Two days after announcing positive third-quarter earnings, PerkinElmer on Monday promoted John Murphy to the new position of COO from his post as president of the company’s optoelectronics business unit, and promoted Robert Friel, CFO since 1999, to executive vice president and added business development to his financial oversight duties.
The executive suite expanded as John Roush was named president of the optoelectronics unit from his post as vice president of product management, global sales, and customer operations for the segment.
Murphy will lead the company’s efforts to improve operational efficiencies with particular emphasis on the supply chain, Six Sigma quality, and customer excellence, PerkinElmer said in a statement. Additionally, he will oversee the company’s strategy to expand medical imaging applications across the health-sciences markets and lead the company’s growth strategy in China.
Friel will manage PerkinElmer’s business-development activities, focusing on strategic growth opportunities in health sciences and select advanced technologies.
The Boston-based conglomerate’s appointments came after announcing revenue of $403 million for the third quarter ending Sept. 26, an increase of 10 percent over $366 million for the year-ago quarter. The company reported net income of $24 million, up over $14 million for the same quarter in 2003.
The company’s revenue growth for the quarter, with currency exchange benefits factored out, was 8 percent year over year.
Greg Summe, PerkinElmer’s chairman and CEO, attributed the growth to new products and “operational productivity” across the company. This included the layoff of 130 employees with the closing of a facility in Torrance, Calif., and its merger with a unit in Downers Grove, Ill., to create a focused site for automation and liquid-handling. Another unit in Norton, Ohio, was closed, and its production was shifted to a company facility in Finland.
The layoffs saved $4 million on an annual basis, and the company took a $2.5 million charge for closing the facilities, Friel told analysts.
“These plans have been underway for some time now,” Summe said. “They just culminated in the quarter. We don’t have a significant agenda for factory closures. Those were the last ones we had targeted.”
The company is targeting its cost structure as its looks to reduce $254 million of net debt. The company had $220 million in cash on hand at the end of the quarter after generating $46.6 million in free cash flow for the period as its debt-to-equity ratio dropped to 0.34 for the quarter, from 0.41 as of June 27.
The company has paid some $95 million toward its debt since the end of the third quarter of 2003, he said. The company had interest expense of $8.8 million for the quarter, down $3 million from the year-ago quarter.
“The hope would be to get back to investment grade, a triple B level,” said Friel about risk-grade goals for its corporate debt. “There is no expectation to take it to single A or the double A level.”
For the quarter, the firm spent $89 million on SG&A, compared to $91.5 million for the same quarter in 2003. R&D expense for the period grew to $21.3 million over $19.6 million for the year-ago quarter.
For the quarter, PerkinElmer’s LAS unit had sales of $243.7 million for the period, up 4 percent over $235 million a year ago, and representing a 3 percent benefit from currency exchange rates. The unit had an operating profit of $18.9 million for the period.
The unit operates four product groups — genetic screening, environmental chemicals, service, and biopharma. The first three units grew at about 8 percent for the period, Friel said.
Services, which represented some 22 percent of the LAS unit’s revenues, grew in the quarter, Summe said, in part from the company’s one-source laboratory technology management services.
However, the biopharma group, which represented some 40 percent of LAS revenues in the quarter, was down 3 percent for the period, compared to a year ago.
“We are seeing growth in our proteomics business within biopharma, while other areas like target identification are experiencing soft demand,” Summe said. “We believe that this market [will] recover gradually as pharma and biotech will need to increase their overall investments in finding new drugs.”
Summe said pharma has been “wrestling with its recipe for R&D,” giving PerkinElmer time to move the positioning of its product line from the discovery budget into drug development.
Asia sales grew 11 percent for the quarter, the company said.
“This is our highest-growth region in the world, in China and outside,” said Summe.
The newly promoted Murphy will oversee PerkinElmer’s efforts in Asia, as well as the company’s customer excellence initiative, a company-wide training effort launched in the quarter and expected to finish by the end of the year, in conjunction with the implementation of web-based tools for measuring and helping manage relationships with the company’s customers.
“For 2005, every one of our employees will have specific customer-relationship goals in their performance objectives,” Summe said in the conference call.
— Mo Krochmal ([email protected])