Full Press Release Details
HBIO Reports Second Quarter 2008 Revenue Growth of 13%
Meets Q2 Guidance and Maintains 2008 Guidance
Holliston, MA, August 11, 2008 / Harvard Bioscience, Inc. (Nasdaq: HBIO), a global developer, manufacturer, and marketer of a broad range of tools to advance life science research, today reported unaudited financial highlights
for the three and six months ended June 30, 2008.
Revenues from our continuing operations for the three months ended June 30,
2008 were $23.0 million, an increase of 12.9% compared to revenues of $20.4 million for the three months ended June 30, 2007. Income from continuing operations, as measured under U.S. generally accepted accounting principles ( GAAP ),
was $1.1 million, or $0.03 per diluted share, for the three months ended June 30, 2008 compared to $2.0 million, or $0.06 per diluted share, for the same period in 2007. Non-GAAP adjusted income from continuing operations was $2.5 million, or
$0.08 per diluted share, for the three months ended June 30, 2008 compared to $2.4 million, or $0.08 per diluted share, for the same period in 2007. GAAP income from continuing operations for the second quarter of 2008 included the effect of
approximately $1.0 million in costs related to the Company s ongoing initiative to consolidate business functions to reduce future operating expenses.
Revenues from our continuing operations for the six months ended June 30, 2008 were $45.0 million, an increase of 13.9% compared to revenues of $39.5 million for the six months ended June 30, 2007. Income
from continuing operations, as measured under U.S. generally accepted accounting principles ( GAAP ), was $2.3 million, or $0.07 per diluted share, for the six months ended June 30, 2008 compared to $3.8 million, or $0.12 per diluted
share, for the same period in 2007. Non-GAAP adjusted income from continuing operations was $4.9 million, or $0.16 per diluted share, for the six months ended June 30, 2008 compared to $4.6 million, or $0.15 per diluted share, for the same
period in 2007. GAAP income from continuing operations for the six months ended June 30, 2008 included the effect of approximately $1.8 million in costs related to the Company s ongoing initiative to consolidate business functions to
reduce future operating expenses.
See Exhibits 3 and 4 for reconciliations of GAAP to non-GAAP adjusted income from continuing operations
and GAAP earnings per diluted share from continuing operations to non-GAAP adjusted earnings per diluted share from continuing operations.
During the second quarter we continued to make excellent progress towards achieving our goals for 2008. Our results are in line with our guidance
and the strong order rate in the first half of the year, significantly increasing our backlog, positions us well to achieve our operating plan for the year. Our growth in orders was driven by demand for the new Biochrom microliter spectrophotometer,
the launch of the Harvard Apparatus physiology catalog, worldwide sales of Panlab behavior products and a large order from China for plate readers. Additionally, we have completed the relocation of our Asys and Anthos product lines from Austria to
our Biochrom facility in the UK. Based on these trends we are comfortable with our guidance for the year of $0.36 $0.38 non-GAAP adjusted EPS and $94.0 $96.0 million in revenue. Our guidance for the third quarter is $0.07-$0.09 non-GAAP
adjusted EPS and revenue of $21.0 $23.0 million. Guidance for both the year and the third quarter exclude the impact of any additional acquisitions , said Chane Graziano, Chief Executive Officer of Harvard Bioscience.
Our revenue guidance is at July 31, 2008 exchange rates and the non-GAAP adjusted earnings per diluted share from continuing operations guidance
excludes amortization of intangible assets, the impact of future acquisitions in 2008, any future restructuring actions, stock-based compensation expense recognized under SFAS No. 123(R), and the impact of tax benefits associated with filing
consolidated tax returns for continuing and discontinued businesses. See the table below for a reconciliation of our estimated non-GAAP adjusted earnings per diluted share from continuing operations to our estimated GAAP adjusted earnings per
diluted share from continuing operations. See Exhibits 3 and 4 for reconciliations of GAAP to non-GAAP adjusted income from continuing operations and GAAP earnings per diluted share to non-GAAP adjusted earnings per diluted share from continuing
Reconciliation of Guidance for US GAAP Earnings per Diluted Share From Continuing Operations to
Adjusted Non-GAAP Earnings per Diluted Share From Continuing Operations
| Three Months Ended September 30, 2008 | Year Ended December 31, 2008 | |||||||||||||||
| Low Estimate | High Estimate | Low Estimate | High Estimate | |||||||||||||
| Non-GAAP adjusted diluted earnings per common share from continuing operations A | $ | 0.07 | $ | 0.09 | $ | 0.36 | $ | 0.38 | ||||||||
| Less the impact of: | ||||||||||||||||
| Amortization of intangible assets, net of tax A | (0.01 | ) | (0.01 | ) | (0.05 | ) | (0.05 | ) | ||||||||
| Stock-based compensation (SFAS No. 123(R)), net of tax B | (0.02 | ) | (0.02 | ) | (0.06 | ) | (0.07 | ) | ||||||||
| Restructuring, net of tax C | (0.04 | ) | (0.04 | ) | ||||||||||||
| Tax benefits of filing consolidated tax returns for continuing operations and discontinued businesses D | 0.01 | 0.01 | 0.02 | 0.02 | ||||||||||||
| GAAP diluted earnings per common share from continuing operations A | $ | 0.05 | $ | 0.07 | $ | 0.23 | $ | 0.24 |
A Assumes no additional acquisitions.
