SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
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 of Incorporation) (IRS Employer Identification No.)
614 McKinley Place N.E., Minneapolis, MN 55413
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (612) 379-8854
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value.
Indicate by check mark whether the Company (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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The aggregate market value of the Common Stock held by non-affiliates of the
Registrant, based upon the closing sale price on September 12, 2000 as
reported on The Nasdaq Stock Market was approximately $1,485,548,000. Shares
of Common Stock held by each officer and director and by each person who owns
5% or more of the outstanding Common Stock have been excluded.
Shares of $.01 par value Common Stock outstanding at September 12, 2000:
20,717,671
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 2000 Annual Meeting of
Shareholders are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
OVERVIEW
Techne Corporation (the "Company") is a holding company which has two wholly-
owned operating subsidiaries: Research and Diagnostic Systems, Inc. (R&D
Systems) located in Minneapolis, Minnesota and R&D Systems Europe Ltd. (R&D
Europe) located in Abingdon, England. R&D Systems is a specialty
manufacturer of biological products. Its two major operating segments are
hematology controls, which are used in hospital and clinical laboratories to
check the accuracy of blood analysis instruments, and biotechnology products
including purified proteins (cytokines) and antibodies which are sold
exclusively to the research market, and assay kits which are sold to the
research and clinical diagnostic markets. R&D Europe distributes R&D
Systems' biotechnology products in Europe. R&D Europe has a German sales
subsidiary, R&D Systems GmbH (R&D GmbH). The Company also has a foreign
sales corporation, Techne Export Inc.
R&D Systems was founded and incorporated in 1976 in Minneapolis, Minnesota
and was acquired by the Company in 1985. In 1977 R&D Systems introduced its
first product, a Platelet-Rich-Plasma control. In 1981 R&D Systems was the
second manufacturer in the world to release a Whole Blood Control with
Platelets, thereby establishing itself as one of the leaders in the field of
hematology control products manufacturing. Subsequently, R&D Systems has
developed several types of hematology controls designed to keep pace with the
technology of the newest models of hematology instruments. These products
are sold throughout the United States directly by R&D Systems and in many
foreign countries through distributors.
In 1985 R&D Systems entered the research reagent market with its first
cytokine, TGF-beta. Cytokines are specialized protein molecules that
stimulate or suppress various cell functions in the body. Cytokines are in
demand by biomedical researchers who want to learn more about their diverse
effects. Encouraged by its success in the cytokine market, R&D Systems
formed a biotechnology division in 1986 with the goal of producing and
marketing a wide range of human cytokines through genetic engineering.
Recombinant DNA technology offers several advantages over extraction of these
proteins from natural sources, including lower production cost and
potentially unlimited supply.
On August 19, 1991, R&D Systems purchased Amgen Inc.'s research reagent and
diagnostic assay kit business. With this purchase, R&D Systems obtained
Amgen's Erythropoietin (EPO) kit, the Company's first enzyme-linked
immunosorbent assay kit for a cytokine that had been cleared by the FDA for
clinical diagnostic use.
In July 1993, the Company acquired its European biotechnology distributor,
British Bio-technology Products Ltd. (renamed R&D Systems Europe Ltd.) from
British Bio-technology Group plc. R&D Europe distributes biotechnology
products developed by R&D Systems.
During fiscal 1998, 1999 and 2000, the Company made equity investments in the
preferred stock of ChemoCentryx, Inc. (CCX), a new technology and drug
development company. The investment gives Techne a 49% interest in CCX. In
addition to the equity investment and joint research efforts, the Company
obtained research and diagnostic market rights to all products discovered or
developed by CCX.
On July 1, 1998, R&D Systems purchased Genzyme Corporation's research
products business. This acquisition established R&D Systems as the world's
leading supplier of research and diagnostic cytokine products.
THE MARKET
The Company, through its two operating subsidiaries, manufactures and sells
products for the clinical diagnostics market (hematology controls and
calibrators) and the biotechnology research and clinical diagnostics market
(cytokines, assays and related products). In fiscal 2000, R&D Systems'
Hematology Division revenues accounted for approximately 13% of consolidated
revenues of $103,838,155. Revenues from R&D Systems' Biotechnology Division
and R&D Europe were 62% and 25% of consolidated revenues, respectively.
Biotechnology Products
R&D Systems is the world's leading supplier of cytokines and cytokine-related
reagents to the biotechnology research community. These valuable proteins
exist in minute amounts in different types of cells and can be extracted from
these cells or made through recombinant DNA technology. In 1985, R&D Systems
introduced its first cytokine and continues to add to this product line. The
first cytokines were extracted from natural sources (human and porcine
platelets and bovine brain). Currently almost all of cytokines are produced
by recombinant DNA technology. R&D Systems also sells antibodies for
specific cytokines, cytokine assay kits, clinical diagnostic kits, kits for
cytokine receptor binding studies, and related research reagents.
The growing interest by researchers in cytokines exists because of the
profound effect a tiny amount of a cytokine can have on the cells and tissues
of the body. Cytokines are intercellular messengers. They act as signals by
interacting with specific receptors on the effected cells. They carry vital
signals to the cell's genetic machinery that can trigger events that can lead
to significant changes in a cell, tissue or organism. For example, cytokines
can signal a cell to differentiate, i.e., to acquire the features necessary
for it to take on a more specialized task. Another example of cytokine
action is the key role they play in stimulating cells surrounding a wound to
grow and divide and to attract migratory cells to the injury site.
R&D Systems' Biotechnology Division was formed in response to a growing need
for highly purified biologically active proteins. R&D Systems believes that
its cytokines are addressing this growing demand for these products within
the scientific research community.
During fiscal 1990, the Biotechnology Division released its first cytokine
assay kits under the tradename Quantikine. These kits are used by
researchers to quantify the level of a specific cytokine in a sample of
blood, serum, or other biological fluid. In fiscal 1996, the Biotechnology
Division expanded its Quantikine line by introducing a line of assay kits for
mouse cytokines. These kits are used extensively by research scientists
doing cytokine studies using animal models, such as those used in
pharmaceutical discovery and development programs.
Current Biotechnology Products
Cytokines and Related Antibodies. Cytokines, extracted from natural
sources or produced using recombinant DNA technology, are manufactured to
the highest purity. Polyclonal antibodies are produced by injecting
purified cytokines into animals (primarily goats and rabbits). The
animals' immune systems recognize the cytokines as foreign and develop
antibodies to these cytokines. The polyclonal antibodies are then
extracted from the animals' blood and purified. Monoclonal antibodies are
produced by injecting purified cytokines into mice. The B cells of a
mouse's immune system are then isolated and fused with immortalized mouse
cells that will produce the desired antibody. Purified cytokines and
antibodies are made available both as research reagents and as parts of
assay kits (below).
Assay Kits. This product line includes R&D Systems' human and murine
(mouse and rat) Quantikine kits which allow research scientists to
quantify the amount of a specific cytokine in a sample of blood or tissue.
Also included in this product line are assay kits, developed by R&D
Europe, to quantify adhesion molecules. These kits are used by research
scientists to measure cellular adhesion molecules in serum, plasma, or
cell culture media. Cellular adhesion molecules facilitate the movement
of infection fighting cells out of the blood stream to the site of
infections.
Clinical Diagnostic Kits. The EPO kit, acquired from Amgen Inc. in fiscal
1992, was the first diagnostic assay for which R&D Systems had FDA
marketing clearance. R&D Systems also has received FDA marketing
clearance for its transferrin receptor (TfR) and Beta2-microglobulin kits.
Flow Cytometry Products. This product line includes R&D Systems'
Fluorokine kits which are used to measure the presence or absence of
receptors for specific cytokines on the surface of cells.
DNA and Related Products. Designer genes and designer probes are
synthetic DNAs used in the study of gene function.
Hematology Controls and Calibrators
Hematology controls and calibrators, manufactured and marketed through the
Hematology Division of R&D Systems, are products made up of the various
cellular components of blood. Proper diagnosis of many illnesses requires a
thorough and accurate analysis of the patient's blood cells, which is usually
done with automatic or semiautomatic hematology instruments. Controls and
calibrators ensure that these instruments are performing accurately and
reliably.
Blood is composed of plasma, the fluid portion of which is mainly water, and
blood cells, which are suspended in the plasma. There are three basic types
of blood cells: red cells, white cells and platelets. About 95 percent of
the blood cells are red cells. Their main job is to transport oxygen from
the lungs throughout the body, which they do by being rich in hemoglobin.
White cells defend the body against foreign invaders. Platelets serve as a
"plug" to stem blood flow at the site of an injury by initiating a complex
series of biochemical reactions that lead to the formation of a clot.
The formed elements of blood (red cells, white cells and platelets) differ a
great deal in size and concentration. The white cells are the largest in
size and platelets the smallest. The red cells are the most numerous. The
average adult has from 20 to 30 trillion red cells. For every 500 red cells
there are approximately one white cell and about 20 platelets. As noted
above, hematology controls are used in automatic and semiautomatic cell
counting analyzers to make sure these instruments are counting blood cells
accurately. One of the most frequently performed laboratory tests on a blood
sample is called a complete blood count, or CBC for short. Doctors use this
test in disease screening and diagnosis. More than a billion of these tests
are done every year, the great majority with cell counting instruments. In
most laboratories the CBC consists of the white cell count, the red cell
count, the hemoglobin reading, and the hematocrit reading or the percent of
red cells in a volume of whole blood after it has been centrifuged. Also
included in a CBC test is the differential which numbers and classifies the
different types of white cells.
These and other characteristics or "parameters" of a blood sample can be
measured by automatic or semiautomatic cell counters. Cell counters can read
the parameters of blood either by impedance, in which a cell interrupts an
electrical current and is counted, or by a laser, in which a cell interrupts
a laser beam and is counted. The number of parameters measurable in a blood
control product depends on the type and sophistication of the instrument for
which the control is designed. Ordinarily, a hematology control is used once
to several times a day to make sure the instrument is reading accurately.
Some instruments need to be calibrated periodically. Hematology calibrators
are similar to controls but go through additional processing and testing to
ensure that the calibration values assigned are extremely accurate and can be
used to adjust the instrument.
The Hematology Division of R&D Systems offers a complete line of hematology
controls and calibrators for both impedance and laser type cell counters.
R&D Systems believes its products have improved stability and versatility and
a longer shelf life than most of those of its competitors. The Hematology
Division supplies hematology control products for use as proficiency testing
materials by laboratory certifying authorities of a number of states and
countries. All products are priced competitively and come with an
unconditional money back guarantee. R&D Systems recognizes that developing
technologies for cell counting instruments will require increasingly
sophisticated and high-quality controls and is prepared to meet this
challenge.
Current Retail Hematology Products
Impedance-Type Whole Blood Controls/Calibrators. The Hematology Division
of R&D Systems currently produces controls and calibrators for the
following impedance-type instruments: Abbott Cell-Dyn, ABX, Beckman
Coulter, Danam, Hycel, Roche and TOA Sysmex instruments.
Laser-Type Whole Blood Controls/Calibrators. Currently produced controls
and calibrators for laser-type instruments include products for the
following: Abbott Cell-Dyn 3000, 3200, 3500 and 4000 instruments, ABX
instruments, Bayer H series instruments, and the TOA Sysmex NE-8000 and
NE-5500 instruments.
Linearity Control. This product provides a means of assessing the
linearity of hematology analyzers for white blood cells, red blood cells,
hemoglobin and platelets.
Whole Blood Reticulocyte Control. This control is designed for manual and
automated counting of reticulocytes (immature red blood cells).
