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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002, or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to___________
__________________
Commission file number 0-17272
__________________
TECHNE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1427402
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
614 MCKINLEY PLACE N.E. (612) 379-8854
MINNEAPOLIS, MN 55413 (Registrant's telephone number,
Address of principal including area code)
executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
At November 6, 2002, 41,434,748 shares of the Company's Common Stock (par
value $.01) were outstanding.
ITEM 1 - FINANCIAL STATEMENTS
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
9/30/02 6/30/02
------------ ------------
ASSETS
Cash and cash equivalents $ 32,881,355 $ 26,392,480
Short-term available-for-sale investments 72,723,114 70,671,341
Trade accounts receivable (net) 16,714,755 16,913,002
Interest receivable 2,350,171 2,500,616
Inventories 6,175,913 6,077,035
Deferred income taxes 3,857,000 3,762,000
Income taxes receivable -- 1,845,421
Prepaid expenses 1,008,348 915,854
------------ ------------
Total current assets 135,710,656 129,077,749
Property and equipment (net) 76,057,517 70,312,602
Intangible assets (net) 18,412,187 18,897,000
Deferred income taxes 9,292,000 9,400,000
Other long-term assets 9,740,396 10,559,608
------------ ------------
$249,212,756 $238,246,959
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Trade accounts payable $ 4,916,582 $ 4,326,359
Salaries, wages and related accounts payable 1,570,037 2,873,505
Other accounts payable and accrued expenses 5,314,097 6,480,023
Income taxes payable 6,901,637 --
Current portion of long-term debt 966,726 949,637
------------ ------------
Total current liabilities 19,669,079 14,629,524
Long-term debt, less current portion 16,854,986 17,100,652
Commitments and contingencies (Note D)
Common stock, par value $.01 per
share; authorized 100,000,000; issued
and outstanding 41,327,186 and
41,562,136, respectively 413,272 415,621
Additional paid-in capital 58,662,781 58,584,103
Retained earnings 151,951,647 147,369,149
Accumulated other comprehensive income 1,660,991 147,910
------------ ------------
Total stockholders' equity 212,688,691 206,516,783
------------ ------------
$249,212,756 $238,246,959
============ ============
See notes to consolidated financial statements (unaudited).
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
QUARTER ENDED
-------------------------
9/30/02 9/30/01
----------- -----------
Net sales $34,548,236 $29,842,666
Cost of sales 8,690,255 7,547,942
----------- -----------
Gross margin 25,857,981 22,294,724
Operating expenses:
Selling, general and administrative 5,100,907 4,535,917
Research and development 4,833,097 3,989,734
Amortization of intangible assets 484,813 2,137,312
Interest expense 322,690 338,705
Interest income (790,440) (962,725)
----------- -----------
9,951,067 10,038,943
----------- -----------
Earnings before income taxes 15,906,914 12,255,781
Income taxes 5,462,000 3,831,000
----------- -----------
Net earnings $10,444,914 $ 8,424,781
Earnings per share:
Basic $ 0.25 $ 0.20
Diluted $ 0.25 $ 0.20
Weighted average common shares outstanding:
Basic 41,363,414 41,435,379
Diluted 42,285,518 42,531,388
See notes to consolidated financial statements (unaudited).
