Year in review: 2006 was good for Beckman Coulter.
The company reaped the benefits from its continuing restructuring of operations, including its 2005 change on how it accounts for leases of its medical testing instruments.
The company now recognizes revenue spread out over the life of an equipment contract, rather than booking revenue as a lump sum at the start of the lease.
Beckman’s profits surged in the fourth quarter, thanks to declining expenses. Profits were up 250% to $62.3 million.
Sales rose 8.6% to $712 million in the quarter.
2006 sales, at $2.5 billion, were hampered by the change in leases for its medical testing instruments.
About 60% of the Fullerton company’s sales come from supplies, chemistry kits and services.
Beckman continued its reorganization efforts.
It plans to close its Palo Alto operations and cut 228 jobs there. That work will be moved to Indianapolis.
The company’s other efforts to boost efficiency include reducing suppliers, contracting out for some “sub-assembly” manufacturing and consolidating several small distribution centers into a large one in Chino.
What’s ahead: Beckman just announced its biggest deal in roughly a decade,its planned $1.5 million acquisition of San Diego-based Biosite Inc.
Last week, Biosite received another bid from Inverness Medical Innovations Inc. of Waltham, Mass. Inverness, a maker of diagnostic medical tests, already owns 5% of Biosite.
The company is offering $90 per share for Biosite, versus Beckman’s $85 a share offer.
Biosite makes tests to diagnose heart failure, as well as to detect drug use and intestinal parasites, and works with big drug makers to identify genetic indicators of heart disease.
Biosite had $300 million in sales last year. The buy, which Beckman Coulter said it still expects to close in the quarter, pending regulatory approval, pushes the company further into biomedical research.
Prior to the Biosite deal, Beckman Coulter said it expects its 2007 sales to be up 7% to 9% to $2.71 billion to $2.76 billion.
The company expects profits of $193 million to $202 million.
Analysts expect the company to earn $200 million on sales of $2.72 billion this year.
Wall Street’s take: At least one analyst was expecting a deal.
Bruce Jackson of RBC Capital Markets wrote in a report that Beckman could be a player in a growing wave of buyout deals in the medical testing market.
But investors and analysts aren’t happy with the Biosite price tag, calling the 50%-plus premium too high.
Shares of Beckman fell on the buyout news.
So far, Beckman’s shares are up nearly 6% for the year.
Piper Jaffray’s William Quirk said in a note that he was downgrading Beckman’s shares to “market perform” from “outperform.”
Beckman’s offer is five times Biosite’s trailing 12-month revenue of $308.6 million, while recent similar acquisitions have been roughly three times that of revenue, he said.
He also noted that revenue from Biosite’s peptide tests for heart failure is expected to grow slower than that of competitors.
Standard & Poor’s Equity Research analyst Jeffrey Loo wrote that the deal expands Beckman’s immunoassay, or biochemical testing, market share. But he thinks the company is paying a rich premium.
He pointed out that Beckman will finance most of the deal with debt, leading to more interest costs.
Loo also said he doesn’t see a significant sales expansion this year as he believes that Biosite’s main products are in mature markets.
,Vita Reed
WHO’S IN CHARGE
Scott Garrett
Chief executive, Beckman Coulter
Joined company: 2002
Education: bachelor’s degree in mechanical engineering from Valparaiso University in Indiana, master’s in business from Lake Forest Graduate School of Management
Career: Spent nearly 20 years with Baxter International Inc. and its 1985 acquisition, American Hospital Supply Corp. Before coming to Beckman, Garrett headed investment firm Garrett Capital Advisors LLC and Kendro Laboratory Products LP.
Notable: Hobbies include golf, reading. “I spend a lot of time on airplanes, so it’s a good hobby to have,” he says.
Headquarters: 4300 N. Harbor Drive, Fullerton
Employees: 11,392; 2,541 in OC
Business: medical diagnostic, research instruments, supplies
Market value, as of April 2: $4 billion
12-month revenue: $2.5 billion, up 3%
12-month net income: $186.9 million, up 24%
