Serologicals Corporation (NASDAQ:SERO) today announced financial
results for the fourth quarter of our fiscal year ended January 1,
2006 (fiscal 2005). Revenues for the fourth quarter increased
26.0%, to $87.1 million, compared to $69.2 million in the same
period last year, while revenues for fiscal 2005 increased 40.3%,
to $274.9 million, compared to $195.9 million in our fiscal year
ended January 2, 2005 (fiscal 2004). Diluted earnings (loss) per
share from continuing operations were $(0.39) and $0.02 per share
for the fourth quarter and fiscal 2005, respectively, compared to
$0.12 and $0.59 per share for the same periods in fiscal 2004. The
fourth quarter and fiscal 2005 results reflect one-time charges
totaling $39.4 million, comprised of $38.0 for impairment and
exiting costs and $1.4 million for inventory write-offs, arising
primarily from our decision to close manufacturing facilities in
Toronto by mid-2006 and our decision not to open a facility in
Lawrence, Kansas. The fourth quarter and fiscal 2004 results
reflect a one-time charge of $3.2 million for in process research
and development arising from the acquisition of Upstate Group, Inc.
in October 2004. 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 and other one-time costs. 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. Fourth quarter fiscal 2005 pro forma
net income was $16.1 million, or $0.40 per share on a fully diluted
basis, compared with $9.2 million, or $0.26 per share on a fully
diluted basis, in the fourth quarter of fiscal 2004. Pro forma net
income for the fourth quarter of fiscal 2005 increased by 75.1% and
fully diluted pro forma earnings per share increased by 51.4% as
compared to the fourth quarter of fiscal 2004. Pro forma net income
for fiscal 2005 was $38.1 million, or $0.98 per share on a fully
diluted basis, compared with $24.7 million, or $0.79 per share on a
fully diluted basis, for the same period in fiscal 2004. Pro forma
net income for fiscal 2005 increased by 54.3% and fully diluted pro
forma earnings per share increased by 24.1% for fiscal 2005
compared to fiscal 2004. Reconciliations between GAAP results and
pro forma results are presented in the attached tables and on our
web site (www.serologicals.com) under the Investor Relations tab.
President & CEO Perspectives "We are extremely pleased with the
strong finish for 2005 which resulted in significant revenue and
earnings growth for the fourth quarter and full year," said David
A. Dodd, President and CEO. "We saw particular strength from our
Bioprocessing segment where continued market growth resulted in
strong revenue performance particularly in our cell culture
products. Increased product demand, coupled with improved
manufacturing performance and favorable product mix due to strong
EX-CYTE(R) sales, enabled us to continue improvement in our gross
margins in our Bioprocessing segment resulting in sharp gains in
both operating income and net income." Mr. Dodd added, "Revenue
from our Research segment also increased significantly during the
quarter as we continued to strengthen our commercial organization,
particularly in the Asia/Pacific region, and further expanded our
product and service portfolio. Revenue growth for the Research
segment continued at more than twice the growth rate of our markets
and major competitors. In addition, we continue to make good
progress on the accelerated integration program for our Upstate
operations and expect to transfer all Lake Placid, N.Y. operations
and research activities to Temecula, CA. during the second quarter
of 2006. The transfer is expected to result in annualized cost
savings for the Research segment of approximately $5.0 million
beginning in the second half of 2006. As part of our ongoing plant
rationalization and consolidation process, we announced two actions
in January, 2006. The first action is closure of our facility in
Toronto, Ontario, Canada. We will be moving all manufacturing of
cell culture products currently produced in Toronto to Kankakee,
Illinois. This action is expected to be completed during 2006. The
Company continues to see increased demand for its patented cell
culture product, EX-CYTE(R). We successfully expanded production
capacity at our Kankakee facility by more than 50% during 2005 and
have developed plans for further capacity expansion in the future.
As a result, the second action we announced is that we will not
open the Lawrence facility as originally anticipated. While these
were very difficult decisions, we feel these actions are necessary
to enable the Company to be more competitive in our marketplace and
more profitable. Furthermore, we believe we will be able to better
serve our customers as a result of the actions. These objectives
continue to be a primary focus as we increase the value delivered
to our customers and shareowners," Mr. Dodd added. Dodd concluded
by saying, "Our remarkable performance during the fourth quarter of
2005 has enabled us to exceed the revenue and earnings guidance we
provided in October, 2005 and to achieve the original guidance we
provided in January, 2005. This was truly an outstanding
achievement by the entire organization that positions the Company
extremely well as we begin 2006. I sincerely appreciate the efforts
and commitments of all those who made 2005 a very successful year
for Serologicals." Significant accomplishments during 2005
included: -- Our Research segment, consisting of Chemicon and
Upstate, introduced 248 new products during the fourth quarter and
over 1,700 products during fiscal 2005. This equates to
approximately 7 products per business day during fiscal 2005. We
also continue to focus on increasing the revenue for each new
product introduced; in fiscal 2005, the average revenue for new
products on a rolling twelve-month basis increased to over $8,000
per product compared to approximately $7,600 for the prior year.
