SERO Serologicals (MM)

Serologicals Corporation (NASDAQ: SERO) announced today its financial results for the first quarter ended April 2, 2006. Revenues decreased 2.8%, to $55.0 million, compared to $56.6 million in the same period last year. Diluted earnings per share increased 52.8% to $0.08 per share compared to $0.05 per share in the same period in the prior year. The decrease in revenues was primarily due to the divestiture of certain Bioprocessing product lines previously manufactured at our former facility in Milford, MA, which was sold in January 2006. The decrease was partially offset by increased revenues in the Research segment. As the result of our numerous acquisitions and other strategic corporate activities over the past five years, we provide pro forma results that exclude acquisition amortization, other acquisition related costs, expenses for stock-based compensation and other one-time charges. We also provide pro forma information as an addition to, and not as a substitute for, financial measures presented in accordance with GAAP. We believe the pro forma presentation is a beneficial supplemental disclosure to investors in analyzing and assessing our past and future performance. First quarter 2006 pro forma net income was $4.9 million, or $0.14 diluted per share, compared with $4.3 million, or $0.13 diluted per share, in the first quarter of 2005. Pro forma net income and pro forma earnings per share increased by 12.8% and 12.9%, respectively. Reconciliations between GAAP results and pro forma results are presented in the attached tables and on the Company's web site (www.serologicals.com) under the Investor Relations tab. Serologicals will not hold the previously announced earnings conference call that was scheduled for Thursday, April 27, 2006 because of the recently announced transaction with Millipore Corporation. Serologicals Corporation (NASDAQ: SERO), headquartered in Atlanta, GA, is a global leader in developing and commercializing consumable biological products, enabling technologies and services in support of biological research, drug discovery, and the bioprocessing of life-enhancing products. Serologicals' customers include researchers at major life science companies and leading research institutions involved in key disciplines, such as neurology, oncology, hematology, immunology, cardiology, proteomics, infectious diseases, cell signaling and stem cell research. In addition, Serologicals is the world's leading provider of monoclonal antibodies for the blood typing industry. Serologicals employs approximately 1,000 people worldwide and reported revenues of $275 million in 2005. For additional information on Serologicals Corporation, please visit our website: www.serologicals.com. Statement Regarding Use of Non-GAAP Measures The financial results that we report on the basis of GAAP include substantial cash and non-cash charges and tax benefits related to acquisitions, to the integration of acquired businesses with existing businesses, to expenses for stock-based compensation and to other one-time events. We present pro forma financial information in this press release because we believe that the information is a beneficial supplemental disclosure to investors in analyzing and assessing our past and future performance. We believe that the pro forma financial information is useful because, among other things, by eliminating the effect of one-time acquisition and integration costs and other one-time events and the related tax benefits, it provides an indication of the profitability and cash flows of the acquired businesses and our on-going operations. The pro forma financial information, excluding acquisition related amortization and other one-time costs, is limited because it does not reflect the entirety of our business costs. Therefore, we encourage investors to consider carefully our results under GAAP, as well as our pro forma disclosures and the reconciliation between these presentations to more fully understand our business. Reconciliations between GAAP results and the pro forma information are presented in the attached tables and also on our web site (www.serologicals.com) under the Investor Relations tab. Safe Harbor Statement This release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 about our subsidiaries and us. Additional information concerning these and other risks and uncertainties is outlined in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2006. This report is available online at http://www.sec.gov. Forward-looking statements are only predictions and are not guarantees of performance. Forward-looking statements are based on current expectations of future