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DEAR FELLOW SHAREHOLDERS
Despite the tough economic conditions of 2009, revenues were up 3% and non-GAAP adjusted diluted earnings per share was $0.31 on a
constant currency basis as we continued with our growth strategy of organic growth through internal development of new products and new markets, acquisition growth and operational
2009 MAJOR ACCOMPLISHMENTS:
We remain committed to being a leading manufacturer of
specialty products used to advance life science research and we see the emerging field of regenerative medicine as a potential long-term growth opportunity for Harvard Bioscience.
We believe we are well positioned to achieve our growth objectives to double revenue and profits in the next three to five years.
Reconciliation of US GAAP Diluted Earnings Per Common Share from Continuing Operations to
Non-GAAP Constant Currency Adjusted Diluted Earnings Per Common Share from Continuing Operations
| For the year ended December 31, 2009 | ||||
| US GAAP diluted earnings per common share from continuing operations | $ | 0.24 | ||
| Adjustments: | ||||
| Effect of currency translation | 0.01 | |||
| Amortization of intangible assets | 0.06 | |||
| Inventory write-down due to restructuring | 0.01 | |||
| Direct acquisition costs | 0.01 | |||
| Gain from adjustment of acquisition contingencies | (0.09 | ) | ||
| Restructuring charges | 0.02 | |||
| Stock-based compensation expense | 0.08 | |||
| Income taxes (A) | (0.03 | ) | ||
| Non-GAAP adjusted diluted earnings per common share from continuing operations | $ | 0.31 |
Tools to Advance Life Science Research and Regenerative Medicine
Harvard Bioscience is a global developer, manufacturer and marketer of a broad range of specialized scientific products used to advance life science
research. In 2009, we started developing new versions of our market leading research products for the emerging field of regenerative medicine. Regenerative medicine means using stem cells to repair damaged tissue in the body and also growing organs
outside the body for transplant. The US Department of Health and Human Services states, the US market for regenerative medicine is estimated at $100 billion. In early 2010 we launched our first regenerative medicine product, a
bioreactor previously used to perform the world s first human transplant of a tissue engineered bronchus. We believe that regenerative medicine represents a long-term growth opportunity for us.
In the twelve years under our current management team, revenue has grown at a compound annual rate of approximately 18% and our
non-GAAP adjusted operating income from continuing operations has grown at a compound annual growth rate of approximately
16%.2 This is despite two major recessions during this
Our goal is to become a leading provider of tools for life science research and regenerative medicine. We focus on relatively low
price point products to avoid the volatility of capital equipment. We also focus on strong brand names like Harvard Apparatus, Hoefer and Denville Scientific to help communicate the value of our products to our research customers.
Our growth strategy is to combine organic growth (driven by new product development and distribution channel expansion) with tuckunder acquisitions and
operational improvements. We have acquired 20 companies since 1997. We believe that implementing this strategy will lead to growth in non-GAAP earnings per diluted share of 15-25% on average over the next three to five years.
We believe we have a strong balance sheet, a conservative approach to financing and the financial resources to implement this tuckunder acquisition
Both our company and our management team have a strong commitment to shareholder value creation. Our management team collectively
holds approximately 18% of our outstanding shares. We have a $10 million share repurchase program under which we have repurchased approximately 6% of the shares outstanding.
We believe our strategy has produced a relatively high level of earnings per share growth with a relatively high level of consistency. We believe the
regenerative medicine opportunity could have long-term growth potential.
Harvard is a registered trademark of Harvard University. The marks
Harvard Apparatus and Harvard Bioscience are being used pursuant to a license agreement between Harvard University and Harvard Bioscience, Inc.
From Inside Front Cover of Annual Report
| For the years ended December 31, | ||||||||||||||||||||||||||||||||||||||||
| 1997 | 1998 | 1999 | 2000 (IPO) | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||||||||||||||
| ($US in thousands, unaudited) | ||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 11,464 | $ | 12,154 | $ | 26,178 | $ | 30,575 | $ | 38,088 | $ | 47,009 | $ | 52,024 | $ | 64,745 | $ | 67,431 | $ | 76,181 | $ | 83,407 | $ | 88,049 | $ | 85,772 | ||||||||||||||
| Revenue twelve-year compound annual growth rate from 1997 to 2009: 18.3% | ||||||||||||||||||||||||||||||||||||||||
| For the years ended December 31, | ||||||||||||||||||||||||||||||||||||||||
| Reconciliation of US GAAP to Non-GAAP Adjusted: | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||||||||||
| US GAAP operating income (loss) | $ | 2,119 | $ | 2,412 | $ | 1,196 | $ | (10,438 | ) | $ | 3,112 | $ | 5,425 | $ | 7,173 | $ | 8,384 | $ | 7,924 | $ | 8,690 | $ | 9,533 | $ | 8,479 | $ | 8,055 | |||||||||||||
| Restructuring and severance related expenses | 474 | 302 | 1,771 | 516 | ||||||||||||||||||||||||||||||||||||
| Inventory write-down due to restructuring | 252 | 159 | ||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | 3,284 | 14,676 | 2,656 | 1,269 | 519 | 69 | 1,934 | 2,335 | 2,003 | 2,514 | ||||||||||||||||||||||||||||||
| In-process research and development expense | 159 | |||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 27 | 368 | 604 | 956 | 595 | 891 | 1,582 | 1,664 | 1,697 | 1,824 | 1,966 | 1,844 | ||||||||||||||||||||||||||||
| Fair value adjustments to costs of product sales | 336 | 258 | 50 | 61 | ||||||||||||||||||||||||||||||||||||
| Non-GAAP adjusted operating income | $ | 2,119 | $ | 2,439 | $ | 4,848 | $ | 4,842 | $ | 6,883 | $ | 7,763 | $ | 8,919 | $ | 10,293 | $ | 9,890 | $ | 12,371 | $ | 13,753 | $ | 14,471 | $ | 13,088 |
Non-GAAP twelve-year adjusted operating income from continuing
operations compound annual growth rate from 1997 to 2009:16.4%
Forward-Looking Statements
This Annual Report contains forward-looking statements, which can be identified by our use of guidance, objectives,
emerging, long-term, growth, potential, future, expects, plans, achieve, could, will, lead, opportunity,
estimate, continue, strategy, intend, believe, see and similar expressions. Such statements include, but are not limited to, statements or inferences about our beliefs, plans or
objectives, our anticipated future revenues and earnings, the strength of our market position and business model, the outlook for the life sciences industry and the field of regenerative medicine, our ability to execute our business strategy, our
positioning for growth and the market demand and opportunity for our products.
These statements involve known and unknown risks,
uncertainties and other factors that may cause the Company s actual performance to be materially different from any future performance expressed or implied by the forward-looking statements. Such factors include our failure to consummate
acquisitions, expand our product offerings or introduce new products, including in the field of regenerative medicine, the current and anticipated size of the regenerative medicine market, our ability to manage our growth, and factors described
under Item 1A. Risk Factors in our 2009 Form 10-K or in our other public filings.