The new products include Chemicon assays and reagents focused in
the areas of neuroscience and stem cell research and a range of new
Upstate kinases and multiplex Beadlyte(R) assays. Upstate has
expanded its industry leading position in kinases by providing
approximately 300 kinases and it has an aggressive plan to further
increase its kinase panel and screening services in 2006. -- During
the quarter, Upstate continued to expand its portfolio of products
and services to support research and drug discovery activities with
such products as Catch & Release(TM), a simplified
immunoprecipitation kit, Spray and Glow(TM), a spray format western
blotting tool and the largest portfolio of bead-based cytokine
multiplex assays on the market today. Pro forma revenues for drug
discovery products and services increased 45% during the fourth
quarter of fiscal 2005 and 69% during all of fiscal 2005. Upstate
continues its commitment to support drug discovery research by
continuing to develop and introduce new products and services using
cell-signaling technologies. -- Chemicon completed a number of
significant co-development opportunities during the fourth quarter.
Chemicon entered into an exclusive manufacturing and marketing
agreement with Stem Cell Sciences that has transferred patented
technology and expertise to Chemicon allowing it to manufacture a
fully formulated, serum-free embryonic stem cell media for the
research market. Chemicon and RheoGene, Inc. signed a license to
use RheoGene's RheoSwitch(R) System and related technologies within
Chemicon's research product lines focused on specialty research
markets, including Chemicon's growing stem cell biology portfolio
of products. Through this agreement, Chemicon accesses the
innovative RheoSwitch(R) technology that regulates the timing and
level of gene expression in all types of eucaryotic cells through
the interaction of RheoGene's proprietary ecdysone-based receptors
and proprietary small molecule ligands, which will be supplied
under the agreement. Chemicon and MorphoSys AG signed a three-year
agreement for the distribution of HuCAL(R) -based recombinant
research antibodies through Chemicon's worldwide sales network.
MorphoSys' Antibodies by Design unit will develop antibodies from
its proprietary HuCAL GOLD(R) antibody library against targets
identified and supplied by Chemicon. Chemicon may market the
licensed HuCAL(R)- based research antibodies for use in in-vitro
research as stand-alone products or as components of reagent kits
and market the antibodies for clinical diagnostic applications. The
parties are aiming to complete 100 research antibody projects per
year over the three-year lifetime of the agreement. -- During the
fourth quarter, Celliance acquired the UCOE (ubiquitous chromatin
opening element) gene expression technology from Innovata plc. This
technology, which is encompassed by domestic and foreign patents,
improves the yield, consistency and stability of protein production
in cultured mammalian cells. We see an opportunity to utilize this
technology for internal development projects as well as licensing
this technology to our customers. -- During the fourth quarter, we
implemented an aggressive expansion in the Asia/Pacific region with
the previously announced hiring of a Regional Director for that
area. We have begun assessing our strategic options available for
expanded business development and growth within this region and
expect to begin achieving the benefits in 2006. -- In January 2006,
we announced two actions related to our ongoing plant consolidation
and rationalization initiative. First, we decided to close the
Celliance facility in Toronto, Ontario and to consolidate all
manufacturing of our cell culture products in Kankakee, Illinois.
This action is expected to occur during 2006. As a consequence of
this decision, the Toronto facility was written down to its
estimated fair value resulting in a one-time non-cash charge of
$14.8 million in the fourth quarter of fiscal 2005. We expect that
the Toronto site will be closed by the end of 2006 and subsequently
prepared for sale. In connection with these activities, we expect
to incur $2.3 million in cash closure costs for clean up,
dismantling, severance and benefit costs. Approximately $16.1
million of these costs were recorded in the fourth quarter of
fiscal 2005 with the balance expected to be incurred during 2006.
As previously discussed, we decided that we will not open the
Celliance facility in Lawrence, Kansas. We expect to meet current
and anticipated demand for EX-CYTE(R) using the existing Kankakee
facility. As a consequence of this decision, the Lawrence facility
was written down to net realizable value resulting in a one-time
non-cash charge of $18.4 million in the fourth quarter of fiscal
2005. This facility will also be prepared for sale and we
anticipate incurring $3.2 million in cash closure costs related to
severance and other costs to prepare the facility for sale. We
recorded substantially all of these costs in the fourth quarter of
fiscal 2005. -- We announced early in 2005 the implementation of an
accelerated integration program for our Research segment. This
program initially included the consolidation of several core
functions, including Business Segment Management, R&D/Business
Development, Marketing, Technical Support, Scientific Sourcing,
Intellectual Property/Licensing and Finance and Accounting. We
incurred one-time costs of approximately $0.3 million and $2.1
million in connection with this program resulting from severance
costs, retention payments and relocation costs recorded during the
fourth quarter of fiscal 2005 and all of fiscal 2005, respectively.
The majority of these costs, $1.3 million, were recorded as
adjustments during the third quarter of fiscal 2005 to the
acquisition purchase price in connection with the purchase of
Upstate, with the balance included as period operating costs.