events and are based on our current views and assumptions regarding future events and operating performance. You should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made, and we undertake no obligation to publicly update these statements based on events that may occur after the date of this press release. -0- *T SEROLOGICALS CORPORATION AND SUBSIDIARIES Consolidated Statements of Income First Quarter Ended April 2, 2006 and April 3, 2005 (in thousands, except per share amounts) (Unaudited) Quarter Ended ----------------- April 2, April 3, 2006 2005 ------- ------- Net revenues $55,028 $56,635 Costs and expenses: Cost of revenues 23,412 25,796 Selling, general and administrative expenses 19,888 20,293 Research and development 4,999 4,485 Amortization of intangibles 1,845 1,763 Gain on sale of long-lived assets (1,184) - Impairment and exiting costs 845 - ------- ------- Operating income 5,223 4,298 Other (income) expense, net (223) 101 Interest expense 1,812 1,803 Interest income (312) (288) ------- ------- Income from operations, before income taxes 3,946 2,682 Provision for income taxes 1,105 778 ------- ------- Net income 2,841 1,904 Add-back interest expense on convertible debt, net of tax - - ------- -------- Numerator for diluted earnings per share $ 2,841 $ 1,904 ======= ======= Earnings per common share: Basic $ 0.08 $ 0.06 ======= ======= Diluted $ 0.08 $ 0.05 ======= ======= Weighted average shares used in per share calculations: Basic 34,129 34,581 ======= ======= Diluted 34,437 35,270 ======= ======= *T -0- *T SEROLOGICALS CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) (In thousands) April 2, January 1, 2006 2006 ---------- ---------- Assets Current assets: Cash and short-term investments $ 43,061 $ 38,452 Trade accounts receivable, net 36,048 64,172 Inventories 67,715 59,418 Assets Held for Sale 22,017 - Other current assets 13,259 15,798 --------- --------- Total current assets 182,101 177,840 Property and equipment, net 66,327 70,015 Goodwill 244,756 239,520 Other intangible assets, net 117,275 120,027 Other assets 3,290 16,217 --------- --------- Total assets $ 613,749 $ 623,619 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 13,322 17,377 Accrued liabilities and other 29,734 41,757 Current maturities of capital lease obligations 792 1,081 --------- --------- Total current liabilities 43,847 60,215 4.75% Convertible debentures 129,914 129,905 Capital lease obligations 447 476 Deferred income taxes 25,736 25,736 Other liabilities 932 910 Stockholders' equity 412,873 406,377 --------- --------- Total liabilities and stockholders' equity $ 613,749 $ 623,619 ========= ========= *T -0- *T SEROLOGICALS CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Three Months Ended April 3, 2005 and March 28, 2004 (Unaudited) (In thousands) April 2, April 3, 2006 2005 --------- --------- Operating Activities: Net income $ 2,841 $ 1,904 Non-cash and working capital changes, net 8,927 (1,526) -------- -------- Net cash provided by (used in) operating activities 11,768 378 -------- -------- Investing Activities: Purchase of property and equipment (3,869) (2,904) Purchase of business, net of cash acquired (7,357) (6,964) Disposition of business 3,312 - Proceeds from (purchases of) short-term investments, net 17,225 (5,100) Other, net (9) 413 -------- -------- Net cash used in investing activities 9,302 (14,555) -------- -------- Financing Activities: Net cash provided by financing activities 981 1,193 -------- -------- Effect of foreign exchange on cash (217) (462) -------- -------- Net increase (decrease) in cash and cash equivalents 21,834 (13,446) Cash and cash equivalents, beginning of period 21,227 33,024 -------- -------- Cash and cash equivalents, end of period $ 43,061 $ 19,578 ======== ======== *T -0- *T SEROLOGICALS CORPORATION AND SUBSIDIARIES RECONCILIATION OF GAAP TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited) For the Three Months Ended April 2, 2006 ------------------------------ (in thousands, except per share data) Pro GAAP Adjustments Forma ------- ----------- -------- Net revenues $55,028 - 55,028 Cost of revenues 23,412 (170)(1) 23,242 ------- ------- ------- Gross profit 31,616 170 31,786 ------- ------- ------- Margin % 57.5% 57.8% Selling, general and administrative 19,888 (1,260)(2) 18,628 Research and development 4,999 (45)(1) 4,953 Amortization of intangibles 1,845 (1,845)(3) - Gain on sale of long-lived assets (1,184) 1,184 (4) - Impairment and exiting costs 845 (845)(5) - ------- ------- ------- Operating income 5,223 2,981 8,204 Operating margin % 9.5% 14.9% Other income (223) - (223) Interest income (312) - (312) Interest expense 1,812 - 1,812 ------- ------- ------- Income from operations before income taxes 3,946 2,981 6,928 Provision for income taxes 1,105 835 (6) 1,940 ------- ------- ------- Net income 2,841 2,147 4,988 Add back interest expense on convertible debt, net of taxes - 1,229 (7) 1,229 ------- ------- ------- Numerator for diluted earnings per share$ 2,841 $ 3,376 $ 6,217 ======= ======= ======= Net income per share: Basic $ 0.08 $ 0.15 ======= ======= Diluted $ 0.08 $ 0.14 ======= ======= Weighted average shares used in per share calculation: Basic 34,129 - 34,129 Diluted 34,437 8,790 43,227 (1) Add back business integration costs in research segment (2) Add back business integration costs principally in research segment of $316 and expenses associated with share- based payments arrangements with employees of $944 (3) Add back purchased intangible asset amortization (4) Gain on cash sale of bioprocessing assets in Milford, MA (5) Cash charges incurred in connection with closing and exiting bioprocessing facilities (6) The income tax effect of pro forma adjustments at prevailing rate for period (7) Add back interest on convertible debt which has an anti-dilutive effect on GAAP results and dilutive effect on pro forma results *T -0- *T SEROLOGICALS CORPORATION AND SUBSIDIARIES RECONCILIATION OF GAAP TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited) For the Three Months Ended April 3, 2005 ----------------------------- (in thousands, except per share data) Pro GAAP Adjustments Forma ----- ------------- -------- Net revenues $56,635 - 56,635 Cost of revenues 25,796 (630)(1) 25,166 ------- --------- ------- Gross profit 30,839 630 31,469 Margin % 54.5% 55.6% Selling, general and administrative 20,293 (1,034)(2) 19,259 Research and development 4,485 - 4,485 Amortization of intangibles 1,763 (1,763)(3) - ------- --------- ------- Operating income 4,298 3,427 7,725 Operating margin % 7.6% 13.6% Other expense 101 - 101 Interest income (288) - (288) Interest expense 1,803 - 1,803 ------- --------- ------- Income from operations before income taxes 2,682 3,427 6,109 Provision for income taxes 778 994 (4) 1,771 ------- --------- ------- Net income 1,904 2,433 4,337 Add back interest expense on convertible debt, net of taxes - 1,190 (5) 1,190 ------- --------- ------- Numerator for diluted earnings per share$ 1,904 $ 3,623 $ 5,527 ======= ========= ======= Net income per share: Basic $ 0.06 $ 0.13 ======= ======= Diluted $ 0.05 $ 0.13 ======= ======= Weighted average shares used in per share calculation: Basic 34,581 - 34,581 Diluted 35,270 8,790 44,060 (1) Add back costs for purchase accounting inventory revaluations related to acquisition of Upstate, $500; other one time charges, $130 (2) Add back business integration costs in research segment (3) Add back purchased intangible asset amortization (4) The income tax effect of pro forma adjustments at prevailing rate for period (5) Add back interest on convertible debt which have an anti-dilutive effect on GAAP results and dilutive effect on pro forma results *T -0- *T SEROLOGICALS CORPORATION AND SUBSIDIARIES EBITDA and Adjusted EBITDA (In thousands) Three Months Ended ------------------- April 2, April 3, 2006 2005 --------- --------- Net income under GAAP $ 2,841 $ 1,904 Provision for income taxes 1,105 778 Interest expense (income), net 1,500 1,515 Depreciation 1,969 2,167 Amortization of intangibles 1,845 1,763 --------- -------- EBITDA 9,260 8,127 Other Adjustments: Impairment and exiting costs 845 - Purchase accounting revaluations and business integration costs 1,476 1,664 Gain on sale of long-lived assets (1,184) ------------------ Adjusted EBITDA $ 10,396 $ 9,791 ========= ======== Note: Income from continuing operations before net interest expense, including amortization of debt issuance costs, provision for income taxes, depreciation, amortization and other adjustments ("Adjusted EBITDA") is not a measure of performance defined in accordance with accounting principles generally accepted in the United States of America. However, we believe that Adjusted EBITDA is useful to investors in evaluating our performance because it is a commonly used financial analysis tool for measuring and comparing life science companies in areas of operating performance. Adjusted EBITDA should not be considered as an alternative to net income as an indicator of our performance or as an alternative to net cash provided by operating activities as a measure of liquidity and may not be comparable to similarly titled measures used by other companies. In addition, the definition of Adjusted EBITDA as presented herein differs from the definition of Consolidated EBITDA used in the Company's revolving credit facility. *T