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
QUARTER ENDED
--------------------------
9/30/02 9/30/01
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 10,444,914 $ 8,424,781
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,557,636 3,128,020
Deferred income taxes 19,000 (261,000)
Other 819,212 239,804
Change in current assets and
current liabilities:
(Increase) decrease in:
Trade accounts and interest receivable 418,383 (746,745)
Inventories (73,647) (411,258)
Prepaid expenses (85,525) (138,408)
Increase (decrease) in:
Trade and other accounts payable (589,982) (2,509,457)
Salaries, wages and related accounts (1,306,507) (287,969)
Income taxes payable 8,719,060 2,207,039
------------ ------------
Net cash provided by operating activities 19,922,544 9,644,807
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (6,800,984) (2,292,987)
Purchase of short-term available-for-
sale investments (15,180,000) (15,091,601)
Proceeds from sale of short-term available-
for-sale investments 14,167,111 11,060,000
Increase in other long-term assets -- (3,000,000)
------------ ------------
Net cash used in investing activities (7,813,873) (9,324,588)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 78,803 15,240
Repurchase of common stock (5,864,890) (485,010)
Payments on long-term debt (228,577) (212,655)
------------ ------------
Net cash used in financing activities (6,014,664) (682,425)
Effect of exchange rate changes on cash 394,868 576,621
------------ ------------
Net increase in cash and cash equivalents 6,488,875 214,415
Cash and cash equivalents at beginning of period 26,392,480 21,267,791
------------ ------------
Cash and cash equivalents at end of period $ 32,881,355 $ 21,482,206
============ ============
See notes to consolidated financial statements (unaudited).
TECHNE CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A. BASIS OF PRESENTATION:
The unaudited consolidated financial statements of Techne Corporation and
Subsidiaries (the Company) have been prepared in accordance with accounting
principles generally accepted in the United States of America and with
instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying
unaudited consolidated financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair presentation of the
results for the interim periods presented. All such adjustments are of a
normal recurring nature.
A summary of significant accounting policies followed by the Company is
detailed in the Annual Report to Shareholders for fiscal 2002. The Company
follows these policies in preparation of the interim unaudited consolidated
financial statements. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. It is suggested that these unaudited consolidated
financial statements be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto for the fiscal year ended June 30,
2002 included in the Company's Annual Report to Shareholders for fiscal 2002.
Certain consolidated balance sheet captions appearing in this interim report
are as follows:
9/30/02 6/30/02
------------ ------------
ACCOUNTS RECEIVABLE
Accounts receivable $ 16,979,755 $ 17,176,002
Less allowance for doubtful accounts 265,000 263,000
------------ ------------
NET ACCOUNTS RECEIVABLE $ 16,714,755 $ 16,913,002
============ ============
INVENTORIES
Raw materials $ 2,765,484 $ 2,785,949
Supplies 137,966 118,895
Finished goods 3,272,463 3,172,191
------------ ------------
TOTAL INVENTORIES $ 6,175,913 $ 6,077,035
============ ============
PROPERTY AND EQUIPMENT
Land $ 1,571,000 $ 1,571,000
Buildings and improvements 63,541,408 63,541,408
Building construction in progress 13,725,358 7,728,660
Laboratory equipment 17,356,496 16,694,898
Office equipment 4,387,570 4,263,512
Leasehold improvements 508,929 497,087
------------ ------------
101,090,761 94,296,565
Less accumulated depreciation
and amortization 25,033,244 23,983,963
------------ ------------
NET PROPERTY AND EQUIPMENT $ 76,057,517 $ 70,312,602
============ ============
INTANGIBLE ASSETS
Customer list $ 18,010,000 $ 18,010,000
Technology licensing agreements 500,000 500,000
Goodwill 39,075,089 39,075,089
------------ ------------
57,585,089 57,585,089
Less accumulated amortization 39,172,902 38,688,089
------------ ------------
NET INTANGIBLE ASSETS $ 18,412,187 $ 18,897,000
============ ============
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 applies to all business combinations initiated after June 30, 2001
and prohibits the use of the pooling-of-interests method of accounting. There
are also transition provisions provided which apply to business combinations
completed before July 1, 2001 that were accounted for using the purchase
method. Under SFAS No. 142, goodwill as well as other intangibles determined
to have an infinite life will no longer be amortized; however, these assets
will be reviewed for impairment on a periodic basis. SFAS No. 142 also
includes provisions for the reclassification of certain existing recognized
intangibles as goodwill, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. The Company
adopted SFAS No. 142 on July 1, 2002. The Company is currently assessing, but
has not yet determined, if a cumulative effect adjustment will be required.