Further, during the fall of 2005, the Company made the decision to
move the manufacturing, distribution and development operations,
currently located in Lake Placid, N.Y. to our facility in Temecula,
CA. during the second quarter of 2006. We recorded one-time costs
of approximately $2.1 million in connection with this program
resulting from severance costs, retention payments and relocation
costs. All of this expense was recorded as a one-time charge to
earnings as part of its integration efforts in the fourth quarter
of fiscal 2005. It is expected that the Lake Placid site will be
closed in the second quarter of 2006 and subsequently prepared for
sale. We expect to recover the carrying value of this facility and
accordingly, no impairment loss has been recorded. We expect to
achieve savings from this transfer of approximately $5.0 million on
an annual basis beginning in the second half of 2006. -- In January
2006, Celliance announced the opening of a new state of the art
18,000 square foot Global Distribution Center near its largest
production facility in Kankakee, Illinois. Celliance made the
decision to relocate its distribution center from its previous
location in connection with the sale of its production and
distribution facility formerly located in Milford, MA. The sale of
the Milford facility, completed in January 2006, is expected to
result in a gain of approximately $1.2 million during the first
quarter of 2006. -- In January 2006, we consolidated our European
customer service and distribution operations for the Research
segment into one facility in Southampton, UK. We believe that this
consolidation will allow us to improve service to our customers and
create additional cost efficiencies. -- In June, we announced that
our Board of Directors authorized a stock repurchase program of up
to 2.0 million shares of our common stock during the three years
ending in June 2008. The program is being executed through
purchases made from time to time in the open market or through
private transactions in accordance with applicable securities laws.
The timing, pricing and size of purchases will depend on market
conditions, prevailing stock prices and other considerations. As of
February 22, 2006, we have completed the repurchase of
approximately 1,175,000 shares of common stock under this program.
Funds for the repurchase of these shares came from cash generated
from operations and available funds on hand. Future purchases are
expected to come from the same sources. -- In October, we received
a cash settlement arising from a contractual claim against a
customer of our former Therapeutic plasma business. The settlement
of approximately $1.9 million, net of collection costs and income
taxes, is reported as Income from Discontinued Operations in the
fourth quarter of fiscal 2005. Fourth Quarter Results Summary The
Research segment, which is focused on the research products and
services business, consists of products and services offered under
the brand names of Chemicon(R) and Upstate(R). The Bioprocessing
segment, Celliance(R), includes cell-culture supplement products
along with diagnostic related products. Overall, revenues for the
fourth quarter of fiscal 2005 grew 26.0% when compared to the
fourth quarter of fiscal 2004. Revenues for fiscal 2005 totaled
$274.9 million, compared to $195.9 million for fiscal 2004, an
increase of 40.3%. The increase was primarily due to the
acquisition of the Upstate Group in October 2004. After adding
actual Upstate revenues to the full year fiscal 2004 results, our
company-wide revenues in the year grew 16.2% compared to the prior
year. During the quarter, Research revenues increased 12.2%
compared to last year. Celliance revenues were $50.3 million and
$137.0 million for the quarter and fiscal 2005 versus $36.4 million
and $117.4 million for the fourth quarter and fiscal 2004. This
represents a 38.4% and 16.6% increase in revenues for the quarter
and full year fiscal 2005 compared to the fourth quarter and full
year fiscal 2004. Celliance achieved these increases as the result
of strong growth in cell culture products, primarily EX-CYTE(R) and
Incelligent(TM). The following table shows a breakdown of the
revenue contribution by segment for the fourth quarter and for the
full fiscal years 2005 and 2004: -0- *T $ in Thousands Quarter
Ended --------------------------------- January 1, 2006 January 2,
2005 ---------------- ---------------- % % Actual Total Actual
Total ---------------- ---------------- Revenue: Research $ 36,790
42.2% $ 32,793 47.4% Bioprocessing 50,343 57.8% 36,369 52.6%
--------- ------ --------- ------ $ 87,133 100% $ 69,162 100%
========= ====== ========= ====== $ in Thousands Year Ended
--------------------------------- January 1, 2006 January 2, 2005
---------------- ---------------- % % Actual Total Actual Total
---------------- ---------------- Revenue: Research $138,005 50.2%
$ 78,506 40.1% Bioprocessing 136,939 49.8% 117,417 59.9% ---------
------ --------- ------ $274,945 100% $195,923 100% =========
====== ========= ====== *T The comments in this paragraph regarding
gross margins refer to pro forma gross margins, excluding
acquisition and one-time reorganization related costs that affected
gross margins. Consolidated pro forma gross margins remain strong.
