(21.0%), respectively, from the same periods of last year. Selling, general
and administrative expenses are composed of the following (in thousands):
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Biotechnology $ 4,194 $ 3,415 $ 7,833 $ 6,388
R&D Europe 2,059 2,194 3,841 3,916
Hematology 424 436 808 845
Corporate 1,303 245 1,952 775
-------- -------- -------- --------
Total selling, general and
administrative expenses $ 7,980 $ 6,290 $ 14,434 $ 11,924
======== ======== ======== ========
Biotechnology selling, general and administrative expenses increased $779,000
(22.8%) and $1.4 million (22.6%) for the quarter and six months ended
December 31, 2005, respectively. Included in these amount were $308,000 and
$674,000 for the quarter and six months ended December 31, 2005,
respectively, of Fortron and BiosPacific selling, general and administrative
expenses. The remainder of the increase in Biotechnology expenses was
primarily the result of increased profit sharing accrual (increases of
$93,000 and $239,000 for the quarter and six months, respectively) and
increased advertising and promotion expenditures (increases of $62,000 and
$119,000, respectively).
Included in Corporate selling, general and administrative expenses for the
quarter and six months ended December 31, 2005 was $1.1 million and $1.4
million, respectively, of employee stock-based compensation expense.
Research and Development Expenses
Research and development expenses are composed of the following (in
thousands):
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Biotechnology $ 4,404 $ 4,430 $ 8,936 $ 8,930
Hematology 170 189 355 377
-------- -------- -------- --------
Total research and
development expenses $ 4,574 $ 4,619 $ 9,291 $ 9,307
======== ======== ======== ========
14
Amortization of Intangible Assets
The Company allocated approximately $12.8 million to goodwill and $7.1
million to other intangible assets arising from the acquisitions of Fortron
and BiosPacific. The other intangible assets, mainly trade names and customer
and supplier relationships, are being amortized over lives of one to eight
years and amortization expense of $271,000 and $543,000 was recorded for the
quarter and six months ended December 31, 2005, respectively, related to
these assets.
Other Non-operating Expense and Income
Other non-operating expense and income consists mainly of foreign currency
transaction losses, rental income, building expenses related to properties
not used in operations, and the Company's share of losses by Hemerus Medical,
LLC (Hemerus). The Company has a 10% equity interest in Hemerus and accounts
for its investment using the equity method of accounting as Hemerus is a
limited liability corporation.
QUARTER ENDED SIX MONTHS ENDED
------------------- -------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------- -------- -------- --------
Foreign currency losses (gains) $ 46 $ (82) $ 74 $ (35)
Rental income (337) (53) (679) (72)
Real estate taxes, depreciation
and utilities 490 478 933 842
Hemerus Medical, LLC losses 82 73 164 147
-------- -------- -------- --------
Total other non-operating
expense (income) $ 281 $ 416 $ 492 $ 882
======== ======== ======== ========
The Company's net investment in Hemerus at December 31, 2005 was $2.5
million. The Company has financial exposure to the losses of Hemerus to the
extent of its net investment in the company. Hemerus' success is dependent,
in part, upon its ability to raise financing and to receiving Federal Drug
Administration (FDA) clearance to market its products. If such financing or
FDA clearance is not received, the Company would potentially recognize an
impairment loss to the extent of its remaining net investment. The Company
is considering an additional investment of up to $1.5 million in Hemerus
within the next several months.
Income Taxes
Income taxes for the quarter and six months ended December 31, 2005 were
provided at rates of approximately 33.7% and 33.5%, respectively, of
consolidated earnings before income taxes compared to 34.2% and 34.4% for the
quarter and six months ended December 31, 2004, respectively. U.S. federal
taxes have been reduced by the credit for research and development
expenditures, the benefit for extraterritorial income and, for the quarter
and six months ended December 31, 2005, the manufacturer's deduction provided
for under the American Jobs Creation Act of 2004. Foreign income taxes have
been provided at rates which approximate the tax rates in the countries in
which R&D Europe operates. Without significant business developments, the
Company expects income tax rates for the remainder of fiscal 2006 to range
from 33% to 34%.