However, management does not believe the adoption of this statement will have
a material effect on the Company's financial position or results of
operations. As of September 30, 2002, the Company had net goodwill and other
intangible assets of approximately $12.5 million and $5.9 million,
respectively. Goodwill amortization for the quarter ended September 30, 2001
was $1.57 million.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS No. 143 applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or the normal operations
of a long-lived asset, except for certain obligations of lessees. SFAS No.
143 is effective for the Company in fiscal 2003. The adoption of this
statement did not have a material effect on the Company's financial position
or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets
and supersedes SFAS No 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions",
for the disposal of a segment of a business (as previously defined in that
Opinion). SFAS No. 144 is effective for the Company in fiscal 2003. The
adoption of this statement did not have a material effect on the Company's
financial position or results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS No. 145 is effective for the Company on July 1, 2002. The
adoption of this statement did not have a material effect on the Company's
financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is
incurred. Under EITF 94-3, a liability for an exit cost was recognized at the
date of an entity's commitment to an exit plan. SFAS No. 146 will be
effective for exit or disposal activities that are initiated by the Company
after December 31, 2002.
B. EARNINGS PER SHARE:
Shares used in the earnings per share computations are as follows:
QUARTER ENDED
----------------------
9/30/02 9/30/01
---------- ----------
Weighted average common shares outstanding-basic 41,363,414 41,435,379
Dilutive effect of stock options and warrants 922,104 1,096,009
---------- ----------
Weighted average common shares outstanding-diluted 42,285,518 42,531,388
========== ==========
C. SEGMENT INFORMATION:
Following is financial information relating to the Company's operating
segments:
QUARTER ENDED
---------------------------
9/30/02 9/30/01
------------ ------------
External sales
Hematology $ 3,773,780 $ 3,649,593
Biotechnology 22,487,446 19,365,734
R&D Systems Europe 8,287,010 6,827,339
------------ ------------
Total external sales $ 34,548,236 $ 29,842,666
============ ============
Intersegment sales
Hematology $ -- $ --
Biotechnology 4,150,318 3,817,484
R&D Systems Europe 13,965 19,485
------------ ------------
Total intersegment sales $ 4,164,283 $ 3,836,969
============ ============
Earnings before income taxes
Hematology $ 1,164,537 $ 1,139,675
Biotechnology 14,244,744 10,580,225
R&D Systems Europe 1,810,873 1,428,398
Corporate and other (1,313,240) (892,517)
------------ ------------
Total earnings before income taxes $ 15,906,914 $ 12,255,781
============ ============
D. CONTINGENCIES:
Portions of the Company's short-term available-for-sale investments were held
in brokerage accounts carried by a clearing firm which in late September 2001
was placed in bankruptcy. The trustee appointed pursuant to the Securities
Investor Protection Act has released to the Company cash and securities
representing approximately 97% of the total value of the accounts and has
withheld securities and cash equivalents in the amount of approximately $1
million pending resolution of the bankruptcy proceeding. Management believes
that all of its securities and cash equivalents will be returned to the
Company as the trustee has available the assets of customers' accounts, SIPC
insurance and third party insurance. Accordingly, no impairment loss has
been recognized at this time.
E. SUBSEQUENT EVENT:
In October 2002, the Company agreed to purchase approximately 649 acres of
farmland, including buildings, in southeastern Minnesota for $2.7 million
in cash. The Company deposited $80,000 subsequent to September 30, 2002
as escrow on the purchase. Closing on the property is expected in December
2002. The property is being purchased to house goats used in the Company's
polyclonal antibody production. Currently the Company houses over 700 goats
in two barns that it donated in 1997 and 2001, respectively, to the
University of Minnesota College of Veterinary Medicine. These facilities are
near capacity and additional space is required.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations Quarter Ended September 30, 2002
vs. Quarter Ended September 30, 2001
Overview
Techne Corporation (the Company) has two 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 has two divisions: Biotechnology and Hematology. The Biotechnology
Division's principal products are purified cytokines (proteins), antibodies
and assay kits, which are sold primarily to biomedical researchers at
pharmaceutical companies and academic and government research laboratories.
