Announces Reorganization and Change in Instrument Leasing Policy
FULLERTON, Calif., July 22 /PRNewswire-FirstCall/ -- Beckman Coulter, Inc.
(NYSE: BEC) announced today second quarter ended June 30, 2005, results
including sales of $619 million, up 3.6%, and earnings per diluted share of
$0.73, down 17.0% when compared to the second quarter 2004. These unaudited
results include the effects of a $0.07 per share charge taken for previously
announced executive retirement and business development costs.
Commenting on the quarter, Scott Garrett, president and chief executive
officer said, "Consumables product sales were up 10%, but total sales growth
was below our expectations, principally due to a shortfall in U.S.
Diagnostics, which more than offset excellent total company results in Europe.
Overall sales were impacted by two factors; a slow down in U.S. automation
purchase decisions as customers pause to evaluate a growing range of newly
available products and an increase in the percentage of instruments placed on
operating-type leases. Favorable product margins from our consumables growth
were more than offset by unfavorable geographic mix and manufacturing costs.
Better outcomes from non-operating expenses, tax rate and diluted share count
added to per share results.
Continued Garrett, "We provide exceptional value to customers by
simplifying, automating and innovating their testing process. We have the
industry's most prolific new product pipeline and our aftermarket business
model provides an ongoing flow of sales and profits as evidenced by the solid
growth of our consumables in the quarter. When consumable sales grow, we are
winning new business, either via new instrument placements or from more
productive utilization of our installed base. Consumables growth, which was
10% in the quarter, is the single best indicator of the health of our
business.
"To better capitalize on our leadership position in biomedical testing we
will undertake two actions to enhance our competitiveness and improve
operations. First, in response to changing market preferences, we will
immediately shift our diagnostic system placements from predominately
sales-type leases to predominately operating-type leases. This should further
improve competitiveness, sales efficiency, and product margins. It is
important to note that the cash payments lab customers make for our products
are the same under both sales-type and operating-type leases. Revenue is
recognized immediately with a sales-type lease but is spread over the life of
an operating-type lease. As a result of the revenue recognition requirements
of operating-type leases, reported sales and earnings will be lower in the
near-term. After full implementation of this change, sales and earnings
growth rates will be enhanced and we will improve the predictability of our
financial performance.
"Second, we will adopt a 'one-company' structure by combining our two
operating divisions. This will allow us to more effectively address
opportunities wherever they may arise across the biomedical testing continuum.
To realign and optimize operations, we expect to take a one-time restructure
charge of up to $60 million in the second half."
Second Quarter 2005 Results & Discussion
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 % Chg 2005 2004 % Chg
Reported Results
(Amounts in
millions, except
per share)
Sales $618.8 $597.3 3.6% $1,194.9 $1,134.1 5.4%
Net Earnings $47.7 $58.3 (18.2%) $89.1 $93.9 (5.1%)
Earnings Per
Diluted Share $0.73 $0.88 (17.0%) $1.37 $1.42 (3.5%)
Comparable Results*
(Amounts in
millions, except
per share)
Sales $618.8 $597.3 3.6% $1,194.9 $1,134.1 5.4%
Net Earnings $51.9 $58.3 (11.0%) $93.3 $93.9 (0.6%)*
Earnings Per
Diluted Share $0.80 $0.88 (9.1%) $1.43 $1.42 0.7%*
*See following "Non-GAAP Disclosures" where the impacts of certain items
on Reported Results are discussed.
Clinical Diagnostics Division sales grew 2.9% with unit placements of
clinical chemistry, immunoassay and hematology systems all up over prior year.
However, U.S. Diagnostics growth reflected weak clinical lab automation sales
and a customer-driven shift from sales-type leases to operating-type leases.
In the Biomedical Research Division, sales grew 5.3% led by centrifugation and
specialty testing. Specialty testing sales were also negatively impacted by
the move to operating-type leases. Due to customer preferences for operating-
type leases, the company estimates that second quarter sales were reduced by
at least $8.0 million, which will be recognized in monthly installments over
future periods.
Said Garrett, "U.S. clinical lab automation sales were very slow in the
second quarter due to a recent increase in competitive automation options,
scheduling of customer lab reconstruction and the anticipated launch of our
new automation solution -- AutoMate(TM) 800.
"Our recent new product flow is delivering steady unit placements and
double-digit consumables revenue growth, including over 24% in immunoassay.
The new UniCel(R) DxC 600 & 800 chemistry systems, in particular, have been an
early success with excellent unit placements and increased consumables flow.
In fact, the UniCel DxC 600 & 800 put us on pace for a record year in overall
chemistry shipments."
