HBIO Reports Second Quarter 2007 Results | Harvard Bioscience, Inc.
HOLLISTON, Mass.--(BUSINESS WIRE)--Aug. 2, 2007--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, 2007.
Revenues from our continuing operations for the three months ended June 30, 2007 were $20.4 million, an increase of 12.2% compared to revenues of $18.2 million for the three months ended June 30, 2006. Excluding the impact of foreign exchange rate changes, revenue grew approximately 8.6% during the three months ended June 30, 2007 compared to the same period in 2006. Income from continuing operations, as measured under U.S. generally accepted accounting principles ("GAAP"), was $2.0 million, or $0.06 per diluted share, for the three months ended June 30, 2007 compared to $1.8 million, or $0.06 per diluted share, for the same period in 2006. Non-GAAP adjusted income from continuing operations was $2.4 million, or $0.08 per diluted share, for the three months ended June 30, 2007 compared to $2.0 million, or $0.07 per diluted share, for the same period in 2006. See Exhibits 3, 4 and 5 for reconciliations of GAAP to non-GAAP adjusted income from continuing operations, GAAP earnings per diluted share from continuing operations to non-GAAP adjusted earnings per diluted share from continuing operations and changes in revenues excluding foreign exchange fluctuations.
Revenues from our continuing operations for the six months ended June 30, 2007 were $39.5 million, an increase of 11.2% compared to revenues of $35.6 million for the six months ended June 30, 2006. Excluding the impact of foreign exchange rate changes, revenue grew approximately 6.9% during the six months ended June 30, 2007 compared to the same period in 2006. Income from continuing operations, as measured under GAAP, was $3.8 million, or $0.12 per diluted share, for the six months ended June 30, 2007 compared to $3.4 million, or $0.11 per diluted share, for the same period in 2006. Non-GAAP adjusted income from continuing operations was $4.6 million, or $0.15 per diluted share, for the six months ended June 30, 2007 compared to $4.0 million, or $0.13 per diluted share, for the same period in 2006. See Exhibits 3, 4 and 5 for reconciliations of GAAP to non-GAAP adjusted income from continuing operations, GAAP earnings per diluted share from continuing operations to non-GAAP adjusted earnings per diluted share from continuing operations and changes in revenues excluding foreign exchange fluctuations.
"Our revenue growth during the second quarter of 2007 was primarily driven by the strong performance of our Harvard Apparatus subsidiaries primarily in the United Kingdom, France, Germany and Canada. Also contributing to this growth was the strong market demand for our new spectrophotometers sold by our Biochrom subsidiary and plate readers sold by our Asys subsidiary," said Chane Graziano, CEO of Harvard Bioscience.
"As we look forward to the third quarter of 2007, based on current economic trends, we anticipate generating revenues between $19.0 and $20.0 million and reporting non-GAAP adjusted earnings per diluted share from continuing operations between $0.07 and $0.08. Also based on these trends, our full year guidance remains unchanged as we expect to generate revenue between $80.0 and $83.0 million and report non-GAAP adjusted earnings per diluted share from continuing operations between $0.29 and $0.31," continued Chane Graziano, CEO of Harvard Bioscience.
This non-GAAP adjusted earnings per diluted share from continuing operations guidance excludes amortization of intangible assets, the impact of potential acquisitions in 2007, the impact of stock-based compensation expense recognized under SFAS No. 123R, 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.
Revenues increased $2.2 million, or 12.2%, to $20.4 million for the three months ended June 30, 2007 compared to $18.2 million for the same period in 2006. Excluding the impact of foreign exchange, revenues increased $1.6 million, or 8.6%. The revenue increase was primarily derived from our cell biology equipment sold by our Harvard Apparatus businesses, the impact of new spectrophotometers sold by our Biochrom subsidiary, increased sales of plate readers at our Asys subsidiary and the impact of our recently acquired Anthos product lines. In addition, revenue growth was strong internationally, particularly in Europe. The foreign exchange impact on sales denominated in foreign currencies was $0.6 million, or 3.6%, during the second quarter of 2007.