During the fourth quarter of fiscal 2005, consolidated pro forma
gross margins were 56.7% compared to 57.1% for the same period in
fiscal 2004. Consolidated pro forma gross margins reached 57.0% for
fiscal 2005 compared to 55.6% in fiscal 2004. Pro forma Research
gross margins for the fourth quarter of fiscal 2005 decreased by
4.7 percentage points compared to the pro forma gross margins for
the fourth quarter of fiscal 2004, due primarily to higher sales of
bulk products and instruments. Pro forma Research gross margins for
fiscal 2005 decreased by 2.2 percentage points when compared to the
pro forma gross margins in fiscal 2004. Pro forma gross margins in
fiscal 2005 for the Research segment were lower than fiscal 2004
due to product mix shifts from the prior year and a second quarter
2004 one-time benefit related to the settlement of a dispute over a
licensing arrangement. This settlement increased Research gross
margins in fiscal 2004 by approximately two percentage points. Pro
forma Bioprocessing margins during the fourth quarter and fiscal
2005 increased by approximately 4.4 and 1.7 percentage points,
respectively, compared to the same periods in fiscal 2004 primarily
as the result of higher EX-CYTE(R) sales and higher manufacturing
productivity which resulted in lower unit production costs. The
following table shows a breakdown of the gross margin contribution
by segment on a pro forma basis for the fourth quarter and the full
fiscal years 2005 and 2004: -0- *T
--------------------------------- $ in Thousands Quarter Ended
--------------------------------- January 1, 2006 January 2, 2005
---------------- ---------------- Pro Forma GM % Pro Forma GM %
---------------- ---------------- Gross Profit: Research $ 22,754
61.8% $ 21,816 66.5% Bioprocessing 26,664 53.0% 17,657 48.6%
--------- --------- $ 49,418 56.7% $ 39,473 57.1% =========
========= --------------------------------- $ in Thousands Year
Ended --------------------------------- January 1, 2006 January 2,
2005 ---------------- ---------------- Pro Forma GM % Pro Forma GM
% ---------------- ---------------- Gross Profit: Research $ 87,071
63.1% $ 51,242 65.3% Bioprocessing 69,539 50.8% 57,613 49.1%
--------- --------- $156,610 57.0% $108,855 55.6% =========
========= *T Selling, general and administrative costs ("SG&A")
for the fourth quarter of fiscal 2005 were $22.9 million compared
to $21.3 million for the fourth quarter of fiscal 2004. On a pro
forma basis, SG&A costs for the quarter were $21.5 compared to
$20.1 million in the same quarter in fiscal 2004. The majority of
this increase was due to increased public company expense, sales
commissions and other incentive compensation arrangements. We
incurred an operating loss in the fourth quarter of fiscal 2005
totaling $(20.4) million compared to operating income of $8.8
million in the fourth quarter of fiscal 2004. The operating loss in
the fourth quarter of fiscal 2005 resulted from a previously
discussed one-time charge totaling $39.4 million for impairment,
exiting costs and inventory write-offs arising from the decision to
close the Toronto facility and not to open the Lawrence facility.
Pro forma operating income for the fourth quarter of fiscal 2005
before impairment and exiting costs, acquisition related
amortization and other similar acquisition and reorganization
related costs was $24.1 million, or 27.7% of revenue, in fiscal
2005 compared to $15.3 million, or 22.1% of revenue, in the fourth
quarter of fiscal 2004. Operating income for fiscal 2005 was $4.6
million, or 1.7% of revenue, compared to operating income of $32
million, or 16.3% of revenue, for the same period in fiscal 2004.
Pro forma operating income for fiscal 2005 before impairment and
exiting costs, acquisition related amortization and other similar
acquisition and reorganization related costs was $59.4 million, or
21.6% of revenue, compared to $40.5 million, or 20.7% of revenue,
in fiscal 2004. Cash flows from operating activities were $14.4
million and $24.8 million in the fourth quarter and all of fiscal
2005, respectively. This compares to cash flows from operating
activities of $16.4 million and $37.6 million in the fourth quarter
and all of fiscal 2004. Cash flows from operating activities were
lower in fiscal 2005 than in fiscal 2004 due primarily to lower net
income as a result of reorganization and integration expenses.
Performance Highlights: Research Products and Services Research
revenue in the fourth quarter and all of fiscal 2005 increased
approximately $4.0 million and $59.5 million, respectively, or
12.2% and 75.8%, respectively, over the prior year quarter and
fiscal 2004 results. While much of the annual increase in revenue
was the result of the Upstate acquisition, Chemicon achieved
revenue of $18.4 million which represents a growth of 6.0% for the
quarter and revenue of $70.3 million for all of fiscal 2005 which
represents an increase of 11.5% over the prior year. Chemicon's
growth in the fourth quarter was driven primarily by contributions
in the areas of neuroscience, stem cells, bulk reagents and
diagnostic products. Upstate revenue was $18.4 million in the
fourth quarter of fiscal 2005 which represents an increase of 19.5%
compared to the fourth quarter of fiscal 2004. While not included
in our operating results for the full year in fiscal 2004, Upstate
achieved $67.7 million in revenue in fiscal 2005 compared to $56.2
million in fiscal 2004, an increase of 20.5%. Upstate growth for
the fourth quarter was driven primarily by strong growth in drug
discovery services as well as product sales in the areas of nuclear
function and multiplex Beadlyte(R) assays and instruments.