The Hematology Division's principal products are whole blood hematology
controls and calibrators which are sold to hospital and clinical laboratories
to check the performance of their hematology instruments to assure the
accuracy of hematology test results. R&D Europe sells R&D Systems'
biotechnology products in Europe, both directly and through a sales
subsidiary in Germany. The Company also had a foreign sales corporation,
Techne Export Inc., which was dissolved in fiscal 2002.
Net Sales
Net sales for the quarter ended September 30, 2002 were $34,548,236, an
increase of $4,705,570 (16%) from the quarter ended September 30, 2001. R&D
Systems' Biotechnology Division net sales increased $3,121,712 (16%) and R&D
Systems' Hematology Division net sales increased $124,187 (3%) for the
quarter ended September 30, 2002. R&D Europe net sales increased $1,459,671
(21%) for the quarter. The larger than expected increase in R&D Europe's net
sales was the result of changes in exchange rates. In British pounds, R&D
Europe's net sales increased 13%. Adjusted for changes in exchange rates,
consolidated net sales increased approximately 13% for the quarter.
Gross Margins
Gross margins for the first quarter of fiscal 2003 were 74.8% compared to
74.7% for the same quarter in fiscal 2002. Biotechnology Division margins
decreased slightly from 79.3% to 78.5% for the quarter September 30, 2002.
R&D Europe gross margins increased from 36.1% to 39.9% for the quarter ended
September 30, 2002 as a result of exchange rate changes. Hematology Division
gross margins increased from 42.9% to 43.4% for the quarter.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $564,990 (12%) from
the first quarter of last year. The increase for the quarter was mainly due
to changes in exchange gains/losses. Exchange gains for the first quarter of
fiscal 2002 were approximately $153,000 while exchange losses for the first
quarter of fiscal 2003 were approximately $49,000.
Research and Development Expenses
Research and development expenses increased $843,363 (21%) for the quarter
ended September 30, 2002. Included in research and development expenses for
the quarter ended September 30, 2002, were losses of $519,144 and $178,499 by
ChemoCentryx, Inc. (CCX) and Discovery Genomics, Inc. (DGI), development stage
companies in which the Company has invested. Losses by CCX and DGI included
in research and development expenses for the quarter ended September 30, 2001
were $83,551 and $45,934, respectively. Excluding CCX and DGI losses,
research and development expenses for the first quarter of fiscal 2003
increased $275,205 (7%).
Amortization of Intangible Assets
Amortization of intangible assets decreased $1,652,499 for the quarter ended
September 30, 2002. On July 1, 2002, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". Goodwill amortization of $1,567,500 was expensed in the first
quarter of fiscal 2002, but is no longer amortized under SFAS No. 142.
Net Earnings
Earnings before income taxes increased $3,651,133 from $12,255,781 in the
first quarter of fiscal 2002 to $15,906,914 in the first quarter of fiscal
2003. The increase in earnings before income taxes was due primarily to the
increase in sales and reduction in goodwill amortization.
Income taxes for the quarter ended September 30, 2002 were provided at a rate
of approximately 34% of consolidated pretax earnings compared to 31% for the
prior year period. The increase in the tax rate was primarily the result of
increased losses by CCX and DGI for which there are no tax benefits,
decreased tax exempt interest income and changes in state income tax
regulations. U.S. federal taxes have been reduced by the credit for research
and development expenditures and the benefit for foreign sales. Foreign
income taxes have been provided at rates which approximate the tax rates in
the United Kingdom and Germany.
Liquidity and Capital Resources
At September 30, 2002, cash and cash equivalents and short-term available-
for-sale investments were $105,604,469 compared to $97,063,821 at June 30,
2002. The Company believes it can meet its future cash, working capital and
capital addition requirements through currently available funds, cash
generated from operations and maturities of short-term available-for-sale
investments. The Company has an unsecured line of credit of $750,000. The
interest rate on the line of credit is at prime. There were no borrowings on
the line in the prior or current fiscal years.
