TECHNE CORPORATION RELEASES UNAUDITED THIRD QUARTER
RESULTS FOR FISCAL YEAR 2006
Minneapolis/April 25, 2006/--Techne Corporation's (NASDAQ: TECH) consolidated
net earnings increased 10.3% to $20.3 million and its earnings per diluted
share increased 15.6% to $.52 for the quarter ended March 31, 2006 compared
with $18.4 million and $.45 per diluted share for the quarter ended March 31,
2005. For the nine months ended March 31, 2006, Techne's consolidated net
earnings increased 13.2% to $53.9 million and its earnings per diluted share
increased 18.3% to $1.36 compared with $47.6 million and $1.15 per diluted
share for the nine months ended March 31, 2005.
Consolidated net earnings and diluted earnings per share for the periods
ended March 31, 2006 were negatively impacted by the decline in exchange
rates used to convert R&D Europe results from British pound sterling 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 on current year reported amounts. The impact of these
items on comparable net earnings and diluted earnings per share is summarized
as follows:
Periods Ended March 31, 2006
---------------------------------------------------
Third 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 $20,347 37.1% $0.52 $53,862 35.8% $1.36
Stock option expense(1) 111 0.2% -- 1,060 0.7% 0.03
Foreign exchange (1) 323 0.6% 0.01 676 0.4% 0.02
Earnings from
acquisitions (1) (103) (0.2%) -- (386) (0.2%) (0.01)
ASB (0.03) (0.08)
-------- -------- ------- -------- -------- -------
$20,678 37.7% $0.49 $55,212 36.7% $1.32
Periods ended 3/31/05 $18,439 38.5% $0.45 $47,565 36.3% $1.15
Change 12.1% 11.1% 16.1% 14.8%
(1) Net of income taxes
Consolidated net sales for the three and nine months ended March 31, 2006
were $54.8 million and $150.6 million, respectively. This was an increase of
14.3% and 14.8% from the three and nine months ended March 31, 2005,
respectively. R&D Systems' Biotechnology Division net sales for the three
and nine months ended March 31, 2006 were $34.0 million and $92.7 million,
increases of 10.8% and 13.8%, respectively, as compared to prior-year
periods. Approximately $600,000 of the increase in Biotechnology Division
net sales for the quarter ended March 31, 2006 was the result of price
increases. R&D Europe's net sales for the three and nine months ended March
31, 2006 were $14.5 million and $39.5 million, increases of 7.1% and 5.5%,
respectively, as compared to prior-year periods. In British pound sterling,
R&D Europe's net sales increased 15.8% and 12.3% for the three and nine
months ended March 31, 2006, respectively, as compared to prior-year periods.
R&D Systems' Hematology Division net sales for the three months ended March
31, 2006 were $3.7 million, an increase of 1.3% as compared to the quarter
ended March 31, 2005. Hematology sales for the nine months were $11.0
million, a decrease of 9.6% from the same period in fiscal 2005, 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 nine months ended March 31,
2006 was $2.6 million and $7.3 million, respectively, of net sales from
Fortron Bio Science, Inc. and BiosPacific, Inc., which were acquired
effective July 1, 2005.
Periods Ended March 31, 2006
---------------------------------------------------
($000's) Third Quarter Fiscal Year to Date
------------------------- -------------------------
2006 2005 Change 2006 2005 Change
-------- -------- ------- -------- -------- -------
Net sales as reported $54,813 $47,935 14.3% $150,551 $131,101 14.8%
Foreign exchange 1,170 2.4% 2,525 1.9%
Acquisitions (2,559) (5.3%) (7,339) (5.6%)
-------- -------- ------- -------- -------- -------
$53,424 $47,935 11.4% $145,737 $131,101 11.1%
Consolidated gross margins were 77.9% for the third quarter of fiscal 2006 as
compared to 77.7% for the second quarter of fiscal 2006. For the nine months
ended March 31, 2006, consolidated gross margins were 77.5%. Excluding
Fortron and BiosPacific, gross margins for the quarter ended March 31, 2006
were 80.3% compared to 80.9% in the third quarter of fiscal 2005, and 79.8%
for the nine-month period ended March 31, 2006 compared to 79.4% for the nine
months ended March 31, 2005. Combined gross margins for Fortron and
BiosPacific operations of 29.7% and 33.2% for the quarter and nine months
ended March 31, 2006, respectively, were negatively affected by expensing of
inventory on hand at the acquisition date that was recorded at fair value as
determined by purchase accounting.