Whole Blood Flow Cytometry Control. This product is a control for flow
cytometry instruments. These instruments are used to identify and
quantify white blood cells by their surface antigens.
Erythrocyte Sedimentation Rate Control. This product is designed to
monitor erythrocyte sedimentation rate tests.
Multi-Purpose Platelet Reference Control. This product, Platelet-Trol
II, is designed for use by automatic and semi-automatic impedance and
laser instruments and is the successor to Platelet-Rich-Plasma which R&D
Systems introduced in 1977.
PRODUCTS UNDER DEVELOPMENT
R&D Systems is engaged in ongoing research and development in all of its
major product lines: hematology controls and calibrators, biotechnology
cytokines, antibodies, assays and related products. The Company believes
that its future success depends, to a large extent, on the ability to keep
pace with changing technologies and markets. At the same time, the Company
continues to examine its production processes to ensure high quality and
maximum economy.
R&D Systems' Biotechnology Division is planning to release new cytokines,
antibodies and cytokine assay kits in the coming year. All of these products
will be for research purposes only and therefore do not require FDA
clearance. R&D Systems' Hematology Division has developed several new
control products in fiscal 2000 and is continuously working on product
improvements and enhancements.
There is no assurance that any of the products in the research and
development phase can be developed, or, if developed, can be successfully
introduced into the marketplace.
Expenditures for research and development activities were $11,198,309,
$12,004,798 and $10,637,804 for fiscal years 2000, 1999 and 1998,
respectively.
BUSINESS RELATIONSHIPS
During fiscal 1998, 1999 and 2000, Techne purchased a total of $5 million of
convertible preferred stock of ChemoCentryx, Inc. (CCX), representing
approximately 49% of issued and outstanding voting shares. CCX is a new
technology and drug development company working in the area of chemokines.
Chemokines are cytokines which regulate the trafficking patterns of
leukocytes, the effector cells of the human immune system. In conjunction
with the equity investment and joint research efforts, Techne obtains
exclusive worldwide research and diagnostic marketing rights to chemokine
proteins, antibodies and receptors discovered or developed by CCX or R&D
Systems. Techne has accounted for the investment under the equity method of
accounting and recognizes 100% of the losses of CCX due to the limited amount
of cash consideration provided by the holders of the common shares of CCX.
Original Equipment Manufacturers (OEM) agreements represent the largest
market for hematology controls and calibrators made by R&D Systems. In
fiscal year 2000, OEM contracts accounted for $6,303,080 or 46% of Hematology
Division revenues and 6% of total consolidated revenues.
GOVERNMENT REGULATION
All manufacturers of hematology controls and calibrators are regulated under
the Federal Food, Drug and Cosmetic Act, as amended. All of R&D Systems'
hematology control products are classified as "In Vitro Diagnostic Products"
by the US Food and Drug Administration. The entire hematology control
manufacturing process, from receipt of raw materials to the monitoring of
control products through their expiration date, is strictly regulated and
documented. FDA inspectors make periodic site inspections of the Hematology
Division's control operations and facilities. Hematology control
manufacturing must comply with Good Manufacturing Practices (GMP) as set
forth in the FDA's regulations governing medical devices.
Three of R&D Systems' immunoassay kits, EPO, TfR and Beta2-microglobulin,
have FDA clearance to be sold for clinical diagnostic use. R&D Systems must
comply with GMP for the manufacture of these kits. Biotechnology products
manufactured in the United States and sold for use in the research market do
not require FDA clearance.
Some of R&D Systems' research groups use small amounts of radioactive
materials in the form of radioisotopes in their product development
activities. Thus, R&D Systems is subject to regulation by the US Nuclear
Regulatory Commission and has been granted a NRC License due to expire in
April 2001. The license is renewable annually. R&D Systems is also subject
to regulation and inspection by the Department of Health of the State of
Minnesota for its use of radioactive materials. It has been granted a
certificate of registration, which is renewable annually, by the Minnesota
Department of Health. The current certificate expires April 1, 2001. R&D
Systems has had no difficulties in renewing these licenses in prior years and
has no reason to believe they wouldn't be renewed in the future. If,
however, the licenses were not renewed, it would have minimal effect on R&D
Systems' business since there are other technologies the research groups
could use to replace radioisotopes.
AVAILABILITY OF RAW MATERIALS
The primary raw material for the Company's hematology controls is whole
blood. Human blood is purchased from commercial blood banks and porcine and
bovine blood is purchased from nearby meat processing plants. After raw
blood is received, it is separated into its components, processed and
stabilized. Although the cost of human blood has increased owing largely to
the requirement that it be tested for HIV ("AIDS") antibodies and hepatitis,
R&D Systems does not anticipate that the higher cost of these materials will
have a seriously adverse effect on its business. R&D Systems does not
perform its own testing for the AIDS antibodies as the supplier tests all
human blood purchased. R&D Systems' Biotechnology Division develops and
manufactures the majority of its cytokines from synthetic genes developed in-
house, thus significantly reducing its reliance on outside resources. R&D
Systems typically has several outside sources for all critical raw materials
necessary for the manufacture of products.
PATENTS AND TRADEMARKS
R&D Systems owns patent protection for certain hematology controls. R&D
Systems may seek patent protection for new or existing products it
manufactures. No assurance can be given that any such patent protection will
be obtained.
No assurance can be given that R&D Systems' products do not infringe upon
patents or proprietary rights owned or claimed by others, particularly for
genetically engineered products. Although, with the exception of products
subject to current licensing agreements and the legal proceedings discussed
in Item 3 of this 10-K, R&D Systems has not been notified that its products
infringe upon proprietary rights held by others, it has not conducted a
patent infringement study for each of its products.
R&D Systems and R&D Europe have a number of licensing agreements with patent
holders under which they have the non-exclusive right to patented technology
or the non-exclusive right to manufacture and sell certain patented cytokine
and cytokine related products to the research market. For fiscal 2000, total
royalties expenses under these licenses were approximately $1,932,000.
R&D Systems has obtained federal trademark registration for its hematology
control trademark CBC-3D, CBC-7, CBC-8, PLATELET-TROL, CBC-Laser and
StatusFlow and claims common law rights in the trademarks CBC-CAL PLUS, CBC-
CAL KIT, CBC-TECH, TECH-CAL, CBC-3K, 3K-CAL and CBC-NE. R&D Systems has also
obtained the Quantikine, Fluorokine, QuantiGlo, Parameter, Surfacemark and
IVD trademarks.
SEASONALITY OF BUSINESS
Sales of the products manufactured by R&D Systems and R&D Europe are not
seasonal, although R&D Europe historically experiences a slowing of sales
during the summer months.
SIGNIFICANT CUSTOMERS
No single customer accounted for more than 10% of total revenues during
fiscal year 2000, 1999 or 1998.
BACKLOG
There was no significant backlog of orders for the Company's products as of
the date of this report or as of a comparable date for fiscal 1999.
COMPETITION
The market for cytokines and research diagnostic assay kits in the United
States and Europe is being supplied by a number of biotechnology companies,
including BD Biosciences, BioSource International, Endogen Corp., Sigma
Chemical Co., Amersham Pharmacia and CN Biosciences. R&D Systems believes
that it is the leading worldwide supplier of cytokine related products in the
research marketplace. R&D Systems believes that the expanding line of its
products, their recognized quality and competitive pricing, and the growing
demand for these rare and versatile proteins, antibodies and assay kits, will
allow the Company to remain competitive in the growing biotechnology research
and diagnostic market.
Competition is intense in the hematology control business. The first control
products were developed in response to the rapid advances in electronic
instrumentation used in hospital and clinical laboratories for blood cell
counting. Most of the instrument manufacturing companies make controls for
use in their own instruments. With rapid expansion of the instrument market,
however, a need for more versatile controls enabled non-instrument
manufacturers to gain a foothold. Today the market is comprised of
manufacturers of laboratory reagents, chemicals and coagulation products and
independent control manufacturers in addition to instrument manufacturers.
The principal hematology control competitors of R&D Systems' retail products
are Beckman Coulter, Inc., TOA Systmex, Streck Laboratories, Abbott
Diagnostics and Hematronix, Inc. R&D Systems believes it is the third
largest supplier of hematology controls in the marketplace behind Beckman
Coulter and Streck Laboratories.
EMPLOYEES
R&D Systems had 387 full-time and 47 part-time employees as of June 30, 2000.
R&D Europe had 42 full-time and 10 part-time employees as of June 30, 2000,
including 10 full-time and 1 part-time at R&D Europe's sales subsidiary in
Germany.
ENVIRONMENT
Compliance with federal, state and local environmental protection laws in the
United States, England and Germany had no material effect on R&D Systems or
R&D Europe in fiscal year 2000.
FOREIGN AND DOMESTIC OPERATIONS
The following table represents certain financial information relating to
foreign and domestic operations for the fiscal years ended June 30 (all
amounts are in thousands of US dollars):
2000 1999 1998
------- ------- -------
Net Sales to External Customers
Hematology Division:
US $11,140 $10,549 $ 9,933
Other 2,435 2,125 1,851
Biotechnology Division:
US 51,788 43,712 30,113
Other 12,443 11,249 7,601
R&D Europe:
Other 26,032 23,266 17,794
Gross Margin
R&D Systems (US) 66,125 52,791 38,826
R&D Europe (England) 9,373 9,490 7,519
R&D GmbH (Germany) 1,590 1,296 937
Net Earnings (Loss)
Parent and R&D Systems (US) 22,418 15,230 13,689
R&D Europe (England) 3,269 2,835 2,160
R&D GmbH (Germany) 253 8 6
ChemoCentryx (US) 643 (1,417) (672)
Identifiable Assets
Parent and R&D Systems (US) 165,834 112,327 64,169
R&D Europe (England) 13,546 10,213 7,831
R&D GmbH (Germany) 1,030 1,261 785
CAUTIONARY STATEMENTS
The Company wishes to caution investors that the following important factors,
among others, in some cases have affected and in the future could affect the
Company's actual results of operations and cause such results to differ
materially from those anticipated in forward-looking statements made in this
document and elsewhere by or on behalf of the Company:
Risk of Technological Obsolescence and Competition
The biotechnology industry is subject to rapid and significant technological
change. While the hematology controls industry historically has been subject
to less rapid change, it too is evolving and is impacted significantly by
changes in the automated testing equipment offered by hardware manufacturers.
Competitors of the Company in the United States and abroad are numerous and
include, among others, specialized biotechnology firms, medical laboratory
instrument and equipment manufacturers and disposables suppliers, major
pharmaceutical companies, universities and other research institutions.
There can be no assurance that the Company's competitors will not succeed in
developing technologies and products that are more effective than any which
have been or are being developed by the Company or that would render the
Company's technologies and products obsolete or noncompetitive. Many of
these competitors have substantially greater resources and product
development, production and marketing capabilities than the Company. With
regard to diagnostic kits, which constitute a relatively minor portion of the
Company's business, many of the Company's competitors have significantly
greater experience than the Company in undertaking preclinical testing and
clinical trials of new or improved diagnostic kits and obtaining Food and
Drug Administration (FDA) and other regulatory approvals of such products.
