SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A Amendment to Current Report Filed Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 1, 1998 Techne Corporation (Exact name of registrant as specified in its charter) Minnesota (State or other jurisdiction of incorporation) 0-17272 41-1427402 (Commission File Number) (I.R.S. Employer Identification No.) 614 McKinley Place N.E. Minneapolis, Minnesota 55413 (Address of principal executive offices)(Zip Code) (612)-379-8854 Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report.) Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired: Audited Financial Statements of the Research Products Business of Genzyme Corporation: Report of Independent Accountants dated August 26, 1998 Statements of Assets Sold as of December 31, 1997 and 1996 Statements of Revenues and Direct Operating Expenses for the years ended December 31, 1997, 1996 and 1995 Notes to Financial Statements Unaudited Financial Statements of the Research Products Business of Genzyme Corporation: Statement of Assets Sold as of June 30, 1998 Statement of Revenues and Direct Operating Expenses for the six months ended June 30, 1998 Note to Unaudited Financial Statements (b) Pro Forma Financial Information(unaudited): Introduction to Pro Forma Financial Statements Pro Forma Balance Sheet Pro Forma Statement of Earnings Notes to Pro Forma Financial Statements (c) Exhibit: 2.1 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 to Form 8-K dated July 1, 1998. RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION STATEMENTS OF ASSETS SOLD AS OF DECEMBER 31, 1997 and 1996 AND STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995 REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors of Genzyme Corporation: We have audited the accompanying statements of assets sold of the Research Products Business of Genzyme Corporation (the "Business") as of December 31, 1996 and 1997 and the related statements of revenues and direct operating expenses for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of Genzyme Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accompanying statements were prepared to present the assets of the Business sold to Techne Corporation pursuant to the acquisition agreement described in Note 1 and the revenues and direct operating expenses of the Business, and are not intended to be a complete presentation of the Business' financial position, results of operations or cash flows. In our opinion, the aforementioned financial statements present fairly the assets related to the Business, which were sold to Techne Corporation pursuant to the acquisition agreement described in Note 1, as of December 31, 1996 and 1997 and the revenues and direct operating expenses of the Business for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts August 26, 1998 RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION STATEMENTS OF ASSETS SOLD
December 31, December 31, 1997 1996 ---- ---- (in thousands) Inventory $4,113 $4,376 Equipment, net 277 198 ------ ------ Total assets sold $4,390 $4,574 ====== ======
The accompanying notes are an integral part of these financial statements. RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
YEARS ENDED DECEMBER 31, ------------------------ 1997 1996 1995 ---- ---- ---- (in thousands) Revenue: External revenue $14,278 $14,201 $13,652 Intercompany revenue 296 292 299 ------- ------- ------- Total revenue 14,574 14,493 13,951 Expenses: Cost of sales 7,686 6,562 6,919 Selling and marketing 3,929 4,087 3,967 General and administrative 1,698 1,511 1,306 Research and development 2,652 2,449 2,567 ------- ------- ------ Total direct operating expenses 15,965 14,609 14,759 ------- ------- ------- Direct operating expenses in excess of revenues $(1,391) $ (116) $ (808) ======= ======= =======
The accompanying notes are an integral part of these financial statements. RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION NOTES TO FINANCIAL STATEMENTS (1) Background Pursuant to a Purchase and Sale Agreement (the "Agreement") between Genzyme Corporation ("Genzyme") and Research and Diagnostic Systems, Inc. and Techne Corporation (collectively, "Techne"), dated June 22, 1998, Genzyme sold to Techne certain assets consisting principally of inventory and equipment plus the intellectual property and contractual rights (carried at zero book value) of Genzyme's Research Products Business (the "Business"). Assets related to Genzyme's Research Products Business which are owned by Genzyme Srl, Genzyme's wholly-owned subsidiary based in Italy, were not sold to Techne and, accordingly such assets and revenues and expenses from Genzyme Srl are excluded from these statements. The Business develops, manufactures and sells a line of cytokines, growth factors, antibodies, proteins, cytokine and apoptosis ELISA systems and other research products used in the areas of immunology and cellular biology. (2) Basis of Presentation The statements of assets sold and the statements of revenue and direct operating expenses (the "Statements") are derived from the historical books and records of Genzyme and present assets sold and revenue and direct operating expenses of the Business. This Business has never been operated as a separate business entity but rather as an integral part of Genzyme Corporation. The statements of revenue and direct operating expenses of the Business include the cost of sales, selling and marketing expenses, general and administrative expenses and research and development expenses that substantially relate directly to the Business to be acquired by Techne. Certain direct operating expenses presented in these statements have been allocated based on management's estimates of the cost of services provided to the Business by Genzyme. General and administrative expenses allocated include a corporate allocation of costs, consisting