FULLERTON, Calif., Aug. 1 /PRNewswire-FirstCall/ -- Beckman Coulter, Inc. , a leading developer, manufacturer and marketer of products that simplify, automate and innovate complex biomedical testing, announced today second quarter ended June 30, 2007 results. Total revenue of $689.7 million was up 11.9% over second quarter 2006. In constant currency, revenue was up 10.4%. Net earnings were $69.4 million, or $1.09 per fully diluted share. Adjusting for special items, net earnings were $47.8 million, or $0.75 per fully diluted share.
(Logo: http://www.newscom.com/cgi-bin/prnh/20031202/BECLOGO ) Three Months Ended Six Months Ended June 30 June 30 2007 2006 % Chg 2007 2006 % Chg Reported Results (in millions, except amounts per share) Revenue $689.7 $616.3 11.9% $1,303.3 $1,185.3 10.0% Operating Income $73.0 $72.1 1.2% $130.3 $121.4 7.3% Diluted Earnings per Share $1.09 $0.70 55.7% $1.67 $1.20 39.2% Adjusted Results * Operating Income $78.2 $69.8 12.0% $142.4 $119.1 19.6% Diluted Earnings per Share $0.75 $0.69 8.7% $1.40 $1.19 17.6% * Excludes special items as detailed in the Adjusted Consolidated Statements of Earnings and Reconciliation of Non-GAAP Adjustments.
Consumables sales grew 10.3%, or 8.8% in constant currency. The acquisition of Lumigen, Inc. in the fourth quarter 2006 contributed 1.6% to this growth. On a trailing twelve month basis, consumables sales grew 9.9% in constant currency. Recurring revenue, comprised of supplies, test kits, service revenue and operating-type lease payments, was 78.6% of total revenue, compared to 79.5% in second quarter 2006.
On a geographic basis, second quarter revenue in the United States increased 11.9% and consumables sales grew 7.5%. In constant currency, international revenue increased 8.7% led by robust growth of 16.1% in Asia Pacific. Internationally, consumables sales grew 10.5% over prior year quarter.
Scott Garrett, president and chief executive officer, said, “Second quarter results indicate continued strong demand for Beckman Coulter’s clinical diagnostics products. Total revenue from clinical diagnostics customers increased 13.9% over prior year quarter. Within clinical diagnostics, immunoassay was up about 24% and chemistry was up 14%. Cellular rose about 6% and revenue from clinical automation products nearly doubled. Total revenue from life science customers grew about 3%.”
Compared to second quarter 2006, gross profit margin declined about 220 basis points to 45.9%. The primary driver was an increase of nearly 20% in hardware revenue due in large part to higher levels of cash sales, particularly in clinical lab automation systems.
Garrett commented, “Hospital capital equipment budgets appear to be strong. Increasingly, customers view investments in automation much the same as they view investments in facilities, and as a result, cash sales for automation were above previous trends. Automation systems, often placed at lower margins, are central to our strategy for long-term customer partnerships and account management. These systems are almost always accompanied by placements of multiple analyzers which utilize large volumes of consumables and generate excellent profitability. Further, within hematology, competition has intensified in anticipation of the launch of our next generation system, the UniCel DxH 800, in 2008. We are retaining customers, in some cases at reduced instrument margins, to maintain the valuable stream of high-margin consumables.”
Operating income was $73 million. On an adjusted basis, operating income was $78.2 million, an increase of $8.4 million or 12% over second quarter 2006.
Non-operating income of $29.8 million included a $40.6 million net gain on the break-up fee associated with the termination of the merger agreement with Biosite, Incorporated. Adjusted non-operating expense was $10.0 million in the quarter, compared to $9.6 million in the second quarter of 2006.
Net earnings were $69.4 million or $1.09 per fully diluted share. Adjusted net earnings were $47.8 million, or $0.75 per fully diluted share.
