Invitrogen Announces Second Quarter 2006 Results
Thursday August 3, 4:21 pm ET
$500 Million Share Repurchase Authorization
CARLSBAD, Calif.--(BUSINESS WIRE)--Aug. 3, 2006--Invitrogen Corporation (Nasdaq:IVGN - News) today announced results for its second quarter ended June 30, 2006. Revenues for the second quarter were $314 million, an increase of 2% over the $306 million reported for the second quarter of 2005. Foreign currency translation had minimal effect on sales growth rate. Net income for the second quarter was $20 million versus $15 million for the same quarter in 2005. GAAP earnings per share for the second quarter of 2006 were $0.36 per share, as compared to $0.27 per share reported in the second quarter of 2005, an increase of 33%. Earnings per share in 2006 includes lower expenses associated with the write up of acquisition inventory to fair market value as a result of a business combination and a gain on the sale of the company's German contract manufacturing business in April.
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Invitrogen reports pro forma results, which excludes certain items primarily related to acquisitions, business divestitures and stock option expensing. The Company reports these pro forma results to better enable financial statement users to assess our historical performance and project our future earnings and cash flows. Reconciliations between Invitrogen's results and pro forma results for the periods reported are presented in the attached tables and on the Company's Investor Relations web page at www.invitrogen.com.
Pro forma net income for the second quarter of 2006 was $49 million, or $0.90 per share, compared with pro forma net income in the second quarter of 2005 of $51 million, or $0.87 per share.
Through the first six months of 2006, revenues for the Company were $623 million, a 7% increase over revenues in the first six months of 2005 of $584 million. Pro forma net income for the first six months was $98 million, or $1.80 earnings per share, compared with $102 million, or $1.76 earnings per share for the same period in 2005.
Second Quarter Review
Second quarter revenue growth of 2% included a positive impact from acquisitions which was offset by a 1% decline in organic growth. The decline in organic growth was driven by an increase of 3% in BioDiscovery, offset by a decline of 8% in BioProduction. The BioDiscovery segment had strong growth in core customer segments, such as academic and biotech, as well as key product areas, such as labeling & detection, gene expression and drug discovery. The strong growth in these areas was somewhat offset by sales ordering challenges related to the implementation of a new ERP system in Europe and the short term impact of facility consolidations associated with acquisition integrations. BioProduction negative growth was attributable to declining sera revenue and the timing of manufacturing orders. This decline was partially offset by healthy demand for cell culture research media.
"We are pleased with the strong performance of our BioDiscovery products to biotech and academic customers, as well as the double digit growth in emerging markets. The issues we had this quarter are identifiable to a few areas: our sera business, cell culture production, the facility consolidation started in second quarter and our system conversion in Europe, which was a one time event. We know where the problems are and we have action plans in place to fix them," said Greg Lucier, Chairman and CEO, Invitrogen Corporation. "Given the first half performance and greater visibility into the second half, we will be updating our guidance on our call today."
Second quarter 2006 pro forma gross margin was 62%, in line with the second quarter of 2005. BioDiscovery gross margin decreased slightly to 70% in the second quarter of 2006 from 71% last year, primarily due to the absorption of new acquisitions. BioProduction gross margin decreased to 46% from 48% in the comparable quarter of 2005, primarily due to changes in volume.
Pro forma operating margin was 23% of revenues in the second quarter of 2006 versus 25% in the second quarter of 2005. The decline was primarily the result of lower first half volume and continued investment in sales, marketing and R&D, which was partially offset by a reduction in the accrual for payments to management for incentive compensation due to the Company's expected full year performance.
"Although, our current rate of investment in the business has outpaced our revenue growth, it is due to the targeted investments we have made in our infrastructure to support the long term success of the company. However, we believe there are specific pockets of opportunity in our cost structure that can be optimized over the next several months." stated David Hoffmeister, CFO, Invitrogen Corporation.
Cash flows from operating activities were $57 million for the six months ended June 30, 2006. Capital expenditures were $32 million during the first half of 2006. Free cash flow, defined as cash from operating activities less capital expenditures, was $25 million for the first half of 2006. Free cash flow for the quarter was affected by the system conversion in Europe, which increased receivables, and an increase in inventory due to sera collections and prebuilding for European holiday schedules.
$500 Million Share Repurchase Program
Today the company also announced a $500 million share repurchase program. This three-year program authorizes management, at its discretion, to repurchase shares from time to time on the open market or in privately negotiated transactions, subject to market conditions and other factors.
"We are continually assessing the best way to optimize shareholder value," said Hoffmeister. "The share repurchase program reflects the confidence we have in the organic growth potential of our business. We will have approximately $1 billion of funds available by year end, which gives us the ability to do a buyback in the near term, as well as continue to evaluate potential acquisitions."
Conference Call and Webcast Details
The Company will discuss its financial and business results as well as its business outlook on its conference call at 5 pm Eastern Time today. This conference call will contain forward-looking information. The conference call will include a discussion of "non-GAAP financial measures" as that term is defined in Regulation G. For actual results, the most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company's financial results determined in accordance with GAAP, as well as other material financial and statistical information to be discussed on the conference call will be posted at the Company's Investor Relations website at www.invitrogen.com.
The conference call will be webcast live over the Company's investor relations website at www.invitrogen.com and will be archived at the site for one month.
To listen to the live conference call, please dial (800) 706-7749 (domestic) or (617) 614-3474 (international) and use passcode 58200727. A replay of the call will be available for one week by dialing (888) 286-8010 (domestic) and (617) 801-6888 (international). The passcode for the replay is 11313109.
About Invitrogen
Invitrogen Corporation (Nasdaq:IVGN - News) provides products and services that support academic and government research institutions and pharmaceutical and biotech companies worldwide in their efforts to improve the human condition. The Company provides essential life science technologies for disease research, drug discovery, and commercial bioproduction. Invitrogen's own research and development efforts are focused on breakthrough innovation in all major areas of biological discovery including functional genomics, proteomics and cell biology -- placing Invitrogen's products in nearly every major laboratory in the world. Founded in 1987, Invitrogen is headquartered in Carlsbad, California and conducts business in more than 70 countries around the world. The Company globally employs approximately 4,800 scientists and other professionals and had revenues of $1.2 billion in 2005. For more information about Invitrogen, visit the Company's web site at www.invitrogen.com. |
