Beckman Coulter, Inc. (Beckman), a US-based medical device company, has reported total revenues of $691.5 million for the first quarter of 2009, down 5.3 %, compared with the total revenues of $730.5 million in the year-ago quarter. It has also reported net earnings of $20.6 million or $0.32 per diluted share, for the first quarter of 2009, compared with net earnings of $40.9 million or $0.63 per diluted share, in the year-ago quarter.
Scott Garrett, chairman, president and chief executive officer, said, Approximately 80% of our revenue is recurring, which continued to grow at 5% on a constant currency basis giving us confidence that we will achieve our full year earnings goals. Within the quarter, an increase in pension expense, legal settlements and a strengthening dollar were offset by effective currency hedging, a favorable product mix and determined expense management. Despite a difficult operating environment which constrained top-line growth, adjusted net earnings per fully diluted share grew over 9%, adjusted EBITDA increased 13% and operating cash flow was $106 million, up $44 million.
Total revenue from Clinical Diagnostics customers decreased 3.7% from prior year quarter, up 1.6% in constant currency. Within Clinical Diagnostics, solid recurring revenue gains were offset by significant decreases in cash instrument sales. Recurring revenue strength was greatest in Access Immunoassay and AutoChemistry, both continuing above-market, constant currency growth of 8%. Cellular Analysis cash instrument sales showed the greatest decline, off more than $18 million versus an unusually strong first quarter 2008 when a backlog from a 2007 supply chain disruption drove 67% growth.
Revenue from life science customers decreased 14.7% compared to prior year, or 10% in constant currency. Life Science cash instrument sales were off nearly 20%, versus a strong prior year quarter in which cash instrument sales grew 29% driven by a weaker dollar. A challenging capital expenditure environment and difficult comparables contributed to this trend.
Total recurring revenue decreased 1% to $573.7 million, but maintained solid growth of 4.7% on a constant currency basis. Above-market growth in Immunoassay continued with recurring revenue in the Access product line up 2.4%, or 8.4% in constant currency. Access Immunoassay recurring revenue was impacted by a decrease of more than $5 million in sales of the BNP assay to Inverness Medical. In 2008, Inverness transitioned to direct distribution, and ordered higher levels of BNP test kits. Excluding this unusual pacing of Inverness purchases, Access Immunoassay recurring revenue grew 13.6% on a constant currency basis.
On a geographic basis, first quarter revenue in the United States decreased 3%, due to a 25% decline in cash instrument sales. In constant currency, international revenue grew 2.7%, on the strength of a double digit increase in Clinical Diagnostics recurring revenue driven by mid-teens growth within Access Immunoassay.
In the quarter, the company reclassified its currency hedging gains and losses related to operating cash flows, moving these items from non operating expense to cost of sales from non operating expense to cost of sales for both periods. While gross profit decreased 3% to $319.1 million, gross margin increased 100 basis points to 46.1% versus first quarter 2008 due to favorable product mix.
Operating income was $39.6 million. On an adjusted basis, operating income increased to $66 million, or 9.5% of sales. Cost containment initiatives, which began in 2008, effectively drove a 5% decrease in adjusted operating expense versus prior year quarter. Adjusted non-operating expense was $9.6 million.
The adjusted tax rate in the quarter was 19.3%, as compared to 23.9% in prior year quarter. The favorable adjusted tax rate is due to discrete items in the quarter. Net earnings were $20.6 million or $0.32 per fully diluted share, including the $0.03 non-cash charge to interest expense due to new accounting rules governing convertible debt instruments. Adjusting for special items but including interest expense associated with the accounting change, net earnings were $45.5 million or $0.71 per fully diluted share.
Garrett stated, In the quarter, we continued to realize strong cash instrument sales in Asia Pacific. Cash instruments sales in other major geographies decreased as the current economic environment caused customers to be cautious in their capital spending. Extremely strong cash instrument sales throughout 2008 will make for a difficult comparison in 2009. A product mix favoring higher margin recurring revenue and a sharp focus on operating expense management should allow us to deliver on our earnings goals.
Introduced the Gallios flow cytometer for the research market, the first in a series of cytometry product introductions in 2009. When combined with the company’s broad reagent offering, new cytometry products provide a powerful solution for cellular analysis, increasing productivity and improving the reliability of results.
Declared a $0.17 per share quarterly cash dividend payable on March 6, 2009 to all stockholders of record on February 20, 2009. This payout represents the 79th consecutive, quarterly payout of dividends.
Entered into a definitive agreement to purchase the lab-based diagnostics business of Olympus Corporation for approximately $780 million. The acquisition will significantly extend Beckman Coulter’s geographic reach and Chemistry depth. The transaction is expected to close in the third quarter of 2009 and be substantially accretive to non-GAAP earnings in 2010.
Acquired Clinical Data’s Cogenics division, a global leader in outsourced genomics services, for approximately $17 million, significantly extending the range of services and geographic reach of the company’s Agencourt sequencing business.
Full Year Outlook
We are affirming our outlook, despite the potential for lower cash instrument sales in 2009. Solid constant currency recurring revenue gains are expected to continue with full year growth of 6% to 7%. As a result, on a constant currency basis, our 2009 full year outlook for revenue growth remains at 4% to 6%, or flat on a reported basis, Garrett continued.
We remain committed to customer satisfaction, careful expense management and delivering on our earnings goals. Operating margin, now including normal hedging activities, is anticipated to be between 12.6% and 12.9%, after absorbing the effects of a stronger dollar and a $25 million increase in pension expense. Adjusted non-operating expense, now excluding normal hedging activities, should be around $62 million. Based on an estimated tax rate of 26% to 27%, our outlook for adjusted earnings per fully diluted share remains unchanged at $3.71 to $3.91 (including $0.14 additional non-cash interest expense associated with the convertible debt accounting change). Capital expenditures are expected to be $350 to $375 million, and depreciation and amortization should be between $270 and $290 million.
Although we anticipate a difficult operating environment to continue throughout 2009, we have made considerable progress in the last two quarters implementing changes necessary to deliver on our commitments. Solid trending of recurring revenue and excellent progress on many cost management initiatives give us confidence that our 2009 goals are achievable, without compromising our long term potential for growth, Garrett concluded.