Selling, general and administrative expenses as a percent of net sales
increased to 14.2% for the nine months ended March 31, 2006 primarily due to
$1.5 million of stock option expense from the adoption of SFAS No. 123R in
fiscal 2006. Excluding the impact of adopting SFAS No. 123R, selling,
general and administrative expense as a percent of net sales decreased to
12.3% from 13.3% for the three months ended March 31, 2006 and 2005,
respectively, and to 13.2% from 14.0% in the nine month periods ended March
31, 2006 and 2005, respectively. As a result of adopting SFAS No. 123R,
estimated total compensation expense of approximately $1.6 million or $.03
per diluted share is anticipated for fiscal 2006 of which approximately
$100,000 remains to be expensed in the last three months of the fiscal year.
The dollar increases in selling, general and administrative expenses were
also impacted by the acquisitions of Fortron and BiosPacific.
Periods Ended March 31, 2006
---------------------------------------------------
($000's) Third Quarter Fiscal Year to Date
------------------------- -------------------------
2006 2005 Change 2006 2005 Change
-------- -------- ------- -------- -------- -------
S,G&A as reported $6,901 $6,379 8.2% $21,335 $18,303 16.6%
Stock option expense (140) (2.2%) (1,516) (8.3%)
Acquisitions (302) (4.7%) (976) (5.3%)
-------- -------- ------- -------- -------- -------
$6,459 $6,379 1.3% $18,843 $18,303 3.0%
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 technologies, trade names and
customer and supplier relationships, are being amortized over lives of one to
eight years and amortization expense of $272,000 and $815,000 was recorded
for the quarter and nine months ended March 31, 2006, respectively, related
to these assets.
In April 2006, the Company made an additional $9 million investment in
ChemoCentryx, Inc. (CCX) in the form of a convertible note subject to the
limitation that the Company's holdings in CCX will not exceed 19.9% of CCX
voting shares.
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 convert 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 nine months ended March
31, 2006 as compared to the reported amounts for the same periods ended March
31, 2005. 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 NINE MONTHS ENDED
----------------- -------------------
3/31/06 3/31/05 3/31/06 3/31/05
-------- -------- -------- --------
Net sales $ 54,813 $47,935 $150,551 $131,101
Cost of sales 12,105 9,138 33,896 26,966
-------- -------- -------- --------
Gross margin 42,708 38,797 116,655 104,135
Operating expenses:
Selling, general and administrative 6,901 6,379 21,335 18,303
Research and development 4,761 4,631 14,052 13,938
Amortization of intangible assets 492 305 1,476 916
-------- -------- -------- --------
Total operating expenses 12,154 11,315 36,863 33,157
-------- -------- -------- --------
Operating income 30,554 27,482 79,792 70,978
Other expense (income):
Interest expense 245 193 706 616
Interest income (1,082) (938) (3,186) (3,180)
Other non-operating
expense (income), net 229 323 721 1,205
-------- -------- -------- --------
Total other expense (income) (608) (422) (1,759) (1,359)
-------- -------- -------- --------
Earnings before income taxes 31,162 27,904 81,551 72,337
Income taxes 10,815 9,465 27,689 24,772
-------- -------- -------- --------
Net earnings $ 20,347 $ 18,439 $ 53,862 $ 47,565
======== ======== ======== ========
Earnings per share:
Basic $ 0.52 $ 0.46 $ 1.38 $ 1.16
Diluted $ 0.52 $ 0.45 $ 1.36 $ 1.15
Weighted average common
shares outstanding:
Basic 39,199 40,423 38,941 40,961
Diluted 39,425 40,896 39,631 41,423
TECHNE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
3/31/06 6/30/05
-------- --------
ASSETS
Cash and equivalents $ 83,596 $ 80,344
Short-term available-for-sale investments 16,166 16,790
Trade accounts receivable 26,024 22,041
Other receivables 911 1,681
Inventory 9,605 7,758
Other current assets 6,798 6,367
-------- --------
Current assets 143,100 134,981
Available-for-sale investments 64,540 41,871
Property and equipment, net 88,203 89,036
Goodwill and intangible assets, net 32,521 14,138
Other non-current assets 13,758 15,237
-------- --------
Total assets $342,122 $295,263
======== ========
LIABILITIES
Current liabilities $ 13,262 $ 14,016
Long-term debt 12,490 13,378
Stockholders' equity 316,370 267,869
-------- --------
Total liabilities and equity $342,122 $295,263
======== ========