Geographically, on a constant currency basis, European sales increased 7%
led by strong performance in France and the dealer markets of Eastern Europe
and the Middle East, partially offset by results in Germany. Sales in Asia
were basically flat, with growth in China and South East Asia offset by a
decline in Japan for biomedical research products. Sales in the Americas were
flat due primarily to Clinical Diagnostics results.
Gross profit margin declined 190 basis points from prior year to 46.1% of
sales. Favorable product margins from our consumables growth were more than
offset by unfavorable geographic mix and higher costs associated with
manufacturing, inventory, freight and new product support. Excluding the
impact of the special charge of $7 million for previously announced executive
retirement and business development costs, operating margin declined 250 basis
points to 13.3% of sales, mainly as a result of the gross margin decline.
Non-operating expense in the second quarter of 2005 was $10.7 million, a
decrease of $2.4 million over prior year quarter, with increased interest
expense more than offset by lower currency-related expenses. The tax rate was
26.2% versus 28% in the prior year quarter. The tax rate change is the net
result of a favorable IRS ruling relating to the American Jobs Creation Act of
2004 and geographic profit mix. Reported net earnings declined 18.2%, and
reported diluted earnings per share declined 17.0%, to $0.73. Comparable net
earnings declined 11.0% and comparable earnings per diluted share declined
9.1% to $0.80.
During the quarter the company repurchased approximately 430,000 shares of
common stock at an average cost of $66.26.
The following business development and product announcements were
significant in the second quarter:
Business Development:
-
Signed licensing agreement with Nephromics, LLC to develop an
immunoassay test for preeclampsia, the second leading cause of death
of women during pregnancy.
- Completed acquisition of Agencourt Bioscience Corporation, enhancing
the company's position in molecular and genetics testing.
- The company's Board of Directors declared a quarterly dividend payout
of $0.14 per share of outstanding common stock payable on
September 8, 2005 to all stockholders of record on August 19, 2005.
This payout represents the 65th consecutive quarterly payout of
dividends in the company's history.
Product Announcements:
-
Shipped Vidiera(TM) NsD nucleic sample detection platform, the first
in a family of systems for molecular testing.
- Launched UniCel(R) DxC 800 SYNCHRON(R) chemistry system with increased
on-board test menu capacity.
- Shipped Cell Lab Quanta flow cytometer, an affordable, easy-to-use
benchtop system for cellular analysis in research and drug discovery
applications.
Reorganization
Said Garrett, "Our value proposition to provide systems and supplies that
simplify, automate and innovate testing has never been more relevant. The
company's product development strategy is on-target and the rollouts continue.
To more rapidly realize our vision of growth for the company, we are
integrating the two-division structure into a 'one-company' organization,
creating synergies and improving focus as we address the entire biomedical
testing continuum."
Garrett continued, "The new structure includes two major commercial
organizations focused on domestic and international markets and creates four
business groups to drive our core product strategies:
- Chemistry Systems
- Immunoassay Systems
- Cellular Systems
- Discovery and Automation Systems"
To align personnel and reduce costs, we expect to take a restructure and
related charges of up to $60 million in the second half of 2005. The
restructure should result in the elimination of approximately 350 positions.
Additionally, the company will be reviewing minor product lines, facilities
and other assets that do not support the 'one-company' strategy. Upon
completion of the review the company will announce the final restructuring
charge and the commensurate annual cost savings.
Change in Leasing Policy
Garrett stated, "Beckman Coulter has completed a review of its customer
leasing policy, including lease mix impacts on company operations. With a
customer bias for operating-type leases and their associated positive business
benefits, the company has decided to shift to a predominately operating-type
policy beginning immediately.
"This shift moves the recognition of instrument revenues and earnings from
a single transaction to smaller monthly installments made over the life of the
lease agreement, which is typically five years. The change will result in a
reduction in reported sales and earnings and higher gross margins. Once fully
implemented the shift will also result in faster growth, allowing us to equal
our previously established internal financial targets within five years.
Operating-type leases will result in improved sales efficiencies and lower
inventory levels, as well as higher capital expenditures. The company plans
to execute strategies to mitigate the near-term effect on cash flow of the
shift from sales-type receivables."
