Trinity Biotech Announces Quarter 2 Financial Results

DUBLIN, IRELAND--(Marketwire - July 29, 2010) - Trinity Biotech plc (NASDAQ: TRIB), a leading developer and manufacturer of diagnostic products for the point-of-care and clinical laboratory markets, today announced results for the quarter ended June 30, 2010.

Quarter 2 Results

Total revenues for the quarter were $22.6m which compares to $32.3m in quarter 2, 2009, a decrease of 30%. This decrease is principally due to the divestiture of the coagulation product line which was effective from 30 April 2010.

Point-of-care revenues for the quarter decreased by 32.1% when compared to quarter 2, 2009. This was due to particularly high sales in quarter 2, 2009 and the continued impact of the company’s decision to restrict shipments to a major HIV customer due to credit related issues. Compared to quarter 1, 2010 point-of-care revenues were down 8% which represents a normal level of fluctuation and were in line with our expectations for the quarter.

Continuing clinical laboratory (i.e. excluding coagulation) revenues were $14.2m which represents a decrease of 5.9% when compared to $15.1m in quarter 2, 2009. However, if the impact of no longer selling fully direct in UK, France and Germany and the impact of foreign exchange are excluded, there would have been organic growth of approximately 2% for the quarter. Compared to quarter 1, 2010 continuing clinical laboratory sales have increased by 6.8%.

Lower coagulation revenues reflect the divestiture of this product line at the end of the first month of the quarter -- 30 April 2010.

Revenues for quarter 2 by key product area were as follows:

 2009 2010 Increase/ 2010 Quarter 2 Quarter 2 Decrease Quarter 1 ---------- ---------- --------- ---------- US$'000 US$'000 % US$'000 ---------- ---------- --------- ---------- Point-of-Care 5,908 4,011 -32.1% 4,362 ---------- ---------- --------- ---------- Continuing Clinical Laboratory 15,062 14,178 -5.9% 13,274 ---------- ---------- --------- ---------- Continuing operations* 20,970 18,189 -13.3% 17,636 ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- Coagulation 11,332 4,437 -60.8% 11,377 ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- Total 32,302 22,626 -30.0% 29,013 ---------- ---------- --------- ---------- * Continuing operations reflects the company’s divestiture of its coagulation product line (shown separately) 

Gross profit for the quarter amounted to $11.2m representing a gross margin of approximately 49.3%. This represents an increase of 3.7% over the same period in 2009. The improvement in gross margin is largely attributable to the divestiture of coagulation, which traditionally had been our lowest gross margin product line. Excluding instrument service costs for the quarter, the gross margin would be 52.1%.

Research and Development expenses for the quarter amounted to $1.2m, which represents a decrease of 32.7% compared to quarter 2, 2009. Similarly SG&A expenses have fallen by 24.9% from $9.0m in quarter 2 of 2009 to $6.8m in the current quarter. In both cases the principal driver for the reduction has been the transfer of R&D, sales and administrative personnel to Stago as part of the coagulation divestiture.

Net financial income for the quarter was $152,000 which compares to an expense of $348,000 in quarter 2, 2009. This improvement is attributable to the increase in cash balances to $50m and the elimination of bank debt during the quarter.

Operating profit decreased from $3.8m in quarter 2, 2009 to $3.5m in the current quarter due to the coagulation divestiture. However, the operating margin for the quarter has increased to 15.5% which represents a significant improvement compared to 11.9% in quarter 2, 2009.

During the quarter the company recognised a profit on the sale of its coagulation product line of $47.4m. This reflects the sales proceeds of $90m less the carrying value of the assets divested and associated costs. This is partly offset by a once-off charge of $0.3m in relation to the restructuring of the company’s HIV manufacturing activities, which will result in improved profitability from early 2011 onwards.

Excluding non-recurring items, profit after tax increased from $3m in quarter 2, 2009 to $3.3m, an increase of 8.7%. Similarly, EPS for the quarter increased from 14.4 cent per share to 15.5 cent per share, an increase of 7.6%.

The tax charge for the quarter was $40,000 which includes a tax credit of $354,000 relating to the coagulation divestiture and a tax charge of $394,000 relating to ongoing activities. The latter represents an effective tax rate of 10.8%.