Geographically, Research revenues increased 32% in Asia, 18% in
Europe and 13% in North America in the fourth quarter of fiscal
2005. Performance Highlights: Bioprocessing Products Bioprocessing
revenue was $50.3 million during the fourth quarter of fiscal 2005
compared to $36.4 million in fiscal 2004, an increase of 38.4%.
Bioprocessing revenue increased $19.5 million, to $136.9 million
over fiscal 2004, an increase of 16.6%. EX-CYTE(R) sales in the
fourth quarter and full year fiscal 2005 were $12.8 million and
$34.2 million, respectively, compared to $8.7 million and $29.6
million, respectively, for the same periods of fiscal 2004. Sales
of Incelligent(TM), Celliance's proprietary branded recombinant
human insulin, were $19.8 million and $39.0 million for the fourth
quarter and full fiscal 2005, respectively, compared with $11.2
million and $26.6 million, respectively, for the same periods of
fiscal 2004. Incelligent(TM) sales increased significantly for the
fourth quarter and fiscal 2005 as the result of changes by our
supplier to their product specifications and supply expectations
for 2006. Sales of Probumin(TM) BSA, MonoSera(TM) antibodies and
other Bioprocessing products in the fourth quarter and full fiscal
2005 were $17.7 million and $63.6 million, respectively, compared
to $16.5 million and $61.2 million, respectively, for the same
periods of fiscal 2004. Other Q4 2005 Financial Information --
Available cash and short-term investments at January 1, 2006 were
$38.5 million, compared with $62.1 million at the end of fiscal
2004. The decline in cash is primarily a result of the previously
described common stock repurchase program. Currently our available
cash and short-term investments are $57.5 million. -- Accounts
receivable totaled $64.2 million at the end of fiscal 2005,
compared with $46.9 million at the end of fiscal 2004.
Day's-sales-outstanding increased to 66 days compared to 61 days at
the end of fiscal 2004 due to the higher fourth quarter revenues in
fiscal 2005. -- Capital expenditures for the fourth quarter of
fiscal 2005 were $6.3 million compared to $4.7 million for the
fourth quarter of fiscal 2004. Capital expenditures for fiscal 2005
were $14.3 million compared to $19.5 million for fiscal 2004. --
Recognized losses on foreign exchange transactions were negligible
in the fourth quarter of fiscal 2005 versus a gain of $0.2 million
in the same quarter of fiscal 2004. We recognized a loss on foreign
exchange transactions of $(0.3) million in fiscal 2005 and a gain
of $0.1 million on such transactions in fiscal 2004. In the
Research segment, currency rate fluctuations favorably affected
gross margins by negligible amounts in the fourth quarter and for
all of fiscal 2005, compared to an adverse affect of less than a
1.0 percentage point reduction in gross margins in both the fourth
quarter and for all of fiscal 2004. Currency rate fluctuations
favorably affected gross margins in the Bioprocessing segment by
1.1 and 0.3 percentage points in the fourth quarter and for fiscal
2005, respectively, compared to an adverse affect of 1.0 percentage
point in the fourth quarter of fiscal 2004 and a negligible amount
for all of fiscal 2004. Q4 2005 Earnings Conference Call We will
hold our fourth quarter earnings conference call at 9:00 a.m.
(Eastern Time) on Thursday, February 23, 2006. The conference call
dial in number is (866) 700-7477(domestic) and (617) 213-8840
(international), confirmation code 16643853. The live broadcast
will also be available online at our website at
www.serologicals.com and at www.StreetEvents.com. If you are unable
to participate in the call, a 14-day playback will start on
February 23, 2006 at 11:00 a.m. (Eastern Time). To listen to the
playback, please call (888) 286-8010 (domestic) or (617) 801-6888
(international) and enter access code 71392296 or access the
archived web cast on our website at www.serologicals.com. About
Serologicals 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 a total of approximately 1,000
people worldwide in three Serologicals' companies: Chemicon
International Inc., headquartered in Temecula, CA., Upstate Group,
LLC, headquartered in Charlottesville, VA. and Celliance
Corporation, headquartered in Atlanta, GA. For more information,
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 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. The
forward-looking statements are subject to risks and uncertainties,
including, without limitation, statements regarding the transfer of
Upstate operations from Lake Placid, NY to Temecula, CA and the
impact that the transfer will have on gross margins and operating
income of the Research segment in 2006; our expectations that the
Research segment will continue to achieve revenue growth in excess
of its markets and major competitors; our ability to achieve
operating efficiencies from the accelerated integration program for