Liquidity and Capital Resources
At December 31, 2005, cash and cash equivalents and available-for-sale
investments were $137.4 million compared to $139.0 million at June 30, 2005.
The Company believes it can meet its future cash, working capital and capital
addition requirements through currently available funds, cash generated from
operations and maturities of available-for-sale investments. The Company has
an unsecured line of credit of $750,000. The interest rate on the line of
credit is at prime. There were no borrowings on the line in the prior or
current fiscal year.
15
Cash Flows From Operating Activities
The Company generated cash of $39.2 million from operating activities in the
first six months of fiscal 2006 compared to $33.8 million in the first six
months of fiscal 2005. The increase from the prior year was mainly the
result of increased net earnings in the current year adjusted for the non-
cash $1.4 million stock-based compensation expense for the six months ended
December 31, 2005.
Cash Flows From Investing Activities
Capital expenditures for fixed assets for the first six months of fiscal 2006
and 2005 were $1.6 million and $1.0 million, respectively. The majority of
capital additions in the first six months of fiscal 2006 and 2005 were for
laboratory and computer equipment. Remaining expenditures in fiscal 2006 for
laboratory and computer equipment are expected to be approximately $1.5
million. The Company also plans an estimated $7.5 million build-out of
laboratory space at its Minneapolis facility. These expenditures are
expected to be financed through currently available funds and cash generated
from operating activities.
During the six months ended December 31, 2005, the Company purchased $26.9
million and had sales or maturities of $18.2 million of available-for-sale
investments. During the six months ended December 31, 2004, the Company
purchased $93.8 million and had sales or maturities of $75.0 million of
available-for-sale investment. The Company's investment policy is to place
excess cash in bonds and other investments with maturities of less than three
years. The objective of this policy is to obtain the highest possible return
with minimal risk, while keeping the funds accessible.
As described previously, the Company acquired Fortron and BiosPacific
effective July 1, 2005 for an aggregate purchase price of $20 million. Cash
acquired in the transactions was $413,000. The net acquisition cost of $19.6
million was financed through cash and equivalents on hand at July 1, 2005.
The Company currently owns a 19.9% equity interest in ChemoCentryx, Inc.,
(CCX) a technology and drug development company, and accounts for its
investment under the cost method of accounting. As a development stage
company, CCX, is dependent on its ability to raise additional funds to
continue research and development efforts. If such funding were unavailable
or inadequate, the Company would potentially recognize an impairment loss to
the extent of its remaining net investment. At December 31, 2005, the
Company's net investment in CCX was $5.1 million. CCX plans to raise
additional financing during calendar 2006 and the Company may participate in
the financing in order to retain its current ownership percentage.
Cash Flows From Financing Activities
Cash of $7.5 million and $1.1 million was received during the six months
ended December 31, 2005 and 2004, respectively, for the exercise of stock
options for 247,000 and 39,000 shares of common stock. Cash of $1.4 million
was received during the six months ended December 31, 2004 for the exercise
of warrants to purchase 120,000 shares of common stock. The Company also
recognized a tax benefit from stock options exercised of $1.7 million and
$131,000 for the six months ended December 31, 2005 and 2004, respectively.
During the first six months of fiscal 2005, options for 6,120 shares of
common stock were exercised by the surrender of 1,190 shares of the Company's
common stock with a fair market value of $45,000.
In the first six months of fiscal 2006 and 2005, the Company purchased 22,541
shares and 6,410 shares of common stock, respectively, for its employee Stock
Bonus Plans at a cost of $1.3 million and $260,000, respectively.
16
In March 2005, the Company repurchased approximately 2.9 million shares of
its common stock under an accelerated stock buyback ("ASB") transaction for
an initial value of approximately $100 million ($34.45 per share). The ASB
agreement was subject to a market price adjustment provision based upon the
volume weighted average price during the nine-month period ending in December
2005. In December 2005, the Company settled the ASB agreement with a payment
of $26.0 million using cash and equivalents on hand as of the settlement
date.