The following table excludes the impact of the non-recurring items:

 2009 2010 Increase Quarter 2 Quarter 2 % US$'000 US$'000 ------------ ------------ ----------- Profit before tax 3,493 3,661 4.8% ------------ ------------ ----------- Income Tax expense 488 394 ------------ ------------ ----------- Profit after tax 3,005 3,267 8.7% ------------ ------------ ----------- Basic EPS - US cents 14.4 15.5 7.6% ------------ ------------ ----------- Diluted EPS - US cents 14.4 15.1 4.9% ------------ ------------ ----------- 

From a cash perspective the Company generated $5.9m of cash from operations which is an increase of almost 40% compared with the same period in 2009. In quarter 2, 2010 the company generated free cash flows of $4.4m, compared to $2.2m for the corresponding quarter in 2009.

Coagulation Divestiture

During the quarter the company completed the divesture of its coagulation product line to Stago. At the time of divestiture, coagulation represented approximately 40% of the company’s revenues. The principal impacts of this divestiture have been as follows:

-- The recognition of a profit on the sale of $47.4m. -- The receipt of cash (net of expenses) to date of $66.5m. The company will receive a further $22.5m in deferred consideration over the next 2 years. This has allowed the company to eliminate all bank debt and increase cash reserves to $50m. -- A significant reduction in the company’s cost base following the transfer of 320 employees to Stago. -- A reduction in property, plant and equipment of $6.8m and goodwill and intangible assets of $12.2m. -- A reduction in working capital of $23.5m. 

Notwithstanding the above, the company’s on-going earnings are expected to be 100-110% of pre-divestiture levels.

Comments

Commenting on the results, Kevin Tansley, Chief Financial Officer, said, “This was a very significant quarter for the company. We divested our coagulation product line for a profit of over $47m. This enabled us to fully eliminate our bank debt and build up significant cash reserves. We also posted EPS before non-recurring items of 15.5 cent in the quarter which represents an increase of 7% over quarter 2 last year. With cash from operations of $5.9m and free cash flows of $4.4m the company is now generating significant cash. With the improved profitability and strong cash flows the company is performing very strongly.”

Ronan O’Caoimh, CEO of Trinity Biotech, stated, “The results this quarter show that we are continuing to succeed in our stated goal of EPS growth. We have shown that without coagulation we have been able to continue our growth in profitability and I can confirm our expectation that earnings will be 100-110% of pre-divestiture levels. We have no debt, cash of $3.43 per share, with cash per share increasing at over 5 cents per month.

“Our new diabetes A1c instrument will launch before year end. We have aggressively implemented our new point-of-care strategy and have created a large R&D team in San Diego and expanded our Irish R&D team. They are working on 9 new point-of-care products with the first launches expected in approximately 18 months.”

Forward-looking statements in this release are made pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including, but not limited to, the results of research and development efforts, the effect of regulation by the United States Food and Drug Administration and other agencies, the impact of competitive products, product development commercialisation and technological difficulties, and other risks detailed in the Company’s periodic reports filed with the Securities and Exchange Commission.

Trinity Biotech develops, acquires, manufactures and markets diagnostic systems, including both reagents and instrumentation, for the point-of-care and clinical laboratory segments of the diagnostic market. The products are used to detect infectious diseases and to quantify the level of Haemoglobin A1c and other chemistry parameters in serum, plasma and whole blood. Trinity Biotech sells direct in the United States, Germany, France and the U.K. and through a network of international distributors and strategic partners in over 75 countries worldwide. For further information please see the Company’s website: www.trinitybiotech.com.