our Research segment; our estimates of the amount of the closure
and exiting costs associated with the realignment of our
manufacturing facilities; our timetable for closing our
manufacturing facilities in Toronto and transferring production of
the Toronto cell culture products to Kankakee, Illinois; our
ability to achieve manufacturing efficiencies by transferring
production of the Toronto cell culture products to Kankakee; our
ability to induce customers of the Toronto products to accept
products manufactured elsewhere; and the success of the commercial
arrangements entered into by Chemicon and Upstate with third
parties. 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 18,
2005. 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. Serologicals(R) and EX-CYTE(R) are registered
trademarks of Serologicals Royalty Company. Incelligent(TM) and
Probumin(TM) are trademarks of Serologicals Royalty Company. -0- *T
SEROLOGICALS CORPORATION AND SUBSIDIARIES Condensed Consolidated
Statements of Operations Fourth Quarter and Year Ended January 1,
2006 and January 2, 2005 (in thousands, except per share amounts)
(Unaudited) Quarter Ended Year Ended ---------------------
--------------------- January 1, January 2, January 1, January 2,
2006 2005 2006 2005 ---------- ---------- ---------- ---------- Net
revenues $ 87,133 $ 69,162 $ 274,945 $ 195,923 Cost of revenues
40,764 30,103 122,798 87,482 ---------- ---------- ----------
---------- Gross profit 46,369 39,059 152,147 108,441 Operating
expenses: Selling, general and administrative expenses 22,928
21,264 85,141 59,293 Research and development 3,957 4,032 17,199
10,144 Amortization of intangibles 1,877 1,707 7,206 3,771
Impairment charges and exiting costs 38,025 - 38,025 - Purchased
in-process research and development - 3,263 - 3,263 ----------
---------- ---------- ---------- Operating income (loss) (20,419)
8,793 4,576 31,970 Other (income) expense, net 24 177 597 (54)
Interest expense 1,815 2,525 7,361 6,052 Interest income (370) (5)
(1,782) (587) Write-off of deferred financing costs - 965 - 965
---------- ---------- ---------- ---------- Income (loss) before
income taxes (21,888) 5,131 (1,600) 25,594 Provision (benefit) for
income taxes (8,299) 1,590 (2,416) 7,933 ---------- ----------
---------- ---------- Income from continuing operations (13,589)
3,541 816 17,661 Income from discontinued operations 1,883 - 1,883
- ---------- ---------- ---------- ---------- Net income (loss)
(11,706) 3,541 2,699 17,661 Add back interest expense on
convertible debt, net of taxes - 1,017 - 3,320 ----------
---------- ---------- ---------- Numerator for diluted earnings
(loss) per share $ (11,706) $ 4,558 $ 2,699 $ 20,981 ==========
========== ========== ========== Earnings (loss) per common share:
Basic earnings (loss) per share: Income (loss) from continuing
operations $ (0.39) $ 0.12 $ 0.02 $ 0.68 Discontinued operations $
0.05 - $ 0.05 - ---------- ---------- ---------- ---------- Net
income (loss) $ (0.34) $ 0.12 $ 0.08 $ 0.68 ========== ==========
========== ========== Diluted earnings (loss) per share: Income
(loss) from continuing operations $ (0.39) $ 0.12 $ 0.02 $ 0.59
Discontinued operations $ 0.05 - $ 0.05 - ---------- ----------
---------- ---------- Net income (loss) $ (0.34) $ 0.12 $ 0.08 $
0.59 ========== ========== ========== ========== Weighted average
shares used in per share calculations: Basic 34,634 29,495 34,729
26,148 ========== ========== ========== ========== Diluted 34,634
38,938 35,195 35,525 ========== ========== ========== ========== *T
-0- *T SEROLOGICALS CORPORATION AND SUBSIDIARIES Condensed
Consolidated Balance Sheets (Unaudited) (In thousands) January 1,
January 2, 2006 2005 ----------- ----------- Assets Current assets:
Cash and short-term investments $ 38,452 $ 62,054 Trade accounts
receivable, net 64,173 46,899 Inventories 59,418 49,846 Other
current assets 15,798 15,226 ----------- ----------- Total current
assets 177,840 174,025 Property and equipment, net 70,015 96,887
Goodwill 239,520 241,038 Other intangible assets, net 117,698
121,647 Other assets 18,545 6,210 ----------- ----------- Total
assets $ 623,619 $ 639,807 =========== =========== Liabilities and
Stockholders' Equity Current liabilities: Accounts payable $ 17,377
$ 11,827 Current maturities of capital lease obligations 1,081
2,419 Accrued liabilities and other 41,758 37,336 -----------
----------- Total current liabilities 60,215 51,582 4.75%
Convertible debentures 129,905 130,395 Capital lease obligations
476 2,194 Deferred income taxes 25,736 38,012 Other liabilities 909
1,093 Stockholders' equity 406,377 416,531 ----------- -----------
Total liabilities and stockholders' equity $ 623,619 $ 639,807
=========== =========== *T -0- *T SEROLOGICALS CORPORATION AND
SUBSIDIARIES Condensed Consolidated Statements of Cash Flows Year
