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In Wake of Restructuring, Beckman Cites Weak US Sales for Lackluster Clinical Dx Growth in Q2

In addition to announcing a restructuring last week, Beckman Coulter reported modest gains in second quarter revenue but a significant drop in net income.

The firm reported revenue of $619 million, up 3.6 percent year over year, but its net earnings dropped 18.2 percent to $47.7 million.

During a conference call, President and CEO Scott Garrett cited weak sales in the US for the firm's clinical diagnostics and lab automation products as a primary reason for its lackluster second quarter. Overall, sales for the Clinical Diagnostics division grew 2.9 percent year-over-year.

In addition, he said the Americas region was flat for the quarter, while sales grew 7 percent in Europe and nearly 8 percent in Southeast Asia and China. Sales in Japan "continued to be mixed," Garrett said, with a decline in biomedical research product sales and mid-single-digit growth in clinical diagnostics.

US customers' preference for operating-type leases over sales-type leases trimmed at least $8 million from the firm's second-quarter sales, he said.

The silver lining for the quarter was a 10-percent improvement in after-market consumable sales — and the firm expects to sustain that growth, predicting sales of consumables to grow 8 percent to 10 percent for the full year. Garrett also cited an increase in sales of 5.3 percent for the Biomedical Research division as a positive for the quarter.

He said during the call that the "selling cycle continued to lengthen" for three reasons. First, a recent increase in competitive automation options had stalled customers' decision processes. However, "we don't believe any of these products pose a long-term threat," he said.

Second, he said, the firm had signed a number of new purchase orders that were awaiting customer lab reconstruction prior to installation. He also speculated that sales of automation products might have been slowed because Beckman exhibited its new AutoMate 800 system in Europe, and customers have been anticipating its launch next year.

The firm is predicting full-year sales in the range of $2.41 billion to $2.61 billion, down from previous projections of $2.57 billion to $2.62 billion. Beckman also forecast earnings per share in the range of $2.55 to $2.90, well below the $3.51 to $3.61 it forecast in May.

For the third quarter, the firm is predicting sales of $570 million to $580 million, which would be a slight drop from 2004 third-quarter revenue of $581 million, and earnings per share of $.45 to $.60. But Garrett cautioned that there may be further restructuring charges that would reduce these predictions.

— Edward Winnick ([email protected])