First Half Summary
For the first six months of 2007, revenue increased 10%, or 8.3% in constant currency, over the prior year period. The acquisition of Lumigen contributed about 1.0% to this growth. Year-to-date 2007 consumables growth was 11.5%, or 9.8% in constant currency. Year to date gross margin was 47.1% compared to 47.7% for the first six months of 2006. Adjusting for special items, operating income increased by 19.6% and pretax profit increased by 16.9%. Adjusted net earnings per fully diluted share increased 17.6% over the same period 2006.
Full Year Outlook
Garrett concluded, “Our first half 2007 results demonstrate the strength of our business. We achieved a 19.6% increase in adjusted operating income on 10% revenue growth, reflecting improving efficiencies. Our momentum enables us to accelerate investment in important growth areas including molecular diagnostics and our next generation hematology system. We are affirming our full year outlook as previously provided. Assuming stable currency, full year revenue growth should be in the range of 7% to 9%. We expect 2007 operating income margin to expand to around 12% on a comparable basis. Adjusted non- operating expense is expected to be flat with prior year, paced evenly throughout 2007. Pretax profit growth should be 10% to 15% over 2006 on a comparable basis. This pretax profit growth is expected to be partially offset by a higher tax rate of 30% to 31%.
“Adjusting for any special items, earnings per diluted share should be $3.10 to $3.25. Capital expenditures are expected to be $325 to $350 million and depreciation and amortization should be between $210 and $230 million.”
Investor Conference Call
As previously announced, there will be a conference call today, Wednesday, August 1, 2007 at 8:30 am ET to discuss the second quarter ended June 30, 2007 results. The call will also be webcast live. The call is accessible to all investors through Beckman Coulter’s website at http://www.beckmancoulter.com or at http://www.streetevents.com. When accessing the webcast through the Beckman Coulter site, select “go to IR” under Investor Relations and find the call listed under “What’s Ahead”. The webcast will be archived on both websites for future on-demand replay through Friday, August 31, 2007.
Non-GAAP Financial Measures
“GAAP” refers to financial information presented in accordance with generally accepted accounting principles in the United States.
This press release includes non-GAAP financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission, with respect to the three and six months ended June 30, 2007 and June 30, 2006 and with respect to Outlook for the full year of 2007.
In this press release, the company reported the following non-GAAP financial measures: “adjusted net earnings” and related “adjusted operating income”, “adjusted pretax profit”, and “adjusted diluted earnings per share.” This presentation is consistent with our internal use of the measures, which we use to measure the profitability of ongoing operating results against prior periods and against our internally developed targets. Our outlook for adjusted operating margin and adjusted EPS for 2007 is provided on a non-GAAP basis. Management believes that its presentation of these non-GAAP financial measures provides useful supplementary information to investors regarding its operational performance because it enhances an investor’s overall understanding of the financial performance to conduct a more meaningful, consistent comparison of our ongoing operating results. Management uses non- GAAP financial measures because it believes that the appropriate analysis of our profitability cannot be effectively considered while incorporating the effect of unusual items and charges that have not been experienced consistently in prior periods. Management uses these non-GAAP financial measures to prepare operating budgets and forecasts and to measure our performance against those budgets and forecasts. Additionally, the company uses these non-GAAP financial measures for evaluating management performance for compensation purposes.
Despite the use of these non-GAAP financial measures in analyzing the company’s underlying business, non-GAAP financial measures have no standardized meaning defined by GAAP. The company is not able to provide a reconciliation of projected non-GAAP financial measures to expected reported results due to the unknown effect, timing and potential significance of special charges, and our inability to forecast charges associated with future transactions and initiatives. Our non-GAAP financial measures outlook excludes the impact of charges or write-offs associated with acquisitions, restructuring, or relocations in connection with our supply chain improvement initiatives, gains or losses upon sale of assets or businesses, and other items which we do not expect to be recurring.