Cash Flows From Operating Activities
The Company generated cash of $19,922,544 from operating activities in the
first three months of fiscal 2003 compared to $9,644,807 for the first three
months of fiscal 2002. The increase was mainly the result of increased
earnings after adjustment for noncash items and increased income taxes
payable.
Cash Flows From Investing Activities
Capital expenditures for fixed assets for the first three months of fiscal
2003 and 2002 were $6,800,984 and $2,292,987, respectively. Included in the
first three months of fiscal 2003 capital additions was $6.3 million for
renovation of property purchased in fiscal 2002 and the construction of an
infill joining the property with R&D Systems' existing property. Included in
the first three months of fiscal 2003 and 2002 capital additions were
$180,000 and $1.4 million for construction of a parking ramp. The remaining
capital additions in the first three months of fiscal fiscal 2003 and 2002
were for laboratory and computer equipment and remodeling of laboratory
space.
Remaining expenditures in fiscal 2003 for laboratory and computer equipment
are expected to cost approximately $2 million and are expected to be
financed through currently available funds and cash generated from operating
activities. Costs to finish the renovation of the property purchased in
fiscal 2002 and the construction of the infill are estimated at approximately
$10 million with completion expected in early fiscal 2004. In October 2002,
the Company agreed to purchase approximately 649 acres of farmland, including
buildings, in southeastern Minnesota for $2.7 million in cash. The Company
deposited $80,000 subsequent to September 30, 2002 as escrow on the purchase.
Closing on the property is expected in December 2002. The renovation costs,
construction of the infill and farm purchase are expected to be financed
through currently available funds, cash generated from operating activities
and maturities of short-term available-for-sale investments.
During the three months ended September 30, 2002 the Company purchased
$15,180,000 and sold $14,167,111 of short-term available-for-sale
investments. During the three months ended September 30, 2001, the Company
purchased $15,091,601 and sold $11,060,000 of short-term available-for sale
investments. The Company's investment policy is to place excess cash in
short-term bonds and other short-term investments. The objective of this
policy is to obtain the highest possible return with minimal risk, while
keeping the funds accessible.
During the first three months of fiscal 2002, the Company invested $3 million
in Discovery Genomics, Inc.
Cash Flows From Financing Activities
Cash of $78,803 and $15,240 was received during the three months ended
September 30, 2002 and 2001, respectively, for the exercise of options for
12,550 and 2,100 shares of common stock. During the first three months of
fiscal 2002 options for 10,000 shares of common stock were exercised by the
surrender of 802 shares of the Company's common stock with a fair market
value of $28,110.
During the first three months of fiscal 2003 and 2002, the Company purchased
and retired 247,500 and 20,000 shares of Company common stock at a market
value of $5,864,890 and $485,010, respectively. The Board of Directors has
authorized the Company, subject to market conditions and share price, to
purchase and retire up to $40 million of its common stock. From the start of
the repurchase program through November 1, 2002, 1,618,700 shares have been
purchased at a market value of $16,528,387.
The Company has never paid cash dividends and has no plans to do so in fiscal
2003.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 applies to all business combinations initiated after June 30, 2001
and prohibits the use of the pooling-of-interests method of accounting. There
are also transition provisions provided which apply to business combinations
completed before July 1, 2001 that were accounted for using the purchase
method. Under SFAS No. 142, goodwill as well as other intangibles determined
to have an infinite life will no longer be amortized; however, these assets
will be reviewed for impairment on a periodic basis. SFAS No. 142 also
includes provisions for the reclassification of certain existing recognized
intangibles as goodwill, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. The Company
adopted SFAS No. 142 on July 1, 2002. The Company is currently assessing, but
has not yet determined, if a cumulative effect adjustment will be required.
However, managment does not believe the adoption of this statement will have
a material effect on the Company's financial position or results of
operations. As of September 30, 2002, the Company had net goodwill and other
intangible assets of approximately $12.5 million and $5.9 million,
respectively. Goodwill amortization for the quarter ended September 30, 2001
was $1.57 million.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS No. 143 applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and/or the normal operations
of a long-lived asset, except for certain obligations of lessees. SFAS No.