Cost of product revenues increased $1.5 million, or 16.6%, to $10.4 million for the three months ended June 30, 2007 from $8.9 million for the three months ended June 30, 2006. The increase in cost of product revenues was mainly due to increased sales volumes in the second quarter of 2007 compared to the same period in 2006. Gross profit as a percentage of revenues decreased to 48.9% for the three months ended June 30, 2007 compared with 50.8% for the same period in 2006. The decrease in gross profit as a percentage of revenues was primarily due to a higher proportion of sales from our lower margin products, primarily from our Anthos product lines.
Sales and marketing expenses increased $0.2 million, or 8.4%, to $2.6 million for the three months ended June 30, 2007 compared to $2.4 million for the three months ended June 30, 2006. This increase is primarily due to an increase in foreign exchange rates of $0.1 million, commissions due to higher sales volumes and other employee related costs of $0.1 million.
General and administrative expenses were $3.5 million, an increase of $0.1 million, or 4.1%, for the three months ended June 30, 2007 compared to $3.4 million for the three months ended June 30, 2006. The increase in general and administrative expenses is primarily due to an increase in foreign exchange rates of $0.1 million and stock-based compensation of $0.2 million offset by a decrease in professional fees of approximately $0.2 million.
Research and development expenses were $0.9 million, an increase of $0.1 million, or 14.9%, for the three months ended June 30, 2007 compared to $0.8 million for the three months ended June 30, 2006. The increase in research and development expenses is primarily due to an increase in employee and other costs associated with recent product introductions.
Revenues increased $4.0 million, or 11.2%, to $39.5 million for the six months ended June 30, 2007 compared to $35.6 million for the same period in 2006. Excluding the impact of foreign exchange, revenues increased $2.4 million, or 6.9%. The revenue increase was primarily derived from our core physiology and cell biology equipment sold by our Harvard Apparatus businesses, the impact of new spectrophotometers sold by our Biochrom subsidiary, increased sales of plate readers at our Asys subsidiary and the impact of our recently acquired Anthos product lines. The foreign exchange impact on sales denominated in foreign currencies was $1.4 million, or 4.3%, during the six months ended June 30, 2007.
Cost of product revenues increased $2.7 million, or 15.4%, to $20.1 million for the six months ended June 30, 2007 from $17.4 million for the six months ended June 30, 2006. The increase in cost of product revenues was mainly due to increased sales volumes in the first six months of 2007 compared to the same period in 2006. Gross profit as a percentage of revenues decreased to 49.1% for the six months ended June 30, 2007 compared with 51.0% for the same period in 2006. The decrease in gross profit as a percentage of revenues was primarily due to a higher proportion of sales from our lower margin products, primarily from our Anthos product lines.
Sales and marketing expenses increased $0.4 million, or 8.3%, to $5.0 million for the six months ended June 30, 2007 compared to $4.6 million for the six months ended June 30, 2006. This increase is primarily due to an increase in foreign exchange rates of $0.2 million, commissions due to higher sales volumes and other employee related costs of $0.2 million.
General and administrative expenses were $6.9 million, an increase of $0.3 million, or 5.3%, for the six months ended June 30, 2007 compared to $6.6 million for the six months ended June 30, 2006. The increase in general and administrative expenses is primarily due to an increase in foreign exchange rates of $0.2 million, stock-based compensation of $0.2 million and bonus of $0.1 million offset by a decrease in professional fees of $0.2 million.
Research and development expenses were $1.7 million, an increase of $0.2 million, or 13.6%, for the six months ended June 30, 2007 compared to $1.5 million for the six months ended June 30, 2006. The increase in research and development expenses is primarily due to an increase in foreign exchange rates of $0.1 million and costs associated with recent product introductions of $0.1 million.