Patents and Proprietary Rights
The Company's success will depend, in part, on its ability to obtain licenses
and patents, maintain trade secret protection and operate without infringing
the proprietary rights of others. The Company has filed a very limited
number of United States and foreign patent applications for products in which
it believes it has a proprietary interest. The Company has obtained and is
negotiating licenses to produce a number of cytokines and related products
claimed to be owned by others. The Company has not conducted a patent
infringement study for each of its products. It is possible that products of
the Company may unintentionally infringe patents of third parties or that the
Company may have to alter its products or processes, pay licensing fees or
cease certain activities because of patent rights of third parties, thereby
causing additional unexpected costs and delays which may have a material
adverse effect on the Company. The patenting of hematology and biotechnology
processes and products involves complex legal and factual questions and, to
date, there has emerged no consistent policy regarding the breadth of claims
in biotechnology patents. Protracted and costly litigation may be necessary
to enforce rights of the Company and defend against claims of infringement of
rights of others.
Financial Impact of Expansion Strategy
The Company engages in an expansion strategy which includes internal
development of new products, collaboration with manufacturers of automated
instruments which may use the Company's products, investment in joint
ventures and companies developing new products related to the Company's
business and acquisition of companies for new products or additional customer
base. Each of the strategies carries risks that objectives will not be
achieved and future earnings will be adversely affected. During early
development stage, the operating losses of certain companies in which the
Company may invest will be reported as operating losses of the Company, as is
currently the case with ChemoCentryx Inc.
Government Regulation
Ongoing research and development activities, including preclinical and
clinical testing, and the production and marketing of the Company's products
are subject to regulation by numerous governmental authorities in the United
States and other countries. Some of the Company's products and manufacturing
processes and facilities require governmental approval prior to commercial
use. The approval process applicable to clinical diagnostic products of the
type which may be developed by the Company usually takes a number of years
and typically requires substantial expenditures. Delays in obtaining
regulatory approvals would adversely affect the marketing of products
developed by the Company and the Company's ability to receive product
revenues or royalties. There can be no assurance that regulatory approvals
for such products will be obtained without lengthy delays, if at all.
Attraction and Retention of Key Employees
Recruiting and retaining qualified scientific and production personnel to
perform research and development work and product manufacturing is critical
to the Company's success. Although the Company believes it has been and will
be able to attract and retain such personnel, there can be no assurance that
the Company will be successful. In addition, the Company's anticipated
growth and expansion into areas and activities requiring additional
expertise, such as clinical testing, government approvals, production and
marketing, will require the addition of new management personnel and the
development of additional expertise by existing management personnel. The
failure to attract and retain such personnel or to develop such expertise
would adversely affect the Company's business.
Litigation
Amgen, Inc. has presented invoices in the amount of $31.9 million for
materials provided to the Company over past years, allegedly pursuant to a
contract under which no accounting or invoices were rendered for nine years.
The Company has brought a declaratory judgement action seeking to have the
court declare that no amount is owed. The Company's management believes that
no material amount is owed, that is has counterclaims against the other
party, and that the ultimate resolution of the matter will not have a
material adverse effect on the financial condition or results of operations
of the Company. See "Financial Statements, Note F. Commitments and
contingencies."
ITEM 2. PROPERTIES
On July 1, 1999, the Company purchased, for approximately $28 million, the
facilities R&D Systems had been leasing in Minneapolis, Minnesota. The R&D
complex currently includes 365,000 square feet of administrative, research
and manufacturing space. The Hematology Division manufacturing and shipping
operations are located at 640 McKinley Place N.E. (47,000 square feet).
Biotechnology Division manufacturing and research operations are located at
600 McKinley Place NE (85,000 square feet) and 2201 Kennedy Street (200,000
square feet). Administrative, sales and marketing functions are also located
at 2201 Kennnedy Street building. The Company also occupies an additional
20,000 square feet in space connecting the three buildings. This area houses
a lunchroom, a library and additional warehouse space. In addition, the
Company constructed a new 13,000 square foot entrance to the facility. The
above space is believed to be adequate to house the Company's R&D Systems
operations for approximately two years. The Company has entered into two
option agreements for real estate adjacent to the current facility. The
options are exercisable through November 2001 and January 2005 on the two
properties, respectively.
R&D Europe sub-leases approximately 12,500 square feet in one building in
Abingdon, England. The sub-lease on the building expires in June 2001 and
R&D Europe has reached an agreement to lease approximately 17,000 square feet
in a building currently under construction less than one mile from its
current location. Rental rates for the new facility are expected to be
slightly higher than rates under the current sub-lease. Base rent for the
above space was $176,000 in fiscal 2000.
R&D GmbH leases approximately 2,300 square feet as a sales office in
Wiesbaden-Nordenstadt, Germany. Base rent was $35,000 in fiscal 2000.
The Company believes the acquired property, purchase options and leased
property discussed above are adequate to meet its occupancy needs in the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
Amgen, Inc. has presented to the Company for payment invoices in the amount
of $31.9 million for materials provided to the Company over past years,
allegedly pursuant to a contract under which no accounting or invoices were
rendered for nine years. On September 19, 2000 the Company brought a
declaratory judgement action in United States Court for the District of
Minnesota, seeking to have the Court declare that no amount is owed and
seeking compensation from Amgen for breach of contract and unfair business
practices in violation of applicable statutes. The Company believes that it
owes no material amount to Amgen and that the ultimate resolution of the
matter will not have a material adverse effect on the financial condition or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the Company's 2000 fiscal year.
EXECUTIVE OFFICERS OF THE COMPANY
(a) The names, ages and positions of each executive officer of the Company
are as follows:
Name Age Position Officer Since
---- --- -------- -------------
Thomas E. Oland 59 Chairman of the Board, President, 1985
Treasurer and Director
Dr. Monica Tsang 55 Vice President, Research 1995
Marcel Veronneau 45 Vice President, Hematology Operations 1995
Timothy M. Heaney 54 Vice President, Secretary, General 1999
Counsel and Director
The term of office of each executive officer is from one annual meeting of
directors until the next annual meeting of directors or until a successor is
elected. There are no arrangements or understandings among any of the
executive officers and any other person (not an officer or director acting as
such) pursuant to which any of the executive officers was selected as an
officer of the Company.
(b) The business experience of the executive officers during the past five
years is as follows:
Thomas E. Oland has been Chairman of the Board, President and Treasurer of
the Company since December 1985.
Dr. Monica Tsang was elected a Vice President of the Company in March 1995.
Prior thereto, she served as Executive Director of Cell Biology for R&D
Systems' Biotechnology Division and has been an employee of R&D Systems since
1985.
Marcel Veronneau was elected a Vice President of the Company in March 1995.
Prior thereto, he served as Director of Operations for R&D Systems'
Hematology Division since joining the Company in 1993.
Timothy M. Heaney was elected a Vice President of the Company in October
1999. Prior thereto, he was a partner at Fredrikson and Byron, P.A., the
Company's outside legal counsel and had served as the managing partner on the
Company's account.
An additional officer, Dr. James A. Weatherbee, who served as Vice President
and Chief Scientific Officer since 1995, is on medical leave. Dr. Weatherbee
and Dr. Tsang are husband and wife.
Dr. Thomas Detwiler, Vice President of the Company since March 1995, retired
from the Company in July, 2000.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The NASDAQ Stock Exchange under the
Symbol "TECH." The following table sets forth for the periods indicated the
range of the closing price per share for the Company as reported by NASDAQ.
2000 PRICE 1999 PRICE
HIGH LOW HIGH LOW
-------- -------- --------- --------
1st Quarter $ 32.75 $ 24.75 $ 18.69 $ 12.25
2nd Quarter 55.06 31.75 21.13 13.00
3rd Quarter 88.38 51.97 28.88 20.50
4th Quarter 140.00 60.00 29.50 23.55
As of September 12, 2000, there were approximately 300 shareholders of
record. As of September 12, 2000, there were over 14,500 beneficial
shareholders of the Company's common stock. TECHNE Corporation has never paid
cash dividends on its common stock. Payment of dividends is within the
discretion of TECHNE's Board of Directors, although the Board of Directors
plans to retain earnings for the foreseeable future for operating the
Company's business.
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUE, EARNINGS AND CASH FLOW
DATA FOR THE YEARS ENDED JUNE 30 2000 1999(1) 1998 1997 1996
- -------------------------------- -------- -------- ------- ------- -------
Net sales $103,838 $ 90,901 $67,291 $60,924 $54,589
Gross margin 74.2% 69.9% 70.3% 68.7% 65.2%
Selling, general and
administrative expense 16.7% 18.6% 22.8% 23.9% 23.7%
Research and development
expenses 10.8% 13.2% 15.8% 19.2% 19.1%
Interest expense 1,441 -- -- 29 2
Earnings before income taxes 39,412 26,054 22,411 15,988 12,592
Net earnings 26,583 16,656 15,183 10,882 8,638
Diluted earnings per share 1.26 0.81 0.77 0.56 0.44
Capital expenditures 30,368 5,564 2,780 4,243 6,377
Depreciation and amortization 12,651 11,890 2,303 2,322 1,872
Change in net working capital 36,352 (12,544) 15,033 6,639 4,573
Net cash provided by operating
activities 38,739 28,422 20,875 12,477 9,760
Return on sales 25.6% 18.3% 22.6% 17.9% 15.8%
Return on average equity 22.3% 20.7% 27.1% 25.0% 25.3%
BALANCE SHEET, COMMON STOCK AND
EMPLOYEE DATA AS OF JUNE 30 2000 1999(1) 1998 1997 1996
- -------------------------------- -------- -------- ------- ------- -------
Cash, cash equivalents and
short-term investments $ 59,824 $ 29,114 $41,436 $24,752 $19,250
Receivables 15,601 13,520 10,002 9,114 8,380
Inventories 4,652 5,715 3,811 4,087 3,653
Working capital 73,740 37,388 49,932 34,899 28,260
Total assets 180,410 123,801 72,785 53,922 44,393
Long-term debt 18,935 -- -- -- --
Stockholders' equity 141,145 96,838 63,831 48,081 38,874
Average common and common
equivalent shares (in thousands) 21,103 20,687 19,608 19,463 19,443
Book value per share(2) 6.82 4.81 3.35 2.55 2.04
Share price:
High 140.00 29.50 20.00 15.25 16.50
Low 24.75 12.25 13.44 10.13 6.63
Price to earnings ratio 103 31 25 27 33
Current ratio 6.87 3.78 7.84 8.12 6.62
Quick ratio 6.00 3.17 7.05 6.91 5.49
Full-time employees 440 402 356 326 341
(1) The Company acquired the research products business of Genzyme Corporation
on July 1, 1998.
(2) Total stockholders' equity divided by total shares outstanding at June 30.
The Company has not declared any cash dividends in the past, and it is not
anticipated that it will declare any dividends in the foreseeable future.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPANY STRUCTURE
TECHNE (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 operating segments: 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 Europe, the Company's third
operating segment, located in Abingdon, England, is the European distributor
of R&D Systems' biotechnology products. R&D Europe has a German sales
subsidiary, R&D Systems GmbH. The Company also has a foreign sales
corporation, Techne Export Inc.
RESULTS OF OPERATIONS
Net sales for fiscal 2000 were $103,838,155, an increase of $12,937,458 (14%)
from fiscal 1999. Sales by R&D Systems' Biotechnology Division for the period
increased $9,269,504 (17%). Sales by R&D Systems' Hematology Division
increased $901,919 (7%) and sales by R&D Europe increased $2,766,035 (12%).
The increase in consolidated sales for the fiscal year was due largely to
increased sales of proteins and antibodies.
Net sales for fiscal 1999 were $90,900,697, an increase of $23,609,259
(35%) from fiscal 1998. Sales by R&D Systems' Biotechnology Division for the
period increased $17,247,069 (46%). Sales by R&D Systems' Hematology Division
increased $889,451 (8%) and sales by R&D Europe increased $5,472,739 (31%).