The presentation of historical non-GAAP financial measures is not meant to be considered in isolation from or as a substitute for results prepared in accordance with GAAP. We use these non-GAAP measures to supplement net earnings and other corresponding measures on a basis prepared in conformance with GAAP. These non-GAAP financial measures reflect additional ways of viewing aspects of our operations that, when viewed with our GAAP results provide a more complete understanding of factors and trends affecting our business. We strongly encourage investors to consider both net earnings and cash flows determined under GAAP as compared to adjusted earnings, and to perform their own analysis, as appropriate.
Our discussion of international revenue includes comparisons on a constant currency basis, which we have previously defined in our annual report on Form 10-K. We believe that use of this measure aids in the understanding of our operations without the impact of foreign currency. This presentation is also consistent with our internal use of the measure, which we use to measure the profitability of ongoing operating results against prior periods and against our internally developed targets. We believe that our investors also use this measure to analyze the underlying trends in our international operations.
About Beckman Coulter
Beckman Coulter, Inc., based in Fullerton, California, develops, manufactures and markets products that simplify, automate and innovate complex biomedical tests. More than 200,000 Beckman Coulter systems operate in laboratories around the world, supplying critical information for improving patient health and reducing the cost of care. Recurring revenue, consisting of supplies, test kits, service and operating-type lease payments, represent more than 75 percent of the company’s 2006 revenue of $2.53 billion. For more information, visit http://www.beckmancoulter.com.
Forward Looking Statements
This press release contains the company’s unaudited financial results for second quarter 2007. These results may change as a result of the review by the company’s independent accountants and management. Final quarterly results will be provided in the company’s quarterly report to the SEC on Form 10-Q. This press release also contains forward-looking statements regarding the company’s outlook for 2007, including expectations for revenue growth, operating income margin, non-operating expense, pretax profit growth, tax rate, earnings per diluted share, capital expenditures, and depreciation and amortization. In addition, the press release contains statements about the company’s expectations regarding the effects of automation system placement, and their anticipated impact on consumables sales. These statements are based on information available at the time they are made and are subject to a number of risks and uncertainties. Actual results could differ materially from those anticipated by these forward-looking statements as a result of a number of factors, some of which may be beyond the company’s control. These and other risk factors that affect the Company are discussed in Part I, Item 1A (Risk Factors) of the Company’s report to the SEC on Form 10-K filed with the SEC on February 26, 2007 and its report to the SEC on Form 10-Q filed with the SEC on May 8, 2007.
