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.)
<PAGE>
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.
<PAGE>
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
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Inventory $4,113 $4,376
Equipment, net 277 198
------ ------
Total assets sold $4,390 $4,574
====== ======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
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)
======= ======= =======
</TABLE>
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.
<TABLE>
<CAPTION>
(in thousands)
December 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Equipment $503 $365
Accumulated depreciation (226) (167)
---- ----
Net equipment $277 $198
==== ====
</TABLE>
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):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Raw materials $1,697 $1,564
Work in process 864 914
Finished goods 1,552 1,898
------ ------
Total inventory $4,113 $4,376
====== ======
</TABLE>
RESEARCH PRODUCTS BUSINESS OF GENZYME CORPORATION
STATEMENT OF ASSETS SOLD (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
June 30,
1998
----
<S> <C>
Inventory $4,352
Equipment, net 266
------
Total assets sold $4,618
======
</TABLE>
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)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, 1998
----------------
<S> <C>
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)
=======
</TABLE>
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)
<TABLE>
<CAPTION>
GENZYME
RESEARCH PRO FORMA
TECHNE PRODUCTS ADJUSTMENTS PRO FORMA
------ -------- ----------- ---------
<S> <C> <C> <C> <C>
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
======= ======= ======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
GENZYME
RESEARCH PRO FORMA
TECHNE PRODUCTS ADJUSTMENTS PRO FORMA
------ -------- ----------- ---------
<S> <C> <C> <C> <C>
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
</TABLE>
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