The increase in consolidated sales for the fiscal year was due, in part, to
the acquisition of Genzyme Corporation's research products business on July
1, 1998. In addition, the increase in consolidated sales was due to increased
sales of R&D Systems products to both R&D Systems customers and to former
Genzyme customers as they were converted from Genzyme products to R&D Systems
products.
Net sales for fiscal 1998 were $67,291,438, an increase of $6,367,688
(10%) from fiscal 1997. Sales by R&D Systems' Biotechnology Division for the
period increased $5,974,563 (19%). Sales by R&D Systems' Hematology Division
increased $1,514,469 (15%) and sales by R&D Europe decreased $1,121,344 (6%).
The increase in consolidated sales for the fiscal year was due largely to
increased sales of proteins and antibodies. The decrease in R&D Europe sales
was not unexpected due to the discontinuance of the molecular biology product
line in fiscal 1997. R&D Europe sales of continuing product lines increased
22% from fiscal 1997.
Gross margins, as a percentage of sales, increased from 69.9% in fiscal 1999
to 74.2% in fiscal 2000. Biotechnology Division gross margins increased from
70.8% to 76.9% in fiscal 2000. As discussed below, margins in fiscal 1999
were affected by higher cost inventory acquired from Genzyme. R&D Europe
gross margins decreased from 46.0% in fiscal 1999 to 41.9% in fiscal 2000
mainly as a result of changes in exchange rates. Hematology Division gross
margins did not change significantly from the prior year.
Gross margins, as a percentage of sales, decreased slightly from 70.3% in
fiscal 1998 to 69.9% in fiscal 1999. Biotechnology Division gross margins
decreased from 72.9% to 70.8% as a result of lower gross profit levels on
inventory acquired from Genzyme and the write-off of obsolete Genzyme
packaging and kit components due to conversion of customers to R&D Systems
labeled product. R&D Europe and Hematology Division gross margins did not
change significantly from the prior year.
Gross margins, as a percentage of sales, increased from 68.7% in fiscal
1997 to 70.3% in fiscal 1998. R&D Europe gross margins decreased from 52.5%
to 46.1% due to changes in product mix and exchange rates. Biotechnology
Division gross margins increased from 71.8% to 72.9% as a result of changes
in product mix and increased production volumes. Hematology Division gross
margins increased from 42.9% in fiscal 1997 to 47.2% in fiscal 1998 also as a
result of changes in product mix and increased production volumes.
Selling, general and administrative expenses increased $452,914 (3%) in
fiscal 2000. The increase was the result of increased wages and benefits and
exchange rate losses partially offset by decreased rent expense due to the
purchase of R&D Systems' Minneapolis facilities on July 1, 1999.
Selling, general and administrative expenses increased $1,494,457 (10%) in
fiscal 1999. The majority of the increase in consolidated selling, general
and administrative expenses was due to additional sales personnel added in
the U.S. and Europe as a result of the Genzyme acquisition and associated
advertising and promotion activities.
Selling, general and administrative expenses increased $782,425 (5%) in
fiscal 1998. The majority of the increase in consolidated selling, general
and administrative expenses was the result of additional occupancy costs at
R&D Systems, plus increased advertising and promotion costs. These increased
costs were partially offset by decreased personnel costs at R&D Europe as a
result of the restructuring of operations undertaken in fiscal 1997.
Research and Development Expenses decreased $806,489 in fiscal 2000,
increased $1,366,994 in fiscal 1999 and decreased $1,064,018 in fiscal 1998.
The decrease in fiscal 2000 was a result of research grant money received in
fiscal 2000 by ChemoCentryx, Inc. (CCX), which offset CCX's research
expenses. CCX is a technology and drug development company in which the
Company has invested. The decrease in research and development expenses in
fiscal 1998 was the result of a decrease of $1,235,000 in payments by R&D
Europe under the Joint Biological Research Agreement with British Bio-
technology Group, plc, and a decrease in R&D Europe personnel costs as a
result of the restructuring of operations in fiscal 1997. Excluding the
above, the increase in consolidated research and development expenses for the
past three years was primarily the result of the development and release of
new cytokines, antibodies and assay kits by R&D Systems' Biotechnology
Division and the development and release of several new Hematology Division
control products. Management of the Company believes that R&D Systems will
continue to develop new products.
Earnings before taxes increased from $26,054,010 in fiscal 1999 to
$39,411,797 in fiscal 2000. The increase in earnings was primarily the result
of a $10,803,845 increase in R&D Systems' Biotechnology Division earnings, a
$777,379 increase in R&D Systems' Hematology Division earnings and a $804,885
increase in R&D Europe earnings. The increases were due mainly to increased
sales and improved Biotechnology Division gross margins. In addition, as a
result of the research grant money received by CCX mentioned above, CCX's
losses decreased $2,059,224 from fiscal 1999. The above were partially offset
by increased interest expense related to financing of the building
acquisition.
Earnings before taxes increased from $22,410,961 in fiscal 1998 to
$26,054,010 in fiscal 1999, despite $9.54 million in intangible asset
amortization in fiscal 1999 related to the Genzyme acquisition. The increase
in earnings was primarily the result of a $3,073,439 increase in R&D Systems'
Biotechnology Division earnings, a $583,237 increase in R&D Systems'
Hematology Division earnings and a $942,983 increase in R&D Europe earnings,
all as a result of increased sales. These increases were offset by increased
net losses of the Company's equity investment in CCX of $744,209.
Earnings before taxes increased from $15,987,662 in fiscal 1997 to
$22,410,961 in fiscal 1998. This increase in earnings was primarily the
result of a $3,987,242 increase in R&D Systems' Biotechnology Division
earnings and a $997,654 increase in Hematology Division earnings as a result
of increased sales and gross margins. In addition, R&D Europe's earnings
before taxes increased $2,052,874, despite a decrease in sales and gross
margin, as a result of lower expenses due to the restructuring of operations.
Income taxes for fiscal 2000, 1999 and 1998 were provided at rates of
approximately 33%, 36% and 32%, respectively. The increase in the tax rate in
fiscal 1999 was due to the net loss of the Company's equity investment in
ChemoCentryx for which no tax benefit was been provided and additional U.S.
federal taxes due to lower tax-exempt interest income. In fiscal 2000, CCX
losses were offset by grant money received, resulting in a decrease in the
tax rate. U.S. federal and state taxes have been reduced as a result of tax-
exempt interest income, the benefit of the foreign sales corporation, and the
federal and state credit for research and development expenditures. Foreign
income taxes have been provided at rates which approximate the tax rates in
the United Kingdom and Germany.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term investments at June 30, 2000, were
$59,824,291, an increase of 105% from the prior year. At June 30, 1999, cash,
equivalents and short-term investments were $29,114,124 compared to
$41,435,542 at June 30, 1998, a decrease of 30%. This decrease was due to the
cash outlay for the Genzyme acquisition. The Company has an unsecured line of
credit of $750,000 available at June 30, 2000. The interest rate on the line
of credit is at the prime rate of 9.5% at June 30, 2000.
Management of the Company expects to be able to meet its future cash and
working capital requirements for operations, debt repayment and capital
additions through currently available funds, cash generated from operations
and maturities of short-term investments.
Cash flows from operating activities
The Company generated cash from operations of $38,739,403, $28,421,859 and
$20,875,469 in fiscal 2000, 1999 and 1998, respectively. The majority of cash
generated from operating activities in all three years resulted from an
increase in net earnings after adjustment for noncash expenses.
Cash flows from investing activities
On July 1, 1999, the Company purchased the facilities it occupies in
Minneapolis, Minnesota for approximately $28 million. Cash of $4 million and
100,000 shares of common stock valued at $2.16 million were placed in escrow
during fiscal 1999. The remainder of the purchase price was financed through
cash on hand and a $20.4 million 15-year mortgage. In addition, on July 1,
1999, the Company paid $2 million and issued warrants to purchase 60,000
shares of common stock as a deposit on an option to purchase additional
property adjacent to its Minneapolis facility.
Capital additions (excluding the building purchase) were $8,505,709,
$5,564,033 and $2,780,194 in fiscal 2000, 1999 and 1998, respectively.
Included in fiscal 2000, 1999 and 1998 capital additions are building
improvements of $5.1, $3.5 and $1.2 million related to R&D Systems'
remodeling and expansion. The remaining capital additions in fiscal 2000,
1999 and 1998 were for laboratory, manufacturing and computer equipment.
Total capital additions for equipment and building improvements planned for
fiscal 2001 are expected to be approximately $5.8 million. All capital
additions are expected to be financed through currently available cash, cash
generated from operations and maturities of short-term investments.
The Company's net investment (withdrawal) in short-term investments in
fiscal 2000, 1999 and 1998 was $26,123,527, $1,022,721 and ($831,955),
respectively. The Company's investment policy is to place excess cash in
tax-exempt bonds with the objective of obtaining the highest possible return
with the lowest risk, while keeping funds accessible.
On July 1, 1998 the Company acquired the research products business of
Genzyme Corporation for $24.76 million cash, $17 million common stock and
royalties on the Company's biotechnology sales for five years. Cash and
equivalents at June 30, 1998 and maturities of short-term investments were
used to finance the cash portion of the acquisition.
Cash flows from financing activities
The Company received $6,470,910, $1,136,633 and $919,831 for the exercise of
options for 526,023, 192,852 and 97,541 shares of common stock in fiscal
2000, 1999 and 1998, respectively.
In fiscal 1999 and 1998, the Company purchased and retired 213,600 and
20,000 shares of Company common stock at a market value of $3,941,950 and
$280,000, respectively. In May 1995, the Company announced a plan to purchase
and retire up to $5 million of its common stock. In April 1997, this was
increased an additional $5 million, subject to market conditions. Through
June 30, 2000, $8,754,000 of common stock had been purchased under the plan.
Any additional purchases will be funded from currently available cash.
The Company has never paid cash dividends and has no plans to do so in
fiscal 2001. The Company's earnings will be retained for reinvestment in the
business.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," which
provides guidance on accounting for derivatives and hedge transactions. This
statement is effective for the Company for its first quarter of fiscal 2001.
The Company has initiated the evaluation of the effects of this
pronouncement. Management does not expect the effects of this pronouncement
will have a material impact on reported operating results or financial
position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "REVENUE RECOGNITION IN FINANCIAL
STATEMENTS," which provides guidance in applying generally accepted
accounting principles to revenue recognition in financial statements.
Management does not believe the application of this SAB is expected to have a
material impact on the Company's reported operating results or financial
position.
FORWARD-LOOKING INFORMATION
Statements in this Annual Report, and elsewhere, that are forward-looking
involve risks and uncertainties which may affect the Company's actual results
of operations. Certain of these risks and uncertainties which have affected
and, in the future, could affect the Company's actual results are discussed
below.
The biotechnology industry is subject to rapid and significant technological
change. While the hematology controls industry historically has been subject
to less rapid change, it too is evolving and is impacted significantly
by changes in the automated testing equipment offered by hardware
manufacturers. Competitors of the Company are numerous and include, among
others, specialized biotechnology firms, medical laboratory instrument and
equipment manufacturers and disposables suppliers, major pharmaceutical
companies, universities and other research institutions. There can be no
assurance that the Company's competitors will not succeed in developing
technologies and products that are more effective than any which have been or
are being developed by the Company or that would render the Company's
technologies and products obsolete or noncompetitive.