Ended January 1, 2006 and January 2, 2005 (Unaudited) (In
thousands) January 1, January 2, 2006 2005 ----------- -----------
Continuing Operations: Operating Activities: Income from continuing
operations $ 816 $ 17,661 Non-cash and working capital changes, net
24,002 19,951 ----------- ----------- Net cash provided by
operating activities 24,818 37,612 ----------- -----------
Investing Activities: Purchases of property and equipment and
intangibles (15,761) (19,482) Purchase of businesses, net of cash
acquired (6,752) (117,680) Proceeds (purchases) of short-term
investments, net 11,805 (1,945) Other, net (8,250) 254 -----------
----------- Net cash used in investing activities (18,958)
(138,853) ----------- ----------- Financing Activities: Repurchase
of common stock (23,125) - Proceeds from equity issued, net 7,786
109,795 Other (2,952) - ----------- ----------- Net cash (used in)
provided by financing activities (18,292) 109,795 -----------
----------- Discontinued Operations: Net cash provided by
discontinued operations 1,883 1,962 ----------- ----------- Effect
of foreign exchange on cash (1,249) 1,029 ----------- -----------
Net (decrease) increase in cash and cash equivalents (11,798)
11,545 Cash and cash equivalents, beginning of period 33,024 21,479
----------- ----------- Cash and cash equivalents, end of period $
21,226 $ 33,024 =========== =========== *T -0- *T SEROLOGICALS
CORPORATION AND SUBSIDIARIES RECONCILIATION FROM GAAP TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in
thousands, except per share data) For the Three Months Ended
January 1, 2006 ----------------------- -------- Pro GAAP
Adjustments Forma --------- --------- --------- Net revenues $
87,133 $ - 87,133 Cost of revenues 40,764 (3,049) (1) 37,714
--------- --------- --------- Gross profit 46,369 3,049 49,418
Margin % 53.2% 56.7% Selling, general and administrative 22,928
(1,427) (3) 21,501 Research and development 3,957 (128) (3) 3,829
Amortization of intangibles 1,877 (1,877) (4) - Impairment charges
and exiting costs 38,025 (38,025) (5) - --------- ---------
--------- Operating income (loss) (20,419) 44,507 24,088 Operating
margin % -23.4% 27.6% Other expense 24 - 24 Interest income (370) -
(370) Interest expense 1,815 - 1,815 --------- --------- ---------
Income (loss) before income taxes (21,888) 44,507 22,619 Provision
(benefit) for income taxes (8,299) 14,859 (7) 6,559 ---------
--------- --------- Income (loss) from continuing operations
(13,589) 29,648 16,059 Add back interest expense on convertible
debt, net of taxes - 1,242 1,242 --------- --------- ---------
Numerator for diluted earnings (loss) per share $(13,589) $ 30,890
$17,302 ========= ========= ======== Income (loss) per share from
continuing operations: Basic $ (0.39) $ 0.46 ========= ========
Diluted $ (0.39) $ 0.40 ========= ======== Weighted average shares
used in per share calculation: Basic 34,634 34,634 Diluted 34,634
43,697 For the Year Ended January 1, 2006
-------------------------------- GAAP Adjustments Pro Forma
--------- --------- --------- Net revenues 274,945 $ - 274,945 Cost
of revenues 122,798 (4,463) (2) 118,335 --------- ---------
--------- Gross profit 152,147 4,463 156,610 Margin % 55.3% 57.0%
Selling, general and administrative 85,141 (4,772) (3) 80,369
Research and development 17,199 (334) (3) 16,864 Amortization of
intangibles 7,206 (7,206) (4) - Impairment charges and exiting
costs 38,025 (38,025) (5) - --------- --------- --------- Operating
income (loss) 4,576 54,801 59,376 Operating margin % 1.7% 21.6%
Other expense 597 (519) (6) 77 Interest income (1,782) - (1,782)
Interest expense 7,361 - 7,361 --------- --------- --------- Income
(loss) before income taxes (1,600) 55,320 53,720 Provision
(benefit) for income taxes (2,416) 17,994 (7) 15,579 ---------
--------- --------- Income (loss) from continuing operations 816
37,325 38,141 Add back interest expense on convertible debt, net of
taxes - 4,940 4,940 --------- --------- --------- Numerator for
diluted earnings (loss) per share $ 816 $ 42,266 $43,082 =========
========= ========= Income (loss) per share from continuing
operations: Basic $ 0.02 $ 1.10 ========= ========= Diluted $ 0.02
$ 0.98 ========= ========= Weighted average shares used in per
share calculation: Basic 34,729 34,729 Diluted 35,195 43,984 (1)
Add back costs associated with reorganization in Bioprocessing
segment and inventory write off at Lawrence (2) Add back YTD costs
for purchase accounting inventory revaluations related to
acquisition of Upstate in the first quarter, other one time charges
for business integration and reorganization costs in both segments
and inventory writeoff at Lawrence in the fourth quarter (3) Add
back business integration and reorganization costs. (4) Add back
purchased intangible asset amortization. (5) Add back impairment
and exiting costs associated with reorganization in Bioprocessing