2005 Outlook Before Special Charges
Factoring in first half performance, a strengthening dollar and a
significant move toward operating-type leases:
2005 Total Year
Sales $2,410 to $2,460 million
EPS $2.55 to $2.90
Reconciliation of 2005 EPS Outlook
Previous Outlook $3.51 to $3.61
Currency / Diluted Share Count (0.04) to (0.03)
Other Cost of Goods Sold (0.22) to (0.18)
Lease Policy (0.70) to (0.50)
Current Outlook* $2.55 to $2.90
*Excludes special charges:
Exec. Retirement/Business Development (0.07)
Restructure Charge TBD
Third Quarter 2005:
Sales $570 to $585 million
Earnings Per Diluted Share $0.45 to $0.60
Investor Conference Call
As previously announced, there will be a conference call today, Friday,
July 22, 2005 at 8:30 a.m. ET to discuss the second quarter ended June 30,
2005 results. The call will also be webcast live. The call is accessible to
all investors through Beckman Coulter's website at www.beckmancoulter.com or
at 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 5, 2005.
This press release contains the company's unaudited second quarter 2005
results. These may change as a result of the completion of management's
review activities and as a result of our 2005 full year external audit. This
press release also contains forward-looking statements regarding the company's
outlook for sales and earnings per diluted share in 2005, as well as its
expectations regarding overall chemistry placements, earnings improvements,
benefits from restructuring, and the benefits of changing from predominantly
sales-type leases to predominantly operating-type leases. 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 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.
Among other things, these factors include the timing and extent of
conversion from sales-type leases to operating-type leases, the amount and
timing of the restructuring and related charges and savings, the effects of
cost containment initiatives by government and industry and the availability
of capital to clinical diagnostics and biomedical research customers. Other
factors include the actual timing of product introductions, our ability to
develop products based on new technologies, changes in tax laws and
interpretation both in the United States and other countries, the impact of
global economic and political conditions, consolidation among customers,
introduction of competitive systems and products, and potential cost, interest
rate and currency fluctuations, and currency hedging costs, as well as other
factors as outlined in the company's SEC filings.
Beckman Coulter, Inc. is a leading manufacturer of biomedical testing
instrument systems, tests and supplies that simplify and automate laboratory
processes. Spanning the biomedical testing continuum -- from pioneering
medical research and clinical trials to laboratory diagnostics and point-of-
care testing -- Beckman Coulter's 200,000 installed systems provide essential
biomedical information to enhance health care around the world. The company,
based in Fullerton, Calif., reported 2004 annual sales of $2.4 billion with
64 percent of this amount generated by recurring revenue from supplies, test
kits and services. For more information, visit www.beckmancoulter.com.
Contact: Jeanie Herbert (714) 773-7620
Director, Investor Relations
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in millions, except amounts per share)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Sales $618.8 $597.3 $1,194.9 $1,134.1
Cost of sales 333.4 310.7 638.7 594.6
Gross profit 285.4 286.6 556.2 539.5
Operating costs and expenses:
Selling, general and
administrative 160.0 146.3 309.2 284.8
Research and development 50.1 46.6 98.1 94.7
Restructure -- (0.4) -- (0.4)
Total operating cost and
expenses 210.1 192.5 407.3 379.1
Operating income 75.3 94.1 148.9 160.4
Non-operating (income) and
expense:
Interest income (4.3) (3.1) (8.4) (5.9)
Interest expense 11.1 7.3 21.3 16.6
Other, net 3.9 8.9 13.8 19.3
Total non-operating
expenses 10.7 13.1 26.7 30.0
Earnings before income taxes 64.6 81.0 122.2 130.4
Income taxes 16.9 22.7 33.1 36.5
Net income $47.7 $58.3 $89.1 $93.9
Basic earnings per share $0.77 $0.95 $1.43 $1.52
Weighted average number of
basic shares outstanding
(in thousands) 62,131 61,683 62,144 61,875
Diluted earnings per share $0.73 $0.88 $1.37 $1.42
Weighted average number of
dilutive shares outstanding
(in thousands) 64,960 65,922 65,092 65,985
Dividends declared per share $0.140 $0.110 $0.280 $0.220
BECKMAN COULTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
June 30, December 31,
2005 2004
(unaudited)
Assets
Current assets:
Cash and cash equivalents $46.7 $67.9
Trade and other receivables, net 579.6 653.5
Inventories 489.5 463.2
Other current assets 108.3 95.0
Total current assets 1,224.1 1,279.6
Property, plant and equipment, net 461.6 443.8
Goodwill 483.2 392.1
Other intangibles, net 318.7 321.1
Other assets 363.8 358.4
Total assets $2,851.4 $2,795.0
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, accrued expenses
and other liabilities 467.8 502.7
Notes payable and current maturities
of long-term debt 39.7 47.7
Income taxes payable 52.5 62.9
Total current liabilities 560.0 613.3
Long-term debt 683.5 611.7
Deferred income taxes 170.7 175.6
Other liabilities 301.1 300.1
Total liabilities 1,715.3 1,700.7
Stockholders' equity:
Common stock 6.7 6.7
Additional paid-in-capital 430.6 414.7
Retained earnings 889.2 820.8
Accumulated other comprehensive income 45.0 68.4
Treasury stock at cost (233.8) (214.4)
Unearned compensation (1.6) (1.9)
Total stockholders' equity 1,136.1 1,094.3
Total liabilities and
stockholders' equity $2,851.4 $2,795.0
BECKMAN COULTER, INC.