The Company's success will depend, in part, on its ability to obtain
licenses and patents, maintain trade secret protection and operate without
infringing the proprietary rights of others. The Company has obtained and is
negotiating licenses to produce a number of cytokines and related products
claimed to be owned by others. Since the Company has not conducted a patent
infringement study for each of its products, it is possible that products of
the Company may unintentionally infringe patents of third parties or that the
Company may have to alter its products or processes, pay licensing fees or
cease certain activities because of patent rights of third parties, thereby
causing additional unexpected costs and delays which may have a material
adverse effect on the Company.
The Company's expansion strategies, which include internal development of
new products, collaborations, investments in joint ventures and companies
developing new products related to the Company's business, and the
acquisition of companies for new products and additional customer base, carry
risks that objectives will not be achieved and future earnings will be
adversely affected.
Ongoing research and development activities, including preclinical and
clinical testing, and the production and marketing of the Company's products
are subject to regulation by numerous governmental authorities in the United
States and other countries. The approval process applicable to clinical
diagnostic products of the type that may be developed by the Company usually
takes a number of years and typically requires substantial expenditures.
Delays in obtaining approvals could adversely affect the marketing of new
products developed by the Company.
Recruiting and retaining qualified scientific and production personnel to
perform research and development work and product manufacturing are critical
to the Company's success. The Company's anticipated growth and its expected
expansion into areas and activities requiring additional expertise will
require the addition of new personnel and the development of additional
expertise by existing personnel. The failure to attract and retain such
personnel could adversely affect the Company's business.
Amgen Inc. has presented invoices in the amount of $31.9 million for
materials provided to the Company over past years, allegedly pursuant to a
contract under which no accounting or invoices were rendered for nine years.
The Company has brought a declaratory judgement action seeking to have the
court declare that no amount is owed. The Company's management believes that
no material amount is owed, that it has counterclaims against the other
party, and that the ultimate resolution of the matter will not have a
material adverse effect on the financial condition or results of operations
of the Company. See "Financial Statements, Note F. Commitments and
contingencies."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
At the end of fiscal 2000, the Company had an investment portfolio of fixed
income securities, excluding those classified as cash and cash equivalents,
of $42,468,183 (see Note A of Notes to Consolidated Financial Statements).
These securities, like all fixed income instruments, are subject to interest
rate risk and will decline in value if market interest rates increase.
However, the Company has the ability to hold its fixed income investments
until maturity and therefore the Company would not expect to recognize an
adverse impact in income or cash flows.
The Company operates internationally, and thus is subject to potentially
adverse movements in foreign currency rate changes. 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. Historically, the effect of movements in the
exchange rates has been immaterial to the consolidated operating results of
the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF EARNINGS
TECHNE CORPORATION AND SUBSIDIARIES
YEAR ENDED JUNE 30,
2000 1999 1998
------------ ----------- -----------
Net sales $103,838,155 $90,900,697 $67,291,438
Cost of sales 26,750,650 27,323,211 20,009,641
------------ ----------- -----------
Gross margin 77,087,505 63,577,486 47,281,797
Operating expenses (income):
Selling, general and administrative 17,315,131 16,862,217 15,367,759
Research and development (Note F) 11,198,309 12,004,798 10,637,804
Amortization of intangible assets
(Note A) 9,229,250 9,578,646 71,457
Interest expense 1,441,272 -- --
Interest income (1,508,254) (922,185) (1,206,184)
------------ ----------- -----------
37,675,708 37,523,476 24,870,836
------------ ----------- -----------
Earnings before income taxes 39,411,797 26,054,010 22,410,961
Income taxes (Note H) 12,829,000 9,398,000 7,228,000
------------ ----------- -----------
Net earnings $ 26,582,797 $16,656,010 $15,182,961
============ =========== ===========
Basic earnings per share $ 1.31 $ 0.83 $ 0.80
Diluted earnings per share $ 1.26 $ 0.81 $ 0.77
Weighted average common
shares outstanding:
Basic 20,312,741 20,117,367 18,952,968
Diluted 21,103,021 20,686,675 19,607,630
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
TECHNE CORPORATION AND SUBSIDIARIES
JUNE 30,
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 17,356,108 $ 12,769,468
Short-term available-for-sale
investments (Note A) 42,468,183 16,344,656
Trade accounts receivable, less
allowance for doubtful accounts
of $162,000 and $300,000, respectively 15,600,868 13,520,409
Inventories (Note C) 4,651,615 5,715,065
Deferred income taxes (Note H) 2,440,000 2,101,000
Prepaid expenses 494,117 399,850
Income taxes receivable 3,290,314 --
------------ ------------
Total current assets 86,301,205 50,850,448
Property and equipment (Note D) 46,266,177 15,065,234
Intangible assets (Note A) 36,335,500 45,564,750
Deferred income taxes (Note H) 3,938,000 3,137,000
Other long-term assets (Note F) 7,568,699 9,183,087
------------ ------------
$180,409,581 $123,800,519
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 2,630,164 $ 2,375,029
Salaries, wages and related accounts 2,998,696 2,313,450
Other accounts payable and accrued expenses 6,107,979 5,547,702
Income taxes payable -- 3,226,451
Current portion of long-term debt (Note E) 824,315 --
------------ -----------
Total current liabilities 12,561,154 13,462,632
Deferred rent -- 1,963,500
Royalty payable (Note B) 7,768,000 11,536,000
Long-term debt, less current portion (Note E) 18,935,049 --
Commitments and contingencies (Note F) -- --
Stockholders' equity (Note G):
Undesignated capital stock, no par;
authorized 5,000,000 shares; none
issued or outstanding -- --
Common stock, par value $.01 a share;
authorized 50,000,000 shares; issued and
outstanding 20,690,999 and 20,132,655
shares, respectively 206,910 201,327
Additional paid-in capital 53,064,354 34,525,581
Retained earnings 88,336,230 62,058,879
Accumulated other comprehensive income (loss) (462,116) 52,600
------------ ------------
Total stockholders' equity 141,145,378 96,838,387
------------ ------------
$180,409,581 $123,800,519
============ ============
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
TECHNE CORPORATION AND SUBSIDIARIES
ACCUM.
OTHER
COMPRE-
ADDITIONAL HENSIVE
COMMON STOCK PAID-IN RETAINED INCOME
SHARES AMOUNT CAPITAL EARNINGS (LOSS) TOTAL
---------- -------- ----------- ----------- --------- ------------
Balances at June 30, 1997 18,875,456 $188,755 $12,559,071 $34,903,146 $ 430,072 $ 48,081,044
Comprehensive income:
Net earnings -- -- -- 15,182,961 -- 15,182,961
Other comprehensive
income, net of tax:
Foreign currency trans-
lation adjustments -- -- -- -- 49,431 49,431
------------
Comprehensive income 15,232,392
Common stock issued:
Exercise of options
(Note G) 153,376 1,533 1,278,492 -- -- 1,280,025
Exercise of warrant
(Note G) 61,775 618 (618) -- -- --
Surrender and retirement
of stock to exercise
options (Note K) (20,624) (206) -- (359,988) -- (360,194)
Repurchase and retirement
of common stock (20,000) (200) -- (279,800) -- (280,000)
Tax benefit from exercise
of stock options -- -- 146,000 -- -- 146,000
Fair value of options
granted (Note K) -- -- 200,500 -- -- 200,500
Cancelation of non-vested
options (Note K) -- -- (469,000) -- -- (469,000)
---------- -------- ----------- ----------- --------- ------------
Balances at June 30, 1998 19,049,983 190,500 13,714,445 49,446,319 479,503 63,830,767
Comprehensive income:
Net earnings -- -- -- 16,656,010 -- 16,656,010
Other comprehensive
income, net of tax:
Foreign currency trans-
lation adjustments -- -- -- -- (426,903) (426,903)
------------
Comprehensive income 16,229,107
Common stock issued:
Exercise of options
(Note G) 213,870 2,139 1,238,178 -- -- 1,240,317
Acquisition (Note B) 987,206 9,872 16,990,128 -- -- 17,000,000
Real estate deposit
(Note B) 100,000 1,000 2,159,830 -- -- 2,160,830
Surrender and retirement
of stock to exercise
options (Note K) (4,804) (48) -- (103,636) -- (103,684)
Repurchase and retirement
of common stock (213,600) (2,136) -- (3,939,814) -- (3,941,950)
Tax benefit from exercise
of stock options -- -- 423,000 -- -- 423,000
---------- -------- ----------- ----------- --------- ------------
Balances at June 30, 1999 20,132,655 201,327 34,525,581 62,058,879 52,600 96,838,387
Comprehensive income:
Net earnings -- -- -- 26,582,797 -- 26,582,797
Other comprehensive
income, net of tax:
Foreign currency trans-
lation adjustments -- -- -- -- (514,716) (514,716)
------------
Comprehensive income 26,068,081
Common stock issued:
Exercise of options
(Note G) 564,815 5,648 6,770,773 -- -- 6,776,421
Fair value of warrants
issued (Note F) -- -- 858,000 -- -- 858,000
Surrender and retirement
of stock to exercise
options (Note K) (6,471) (65) -- (305,446) -- (305,511)
Tax benefit from exercise
of stock options -- -- 10,910,000 -- -- 10,910,000
---------- -------- ----------- ----------- --------- ------------
Balances at June 30, 2000 20,690,999 $206,910 $53,064,354 $88,336,230 $(462,116) $141,145,378
========== ======== =========== =========== ========= ============
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE K)
TECHNE CORPORATION AND SUBSIDIARIES
YEAR ENDED JUNE 30,
2000 1999 1998
------------ ------------ ------------
Cash flows from operating activities:
Net earnings $ 26,582,797 $ 16,656,010 $ 15,182,961
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 12,651,350 11,890,384 2,302,686
Deferred income taxes (1,157,000) (1,902,000) (356,000)
Deferred rent -- 308,400 712,800
Other (404,042) 2,081,435 1,107,762
Change in current assets and
current liabilities, net of
acquisition:
(Increase) decrease in:
Trade accounts receivable (2,141,023) (3,764,422) (1,037,755)
Inventories 986,120 3,754,942 266,427
Prepaid expenses (9,850) (14,113) 122,005
Increase (decrease) in:
Trade and other accounts payable (2,898,880) (2,434,625) 1,032,583
Salaries, wages and related
accounts 695,184 314,777 214,554
Income taxes payable 4,434,747 1,531,071 1,327,446
------------ ------------ ------------
Total adjustments 12,156,606 11,765,849 5,692,508
------------ ------------ ------------
Net cash provided by operating
activities 38,739,403 28,421,859 20,875,469
Cash flows from investing activities:
Acquisition (Note B) -- (24,989,542) --
Real estate deposits (Notes B and F) (2,001,000) (4,000,000) --
Additions to property and equipment (30,367,862) (5,564,033) (2,780,194)
Proceeds from sale of equipment -- -- 233,862
Purchase of short-term
available-for-sale investments (39,569,406) (15,025,991) (24,170,831)
Proceeds from sale of short-term
available-for-sale investments 13,445,879 14,003,270 25,002,786
Increase in other long-term assets (1,552,160) (3,060,826) (2,347,123)
------------ ------------ ------------
Net cash used in investing
activities (60,044,549) (38,637,122) (4,061,500)
Cash flows from financing activities:
Issuance of common stock 6,470,910 1,136,633 919,831
Repurchase of common stock -- (3,941,950) (280,000)
Proceeds from issuance of
long-term debt 20,400,000 -- --
Payments on long-term debt (640,636) -- --
------------ ------------ ------------
Net cash provided by (used in)
financing activities 26,230,274 (2,805,317) 639,831
Effect of exchange rate changes
on cash (338,488) (323,559) 61,440
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents 4,586,640 (13,344,139) 17,515,240
Cash and cash equivalents at
beginning of year 12,769,468 26,113,607 8,598,367
------------ ------------ ------------
Cash and cash equivalents at end
of year $ 17,356,108 $ 12,769,468 $ 26,113,607
============ ============ ============
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TECHNE CORPORATION AND SUBSIDIARIES
Years Ended June 30, 2000, 1999 and 1998
A. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS: Techne Corporation and subsidiaries (the Company)
are engaged domestically in the development and manufacture of biotechnology
products and hematology calibrators and controls through its wholly owned
subsidiary, Research and Diagnostic (R&D) Systems, Inc. Through its wholly
owned English subsidiary, R&D Systems Europe Ltd., the Company distributes
biotechnology products throughout Europe. R&D Systems Europe Ltd. has a sales
subsidiary, R&D Systems GmbH, in Germany. The Company also has a foreign
sales corporation, Techne Export Inc.