segment. (6) Add back loss on collection and settlement of Note
Receivable arising from sale of Therapeutic segment (7) The income
tax effect at prevailing rate for period. *T -0- *T SEROLOGICALS
CORPORATION AND SUBSIDIARIES RECONCILIATION FROM GAAP TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in
thousands, except per share data) For the Three Months Ended
January 2, 2005 -------------------------------- GAAP Adjustments
Pro Forma --------- --------- --------- Net revenues $ 69,162 $ - $
69,162 Cost of revenues 30,103 (414) (1) 29,689 --------- ---------
--------- Gross profit 39,059 414 39,473 Margin % 56.5% 57.1%
Selling, general and administrative 21,264 (1,126) (2) 20,138
Research and development 4,032 - 4,032 Amortization of intangibles
1,707 (1,707) (3) - Purchased in-process research and development
3,263 (3,263) (4) - --------- --------- --------- Operating income
8,793 6,510 15,303 Operating margin % 12.7% 22.1% Other expense 177
(353) (5) (176) Write-off of deferred financing costs 965 (965) (6)
- Interest income (201) - (201) Interest expense 2,721 (328) (7)
2,393 --------- --------- --------- Income before income taxes
5,131 8,156 13,287 Provision for income taxes 1,590 2,528 (8) 4,118
--------- --------- --------- Income from continuing operations
3,541 5,628 9,169 Add back interest expense on convertible debt,
net of taxes 1,017 - 1,017 --------- --------- --------- Numerator
for diluted earnings per share $ 4,558 $ 5,628 $ 10,186 =========
========= ========= Income per share from continuing operations:
Basic $ 0.12 $ 0.19 $ 0.31 Diluted $ 0.12 $ 0.14 $ 0.26 Weighted
average shares used in per share calculation: Basic 29,495 29,495
29,495 Diluted 38,938 38,938 38,938 For the Year Ended January 2,
2005 -------------------------------- GAAP Adjustments Pro Forma
--------- --------- --------- Net revenues $195,923 $ - $195,923
Cost of revenues 87,482 (414) (1) 87,068 --------- ---------
--------- Gross profit 108,441 414 108,855 Margin % 55.3% 55.6%
Selling, general and administrative 59,293 (1,126) (2) 58,167
Research and development 10,144 - 10,144 Amortization of
intangibles 3,771 (3,771) (3) - Purchased in-process research and
development 3,263 (3,263) (4) - --------- --------- ---------
Operating income 31,970 8,574 40,544 Operating margin % 16.3% 20.7%
Other expense (54) (353) (5) (407) Write-off of deferred financing
costs 965 (965) (6) - Interest income (783) - (783) Interest
expense 6,248 (328) (7) 5,920 --------- --------- --------- Income
before income taxes 25,594 10,220 35,814 Provision for income taxes
7,933 3,168 (8) 11,101 --------- --------- --------- Income from
continuing operations 17,661 7,052 24,713 Add back interest expense
on convertible debt, net of taxes 3,320 - 3,320 --------- ---------
--------- Numerator for diluted earnings per share $ 20,981 $ 7,052
$ 28,033 ========= ========= ========= Income per share from
continuing operations: Basic $ 0.68 $ 0.27 $ 0.95 Diluted $ 0.59 $
0.20 $ 0.79 Weighted average shares used in per share calculation:
Basic 26,148 26,148 26,148 Diluted 35,525 35,525 35,525 (1) Add
back costs for purchase accounting inventory revaluations related
to acquisition of Upstate. (2) Add back business integration costs.
(3) Add back purchased intangible asset amortization. (4) Add back
purchased in-process research and development related to
acquisition of Upstate. (5) Add back loss on renegotiation of terms
of notes receivable from sale of discontinued operations. (6) Add
back write-off of unamortized deferred costs related to debt
financings. (7) Add back imputed interest expense on purchase price
of acquisition of Upstate. (8) The income tax effect at prevailing
rate for period. *T -0- *T SEROLOGICALS CORPORATION AND
SUBSIDIARIES EBITDA and Adjusted EBITDA (In thousands) Three Months
Ended Year Ended --------------------- ---------------------
January 1, January 2, January 1, January 2, 2006 2005 2006 2005
---------- ---------- ---------- ---------- Income (loss) from
continuing operations $ (13,589) $ 5,739 $ 816 $ 14,120 Provision
(benefit) for income taxes (8,299) 2,579 (2,416) 6,344 Interest
expense (income), net 1,446 1,056 5,579 2,945 Depreciation 2,165
1,661 8,337 5,157 Amortization of intangibles 1,877 655 7,206 2,064
---------- ---------- ---------- ---------- EBITDA (16,401) 11,690
19,522 30,630 Other Adjustments: Impairment and exiting costs
38,025 - 38,025 - Write-offs of unvalidated start- up lots in
inventory 1,336 1,336 Purchase accounting revaluations and business
integration costs 3,269 - 8,233 - Loss on collection and settlement
of Note Receivable arising from sale of Therapeutic segment - - 519
- ---------- ---------- ---------- ---------- Adjusted EBITDA $
26,229 $ 11,690 $ 67,636 $ 30,630 ========= ========= =========
========== 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
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