FULLERTON, Calif., Oct. 30 /PRNewswire-FirstCall/ -- Beckman Coulter, Inc. , a leading developer, manufacturer and marketer of products that simplify, automate and innovate complex biomedical testing, announced today third quarter ended September 30, 2007 results. Total revenue of $669 million was up 6.0% over third quarter 2006, on strong sales in clinical diagnostics partially offset by lower than expected sales of life science products. In constant currency, revenue increased 4.1%. Net earnings were $60.0 million, or $0.93 per fully diluted share. Adjusting for special items, net earnings were $49.5 million, or $0.77 per fully diluted share, an increase of 16.7% over prior year quarter.
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Total revenue from clinical diagnostics products increased 9.4% over prior year quarter, or 7.5% in constant currency. Within clinical diagnostics, Immunoassay was up 28%, Chemistry increased 6%, and Cellular was flat. Clinical Automation systems revenue grew more than 40% over prior year quarter indicating continued strong demand for the company’s industry-leading laboratory systems that automate hospital laboratories, improving productivity and patient safety while reducing skilled labor requirements.
Markets for the company’s life science products continued to be soft in most geographies. Compared to third quarter 2006, sales of life science products declined 8.6%, or 10.5% in constant currency.
The company’s consumables sales grew 8.7%, or 6.8% in constant currency. The fourth quarter 2006 acquisition of Lumigen, Inc. contributed 1.7% to this growth. Access Immunoassay consumables grew nearly 23%. Recurring revenue, comprised of supplies, test kits, service revenue and operating-type lease payments, was 79.9% of total revenue, compared to 76.6% in third quarter 2006.
Scott Garrett, president and chief executive officer, said, “Beckman Coulter’s broad product offering continues to be attractive to our clinical diagnostics customers as they deal with labor shortages, requirements for faster turn-around times, and the continuing growth of their outpatient and outreach testing. Demand for our immunoassay systems continues on a strong pace and placements of our UniCel(R) DxC 600i chemistry / immunoassay work cells nearly doubled in the quarter.
“Although we continued to experience strong demand for our industry-leading clinical systems, total revenue in the third quarter was lower than anticipated due primarily to two items. First, worldwide life science markets were generally soft. Academic research funding is down in many major markets. Second, sales of Cellular products were constrained by a short-term supply disruption caused by the consolidation of our printed circuit board operations. Consequently, the quarter ended with about $10 million in cellular instrument backorders. We expect to work down these backorders sufficiently in the fourth quarter to achieve our goals for the full year,” he said.
Gross profit margin (adjusted) declined 70 basis points to 46.6%, compared to third quarter 2006. Higher distribution costs and a decline in margin on life science products were primarily responsible. Diagnostics product margins were flat with prior year quarter reflecting overall stable pricing trends.
R&D investment, excluding the license acquired in 2006 for $27.5 million, ramped up $6.5 million, or 12.2% over prior year quarter. The increase in R&D investment was largely directed at the development of the company’s previously announced sample-to-result system for molecular diagnostics, the UniCel(R) DxN, slated for commercialization in 2010.
Reported operating income was $67.5 million. In the third quarter, the company recorded a $3 million charge in connection with the previously announced closure and relocation of several facilities. On an adjusted basis, operating income was $70.5 million, down 5% compared to third quarter 2006. The decline in operating income in the quarter was primarily driven by the increase in R&D investment and the decline in profit contribution from life science products.
Non-operating income of $10.8 million included a $26.2 million gain on the sale of vacant land in Miami. From these proceeds, the company made a $9 million contribution in the quarter to establish the Beckman Coulter Foundation. This new foundation will benefit research and educational institutions and programs. Adjusted non-operating expense, excluding these two items, was $6.4 million in the quarter, compared to $13.1 million in the third quarter of 2006. The lower expense was due primarily to currency gains.
The effective tax rate in the quarter was 25.4% reflecting certain discrete tax items including a tax settlement, reductions of certain foreign tax rates and additional R&D tax credits.
Net earnings were $60 million or $0.93 per fully diluted share. Adjusted net earnings were $49.5 million, or $0.77 per fully diluted share.
First Nine Months Summary
Through the first nine months of 2007, revenue increased 8.6%, or 6.8% in constant currency, over the prior year period. The acquisition of Lumigen contributed about 1% to this growth. Year-to-date 2007 consumables growth was 10.5%, or 8.8% in constant currency. The Lumigen contribution to consumables growth was 1.6%. Gross margin was 46.9% compared to 47.6% (adjusted) for the first nine months of 2006. Operating income increased by 22% and pretax profit increased by 74%; adjusting for special items, operating income increased by 10.1% and pretax profit increased by 12.9%. Adjusted earnings per diluted share increased 17.3% over the same period 2006.
“We are delighted in the continuing progress we are making in cash flow and EBITDA,” Garrett added. “For the first nine months of 2007, free cash flow improved by $55.6 million to $61.3 million. On an adjusted basis trailing-twelve months EBITDA increased by $61 million compared to EBITDA for the full year 2006. We expect these positive trends to continue.”
Full Year Outlook
Garrett concluded, “Our clinical diagnostics business is strong, up 9.8% in constant currency through the first nine months. This gives us confidence that we should achieve our full year outlook for total company revenue growth of 7% to 9% enabling us to fund a higher level of investment in important growth areas like molecular diagnostics. We expect 2007 operating income margin to be around 12% on a comparable basis. Adjusted non-operating expense is expected to be flat with prior year. Pretax profit growth should be 10% to 15% over 2006 on a comparable basis. Our estimate for the full year tax rate has changed to between 28% and 29%. With the first nine months completed, we are now able to narrow the range for earnings per share to $3.15 to $3.22. Full year capital expenditures are expected to be $325 to $350 million and depreciation and amortization should be between $210 and $230 million.”
“We’re pleased with the advances our company is making in 2007. Clearly, we are making the improvements and creating the capabilities necessary for achieving our goal of sustainable growth well above historical rates,” he said.
Investor Conference Call
As previously announced, there will be a conference call today, Tuesday, October 30, 2007 at 8:30 am ET to discuss the third quarter ended September 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, November 30, 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 nine months ended September 30, 2007 and September 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: “EBITDA”, “free cash flow”, “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 the third quarter of 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, adjusted 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 schedule for commercialization of its sample-to-result molecular diagnostics system and the effects of what it believes will be a short-term supply disruption. 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 August 7, 2007.
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:
Reconciliation of GAAP Net Earnings to Adjust Earnings Before Interest, Taxes, Depreciation & Amortization (“Adjusted EBITDA”)
CONTACT: Robert Raynor, Director, Investor Relations of Beckman Coulter,
Inc., +1-714-773-7620
Web site: http://www.beckmancoulter.com//