ESTIMATES: The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
RISKS AND UNCERTAINTIES: There are no concentrations of business transacted
with a particular customer or supplier nor concentrations of revenue from a
particular product or geographic area that would severely impact the Company
in the near term.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
TRANSLATION OF FOREIGN FINANCIAL STATEMENTS: Assets and liabilities of the
Company's foreign operations are translated at year end rates of exchange and
the foreign statements of earnings are translated at the average rate of
exchange for the year. Gains and losses resulting from translating foreign
currency financial statements are not included in operations but are
accumulated in other comprehensive income. Foreign currency transaction gains
and losses are included in operations.
REVENUE RECOGNITION: The Company recognizes revenues upon shipment of
products. Revenues are reduced to reflect estimated returns.
RESEARCH AND DEVELOPMENT: Research and development expenditures are expensed
as incurred. Development activities generally relate to creating new
products, improving or creating variations of existing products, or modifying
existing products to meet new applications.
EARNINGS PER SHARE: The number of shares used to calculate earnings per share
are as follows:
YEAR ENDED JUNE 30,
2000 1999 1998
---------- ---------- ----------
Weighted average common shares
outstanding (basic) 20,312,741 20,117,367 18,952,968
Dilutive stock options and
warrants outstanding 790,280 569,308 654,662
---------- ---------- ----------
Weighted average common shares
outstanding (diluted) 21,103,021 20,686,675 19,607,630
========== ========== ==========
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand and
highly liquid investments with original maturities less than three months.
SHORT-TERM INVESTMENTS: Short-term investments consist of tax-exempt bonds
with original maturities of generally three months to one year.
The Company reports marketable securities at fair market value. Unrealized
gains and losses on available-for-sale securities are excluded from income,
but are included in other comprehensive income. The Company considers all of
its marketable securities available-for-sale. Fair market values are based on
quoted market prices.
Proceeds from sales of available-for-sale securities were $13,445,879,
$14,003,270 and $25,002,786 during fiscal 2000, 1999 and 1998, respectively.
There were no material gross realized gains or losses on these sales.
Realized gains and losses are determined on the specific identification
method. Unrealized gains and losses at June 30, 2000, 1999 and 1998 were not
material.
INVENTORIES: Inventories are stated at the lower of cost (first-in, first-out
method) or market.
DEPRECIATION AND AMORTIZATION: Equipment is being depreciated using the
straight-line method over an estimated useful life of five years. Buildings
and building improvements are being amortized over estimated useful lives of
five to forty years.
INTANGIBLES: Intangible assets, related to the acquisition of Genzyme
Corporation's research products business in fiscal 1999 (Note B) and Amgen
Inc.'s research reagent and diagnostic kit business in fiscal 1992 are being
amortized on a straight-line basis over the estimated useful lives and
consist of the following:
JUNE 30,
USEFUL LIFE 2000 1999
----------- ----------- -----------
Customer list 10 years $18,010,000 $18,010,000
Technology licensing agreements 16 years 500,000 500,000
Goodwill 6 years 39,075,089 39,075,089
----------- -----------
57,585,089 57,585,089
Less accumulated amortization 21,249,589 12,020,339
----------- -----------
$36,335,500 $45,564,750
=========== ===========
IMPAIRMENT OF LONG-LIVED ASSETS: Management periodically reviews the carrying
value of long-term assets based on the estimated undiscounted future cash
flows expected to result from the use of these assets. Should the sum of the
expected future net cash flows be less than the carrying value, an impairment
loss would be recognized. An impairment loss would be measured by the amount
by which the carrying value of the asset exceeds the fair value of the asset
based on discounted estimated future cash flows. To date, management has
determined that no impairment exists.
INVESTMENTS: The Company has an approximate 49% interest in the issued and
outstanding voting shares of ChemoCentryx, Inc. (CCX), a technology and drug
development company. The Company accounts for this investment under the
equity method of accounting. The Company includes 100% of the operating
results of CCX in its consolidated financial statements due to the limited
amount of cash consideration provided by the holders of the common shares of
CCX. The Company's net investment in CCX was $3,553,516 and $1,910,931 at
June 30, 2000 and 1999, respectively.
STOCK OPTIONS: As permitted by SFAS No. 123, the Company has elected to
continue following the guidance of Accounting Principles Board (APB) Opinion
No. 25 for measurement and recognition of stock-based transactions with
employees. No compensation cost has 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.
RECLASSIFICATIONS: Certain reclassifications have been made to prior years'
consolidated financial statements to conform to the current year
presentation. These reclassifications had no impact on net earnings or
stockholders' equity as previously reported.
NEW ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES," which provides guidance on accounting for
derivatives and hedge transactions. This statement is effective for the
Company for its first quarter of fiscal 2001. The Company has initiated the
evaluation of the effects of this pronouncement. Management does not expect
the effects of this pronouncement will have a material impact on reported
operating results or financial position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "REVENUE RECOGNITION IN FINANCIAL
STATEMENTS," which provides guidance in applying generally accepted
accounting principles to revenue recognition in financial statements.
Management does not believe the application of this SAB is expected to have a
material impact on the Company's reported operating results or financial
position.
B. ACQUISITIONS:
On July 1, 1999, the Company purchased the facilities it occupies in
Minneapolis, Minnesota for approximately $28 million. Other long-term assets
at June 30, 1999 included cash of $4 million and 100,000 shares of Common
Stock valued at $2.16 million which were placed in escrow during fiscal 1999.
The remainder of the purchase price was financed through cash on hand and a
$20.4 million 15-year mortgage.
C. INVENTORIES:
Inventories consist of:
JUNE 30,
2000 1999
---------- ----------
Raw materials $2,288,719 $2,105,150
Finished goods 2,238,164 3,499,688
Supplies 124,732 110,227
---------- ----------
$4,651,615 $5,715,065
========== ==========
D. PROPERTY AND EQUIPMENT:
Property and equipment consist of:
JUNE 30,
2000 1999
----------- -----------
Cost:
Land $ 871,000 $ --
Buildings and improvements 43,965,312 --
Laboratory equipment 14,114,039 11,308,984
Office and computer equipment 3,535,164 3,294,704
Leasehold improvements 180,770 13,770,763
----------- -----------
62,666,285 28,374,451
Less accumulated depreciation
and amortization 16,400,108 13,309,217
----------- -----------
$46,266,177 $15,065,234
=========== ===========
E. DEBT:
The Company's short-term line of credit facility consists of an unsecured
line of credit of $750,000 at June 30, 2000. The interest rate charged on the
line of credit is at the prime rate of 9.5% at June 30, 2000. There were no
borrowings on the line in the current year.
Long-term debt consists of:
JUNE 30,
2000
-----------
Mortgage note, payable in monthly installments
of $183,631 including interest $19,759,364
Less current portion 824,315
-----------
$18,935,049
===========
The interest rate on the mortgage note is fixed at 7% for the first seven
years and is thereafter adjusted based on U.S. Treasury rates.
Principal maturities of long-term debt as of June 30, 2000 are as follows:
YEAR ENDING JUNE 30:
- ---------------------
2001 $ 824,315
2002 884,760
2003 949,637
2004 1,016,017
2005 1,093,772
Thereafter 14,990,863
-----------
$19,759,364
===========
F. COMMITMENTS AND CONTINGENCIES:
The Company leases buildings, vehicles and various data processing, office
and laboratory equipment under operating leases. These leases provide for
renewal or purchase options during or at the end of the lease periods. At
June 30, 2000, aggregate net minimum rental commitments under noncancelable
leases having an initial or remaining term of more than one year are payable
as follows:
YEAR ENDING JUNE 30:
- ---------------------
2001 $ 231,540
2002 420,670
2003 396,182
2004 391,217
2005 386,784
Thereafter 4,254,625
----------
$6,081,018
==========
Total rent expense was approximately $305,000, $2,587,000 and $2,616,000 for
the years ended June 30, 2000, 1999 and 1998, respectively.
In fiscal 1999, the Company entered into two option agreements for real
estate adjacent to its R&D Systems' facility. The purchase price for the
property under the first option is $7,951,000 and six-year warrants to
purchase 60,000 shares of the Company's common stock at $23.77 per share.
This purchase option expires on November 15, 2001. On July 1, 1999, the
Company paid $2 million cash and issued the warrants as a nonrefundable
deposit on the option purchase price. The fair market value of the warrants
was $858,000. The deposit is included in other long-term assets at June 30,
2000.
The purchase price for the property under the second option is $7 million
plus capital improvement costs. This option expires on January 1, 2005 and
requires a nonrefundable deposit of $2 million. A deposit of $1,000 was made
on this option in fiscal 2000 with the remainder of the deposit due on the
earlier of January 15, 2002 or sixty days after exercise of the first option.
In fiscal 1994, the Company entered into a four year Joint Biological
Research Agreement with British Bio-technology Group plc. Under the
agreement, R&D Systems Europe Ltd. received the exclusive right to develop,
manufacture, market and sell biomolecules developed by British Bio-technology
Group, plc. or its subsidiaries and any resulting diagnostic kits in the
research reagent and diagnostic markets. In June 1997, the agreement was
extended for an additional five years for 100,000 British pounds per year.
The Company terminated the agreement effective December 31, 1999. Research
and development expenses include $80,000, $164,000 and $165,000 for the years
ended June 30, 2000, 1999 and 1998, respectively, under this agreement.
A party has presented invoices in the amount of $31.9 million for materials
provided to the Company over past years, allegedly pursuant to a contract
under which no accounting or invoices were rendered for nine years. The
Company has brought a declaratory judgement action seeking to have the court
declare that no amount is owed. The Company's management believes that no
material amount is owed, that it has claims against the other party, and that
the ultimate resolution of the matter will not have a material adverse effect
on the financial condition or results of operations of the Company.
The Company is routinely subject to claims and involved in legal actions
which are incidental to the business of the Company. Although it is difficult
to predict the ultimate outcome of these matters, management believes that
any ultimate liability will not materially affect the consolidated financial
position or operations of the Company.
G. STOCKHOLDERS' EQUITY:
STOCK OPTION PLANS: The Company has stock option plans which provide for the
granting of stock options to employees (the TECHNE Corporation 1997 and 1987
Incentive Stock Option Plans) and to employees, officers, directors and
consultants (the TECHNE Corporation 1998 and 1988 Nonqualified Stock Option
Plans). The plans are administered by the Board of Directors, or a committee
designated by the Board, which determines the persons who are to receive
awards under the plans, the number of shares subject to each award and the
term and exercise price of each option. The maximum term of options granted
under all plans is ten years. The number of shares of common stock authorized
to be issued is 600,000, 1,600,000, 300,000 and 1,000,000 under the TECHNE
Corporation 1997 Incentive Stock Option Plan, the TECHNE Corporation 1987
Incentive Stock Option Plan, the TECHNE Corporation 1998 Nonqualified Stock
Option Plan and the TECHNE Corporation 1988 Nonqualified Stock Option Plan,
respectively.