KEY PRODUCT SALES
(Amounts in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
Constant Constant
Reported Currency Reported Currency
$ Growth % Growth % $ Growth % Growth %
Routine Chemistry $168.3 (4.5) (5.8) $330.4 (0.6) (2.3)
Immunodiagnostics 138.8 11.7 9.7 266.6 14.5 12.1
Subtotal Chemistry 307.1 2.2 0.6 597.0 5.6 3.6
Hematology 132.1 4.8 3.4 259.6 3.4 1.7
Total Clinical
Diagnostics 439.2 2.9 1.4 856.6 4.9 3.0
Robotic Auto/
Genetic Analysis 39.4 1.5 (0.5) 72.1 2.9 0.3
Centrifuge/
Analytical Systems 77.2 6.6 4.7 143.9 6.9 4.5
Specialty Testing 63.0 6.1 4.0 122.3 8.2 5.3
Total Biomedical
Research 179.6 5.3 3.3 338.3 6.5 3.8
Total Beckman
Coulter $618.8 3.6 2.0 $1,194.9 5.4 3.3
GEOGRAPHIC SALES
(Amounts in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
Constant Constant
Reported Currency Reported Currency
$ Growth % Growth % $ Growth % Growth %
Americas $360.7 0.6 0.0 $690.4 (1.8) (2.3)
Europe 183.1 10.9 6.9 360.4 19.8 14.0
Asia 75.0 2.0 0.5 144.1 10.5 8.6
Total Beckman
Coulter $618.8 3.6 2.0 $1,194.9 5.4 3.3
Non-GAAP Disclosures
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 inclusion of these disclosures provides investors a more
meaningful presentation of the Company's results. These non-GAAP disclosures
and the basis for excluding them are as follows:
Currency Impacts on Reported Revenues -- We define constant currency sales
as current period sales in local currency translated to U.S. dollars at the
prior year's foreign currency exchange rate. This measure provides information
on sales growth as if foreign currency exchange rates have not changed between
the prior year and the current period. Fluctuations in exchange rates impact
the comparative results and growth rates of the Company's underlying business.
The impact of foreign currency exchange rate fluctuations have been excluded
from certain presentations and discussion of Sales by Product Area and Region.
Management believes that excluding this impact helps explain changes in the
fundamental business operations.
Officer Retirement Charges -- In June 2005, a $5.3 million charge
($3.2 million after taxes) related to the retirement of the Company's former
Chief Executive Officer, John P. Wareham, was recorded. The charge was
comprised of approximately $4.0 million related to the cash settlement of his
earned supplemental pension and approximately $1.3 million related to the
modification and acceleration of a previously granted restricted stock award.
Given the significance and unusual nature of these expenses relative to the
operating results for the periods presented, these expenses have been excluded
from the "Comparable" presentation of our operating results herein.
Business Development Charge -- In the second quarter of 2005, a
$1.7 million charge ($1.0 million after taxes) was recorded related to a
potential business development transaction that the Company decided not to
pursue. The charge consisted primarily of legal and consulting fees that
would have been recorded as part of the consideration in the event that the
transaction was actually completed. Given the significance and unusual nature
of this expense relative to the operating results for the periods presented,
this expense has been excluded from the "Comparable" presentation of our
operating results herein.
Net Income and Diluted EPS were impacted by the above item as follows:
Three Months Ended Six Months Ended
June 30, 2005 June 20, 2005
Net Diluted Net Diluted
Income EPS Income EPS
GAAP $47.7 $0.73 $89.1 $1.37
Officer retirement charges 3.2 3.2
Business development charge 1.0 1.0
Non-GAAP $51.9 $0.80 $93.3 $1.43
NOTE: The above schedule does not include the estimated second quarter
impact on revenues of at least $8 million from the shift to operating-type
leases.
SOURCE Beckman Coulter, Inc.
CONTACT: Jeanie Herbert, Director, Investor Relations, Beckman Coulter,
Inc., +1-714-773-7620
Press Release