 Trinity Biotech plc Consolidated Income Statements (US$000’s except Three Three Six Six share data) Months Months Months Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 (unaudited) (unaudited) (unaudited) (unaudited) Revenues 22,626 32,302 51,639 63,408 Cost of sales (excluding service costs) (10,849) (16,306) (25,283) (31,729) ----------- ----------- ----------- ----------- Gross profit (excluding service costs) 11,777 15,996 26,356 31,679 Gross profit % (excluding service costs) 52.1% 49.5% 51.0% 50.0% Cost of sales - instrument servicing costs (620) (1,256) (1,670) (2,626) ----------- ----------- ----------- ----------- Gross profit (including service costs) 11,157 14,740 24,686 29,053 Gross profit % (including service costs) 49.3% 45.6% 47.8% 45.8% Other operating income 527 68 583 272 Research & development expenses (1,198) (1,781) (2,992) (3,557) Selling, general and administrative expenses (6,766) (9,011) (14,705) (18,612) Indirect share based payments (211) (175) (387) (273) ----------- ----------- ----------- ----------- Operating profit 3,509 3,841 7,185 6,883 Non-recurring items 47,061 - 47,061 - Financial income 268 3 278 4 Financial expenses (116) (351) (357) (640) ----------- ----------- ----------- ----------- Net financing income/(expense) 152 (348) (79) (636) ----------- ----------- ----------- ----------- Profit before tax 50,722 3,493 54,167 6,247 Income tax expense on operating activities (394) (488) (682) (738) Income tax credit on non-recurring items 354 - 354 - ----------- ----------- ----------- ----------- Profit for the period 50,682 3,005 53,839 5,509 ----------- ----------- ----------- ----------- Profit for the period (excluding non-recurring items) 3,267 3,005 6,424 5,509 ----------- ----------- ----------- ----------- Earnings per ADR (US cents) 240.1 14.4 255.2 26.4 Earnings per ADR (US cents) - excluding non-recurring items 15.5 14.4 30.4 26.4 Diluted earnings per ADR (US cents) 235.0 14.4 251.2 26.4 Diluted earnings per ADR (US cents) - excluding non-recurring items 15.1 14.4 30.0 26.4 Weighted average no. of ADRs used in computing basic earnings per ADR 21,109,023 20,856,868 21,098,574 20,855,638 The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company’s accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting). Trinity Biotech plc Consolidated Balance Sheets June 30, March 31, December 2010 2010 31, 2009 US$ ‘000 US$ ‘000 US$ ‘000 (unaudited) (unaudited) (audited) ASSETS Non-current assets Property, plant and equipment 5,339 12,131 12,174 Goodwill and intangible assets 35,127 46,247 44,822 Deferred tax assets 4,073 5,627 5,801 Other assets 11,762 1,330 1,212 ----------- ----------- ----------- Total non-current assets 56,301 65,335 64,009 ----------- ----------- ----------- Current assets Inventories 18,064 40,033 39,198 Trade and other receivables 28,592 20,415 22,931 Income tax receivable 257 260 229 Cash and cash equivalents 50,042 6,222 6,078 ----------- ----------- ----------- Total current assets 96,955 66,930 68,436 ----------- ----------- ----------- ----------- ----------- ----------- TOTAL ASSETS 153,256 132,265 132,445 =========== =========== =========== EQUITY AND LIABILITIES Equity attributable to the equity holders of the parent Share capital 1,083 1,080 1,080 Share premium 160,817 160,739 160,683 Accumulated deficit (32,811) (83,717) (87,070) Translation reserve (544) (385) 206 Other reserves 4,144 4,241 4,445 ----------- ----------- ----------- Total equity 132,689 81,958 79,344 ----------- ----------- ----------- Current liabilities Interest-bearing loans and borrowings 246 13,429 12,625 Income tax payable 148 207 24 Trade and other payables 12,241 11,732 12,844 Derivative Financial Instruments 406 279 58 Provisions 50 50 50 ----------- ----------- ----------- Total current liabilities 13,091 25,697 25,601 ----------- ----------- ----------- Non-current liabilities Interest-bearing loans and borrowings 294 16,409 19,231 Other payables 607 38 59 Deferred tax liabilities 6,575 8,163 8,210 ----------- ----------- ----------- Total non-current liabilities 7,476 24,610 27,500 ----------- ----------- ----------- ----------- ----------- ----------- TOTAL LIABILITIES 20,567 50,307 53,101 ----------- ----------- ----------- ----------- ----------- ----------- TOTAL EQUITY AND LIABILITIES 153,256 132,265 132,445 =========== =========== =========== The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company’s accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting). Trinity Biotech plc Consolidated Statement of Cash Flows (US$000’s) Three Three Six Six Months Months Months Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2010 2009 2010 2009 (unaudited) (unaudited) (unaudited) (unaudited) Cash and cash equivalents at beginning of period 6,222 2,589 6,078 5,184 Operating cash flows before changes in working capital 4,415 4,928 9,326 9,009 Changes in Working Capital 1,468 (707) 1,689 (2,476) ----------- ----------- ----------- ----------- Cash generated from operations 5,883 4,221 11,015 6,533 Net Interest and Income taxes paid (352) (133) (577) (393) Capital Expenditure (net) (1,111) (1,886) (3,435) (4,387) Repayment of bank debt (27,117) - (29,556) (2,146) Proceeds from sale of Coagulation Product Line 66,517 - 66,517 - ----------- ----------- ----------- ----------- Cash and cash equivalents at end of period 50,042 4,791 50,042 4,791 ----------- ----------- ----------- ----------- The above financial statements have been prepared in accordance with the principles of International Financial Reporting Standards and the Company’s accounting policies but do not constitute an interim financial report as defined in IAS 34 (Interim Financial Reporting).