Contact: Robert Raynor (714) 773-7620 Director, Investor Relations BECKMAN COULTER, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except amounts per share and share data) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Product revenue $584.7 $517.9 $1,097.1 $991.2 Service revenue 105.0 98.4 206.2 194.1 Total revenue 689.7 616.3 1,303.3 1,185.3 Cost of goods sold 292.2 247.6 536.0 479.1 Cost of service 81.1 72.3 153.5 140.5 Total cost of sales 373.3 319.9 689.5 619.6 Gross profit 316.4 296.4 613.8 565.7 Operating costs and expenses Selling, general and administrative 181.0 176.6 356.4 340.0 Research and development 58.8 75.1 116.6 129.7 Restructuring 2.8 6.2 9.7 7.3 Asset impairment charges 0.8 1.4 0.8 2.3 Litigation settlement - (35.0) - (35.0) Total operating costs and expenses 243.4 224.3 483.5 444.3 Operating income 73.0 72.1 130.3 121.4 Non-operating (income) and expense Interest income (3.2) (3.6) (7.8) (7.7) Interest expense 14.3 15.7 26.7 26.5 Other, net (40.9) (1.5) (38.7) (3.4) Total non-operating (income) expense (29.8) 10.6 (19.8) 15.4 Earnings before income taxes 102.8 61.5 150.1 106.0 Income taxes 33.4 16.9 43.6 28.8 Net earnings $69.4 $44.6 $106.5 $77.2 Basic earnings per share $1.11 $0.72 $1.71 $1.23 Weighted average number of basic shares outstanding (in thousands) 62,389 62,252 62,120 62,742 Diluted earnings per share $1.09 $0.70 $1.67 $1.20 Weighted average number of dilutive shares outstanding (in thousands) 63,838 63,532 63,603 64,130 Dividends declared per share $0.160 $0.150 $0.320 $0.300 BECKMAN COULTER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) Six Months Ended June 30, 2007 2006 Cash flows from operating activities Net earnings $106.5 $77.2 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization * 99.9 77.3 Provision for doubtful accounts receivable 3.3 3.9 Share-based compensation expense 12.4 14.6 Tax benefits from exercises of share-based payment awards 13.3 3.3 Excess tax benefits from share-based payment transactions (12.2) (2.6) Asset impairment charges 0.8 2.3 U.S. Pension Trust contributions (9.3) (23.0) Restructuring charges 9.7 7.3 Deferred income taxes (2.6) (0.3) Changes in assets and liabilities: Trade and other receivables 12.7 38.5 Inventories (28.7) (39.2) Accounts payable 30.3 5.5 Accrued expenses (17.7) (27.7) Income taxes payable (19.7) 6.3 Long-term lease receivables 6.2 22.8 Other (7.9) 11.3 Net cash provided by operating activities * 197.0 177.5 Cash flows from investing activities Additions to property, plant and equipment * (147.6) (134.1) Payments for business acquisitions and technology licenses (10.7) (15.5) Net cash used in investing activities * (158.3) (149.6) Cash flows from financing activities Dividends to stockholders (20.5) (18.9) Proceeds from issuance of stock 46.0 26.9 Repurchase of common stock as treasury stock (0.5) (86.5) Repurchase of common stock held in grantor trust (0.7) (0.8) Excess tax benefits from share-based payment transactions 12.2 2.6 Debt borrowings, net 8.1 107.0 Debt repayments (96.7) (59.2) Debt acquisition costs (0.4) - Net cash used in financing activities (52.5) (28.9) Effect of exchange rates on cash and cash equivalents 0.6 2.8 Change in cash and cash equivalents (13.2) 1.8 Cash and cash equivalents-beginning of period 75.2 57.6 Cash and cash equivalents-end of period $62.0 $59.4 * Prior period amounts have been adjusted due to an immaterial error. BECKMAN COULTER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) June 30, December 31, 2007 2006 Assets Current assets Cash and cash equivalents $62.0 $75.2 Trade and other receivables, net 659.6 671.5 Inventories 490.3 455.8 Deferred income taxes 80.5 83.2 Prepaids and other current assets 60.1 52.4 Total current assets 1,352.5 1,338.1 Property, plant and equipment, net 789.9 721.0 Goodwill 679.7 672.7 Other intangible assets, net 387.0 397.4 Other assets 154.3 162.5 Total assets $3,363.4 $3,291.7 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $204.6 $180.3 Accrued expenses 384.6 387.9 Income taxes payable 6.3 60.9 Notes payable 47.0 73.2 Current maturities of long-term debt 12.1 9.3 Total current liabilities 654.6 711.6 Long-term debt, less current maturities 887.7 952.0 Deferred income taxes 98.5 110.1 Other liabilities 408.1 363.7 Total liabilities 2,048.9 2,137.4 Commitments and contingencies Stockholders’ equity Common stock 6.8 6.8 Additional paid-in capital 499.5 488.0 Retained earnings 1,161.9 1,076.4 Accumulated other comprehensive loss (50.5) (55.4) Treasury stock, at cost (303.2) (361.5) Common stock held in grantor trust, at cost (17.5) (16.8) Grantor trust liability 17.5 16.8 Total stockholders’ equity 1,314.5 1,154.3 Total liabilities and stockholders’ equity $3,363.4 $3,291.7 BECKMAN COULTER, INC PRODUCT AREA SALES (in millions) (unaudited) Three Months Ended Six Months Ended June 30, 2007 June 30, 2007 Constant Constant Reported Currency Reported Currency $ Growth % Growth % $ Growth % Growth % Chemistry Systems $191.1 14.0 12.3 $364.0 11.8 9.9 Cellular Systems 208.3 6.0 4.9 402.7 5.8 4.7 Immunoassay Systems 151.6 23.8 21.7 286.0 22.6 20.3 Discovery & Automation Systems 138.7 7.1 5.3 250.6 2.0 - Total Beckman Coulter $689.7 11.9 10.4 $1,303.3 10.0 8.3 United States $360.1 11.9 11.9 $692.0 10.4 10.4 International 329.6 12.0 8.7 611.3 9.5 5.9 Total Beckman Coulter $689.7 11.9 10.4 $1,303.3 10.0 8.3 Chemistry Systems include: > Autochemistry > Protein and rapid test products Cellular Systems include: > Hematology > Coagulation > Flow cytometry and related products Immunoassay Systems include: > All immunoassay products Discovery and Automation Systems include: > Life Science Tools: (All robotic automation, genetic analysis products, centrifuge and analytical systems) > Industrial particle characterization > Clinical diagnostic automation BECKMAN COULTER, INC. ADJUSTED CONSOLIDATED STATEMENTS OF EARNINGS AND RECONCILIATION OF NON-GAAP ADJUSTMENTS (in millions, except amounts per share and share data) (unaudited) Three Months Ended June 30, 2007 June 30, 2006 Non-GAAP Non-GAAP GAAP Adjustments Adjusted GAAP Adjustments Adjusted Product revenue $584.7 $- $584.7 $517.9 $- $517.9 Service revenue 105.0 - 105.0 98.4 - 98.4 Total revenue 689.7 - 689.7 616.3 - 616.3 Cost of goods sold 292.2 - 292.2 247.6 - 247.6 Cost of service 81.1 - 81.1 72.3 - 72.3 Total cost of sales 373.3 - 373.3 319.9 - 319.9 Gross profit 316.4 - 316.4 296.4 - 296.4 Operating costs and expenses Selling, general and administrative 181.0 (1.6)(a) 179.4 176.6 (2.9)(d) 173.7 Research and development 58.8 - 58.8 75.1 (22.2)(e) 52.9 Restructuring 2.8 (2.8)(b) - 6.2 (6.2)(f) - Asset impairment charges 0.8 (0.8)(b) - 1.4 (1.4)(f) - Litigation settlement - - - (35.0) 35.0 (e) - Total operating costs and expenses 243.4 (5.2) 238.2 224.3 2.3 226.6 Operating income 73.0 5.2 78.2 72.1 (2.3) 69.8 Non-operating (income) and expense Interest income (3.2) - (3.2) (3.6) - (3.6) Interest expense 14.3 (0.8)(a) 13.5 15.7 (2.7)(g) 13.0 Other, net (40.9) 40.6 (c) (0.3) (1.5) 1.7 (h) 0.2 Total non-operating (income) expense (29.8) 39.8 10.0 10.6 (1.0) 9.6 Earnings before income taxes 102.8 (34.6) 68.2 61.5 (1.3) 60.2 Income taxes 33.4 (13.0) 20.4 16.9 (0.5) 16.4 Net earnings $69.4 $(21.6) $47.8 $44.6 $(0.8) $43.8 Basic earnings per share $1.11 $0.77 $0.72 $0.70 Diluted earnings per share $1.09 $0.75 $0.70 $0.69 (a) Rental tax dispute (b) Supply chain relocation (c) Biosite break-up fee (d) Investigation charges (e) Litigation settlement and research and development charge (f) Restructuring related charges (g) Debt extinguishment (h) Agencourt Personal Genomics (APG) related expenses BECKMAN COULTER, INC. ADJUSTED CONSOLIDATED STATEMENTS OF EARNINGS AND RECONCILIATION OF NON-GAAP ADJUSTMENTS (in millions, except amounts per share and share data) (unaudited) Six Months Ended June 30, 2007 June 30, 2006 Non-GAAP Non-GAAP GAAP Adjustments Adjusted GAAP Adjustments Adjusted Product revenue $1,097.1 $- $1,097.1 $991.2 $- $991.2 Service revenue 206.2 - 206.2 194.1 - 194.1 Total revenue 1,303.3 - 1,303.3 1,185.3 - 1,185.3 Cost of goods sold 536.0 - 536.0 479.1 - 479.1 Cost of service 153.5 - 153.5 140.5 - 140.5 Total cost of sales 689.5 - 689.5 619.6 - 619.6 Gross profit 613.8 - 613.8 565.7 - 565.7 Operating costs and expenses Selling, general and administrative 356.4 (1.6)(a) 354.8 340.0 (2.9)(d) 337.1 Research and development 116.6 - 116.6 129.7 (22.2)(e) 107.5 Restructuring 9.7 (9.7)(b) - 7.3 (6.2)(f) 1.1 Asset impairment charges 0.8 (0.8)(b) - 2.3 (1.4)(f) 0.9 Litigation settlement - - - (35.0) 35.0 (e) - Total operating costs and expenses 483.5 (12.1) 471.4 444.3 2.3 446.6 Operating income 130.3 12.1 142.4 121.4 (2.3) 119.1 Non-operating (income) and expense Interest income (7.8) - (7.8) (7.7) - (7.7) Interest expense 26.7 (0.8)(a) 25.9 26.5 (2.7)(g) 23.8 Other, net (38.7) 40.6 (c) 1.9 (3.4) 1.7 (h) (1.7) Total non-operating (income) expense (19.8) 39.8 20.0 15.4 (1.0) 14.4 Earnings before income taxes 150.1 (27.7) 122.4 106.0 (1.3) 104.7 Income taxes 43.6 (10.4) 33.2 28.8 (0.5) 28.3 Net earnings $106.5 $(17.3) $89.2 $77.2 $(0.8) $76.4 Basic earnings per share $1.71 $1.44 $1.23 $1.22 Diluted earnings per share $1.67 $1.40 $1.20 $1.19 (a) Rental tax dispute (b) Supply chain relocation (c) Biosite break-up fee (d) Investigation charges (e) Litigation settlement and research and development charge (f) Restructuring related charges (g) Debt extinguishment (h) Agencourt Personal Genomics (APG) related expenses Non-GAAP Financial Measures
Certain disclosures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) included in this release are accompanied by disclosures that are not prepared in conformity with GAAP. Management has determined that these disclosures provide investors a more complete understanding of the company’s results, as these income and expense items are not expected to recur in subsequent periods, or in the case of restructuring and supply chain initiatives, could vary significantly based upon the project or initiative. Given the significance and unusual nature of these income or expense items relative to the operating results for the periods presented, these items have been excluded in the “Adjusted Results” presentation of our operating results herein. These non-GAAP disclosures are as follows:
a) Rental tax dispute - In 1998, the company entered into a sale-leaseback transaction with Cardbeck Miami Trust (“Cardbeck”) in connection with the company’s Miami facility. In May 2005, Cardbeck notified the company that it had received an assessment from the State of Florida in the amount of $4.4 million for rental tax, interest and penalties related to payments made by the company to Cardbeck from June 2000 to February 2005. The State of Florida has asserted that this transaction is subject to commercial rental tax in accordance with applicable state laws and requested Cardbeck to pay this assessment. Both Cardbeck and the company have taken steps to challenge the assessment and are attempting to settle the assessment. Therefore, at June 30, 2007, the company has made an accrual of $2.4 million ($1.6 million sales tax and $.8 mi