principally of MIS, legal, corporate finance, telecommunications, purchasing, security, human resources and information services based on the Business' revenues as a percentage of Genzyme's revenues. These allocations are believed by management to be reasonable allocations. However, there can be no assurance that such allocations will be indicative of future results of operations. Management of Genzyme cannot estimate what expenses would have been if the Business had been operated on a stand alone basis. The Business is not a separate taxable entity for federal, state or local income tax purposes and its operations are included in the consolidated Genzyme tax returns. No income tax provision or benefit has been allocated to the Business. Genzyme does not allocate interest income or interest expense to its business units and, accordingly, no interest income or expense is reflected in these Statements. As a result of the foregoing, the Statements presented may not be indicative of the results of operations that would have been achieved had the Business been operated as an unaffiliated entity. (3) Summary of Significant Accounting Policies Inventories Inventories are stated at the lower of cost (first in, first out) or market. Inventories are routinely subject to changes in value resulting from technological change, price competition and changes in customer demand patterns. The assessment of market value of inventory is based on Genzyme's analysis of the Business's inventory and is not necessarily indicative of the market value that Techne would ascribe to the inventory. In addition, the carrying value of inventories, as reflected in the accompanying statement of assets to be acquired, does not include any adjustments which may result on the date of acquisition. Marketing and promotional materials, samples and display inventory are charged to selling and marketing expense when purchased. Packaging materials are included in inventory and expensed as cost of sales upon shipment of related product. Revenue Recognition Revenue from external sales is recognized upon shipment of the product. Allowances for sales returns, discounts, and rebates are provided for based on the volume of sales and actual experience. Revenue from intercompany sales is recognized at the point of transfer to affiliates at a transfer price negotiated by the business unit of Genzyme. Research and Development Costs Research and development costs are charged to expense when incurred. Equipment Equipment is stated at cost. Depreciation expense is computed on a straight-line basis over the useful life of the equipment (3 to 7 years). Depreciation expense was approximately $59,000 and $48,000 for the years ended December 31, 1997 and 1996, respectively. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts and any resulting gains or losses are included in the results of operations.
(in thousands) December 31, December 31, 1997 1996 ---- ---- Equipment $503 $365 Accumulated depreciation (226) (167) ---- ---- Net equipment $277 $198 ==== ====
Use of Estimates The preparation of the Statements requires management to make estimates and judgments that affect the reported assets sold of the Business and its revenues and direct operating expense related disclosures. Such estimates include inventory reserves and amortization of manufacturing variances. Actual results could differ from those estimates. Translation of Foreign Currencies For non-U.S. operations, the local currency is the functional currency. Assets and liabilities are translated into U.S. dollars at current exchange rates. Income and expense items are translated at average exchange rates prevailing during the year. Transaction gains and losses are included in corporate general and administrative expenses, a portion of which has been allocated to the Business (see Note 2). (4) Inventories The components of inventories were as follows (in thousands):
December 31, December 31, 1997 1996 ---- ---- Raw materials $1,697 $1,564 Work in process 864 914 Finished goods 1,552 1,898 ------ ------ Total inventory $4,113 $4,376 ====== ======
RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION STATEMENT OF ASSETS SOLD (UNAUDITED) (in thousands)
June 30, 1998 ---- Inventory $4,352 Equipment, net 266 ------ Total assets sold $4,618 ======
The accompanying note is an integral part of these unaudited financial statements. RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES (UNAUDITED) (in thousands)
SIX MONTHS ENDED June 30, 1998 ---------------- Revenue: External revenue $ 7,044 Intercompany revenue 119 ------- Total revenue 7,163 Expenses: Cost of sales 4,523 Selling and marketing 2,218 General and administrative 888 Research and development 1,448 ------- Total direct operating expenses 9,076 ------- Direct operating expenses in excess of revenues $(1,913) =======
The accompanying note is an integral part of these unaudited financial statements. RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION NOTE TO UNAUDITED FINANCIAL STATEMENTS (1) Basis of Presentation The unaudited statement of assets sold and unaudited statement of revenues and direct operating expenses have been prepared in accordance with generally accepted accounting principles. The unaudited statements reflect all adjustments which are, in the opinion of management, necessary to a fair presentation of the results for the interim period presented. All such adjustments are of a normal recurring nature. A summary of significant accounting policies followed in preparing the unaudited statements is detailed in the audited financial statements of the Research Products Business of Genzyme Corporation, which are presented elsewhere in this Form 8-K/A. It is suggested that the unaudited financial statements be read in conjunction with the accompanying audited financial statements. TECHNE CORPORATION INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) The following unaudited Pro Forma Balance Sheet as of June 30, 1998 and the unaudited Pro Forma Statement of Earnings for the year ended June 30, 1998 have been prepared to illustrate the effect of the acquisition of the Research Products Business of Genzyme Corporation as though the acquisition had occurred on June 30, 1998 in the Pro Forma Balance Sheet and as of July 1, 1997 in the Pro Forma Statement of Earnings. The pro forma information is based upon Techne Corporation's audited Consolidated Financial Statements and the unaudited historical Financial Statements of the Research Product Business of Genzyme Corporation, giving effect to the acquisition under the purchase method of accounting and the assumptions and adjustments in the accompanying Notes. The Techne Corporation Pro Forma Financial Statements are presented for illustrative purposes only and are not necessarily indicative of the consolidated financial position or consolidated results of operations of Techne Corporation that would have been reported had the acquisition occurred on the dates indicated, nor do they represent a forecast of the consolidated financial position of Techne Corporation at any future date or the consolidated earnings of Techne Corporation at any future period. Furthermore, no effect has been given in the Techne Corporation Pro Forma Financial Statements for operating and synergistic benefits that may be realized by the combination of the entities. The Techne Corporation Pro Forma Balance Sheet adjustments are based on the estimated fair values of the assets acquired. The Techne Corporation Pro Forma Financial Statements, including Notes thereto, should be read in conjunction with the historical Consolidated Financial Statements of Techne Corporation contained in the 1998 Annual Report on Form 10-K and the audited and unaudited financial statements of the Research Products Business of Genzyme Corporation presented elsewhere in this Form 8-K/A. TECHNE CORPORATION PRO FORMA BALANCE SHEET AS OF JUNE 30, 1998 (UNAUDITED) (In thousands)
GENZYME RESEARCH PRO FORMA TECHNE PRODUCTS ADJUSTMENTS PRO FORMA ------ -------- ----------- --------- ASSETS Cash and equivalents $27,372 $ - $(24,760) (1) $ 2,612 Short-term investments 15,322 - - 15,322 Accounts receivable 10,002 - - 10,002 Inventories 3,811 4,352 1,308 (1) 9,471 Deferred income taxes 1,583 - - 1,583 Prepaid expenses 431 - - 431 ------- ------- -------- -------- Total current assets 58,521 4,352 (23,452) 39,421 Equipment (net) 11,687 266 54 (1) 12,007 Intangible assets (net) 491 - 54,620 (1) 55,111 Deferred income taxes 1,798 - - 1,798 Other-long term assets 422 - - 422 ------- ------- -------- -------- $72,919 $ 4,618 $ 31,222 $108,759 ======= ======= ======== ======== LIABILITIES AND EQUITY Trade accounts payable $ 2,203 $ - $ - $ 2,203 Salary and related accounts payable 2,005 - - 2,005 Other payables 1,040 - 3,612 (1) 4,652 Income taxes payable 2,185 - - 2,185 ------- ------- -------- -------- Total current liabilities 7,433 - 3,612 11,045 Deferred rent 1,655 - - 1,655 Royalties payable - - 15,228 (1) 15,228 Net assets of acquired entity - 4,618 (4,618) (1) - Common stock 191 - 10 (1) 201 Additional paid-in capital 13,810 - 16,990 (1) 30,800 Retained earnings 49,351 - - 49,351 Foreign currency adjust. 479 - - 479 ------- ------- -------- -------- Total equity 63,831 - 17,000 80,831 ------- ------- -------- -------- $72,919 $ 4,618 $ 31,222 $108,759 ======= ======= ======== ========
See accompanying Notes to Pro Forma Financial Statements TECHNE CORPORATION PRO FORMA STATEMENT OF EARNINGS FOR THE YEAR ENDED JUNE 30, 1998 (UNAUDITED) (In thousands except per share data)
GENZYME RESEARCH PRO FORMA TECHNE PRODUCTS ADJUSTMENTS PRO FORMA ------ -------- ----------- --------- Net sales $67,291 $14,236 $ - $81,527 Cost of sales 20,009 8,737 32 (2) 28,778 ------- ------- ------- ------- Gross margin 47,282 5,499 (32) 52,749 Selling, general & admin. 15,368 5,875 - 21,243 Research & development 10,638 2,820 - 13,458 Intangible amortization 71 - 9,500 (3) 9,571 Interest income (1,206) - 990 (4) (216) ------- ------- ------- ------- 24,871 8,695 10,490 44,056 ------- ------- ------- ------- Earnings (loss) before income taxes 22,411 (3,196) (10,522) 8,693 Income taxes 7,228 - (4,073)(5) 3,155 ------- ------- ------- ------- Net earnings (loss) $15,183 $(3,196) $(6,449) $ 5,538 ======= ======= ======= ======= Basic earnings per share $ 0.80 $ 0.28 Diluted earnings per share $ 0.77 $ 0.27 Weighted average common shares 18,953 987 19,940 Weighted average common and dilutive shares 19,608 987 20,595
See accompanying Notes to Pro Forma Financial Statements TECHNE CORPORATION NOTES TO PRO FORMA FINANCIAL STATEMENTS (1) Purchase of inventory, equipment and intangible assets, including the write-up of inventory ($1,308,000), equipment ($54,000) and intangible assets ($54,620,000) to current estimates of fair value, which are subject final determinations, and the recognition of the purchase price paid and payable as follows: 987,206 shares of Techne Corporation common stock valued at $17 million, $24.76 million of cash and $18.84 million of royalties (present value of an estimated $23.7 million payable over five years.) (2) Depreciation on equipment acquired. (3) Amortization of intangible assets acquired over an estimated economic life of 5 to 6 years. (4) Reduction of interest income due to payment of cash purchase price. (5) Income tax effect of the operating loss by the Research Products Business of Genzyme Corporation and the pro forma adjustments for depreciation and intangible amortization, at an effective rate of 32%. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. Techne Corporation. (Registrant) Date: September 14, 1998 By:/s/ Thomas E. Oland --------------------------- Thomas E. Oland, President