143 is effective for the Company in fiscal 2003. The adoption of this
statement did not have a material effect on the Company's financial position
or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets
and supersedes SFAS No 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions",
for the disposal of a segment of a business (as previously defined in that
Opinion). SFAS No. 144 is effective for the Company in fiscal 2003. The
adoption of this statement did not have a material effect on the Company's
financial position or results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS No. 145 is effective for the Company on July 1, 2002. The
adoption of this statement did not have a material effect on the Company's
financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is
incurred. Under EITF 94-3, a liability for an exit cost was recognized at the
date of an entity's commitment to an exit plan. SFAS No. 146 will be
effective for exit or disposal activities that are initiated by the Company
after December 31, 2002.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At September 30, 2002, the Company had a professionally managed investment
portfolio of fixed income securities, excluding those classified as cash and
cash equivalents, of $72,723,114. 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 does
not expect any such increase in interest rates to have an adverse impact on
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.
As of September 30, 2002, the Company's long-term debt consisted of a
mortgage note payable with a fixed interest rate of 7% through July 2006 and
is thereafter adjusted based on U.S. Treasury rates. Thus, during the period
that the interest rate is fixed, interest rate fluctuations would not impact
interest expense or cash flows. However, the mortgage note payable will
increase or decrease in value if market interest rates change. As of
September 30, 2002, the fair market value of the Company's mortgage note
payable approximated its carrying value.
ITEM 4 - CONTROLS AND PROCEDURES
The Company's Chief Executive and Financial Officer, with the participation
of Company management, has concluded, based on an evaluation within 90 days
of the filing date of this report, that the Company's disclosure controls and
procedures are effective for gathering, analyzing and disclosing information
required to be disclosed in the Company's reports filed under the Securities
Exchange Act of 1934.
Management is not aware of any significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the above mentioned evaluation, including any
significant deficiencies or material weaknesses of internal controls that
would require corrective action.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No change.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
(a) The Annual Meeting of the Registant's shareholders was held on
Thursday, October 24, 2002.
(b) A proposal to set the number of directors at seven was adopted by a
vote of 36,973,263 in favor with 696,372 shares against, 38,614 shares
abstaining and no shares represented broker nonvotes.
(c) Proxies for the Annual Meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934. There was no solicitation in
opposition to management's nominees as listed in the Proxy Statement,
and all such nominees were elected, as follows:
Nominee For Withheld
----------------------- ----------- -----------
Thomas E. Oland 33,906,824 3,801,425
Roger C. Lucas 37,313,143 395,106
Howard V. O'Connell 37,435,283 272,966
G. Arthur Herbert 37,435,283 272,966
Randolph C. Steer 37,437,483 270,766
Lowell E. Sears 36,254,639 1,453,610
Christopher S. Henney 36,417,193 1,291,056
ITEM 5 - OTHER INFORMATION
Forward Looking Information and Cautionary Statements: Statements in this
filing, and elsewhere, which look forward in time 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 into cytokines by the Company's customers, the impact
of the growing number of producers of cytokine research products and related
price competition, the retention of hematology OEM (private label) and
proficiency survey business, the impact of changes in foreign currency
exchange rates, 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 as
filed with the Securities and Exchange Commission.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
See exhibit index following.
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended September
30, 2002.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNE CORPORATION
(Company)
Date: November 13, 2002 /s/ Thomas E. Oland
------------------------
President, Chief Executive and
Chief Financial Officer
CERTIFICATIONS
I, Thomas E. Oland, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Techne Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and the other financial
information included in this quarterly report, fairly present in all
respects the financial condition, results of operation and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
date of this quarterly report (the "Evaluation Date");
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design and operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weakness
in internal controls;
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether on not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Thomas E. Oland
- -------------------------
Thomas E. Oland
Chief Executive Officer and
Chief Financial Officer
EXHIBIT INDEX
TO
FORM 10-Q
TECHNE CORPORATION
Exhibit # Description
- ----------- ----------------
99 Certification