The Company has never paid cash dividends and has no plans to do so in fiscal
2006.
Critical Accounting Policies
The Company's significant accounting policies are discussed in the Company's
Annual Report on Form 10-K for fiscal 2005. There have been no changes to
these policies in fiscal 2006. The application of certain of these policies
require judgments and estimates that can affect the results of operations and
financial position of the Company. Judgements and estimates are used for,
but not limited to, accounting for the allowance for doubtful accounts,
inventory valuation and allowances, impairment of goodwill, intangibles and
other long-lived assets, accounting for investments and income taxes.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards No. 123 (Revised 2004) (SFAS No. 123R),
Share-Based Payment. SFAS No. 123R is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation and supersedes Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees and its
related implementation guidance. The Statement focuses primarily on
accounting for transactions in which an entity obtains employee services
through stock-based payment transactions. The Company adopted the standard as
of July 1, 2005 (see Note D).
In November 2004, the FASB issued SFAS No. 151, Inventory Costs. The
Statement amends Accounting Research Bulletin No. 43 to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and spoilage. The Statement also requires the allocation of fixed
production overheads to inventory be based on normal production capacity.
The Company adopted the standard as of July 1, 2005. The adoption did not
have an impact on the Company's consolidated financial statements.
In December 2004, the FASB issued Staff Position No. 109-1, Application of
FASB Statement No. 109 (SFAS 109), Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004 (FSP 109-1). FSP 109-1 clarifies that the manufacturer's
deduction provided for under the American Jobs Creation Act of 2004 (AJCA)
should be accounted for as a special deduction in accordance with SFAS 109
and not as a tax rate reduction. The Company accounted for the manufacturer's
deduction for the quarter and six months ended December 31, 2005 as provided
for in FSP 109-1. The deduction reduced income tax expense approximately
$195,000 and $395,000 for the quarter and six months ended December 31, 2005,
respectively.
The FASB also issued Staff Position No. 109-2, Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American
Jobs Creation Act of 2004 (FSP 109-2). The AJCA introduces a special one-time
dividends received deduction on the repatriation of certain foreign earnings
to a U.S. taxpayer provided certain criteria are met. The Company
periodically evaluates the possibility of repatriating foreign earnings. At
the present time, deferred taxes have not been recorded on undistributed
earnings of foreign subsidiaries as the amounts are considered permanently
invested. If the Company decides to repatriate foreign earnings, a one-time
charge may be recorded for the deferred taxes.
17
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections. The Statement replaces APB Opinion No. 20, Accounting Changes
and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements.
SFAS No. 154 requires companies to apply voluntary changes in accounting
principles retrospectively whenever practicable. The requirements are
effective for the Company beginning in fiscal 2007. Adoption of the Statement
is not expected to have a significant impact on the Company's consolidated
financial statements.
Forward Looking Information and Cautionary Statements
This filing contains forward-looking statements within the meaning of the
Private Litigation Reform Act. These statements, including the Company's
expectations as to the estimated compensation expense resulting from stock
option expensing, the expected effective tax rate, expected capital
expenditures, the margin impact of the recent acquisitions and the potential
additional investments in Hemerus and ChemoCentryx, 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 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 (private label) and proficiency survey business, the impact
of currency exchange rate fluctuations, 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, and
the success of financing efforts by companies in which the Company has
invested. For additional information concerning such factors, see the
Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 2005, the Company had a professionally managed investment
portfolio of fixed income securities, excluding those classified as cash and
cash equivalents, of $68.7 million. These securities, like all fixed income
instruments, are subject to interest rate risk and will decline in value if
market interest rates increase.
The Company operates internationally, and thus is subject to potentially
adverse movements in foreign currency rate changes. The Company is exposed to
market risk from foreign exchange rate fluctuations of the euro and the
British pound to the U.S. dollar as the financial position and operating
results of the Company's U.K. subsidiary and European operations are
translated into U.S. dollars for consolidation. At the current level of R&D
Europe operating results, a 10% increase or decrease in the average exchange
rate used to translate operating results into U.S. dollars would have an
approximate $1.3 million effect on consolidated operating income annually.