Stock option activity during the three years ended June 30, 2000 consists of
the following:
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
Outstanding at June 30, 1997 1,285,802 $ 8.25
Granted 181,984 16.26
Exercised (153,376) 8.35
Canceled (59,352) 12.91
--------- ------
Outstanding at June 30, 1998 1,255,058 9.42
Granted 116,645 17.11
Exercised (213,870) 5.80
--------- ------
Outstanding at June 30, 1999 1,157,833 10.87
Granted 115,652 35.86
Exercised (564,815) 11.99
--------- ------
Outstanding at June 30, 2000 708,670 $14.05
========= ======
Options exercisable at June 30:
1998 956,058 $ 9.04
1999 935,833 10.87
2000 649,169 13.10
Currently outstanding and exercisable stock options at June 30, 2000 consist
of the following:
OPTIONS OUTSTANDING
------------------------------------------------
WEIGHTED AVG.
CONTRACTUAL WEIGHTED AVG.
EXERCISE PRICES OUTSTANDING LIFE (YRS.) EXERCISE PRICE
- ----------------- ------------- -------------- ---------------
$ 5.38- 9.99 388,334 4.25 $ 7.54
10.00-14.99 90,516 4.42 11.76
15.00-19.99 127,071 6.75 17.75
25.00-40.00 102,749 7.92 36.05
------- ---- ------
708,670 5.25 $14.05
======= ==== ======
OPTIONS EXERCISABLE
------------------------------------------------
WEIGHTED AVG.
EXERCISE PRICES EXERCISABLE EXERCISE PRICE
- ----------------- ----------- --------------
$ 5.00- 9.99 377,334 $ 7.50
10.00-14.99 87,516 11.76
15.00-19.99 119,071 17.91
25.00-40.00 65,248 38.52
------- ------
649,169 $13.10
======= ======
Total compensation cost recognized for the year ended June 30, 1998 for stock
options granted to consultants was $34,000. No options were granted to
consultants during the years ended June 30, 2000 and 1999. If compensation
cost for employee options granted in 2000, 1999 and 1998 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, "ACCOUNTING FOR
STOCK-BASED COMPENSATION," the Company's net income and earnings per share
would have been as follows:
YEAR ENDED JUNE 30,
2000 1999 1998
----------- ----------- -----------
Net income:
As reported $26,582,797 $16,656,010 $15,182,961
Pro forma 24,817,402 15,071,990 13,464,290
Basic earnings per share:
As reported $ 1.31 $ 0.83 $ 0.80
Pro forma 1.22 0.75 0.71
Diluted earnings per share:
As reported $ 1.26 $ 0.81 $ 0.77
Pro forma 1.18 0.73 0.69
The fair value of options granted under the Company's stock option plans
during fiscal 2000, 1999 and 1998 was estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used:
no dividend yield, expected volatility of between 35% and 70%, risk-free
interest rates between 4.6% and 6.8% and expected lives between 7 and 10
years.
WARRANTS: In fiscal 1994, the Company issued a warrant to purchase 100,000
shares of the Company's common stock at $6.88 as part of the acquisition of
R&D Systems Europe Ltd. The warrant was exercised in fiscal 1998 in a
cashless exercise which resulted in the issuance of 61,775 shares of common
stock.
In fiscal 2000, the Company issued warrants to purchase 60,000 shares of the
Company's common stock at $23.77 per share as a nonrefundable deposit on an
option to purchase property adjacent to its R&D Systems' facility. The fair
market value of the warrants was $858,000.
H. INCOME TAXES:
The provisions for income taxes consist of the following:
YEAR ENDED JUNE 30,
2000 1999 1998
----------- ------------ ------------
Earnings before income
taxes consist of:
Domestic $34,354,428 $21,801,526 $19,101,460
Foreign 5,057,369 4,252,484 3,309,501
----------- ----------- -----------
$39,411,797 $26,054,010 $22,410,961
=========== =========== ===========
Taxes on income consist of:
Currently payable:
Federal $ 1,358,000 $ 9,122,000 $ 6,280,000
State 305,000 355,000 255,000
Foreign 1,396,000 1,355,000 903,000
Tax benefit from exercise
of stock options 10,910,000 423,000 146,000
Net deferred (1,140,000) (1,857,000) (356,000)
----------- ----------- -----------
$12,829,000 $ 9,398,000 $ 7,228,000
=========== =========== ===========
The following is a reconciliation of the federal tax calculated at the
statutory rate of 35% to the actual income taxes provided:
YEAR ENDED JUNE 30,
2000 1999 1998
----------- ----------- -----------
Computed expected federal
income tax expense $13,794,000 $ 9,119,000 $ 7,844,000
State income taxes, net
of federal benefit 335,000 377,000 270,000
Foreign sales corporation (566,000) (444,000) (317,000)
Research and development
credits (605,000) (334,000) (376,000)
Tax-exempt interest (318,000) (165,000) (288,000)
Other 189,000 845,000 95,000
----------- ---------- -----------
$12,829,000 $9,398,000 $ 7,228,000
=========== ========== ===========
Deferred income taxes are provided to record the income tax effect of
temporary differences between the tax basis and financial reporting basis of
assets and liabilities. Temporary differences comprising deferred taxes on
the consolidated balance sheets are as follows:
JUNE 30,
2000 1999
---------- ----------
Inventory $1,335,000 $1,032,000
Inventory costs capitalized 619,000 509,000
Foreign net operating loss carryforward 81,000 158,000
Unrealized profit on intercompany sales 293,000 250,000
Other 112,000 152,000
---------- ----------
Current asset 2,440,000 2,101,000
Excess of book over tax intangible
asset amortization 2,613,000 1,595,000
Excess of book over tax research expense 382,000 621,000
Deferred rent -- 687,000
Excess of book over tax depreciation 870,000 369,000
Other 73,000 (135,000)
---------- ----------
Noncurrent asset 3,938,000 3,137,000
---------- ----------
$6,378,000 $5,238,000
========== ==========
At June 30, 2000, approximately $114,000 of non-U.S. tax losses were
available for carryforward indefinitely.
The Company's tax returns are subject to audit by various governmental
entities in the normal course of business. The Company does not believe that
such audits will have a material impact on the Company's financial position
or results of operations.
I. SEGMENT INFORMATION:
The Company has three reportable operating segments based on the nature of
products and geographic location: Hematology Division, Biotechnology Division
and R&D Systems Europe. The Hematology Division develops and manufactures
hematology controls and calibrators for sale world-wide. The Biotechnology
Division develops and manufactures biotechnology research and diagnostic
products for sale world-wide. R&D Systems Europe distributes Biotechnology
Division products throughout Europe. No customer accounted for more than 10%
of the Company's revenues for the years ended June 30, 2000, 1999 and 1998.
The accounting policies of the segments are the same as those described in
Note A. In evaluating segment performance, management focuses on sales and
income before taxes. Sales between segments are made at prices which would
approximate transfers to unaffiliated distributors.
Following is financial information relating to the operating segments:
YEAR ENDED JUNE 30,
2000 1999 1998
------------ ----------- -----------
External sales
Hematology $ 13,575,463 $12,673,544 $11,784,093
Biotechnology 64,230,320 54,960,816 37,713,747
R&D Systems Europe 26,032,372 23,266,337 17,793,598
------------ ----------- -----------
Total external sales $103,838,155 $90,900,697 $67,291,438
============ =========== ===========
Intersegment sales
Hematology $ -- $ -- $ --
Biotechnology 13,422,813 11,578,230 7,788,587
R&D Systems Europe 135,106 187,054 557,662
------------ ----------- -----------
Total intersegment sales $ 13,557,919 11,765,284 $ 8,346,249
============ =========== ===========
Income before taxes
Hematology $ 4,483,839 $ 3,706,460 $ 3,123,223
Biotechnology 31,223,230 20,419,385 17,345,946
R&D Systems Europe 5,057,369 4,252,484 3,309,501
Corporate and other (1,352,641) (2,324,319) (1,367,709)
------------ ----------- ------------
Total income before taxes $ 39,411,797 $26,054,010 $22,410,961
============ =========== ===========
Interest income
Hematology $ 322,166 $ 289,105 $ 278,601
Biotechnology 751,720 313,373 753,253
R&D Systems Europe 376,405 213,589 125,230
Corporate and other 57,963 106,118 49,100
------------ ----------- -----------
Total interest income $ 1,508,254 $ 922,185 $ 1,206,184
============ =========== ===========
Depreciation and
amortization
Hematology $ 187,077 $ 170,105 $ 206,330
Biotechnology 11,135,442 11,109,795 1,392,442
R&D Systems Europe 221,272 239,277 342,140
Corporate and other 1,107,559 371,207 361,774
------------ ----------- -----------
Total depreciation
and amortization $ 12,651,350 $11,890,384 $ 2,302,686
============ =========== ===========
Capital purchases
Hematology $ 437,057 $ 174,844 $ 101,258
Biotechnology 4,122,418 3,940,127 2,299,798
R&D Systems Europe 150,471 287,413 193,070
Corporate and other 25,657,916 1,161,649 186,068
------------ ----------- -----------
Total capital purchases $ 30,367,862 $ 5,564,033 $ 2,780,194
============ =========== ===========
Corporate and other reconciling items include the results of unallocated
corporate expenses and assets, the elimination of profit on intersegment
sales and the operations of the Company's equity investment in ChemoCentryx,
Inc.
Following is financial information relating to geographic areas:
YEAR ENDED JUNE 30,
2000 1999 1998
------------ ----------- -----------
External sales
United States $ 62,927,628 $54,261,592 $40,045,282
Other areas 40,910,527 36,639,105 27,246,156
------------ ----------- -----------
Total external sales $103,838,155 $90,900,697 $67,291,438
============ =========== ===========
Long-lived assets
United States $ 48,928,147 $20,923,992 $11,078,177
Other areas 374,325 462,898 437,546
------------ ----------- -----------
Total long-lived assets $ 49,302,472 $21,386,890 $11,515,723
============ =========== ===========
External sales are attributed to countries based on the location of the
customer/distributor. Long-lived assets are comprised of land, buildings and
improvements, equipment and deposits on real estate.
J. BENEFIT PLANS:
PROFIT SHARING PLAN: The Company has a Profit Sharing and Savings Plan for
non-union U.S. employees, which conforms to IRS provisions for 401(k) plans.
The Company may make profit sharing contributions at the discretion of the
Board of Directors. Operations have been charged for contributions to the
plan of $787,500, $651,000 and $574,500 for the years ended June 30, 2000,
1999 and 1998, respectively.
STOCK BONUS PLANS: The Company also has Stock Bonus Plans covering non-union
employees. The Company may make contributions to the plans in the form of
common stock, cash or other property at the discretion of the Board of
Directors. The Company purchased its common stock at market value for
contribution to the plans for the years ended June 30, 2000, 1999 and 1998
and operations have been charged $832,000, $684,000 and $595,000,
respectively.
PERFORMANCE INCENTIVE PROGRAM: Under certain employment agreements with
executive officers, the Company recorded bonuses of $126,000, $80,000 and
$109,000 for the years ended June 30, 2000, 1999 and 1998, respectively. In
addition, options for 3,152, 4,145 and 5,984 shares of common stock were
granted to the executive officers during fiscal 2000, 1999 and 1998,
respectively.
K. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
The Company paid and received cash for the following items:
YEAR ENDED JUNE 30,
2000 1999 1998
---------- ---------- ----------
Income taxes paid $9,561,485 $9,763,600 $6,602,926
Interest paid 1,326,009 -- --
Interest received 1,626,260 1,019,630 1,431,305
Noncash transactions during the years ended June 30, 2000, 1999 and 1998
consisted of:
In fiscal 1998 stock options with fair values of $200,500 were granted to
consultants for services to be provided to the Company. In fiscal 1998 the
Company canceled all non-vested stock options granted to consultants.
In fiscal 2000 stock options for 38,792 shares of common stock were exercised
by surrender of 6,471 shares of common stock at fair market value of
$305,511. In fiscal 1999 stock options for 21,018 shares of common stock were
exercised by surrender of 4,804 shares of common stock at fair market value
of $103,684. In fiscal 1998 stock options for 55,835 shares of common stock
were exercised by surrender of 20,624 shares of common stock at fair market
value of $360,194.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
TECHNE Corporation
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheets of TECHNE
Corporation and subsidiaries as of June 30, 2000 and 1999, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the three years in the period ended June 30, 2000. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of TECHNE Corporation and
subsidiaries at June 30, 2000 and 1999 and the results of their operations
and cash flows for each of the three years in the period ended June 30, 2000,
in conformity with accounting principles generally accepted in the United
States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
August 15, 2000 (September 19, 2000 as to the sixth paragraph of Note F.)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Other than "Executive Officers of the Company" which is set forth at the end
of Part I of this Form 10-K, the information required by Item 10 is
incorporated herein by reference to the sections entitled "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Company's proxy statement for its 2000 Annual Meeting of Shareholders
which will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal year for which
this report is filed.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
the section entitled "Executive Compensation" in the Company's proxy
statement for its 2000 Annual Meeting of Shareholders which will be filed
with the Securities and Exchange Commission pursuant to Regulation 14A within
120 days after the close of the fiscal year for which this report is filed.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference to the
sections entitled "Principal Shareholders" and "Management Shareholdings" in
the Company's proxy statement for its 2000 Annual Meeting of Shareholders
which will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the close of the fiscal year for which
this report is filed.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
A. (1) List of Financial Statements.
The following Consolidated Financial Statements are filed as part
of this Report:
Consolidated Statements of Earnings for the Years Ended
June 30, 2000, 1999 and 1998
Consolidated Balance Sheets as of June 30, 2000 and 1999
Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended
June 30, 2000, 1999 and 1998
Notes to Consolidated Financial Statements for the Years
Ended June 30, 2000, 1999 and 1998
Independent Auditors' Report on Consolidated Financial Statements
(2) Financial Statement Schedules.
None.
(3) Exhibits.
See Exhibit Index immediately following signature page.
B. Reports on Form 8-K:
No report on Form 8-K was filed during the quarter ended June 30, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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
Date: September 27, 2000 Thomas E. Oland
-----------------------------
By: Thomas E. Oland
Its: President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Date Signature and Title
- ---- ------------------------------
September 27, 2000 Thomas E. Oland
------------------------------
Thomas E. Oland
President, Treasurer and Director
(principal executive officer and
principal financial and accounting
officer)
September 27, 2000 Roger C. Lucas
Dr. Roger C. Lucas, Director
September 27, 2000 Howard V. O'Connell
------------------------------
Howard V. O'Connell, Director
September 27, 2000 G. Arthur Herbert
------------------------------
G. Arthur Herbert, Director
September 27, 2000 Randolph C. Steer
------------------------------
Dr. Randolph C. Steer, Director
September 27, 2000 Lowell E. Sears
------------------------------
Lowell E. Sears, Director
September 27, 2000 Christopher S. Henney
------------------------------
Dr. Christopher S. Henney, Director
September 27, 2000 Timothy M. Heaney
------------------------------
Timothy M. Heaney, Director
EXHIBIT INDEX
for Form 10-K for the 2000 Fiscal Year
Exhibit
Number Description
- ------- -----------
3.1 Restated Articles of Incorporation of Company, as amended to date
--incorporated by reference to Exhibit 19.1 of the Company's Form
10-Q for the quarter ended September 30, 1991*
3.2 Restated Bylaws, as amended to date--incorporated by reference to
Exhibit 3.2 of the Company's Form 10, dated October 27, 1988*
10.1 Employee Agreement with Respect to Inventions, Proprietary
Information, and Unfair Competition with Thomas E. Oland-
incorporated by reference to Exhibit 10.2 of the Company's Form
10, dated October 27, 1988*
10.2** Company's Profit Sharing Plan--incorporated by reference to
Exhibit 10.6 of the Company's Form 10, dated October 27, 1988*
10.3** Company's Stock Bonus Plan--incorporated by reference to Exhibit
10.7 of the Company's Form 10, dated October 27, 1988*
10.4** 1987 Incentive Stock Option Plan--incorporated by reference to
Exhibit 10.14 of the Company's Form 10, dated October 27, 1988*
10.5 Form of Stock Option Agreement for 1987 Incentive Stock Option
Plan--incorporated by reference to Exhibit 10.15 of the Company's
Form 10, dated October 27, 1988*
10.6** 1988 Nonqualified Stock Option Plan--incorporated by reference to
Exhibit 10.16 of the Company's Form 10, dated October 27, 1988*
10.7 Form of Stock Option Agreement for Nonqualified Stock Option Plan
--incorporated by reference to Exhibit 10.17 of the Company's Form
10, dated October 27, 1988*
10.8 International Distributor Agreement dated October 1, 1991 between
Research and Diagnostic Systems, Inc. and Hycel, S.A.-
incorporated by reference to Exhibit 28.2 of the Company's Form
8-K dated September 30, 1991, as amended by Forms 8 dated November
1, 1991 and November 25, 1991*
10.9** Employment Agreement, dated March 6, 1996, with James A.
Weatherbee--incorporated by reference to Exhibit 10.24 of the
Company's Form 10-K for the year ended June 30, 1996*
10.10** Employment Agreement, dated March 6, 1996, with Monica Tsang-
incorporated by reference to Exhibit 10.25 of the Company's Form
10-K for the year ended June 30, 1996*
10.11** 1997 Incentive Stock Option Plan--incorporated by reference to
Exhibit 10.24 of the Company's Form 10-K for the year ended June
30, 1997*
10.12 Form of Stock Option Agreement for 1997 Incentive Stock Option
Plan--incorporated by reference to Exhibit 10.25 of the Company's
Form 10-K for the year ended June 30, 1997*
10.13 Investment Agreement between ChemoCentryx, Inc. and Techne
Corporation dated November 18, 1997--incorporated by reference to
Exhibit 10.1 of the Company's Form 10-Q for the quarter ended
December 31, 1997*
10.14 Purchase and Sale Agreement dated as of June 22, 1998 among Techne
Corporation, Research and Diagnostic Systems, Inc. and Genzyme
Corporation--incorporated by reference to Exhibit 2.1 of the
Company's Form 8-K dated July 1, 1998, as amended by Form 8-K/A
dated September 14, 1998*
10.15** 1998 Nonqualified Stock Option Plan--incorporated by reference to
Exhibit 10.1 of the Company's Form 10-Q for the quarter ended
September 30, 1998*
10.16 Form of Stock Option Agreement for 1998 Nonqualified Stock Option
Plan--incorporated by reference to Exhibit 10.2 of the Company's
Form 10-Q for the quarter ended September 30, 1998*
10.17 Purchase Agreement dated January 22, 1999, between R&D Systems,
Inc. and Hillcrest Development, relating to the purchase of
property as 614 and 640 McKinley Place NE and 2201 Kennedy Street
in Minneapolis, Minnesota and First amendment dated February 5,
1999--incorporated by reference to Exhibit 10.1 of the Company's
Form 10-Q for the quarter ended December 31, 1998*
10.18** Extension, dated March 31, 1999, to Employment Agreement with
Monica Tsang, Ph.D.--incorporated by reference to Exhibit 10.2 of
the Company's Form 10-Q for the quarter ended March 31, 1999*
10.19** Extension, dated March 31, 1999, to Employment Agreement with
Marcel Veronneau--incorporated by reference to Exhibit 10.3 of the
Company's Form 10-Q for the quarter ended March 31, 1999*
10.20 Second Amendment, dated February 2, 1999, to Purchase Agreement
dated January 22, 1999 between R&D Systems, Inc. and Hillcrest
Development--incorporated by reference to Exhibit 10.4 of the
Company's Form 10-Q for the quarter ended March 31, 1999*
10.21 Third Amendment, dated April 3, 1999, to Purchase Agreement dated
January 22, 1999 between R&D Systems, Inc. and Hillcrest
Development--incorporated by reference to Exhibit 10.5 of the
Company's Form 10-Q for the quarter ended March 31, 1999*
10.22 Phase I Option Agreement, dated February 10, 1999, between R&D
Systems, Inc. and Hillcrest Development and form of Purchase
Agreement relating to the purchase of property at 2101 Kennedy
Street in Minneapolis, Minnesota-- incorporated by reference to
Exhibit 10.6 of the Company's Form 10-Q for the quarter ended
March 31, 1999*
10.23 First Amendment, dated April 10, 1999, to Phase I Option Agreement
dated February 10, 1999-- incorporated by reference to Exhibit
10.7 of the Company's Form 10-Q for the quarter ended March 31,
1999*
10.24 Phase II Option Agreement, dated February 10, 1999, between R&D
Systems, Inc. and Hillcrest Development and form of Purchase
Agreement relating to the purchase of property at 2001 Kennedy
Street in Minneapolis, Minnesota-- incorporated by reference to
Exhibit 10.8 of the Company's Form 10-Q for the quarter ended
March 31, 1999*
10.25 Second Amendment, dated June 9, 1999, to Phase I Option Agreement
dated February 10, 1999-- incorporated by reference to Exhibit
10.33 of the Company's Form 10-K for the year ended June 30, 1999*
10.26 Second Amendment, dated June 10, 1999, to Phase II Option
Agreement dated February 10, 1999-- incorporated by reference to
Exhibit 10.34 of the Company's Form 10-K for the year ended June
30, 1999*
10.27 Warrant to purchase 60,000 shares of Common Stock issued to
Hillcrest Development on July 1, 1999--incorporated by reference
to Exhibit 10.35 of the Company's Form 10-K for the year ended
June 30, 1999*
10.28 Combination Mortgage, Security Agreement and Fixture Financing
Statement dated July 1, 1999 between the Company and TCF National
Bank Minnesota (TCF)--incorporated by reference to Exhibit 10.36
of the Company's Form 10-K for the year ended June 30, 1999*
10.29 Promissory Note from the Company to TCF dated July 1, 1999 in the
principal amount of $20,400,000-- incorporated by reference to
Exhibit 10.37 of the Company's Form 10-K for the year ended June
30, 1999*
10.30** Employment Agreement, dated October 1, 1999, with Timothy M.
Heaney-- incorporated by reference to Exhibit 10.1 of the
Company's Form 10-Q for the quarter ended September 30, 1999*
11 Calculation of Earnings Per Share
21 Subsidiaries of the Company:
State/Country of
Name Incorporation
---- ----------------
Research and Diagnostic Systems, Inc. Minnesota
Techne Export Inc. Barbados
R&D Systems Europe Ltd. Great Britain
R&D Systems GmbH Germany
23 Independent Auditors' Consent
27 Financial Data Schedule
- -------------
*Incorporated by reference; SEC File No. 0-17272
**Management contract or compensatory plan or arrangement