B Assumes no additional 2008 stock option grants.
C Assumes no additional 2008 restructuring actions.
D Does not include the tax impact of completing the divestiture of our Capital Equipment Business.
Operating Results for Continuing Operations
Three months ended June 30, 2008 compared to three months
ended June 30, 2007:
Revenues increased $2.6 million, or 12.9%, to $23.0 million for the three months ended June 30, 2008
compared to $20.4 million for the same period in 2007. The increase in revenue is primarily due to revenues from our recently acquired Panlab subsidiary of $2.8 million, an increase in sales at our Biochrom UK subsidiary of $0.5 million, primarily
of our new microliter spectrophotometer, and favorable foreign exchange rate impact on sales denominated in foreign currencies of $0.3 million during the second quarter of 2008. This revenue growth was offset by a decrease of $0.4 million in revenue
of our electrophoresis products to GE Healthcare and a decrease of $0.4 million in our Asys plate reader business compared to a particularly strong second quarter in 2007.
Cost of product revenues increased $1.9 million, or 17.8%, to $12.3 million for the three months ended June 30, 2008 from $10.4 million for the
three months ended June 30, 2007. The increase in cost of product revenues is primarily due to increases of $1.8 million attributable to our recently acquired Panlab subsidiary and $0.2 million attributable to changes in foreign exchange rates.
Gross profit as a percentage of revenues decreased to 46.7% for the three months ended June 30, 2008 compared with 48.9% for the same period in 2007. The decrease in gross profit as a percentage of revenues was primarily due to sales from our
Panlab subsidiary, which sells at lower gross margins than our historical consolidated gross margins, as a result of Panlab s mix of distributed products compared to manufactured products. The impact of Panlab on gross margin percentage was
Sales and marketing expenses increased $0.4 million, or 16.3%, to $3.0 million for the three months ended June 30, 2008
compared to $2.6 million for the three months ended June 30, 2007. This increase was primarily due to expenses from our recently acquired Panlab subsidiary of $0.3 million and changes in foreign exchange rates of $0.1 million.
General and administrative expenses increased $0.3 million, or 7.1%, to $3.8 million for the three months ended
June 30, 2008 compared to $3.5 million for the three months ended June 30, 2007. General and administrative expenses increased $0.2 million due to our recent acquisition of Panlab.
Research and development expenses were $1.1 million, an increase of $0.2 million, or 21.3%, for the three months ended June 30, 2008
compared to $0.9 million for the three months ended June 30, 2007. The increase in research and development expenses was primarily due to our recent acquisition of Panlab.
Six months ended June 30, 2008 compared to Six months ended June 30, 2007:
Revenues increased $5.5 million, or 13.9%, to $45.0 million for the six months ended June 30, 2008 compared to $39.5 million for the same period in
2007. The increase in revenue is primarily due to revenues from our recently acquired Panlab subsidiary of $5.2 million, an increase in sales at our Biochrom UK subsidiary of $2.4 million, primarily of our new microliter spectrophotometer, and
favorable foreign exchange rate impact on sales denominated in foreign currencies of $0.7 million during the first half of 2008. This revenue growth was offset by large one-off orders in the first half of 2007, which were not repeated in 2008,
including a large tender order for our Anthos plate readers from China of approximately $0.9 million and a decrease of approximately $0.6 million in revenues of our electrophoresis products to GE Healthcare.
Cost of product revenues increased $3.8 million, or 18.9%, to $23.9 million for the six months ended June 30, 2008 from $20.1 million for the six
months ended June 30, 2007. The increase in cost of product revenues is primarily due to increases of $3.4 million attributable to our recently acquired Panlab subsidiary, $0.3 million of inventory write-downs associated with our decision to
consolidate our Asys subsidiary into our Biochrom UK subsidiary and $0.4 million attributable to changes in foreign exchange rates. Gross profit as a percentage of revenues decreased to 46.9% for the six months ended June 30, 2008 compared with
49.1% for the same period in 2007. The decrease in gross profit as a percentage of revenues was primarily due to sales from our Panlab subsidiary, which sells at lower gross margins than our historical consolidated gross margins, as a result of
Panlab s mix of distributed products compared to manufactured products and certain inventory write-downs related to our consolidation plan (see Restructuring on the following page). The impact of Panlab and the inventory write-downs
on gross margin percentage was 2.1%.
Sales and marketing expenses increased $0.8 million, or 15.7%, to $5.8 million for the six months
ended June 30, 2008 compared to $5.0 million for the six months ended June 30, 2007. This increase was primarily due to expenses from our recently acquired Panlab subsidiary of $0.5 million and, to a lesser extent, to increases in salary
related expenses of $0.1 million and changes in foreign exchange rates of $0.2 million.
