TECHNE CORPORATION RELEASES UNAUDITED SECOND QUARTER RESULTS FOR FISCAL YEAR 2005 Minneapolis/February 1, 2005/--For the quarter ended December 31, 2004, Techne Corporation's consolidated net earnings were a record $14.9 million or $.36 per share (diluted) compared with $12.4 million or $.30 per share (diluted) for the quarter ended December 31, 2003. Net earnings as a percentage of sales improved from 32.3% in the second quarter of last year to 35.3% for the quarter ended December 31, 2004. For the six months ended December 31, 2004, Techne's consolidated net earnings were $29.1 million or $.70 per share (diluted) compared with $24.9 million or $.60 per share (diluted) for the six months ended December 31, 2003. Net earnings as a percentage of sales improved from 32.7% in the first six months of last year to 35.0% for the six months ended December 31, 2004. Consolidated net sales for the quarter and six months ended December 31, 2004 were $42.2 million and $83.2 million, respectively. This was an increase of 10% and 9% from the second quarter and first six months of last year. Excluding the effect of changes in foreign currency exchange rates, consolidated net sales increased 7% and 6% for the quarter and six months ended December 31, 2004, respectively. R&D Systems' Biotechnology Division net sales for the quarter and six months ended December 31, 2004 were $24.9 million and $50.8 million, increases of 9% and 8%, respectively. R&D Europe's net sales for the quarter and six months were $12.9 million and $23.9 million, increases of 17% and 15%, respectively. In British pound sterling, R&D Europe's net sales increased 7% and 4% for the quarter and six months ended December 31, 2004, respectively. R&D Systems' Hematology Division net sales for the quarter were $4.5 million, an increase of 1%, while net sales for the six months ended December 31, 2004 were $8.5 million, a decrease of 2% from the prior year. Selling, general and administrative expenses for the quarter and six months ended December 31, 2004 increased $771,000 (14%) and $1.3 million (12%), respectively. The majority of the increase for the quarter and six months was a result of increased personnel costs, including additional sales and marketing personnel. Foreign currency exchange rate changes also increased selling, general and administrative expenses by approximately $200,000 and $400,000 for the quarter and six-month period, respectively. Second quarter expenses are higher than first quarter costs because of seasonal advertising and promotion expenses. Research and development expenses for the quarter and six months ended December 31, 2004 decreased $831,000 (15%) and $1.1 million (11%), respectively. Included in research and development expenses for the prior year periods were the Company's share of losses by ChemoCentryx, Inc. (CCX) and Discovery Genomics, Inc. (DGI), development stage companies in which Techne has invested. The losses by these companies included in Techne results for the quarter and six months ended December 31, 2003 were $953,000 and $1.6 million, respectively. In the fourth quarter of fiscal 2004, the Company wrote off its investment in DGI as an impairment loss. The Company also converted from the equity method to the cost method for accounting for its investment in CCX in the fourth quarter of fiscal 2004. Excluding the losses by CCX and DGI, research and development expenses increased $122,000 (3%) and $455,000 (5%) for the quarter and six months ended December 31, 2004, respectively, mainly as a result of increased personnel. Other non-operating expenses increased $396,000 and $784,000 for the quarter and six months ended December 31, 2004, respectively, mainly as a result of non-operating building expenses. Fiscal 2005 results were favorably effected by the strength of the British pound as compared to the U.S. dollar. The impact on consolidated net earnings of the change in exchange rates used to convert R&D Europe results from British pounds to U.S. dollars was approximately $300,000 and $620,000 for the quarter and six months ended December 31, 2004. During the second quarter of fiscal 2005 a large OEM customer notified the Hematology Division that they will be changing to a new primary vendor for certain controls and calibrators. Although the Hematology Division will continue to manufacture products for this customer as a secondary supplier, it is anticipated that the effect on revenues will be a reduction of approximately $450,000 and $850,000 in the third and fourth quarters of fiscal 2005, respectively. The reduction in Hematology Division revenues is not expected to have a significant impact on consolidated earnings and revenues. Statements in this earnings release and elsewhere, which look forward in time, including anticipated lower revenues in the Hematology Division, involve risks and uncertainties which may affect the actual results of operations. The following important factors, among others, have affected and, in the future, could affect the Company's actual results: the introduction and acceptance of new biotechnology and hematology products, the levels and particular directions of research by the Company's customers, the impact of the growing number of producers of biotechnology research products and related price competition, the retention of hematology OEM and proficiency survey business, the impact of currency exchange rate fluctuations, and the costs and results of research and product development efforts of the Company and of companies in which the Company has invested or with which it has formed strategic relationships. For additional information concerning such factors, see the Company's annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission. * * * * * * * * * * * * * * Techne Corporation has two operating subsidiaries: Research and Diagnostic Systems, Inc. (R&D Systems) of Minneapolis, Minnesota and R&D Systems Europe, Ltd. (R&D Europe) of Abingdon, England. R&D Systems is a specialty manufacturer of biological products and R&D Europe is a distributor of biotechnology products. Contact: Greg Melsen, Chief Financial Officer Kathy Backes, Controller (612) 379-8854 TECHNE CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) (Unaudited) QUARTER ENDED SIX MONTHS ENDED ------------------ ------------------ 12/31/04 12/31/03 12/31/04 12/31/03 -------- -------- -------- -------- Net sales $ 42,247 $ 38,264 $ 83,166 $ 76,257 Cost of sales 8,941 8,441 17,828 17,104 -------- -------- -------- -------- Gross margin 33,306 29,823 65,338 59,153 Operating expenses: Selling, general and administrative 6,290 5,519 11,924 10,602 Research and development 4,619 5,450 9,307 10,413 Amortization of intangible assets 306 399 611 799 -------- -------- -------- -------- Total operating expenses 11,215 11,368 21,842 21,814 -------- -------- -------- -------- Operating income 22,091 18,455 43,496 37,339 Other expense (income): Interest expense 178 172 423 347 Interest income (1,189) (762) (2,242) (1,488) Other non-operating expense (income), net 416 20 882 98 -------- -------- -------- -------- Total other income (595) (570) (937) (1,043) -------- -------- -------- -------- Earnings before income taxes 22,686 19,025 44,433 38,382 Income taxes 7,752 6,655 15,307 13,440 -------- -------- -------- -------- Net earnings $ 14,934 $ 12,370 $ 29,126 $ 24,942 ======== ======== ======== ======== Earnings per share: Basic $ 0.36 $ 0.30 $ 0.71 $ 0.61 Diluted $ 0.36 $ 0.30 $ 0.70 $ 0.60 Weighted average common shares outstanding: Basic 41,279 41,035 41,224 41,000 Diluted 41,681 41,653 41,678 41,627 TECHNE CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) 12/31/04 6/30/04 -------- -------- ASSETS Cash and equivalents $ 69,626 $ 51,201 Short-term available-for-sale investments 47,104 42,534 Trade accounts receivable 18,801 20,262 Interest receivable 944 837 Inventory 8,079 7,457 Other current assets 6,017 5,774 -------- -------- Current assets 150,571 128,065 -------- -------- Available-for-sale investments 97,033 82,858 Property and equipment, net 79,119 80,504 Goodwill and intangible assets, net 14,748 15,359 Other non-current assets 18,016 18,674 -------- -------- Total assets $359,487 $325,460 ======== ======== LIABILITIES Current liabilities $ 13,214 $ 13,459 Long-term debt 13,958 14,576 Stockholders' equity 332,315 297,425 -------- -------- Total liabilities and equity $359,487 $325,460 ======== ========