The Company's exposure to foreign exchange rate fluctuations also arises from
transferring funds from the U.K. subsidiary to the U.S. subsidiary and from
transferring funds from the German subsidiary and French sales office to the
U.K. subsidiary. At December 31, 2005 and 2004, the Company had $850,000 and
$22,000, respectively, of dollar denominated intercompany debt at its U.K.
subsidiary. At December 31, 2005 and 2004, the U.K. subsidiary had $459,000
and $292,000, respectively, of dollar denominated intercompany debt from its
European operations. These intercompany balances are revolving in nature and
are not deemed to be long-term balances. The Company's U.K. subsidiary
recognized net foreign currency losses of 26,000 pounds ($46,000) and net
foreign currency gains of 100,000 pounds ($198,000) for the quarters ended
September 30, 2005 and 2004, respectively. For the six months ended December
31, 2005 and 2004, the Company's U.K. subsidiary recognized net foreign
currency losses of 42,000 pounds ($74,000) and net foreign currency gains of
122,000 pounds ($238,000), respectively. The Company's German subsidiary
recognized net foreign currency losses of 81,000 euro ($116,000) and 153,000
euro ($203,000) for the quarter and six months ended December 31, 2004,
respectively. The Company does not enter into foreign exchange forward
contracts to reduce its exposure to foreign currency rate changes on
intercompany foreign currency denominated balance sheet positions.
18
As of December 31, 2005, the Company's long-term debt of $12.8 million
consisted of a mortgage note payable with a floating interest rate at the
one-month LIBOR rate plus 2.5% with a floor of 4%. The floating interest
rate on the mortgage note payable was 6.7% as of December 31, 2005.
ITEM 4 - CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based
on this evaluation, the principal executive officer and principal financial
officer concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. There was no changes in
the Company's internal control over financial reporting during the Company's
most recently completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
See Item 3 of the Registrant's Annual Report of Form 10-K for the fiscal year
ended June 30, 2005.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth the repurchases of Company common stock for
the quarter ended December 31, 2005:
Total Number of Maximum Approximate
Shares Purchased as Dollar Value of
Total Number Average Part of Publicly Shares that May Yet
of Shares Price Paid Announced Plans Be Purchased Under
Period Purchased Per Share or Programs the Plans or Programs
- ---------- ------------ ---------- ------------------- ---------------------
10/1/05-
10/31/05 0 -- 0 $6.8 million
11/1/05-
11/30/05 0 -- 0 $6.8 million
12/1/05-
12/31/05 0 (1) 0 $6.8 million
(1) On February 17, 2005, the Board of Directors of the Company approved the
repurchase of approximately 2.9 million shares of its common stock under an
accelerated stock buyback (ASB) transaction for an initial value of
approximately $100 million which was paid in March 2005. As described above,
the agreement was subject to a market price adjustment which was settled, at
the Company's option, in cash in December 2005 for $26.0 million, resulting
in a total price paid per share of approximately $44.67.
19
In May 1995, the Company announced a plan to purchase and retire its common
stock. Repurchases of $40 million were authorized as follows: May 1995 - $5
million; April 1997 - $5 million; January 2001 - $10 million; October 2002 -
$20 million. The plan does not have an expiration date.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
Information relating to the Company's Annual Meeting of Shareholders, held on
October 27, 2005 is contained in the Company's Form 10-Q for the quarter
ended September 30, 2005, which is incorporated herein by reference.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS
See exhibit index following.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNE CORPORATION
(Company)
Date: February 8, 2006 /s/ Thomas E. Oland
------------------------------------
President, Chief Executive Officer
February 8, 2006 /s/ Gregory J. Melsen
------------------------------------
Chief Financial Officer
20
EXHIBIT INDEX
TO
FORM 10-Q
TECHNE CORPORATION
Exhibit # Description
- --------- ----------------------------
31.1 Section 302 Certification
31.2 Section 302 Certification
32.1 Section 906 Certification
32.2 Section 906 Certification