General and administrative expenses increased $0.6 million, or 8.7%, to $7.6 million for the six months
ended June 30, 2008 compared to $6.9 million for the six months ended June 30, 2007. General and administrative expenses increased $0.4 million due to expenses from our recent acquisition of Panlab and $0.1 million due to our
implementation of our shareholder rights plan.
Research and development expenses were $2.2 million, an increase of $0.4 million for the
six months ended June 30, 2008 compared to $1.7 million for the six months ended June 30, 2007. The increase in research and development expenses was primarily due to expenses from our recent acquisition of Panlab of $0.3 million.
second quarter of 2008 with cash and cash equivalents of $14.2 million compared to cash and cash equivalents of $18.2 million at December 31, 2007. As of June 30, 2008, $13.8 million was held by our continuing operations and $0.4 million
was held by our discontinued operations. As of June 30, 2008, we had no debt outstanding on our revolving credit facility compared to $5.5 million at December 31, 2007. Additionally, our Panlab subsidiary had $2.1 million and $2.3 million
in debt remaining at June 30, 2008 and December 31, 2007, respectively.
Trade receivables were $15.4 million and inventories
were $16.2 million as of June 30, 2008 compared to trade receivables of $13.1 million and inventories of $12.7 million as of June 30, 2007. Outstanding days of sales, or DSO, were 63 days for the three months ended June 30, 2008 and
59 days for the three months ended June 30, 2007. DSO increased primarily due to our acquisition of Panlab whose customers pay significantly slower than the customers of our other subsidiaries. Excluding Panlab, DSO were 55 days during the
three months ended June 30, 2008, an improvement of four days compared to the same period a year ago. Inventory turns were 3.0 times for the three months ended June 30, 2008 compared to 3.4 times for the same period of 2007. Inventory
turns are down primarily due to the reduction of sales at our Asys subsidiary, the build up of inventory at Asys in preparation for the relocation to our Biochrom facility and the building of inventories for certain new product launches.
During the quarter ended
March 31, 2008, the management of Harvard Bioscience committed to an ongoing initiative to consolidate business functions to reduce operating expenses. Our recent actions have been related to the separation of our electrophoresis product lines
from our spectrophotometer and plate reader product lines. As part of these initiatives we have made changes in management, completed the consolidation of the Hoefer electrophoresis administrative and marketing operations from San Francisco,
California to the headquarters of the Harvard Apparatus subsidiary in Holliston, Massachusetts and consolidated the activities of our Asys Hitech subsidiary in Austria to the Company s Biochrom subsidiary s facility located in Cambridge
UK. The combined costs of these activities recorded in the first half of 2008 are $1.8 million.
During the quarter ended March 31, 2008, we recorded charges relating to the restructuring of
approximately $0.8 million. These charges were comprised of $0.4 million in severance payments, $0.3 million in inventory impairment charges related to the discontinuance of certain product lines (included in cost of product revenues) and $0.2
million in various other costs.
During the quarter ended June 30, 2008, we recorded charges relating to the
restructuring of approximately $0.9 million. These charges were comprised of $0.5 million in severance payments, $0.3 million in various other costs and $0.1 million in facility closure costs.
Discontinued Operations
discontinued operations, net of tax, was approximately $3.3 million for the three months ended June 30, 2008 compared to a loss of $3.8 million for the same period in 2007. The loss from discontinued operations, net of tax, was approximately
$3.8 million for the six months ended June 30, 2008 compared to a loss of $5.0 million for the same period in 2007.
quarter ended June 30, 2008, we re-evaluated the fair value less costs to sell the remaining assets that comprise the Capital Equipment Business segment. Based on this evaluation, we recorded additional asset impairment charges of $2.9 million.
For the three and six months ended June 30, 2008, the loss from discontinued operations, net of tax, includes the operating results
of the Company s Union Biometrica US and German subsidiaries. For the three and six months ended June 30, 2007, the loss from discontinued operations, net of tax, included the operating results of the Company s former Genomic
Solutions Division, its former MAIA Scientific subsidiary, and its current Union Biometrica US and German subsidiaries.
Conference Call Details
As previously announced, management will host a conference call to discuss second quarter 2008 results and business highlights and
outlook, which will be simultaneously broadcast over the Internet and can be accessed through the Harvard Bioscience, Inc. web site. In addition, management may answer one or more questions concerning business and financial developments and trends
and other business and financial matters affecting the Company, some of the responses to which may contain information that has not been previously disclosed. The conference call will begin at 5:30 p.m. Boston time on Monday, August 11, 2008.
To listen to the conference call, log on to our website at: www.harvardbioscience.com and click on the Earnings Call icon. The live conference call is also accessible by dialing 866-383-7998 and referencing the pass code of 85078768. A
replay of this conference call will be available from 7:30 p.m. on August 11, 2008 through August 18, 2008 and will be accessible by dialing 888-286-8010 and referencing the pass code of 12678084 . This earnings release, as
well as any material financial and other statistical information presented on the call which is not included in this earnings release, is available on our website by clicking on the Press Releases icon. If you are unable to listen to the live