Thursday, Beckman Coulter Inc. (BEC), a biomedical testing instrument systems maker, reported an increase in second quarter profit, helped predominantly by lower operating costs. Revenue declined 5.2% due to lower cash instrument sales, however, recurring revenue increased 1.7% for the quarter. The company providing an update to its forecast, raised the low-end of its fiscal 2009 adjusted earnings guidance, while maintaining recurring revenue growth outlook.
The Fullerton, California-based company posted second-quarter net earnings of $60.8 million or $0.94 per share, compared to $45.9 million or $0.71 per share in the same quarter of last year.
On a non-GAAP basis, net earnings, adjusted for restructuring and acquisition-related items, but including interest expense associated with the accounting change, for the quarter were $63.9 million, or $0.99 per share, compared to $55.4 million or $0.86 per share in the previous year period.
On average, twelve analysts polled by Thomson Reuters expected the company to report earnings of $0.81 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter declined 5.2% to $756.7 million from $798.3 million in the corresponding period last year. Nine analysts had a consensus revenue estimate of $761.34 million for the quarter. On a constant currency basis, total revenue rose 0.2%.
Recurring revenue, comprising supplies, service and lease payments, for the quarter was $629.0 million, or about 80% of total revenue, up 1.7% from $618.7 million in the comparable period last year. On a constant currency basis, recurring revenue increased 7.7%, excluding revenue from its Cogenics acquisition. Cash instrument sales was $127.7 million, down from $179.6 million in the year-ago period.
Segment wise, revenue from Clinical Diagnostics declined 3.4% to $647.8 million from $670.8 million in the prior year quarter. Within Clinical Diagnostics, revenue for Immunoassay and Molecular Diagnostics grew 4.9%, Chemistry and Clinical Automation revenues dropped 6.2% and Cellular analysis revenue dropped 7.4% from last year.
In clinical diagnostics segment, recurring revenue increased 8.3% on a constant currency basis, led by strong growth in Flow Cytometry and Access Immunoassay. Access Immunoassay recurring revenue increased 13.7% on a constant currency basis. Declining cash instrument sales offset recurring revenue gains.
Weakness in the U.S. Market led cash instrument sales from Cellular Analysis and Chemistry & Clinical Automation to decline more than 30%. Declines in cash instrument sales in Cellular were magnified by an unusually strong second quarter of 2008 when a backlog drove 30% growth in cash instrument sales.
Life sciences segment revenue dropped 14.7% year-over-year to $108.8 million from $127.5 million in the prior year quarter, or 9.3% in constant currency, due to a weak capital expenditure environment and difficult comparables.
On a geographic basis, second quarter revenue in the United States decreased 3.3%, revenues from Europe declined 9.5%, Emerging markets dropped 11.2%, other revenues decreased 10.2%, while Asia Pacific revenues rose 2.1% from prior year quarter. In constant currency, International revenue grew 3.6%, driven by continued strength in China and recurring revenue growth in other emerging markets.
As a percentage of sales, gross profit margin for the quarter improved 120 basis points to 47.2% over last year. Growth in higher margin recurring revenue more than offset an unfavorable geographic mix.
Operating income for the quarter increased to $75.9 million from $71.8 million in the previous year quarter. On an adjusted basis, operating income grew 10.2% to $97.5 million from $88.5 million a year-ago. Cost containment initiatives, which began in 2008, contributed to reducing adjusted operating expense by 6.8% from prior year quarter.
For the first six months of 2009, net earnings decreased to $81.4 million or $1.26 per share from $86.8 million or $1.35 per share last year. Excluding items, earnings for the first half increased to $109.4 million or $1.70 per share from $97.4 million or $1.51 per share in the previous year period.
Total revenue for the first half declined 5.3%, or flat in constant currency, to $1.45 billion from $1.53 billion in the comparable period last year. Recurring revenue rose 0.4%, or 6.3% in constant currency, to $1.203 billion from $1.198 billion in the preceding year period.
The company also declared a quarterly cash dividend of $0.17 per share, payable on August 24, to stockholders of record as of the close of business on August 10, 2009.
Looking forward, on a constant currency basis, Beckman Coulter still expects 2009 full year revenue growth to be 4% - 6%, driven by recurring revenue growth estimated in the 6% - 7% range. However, at current exchange rates, the company expects reported total revenue to be roughly flat.
Operating margin, including normal hedging activities, is anticipated to be around 13% for fiscal 2009. Adjusted non-operating expense is expected to be around $62 million. The company also revised its expectations for capital expenditures to a range of $325 million - $350 million, while continuing to expect depreciation and amortization to be between $270 million and $290 million.
Based on an estimated tax rate of 26% - 27%, the company now expects adjusted earnings to be between $3.76 and $3.91 per share. Previously, the company anticipated adjusted earnings of $3.71 to $3.91 per share.
Analysts currently expect the company to report earnings of $3.79 per share on revenues of $3.08 billion for fiscal 2009.
The company's chief executive officer Scott Garrett said, "Despite a challenging operating environment, we expect to continue solid recurring revenue growth and determined expense management. We believe this reflects the stability of our sector and our ability to manage risk and is consistent with our long-term goal to deliver annual earnings growth of 9% to 12%."
BEC closed Thursday's regular trading at $56.66, down $2.22 or 3.77% on a volume of 1.40 million shares. In the last 52-week period, the stock trended in a range of $35.94 - $77.14, with a three-month average volume of 0.67 million shares.
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