We ended the second quarter of 2007 with cash and cash equivalents of $10.0 million compared to cash and cash equivalents of $9.8 million at December 31, 2006. As of June 30, 2007, $9.0 million was held by our continuing operations and $1.0 million was held by our discontinued operations. During the six months ended June 30, 2007, we repaid $2.8 million on our revolving credit facility bringing down the amount outstanding as of June 30, 2007 to $0.2 million compared to $3.0 million at December 31, 2006.
Accounts receivable were $13.1 million and inventories were $12.7 million as of June 30, 2007. Outstanding days of sales were 59 days for the three months ended June 30, 2007 compared to 57 days for the same period of 2006. Outstanding days of sales increased primarily due to an increase in international customers who generally pay slower. Inventory turns were 3.4 times for the three months ended June 30, 2007 compared to 3.6 times for the same period of 2006. Inventory turns are down primarily due to the building of inventories in anticipation of certain new product launches set for the third quarter of 2007.
During the quarter ended September 30, 2005, the Company announced plans to divest its Capital Equipment Business segment. The decision to divest this business segment was based on the fact that market conditions for the Capital Equipment Business have been such that this business has not met the Company's expectations and the decision to focus Company resources on the Apparatus and Instrumentation Business segment. As a result, we began reporting the Capital Equipment Business segment as a discontinued operation in the third quarter of 2005. The loss from discontinued operations, net of tax was approximately $3.8 million for the three months ended June 30, 2007 compared to a loss of $2.1 million for the same period in 2006. The loss from discontinued operations, net of tax was approximately $5.0 million for the six months ended June 30, 2007 compared to a loss of $3.2 million for the same period in 2006. During the quarter ended June 30, 2007, the Company utilized the terms of a proposed agreement to purchase substantially all of the assets that comprise the Capital Equipment Business segment to re-evaluate the fair value less costs to sell these assets. The proposed agreement included contingent consideration from an earn-out agreement for which no value has been ascribed since realization is not assured. Based on management's evaluation, additional asset impairment charges of approximately $2.9 million were recorded during the three and six months ended June 30, 2007.
The above proposed agreement is not a definitive agreement for the sale of the Capital Equipment Business segment. There can be no assurances that the Company will sell this portion of its Capital Equipment Business segment pursuant to the terms of this proposed agreement or at all. We will provide an update on the status of the divestiture of the Capital Equipment Business segment during our conference call later this afternoon.
As previously announced, management will host a conference call to address second quarter 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 Thursday, August 2, 2007. 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 888.679.8018 and referencing the pass code of "82501429." 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 conference call, the call, this press release and any related financial or statistical information will be archived on our web site under the Press Releases icon or Earnings Call icon, as appropriate.
In this press release, we have included non-GAAP financial information including adjusted income from continuing operations, adjusted earnings per diluted share from continuing operations and revenue growth excluding foreign exchange. We believe that this non-GAAP financial information provides investors with an enhanced understanding of the underlying operations of the business. For the periods presented, these non-GAAP financial measures of income have excluded certain expenses primarily resulting from purchase accounting or events that we do not believe are related to the underlying operations of the business such as amortization of intangibles related to acquisitions, fair value adjustments of inventory and backlog related to acquisitions, restructuring expenses, discontinued operations and stock-based compensation expense, all net of tax. They also exclude the tax benefits of filing consolidated tax returns for continuing and discontinued businesses. We believe that revenue excluding foreign exchange provides useful information to investors by enabling them to evaluate growth in our business, excluding the impact of change in foreign exchange rates. This non-GAAP financial information approximates information used by our management to internally evaluate the operating results of the Company. Tabular reconciliations of our non-GAAP adjusted income and earnings per diluted share from continuing operations for the three months ended June 30, 2007 and 2006, and our revenue growth excluding the impact of foreign exchange for the quarters ending March 31, 2006 through June 30, 2007, the year ended December 31, 2006 and the six months ended June 30, 2007 compared to the corresponding periods ending from the prior year to the comparable GAAP financial information is included below in this press release.