Financial News
GE’s Healthcare Revenues Fall 9 Percent in Q1
Safe and secure. Investing in growth. Managing costs. Those were some of the key phrases General Electric Co. executives used recently to describe their strategy for running the company.
“We’re running GE for the long term,” Chairman and CEO Jeff Immelt told investors during a first-quarter earnings conference call. “We’re investing in growth…we continue to be cautious and run the company to be safe and secure.”
As the world struggles to recover from the worst financial crisis since the Great Depression, companies such as GE are realizing they have to adjust their business plans. Focusing only on short-term capital gains or incurring great amounts of debt no longer make sense; concentrating on long-term growth and keeping costs to a minimum have become the new norm.
Adhering to this new norm is expected to help GE turn a profit this year, Immelt said. It also will help“position the company to excel” once the recession ends later this year or early next year, as economists have predicted. But Immelt’s“safe and cautious” approach could not help the company overcome an overall 36 percent drop in first-quarter net earnings and 9 percent slide in total revenue.
GE reported $2.73 billion in net earnings and $38.4 billion in revenue for the quarter ended March 31. Those figures represent a significant decrease from the $4.30 billion in net earnings and $42.2 billion in net revenue the company posted during the first quarter of 2008.
GE’s industrial sales slipped 1 percent to $24 billion, but the company posted strong results in divisions that manufacture power-plant turbines and jet engines. Those gains partly offset decreases in its healthcare, consumer products and entertainment divisions.
“I think there’s a lot of mitigants despite the fact that we’re in a very difficult period,” Imment said. “We positioned our infrastructure businesses to really weather the cycle and do well. The economy remains tough. I think there’s places where we can still win, and we’re positioning the company to excel as we come out of this in 2010, 2011 or whenever that takes place.”
Whether GE’s healthcare division will help the company excel when the world emerges from recession remains to be seen. The division reported $3.54 billion in revenue, a 9 percent decrease compared with the $3.88 billion it generated in the comparable period last year.
Equipment orders in the healthcare division were down 11 percent, as hospitals delayed purchasing necessary equipment. Keith Sherin, GE’s vice chairman and chief financial officer, said equipment orders in the United States and Europe were down 16 percent. “We have a bright spot in Asia. China and Japan were both very strong,” he explained. “China [equipment orders] was up 23 percent. But it was a tough quarter in terms of orders pretty much across all product lines.”
It also was a tough quarter for direct investment, which was down 22 percent. And while profit in the healthcare division fell 22 percent in the first quarter, Sherin said he expected the segment’s profit margin to improve through the year as product lines from GE OEC Medical Systems Inc. hit the market. Comparisons to the later quarters in 2008 also get easier “from a timing and relationship to last year’s perspective,” Sherin noted.
Beckman Coulter’s First-Quarter Profit Cut in Half
Restructuring and acquisition costs halved Beckman Coulter’s first-quarter profit, but the company’s adjusted earnings beat Wall Street expectations.
Net earnings totaled $20.6 million, or 32 cents per share, a 49.6 percent decrease compared with the $40.9 million the manufacturer of biomedical testing instrument systems posted in the first quarter of 2008. The company’s first-quarter results included severance charges of $9.9 million from job cuts, $6.7 million in restructuring expenses, and $9.8 million in costs associated with the $800 million buyout of Olympus Corp.’s lab-based diagnostics business. The acquisition is expected to close by Sept. 30.
The restructuring expenses and acquisition costs Beckman Coulter incurred during the first quarter of the year significantly dragged down its profits. When those charges were excluded from results, the company’s net earnings skyrocketed, soaring to $45.5 million, or 71 cents per share, a 9.2 percent jump compared with the 65 cents per share the Fullerton, Calif.-based firm reported in the first quarter of 2008. The adjusted earnings amount was well above the 59 cents per share that analysts were expecting, according to a Thomson Reut-ers estimate.
“Within the quarter, an increase in pension expense, legal settlements and a stren-gthening dollar were offset by effective currency hedging, a favorable product mix and determined expense management,” said Scott Garrett, Beckman Coulter’s chairman, president and CEO. “Despite a difficult operating environment which constrained top-line growth, adjusted net earnings per fully diluted share grew over 9 percent, adjusted EBITDA increased 13 percent and operating cash flow was $106 million, up $44 million.”
Revenue fell 5.3 percent to $691.5 million, as the stronger dollar led to weaker sales overseas. That figure was well below the $705.6 million in revenue that analysts expected for the first quarter, ended March 31. Gross profit slipped 2.9 percent to $319.1 million, while research and development costs fell 4 percent to $59.9 million.
Beckman Coulter’s recurring revenue, which includes supplies, service, and lease payments, stumbled to $573.7 million from $579.3 million (a 0.97 percent decrease), but was up nearly 5 percent on a constant currency basis. Cash instrument sales plunged 22 percent to $117.8 million, with the firm’s life science and cellular analysis businesses bearing the brunt of the decline.
The company’s clinical diagnostics segment posted first-quarter revenue of $597.3 million, a 3.7 percent decrease compared with the $620 million generated in the first quarter of 2008.
Within that segment, the firm’s immunoassay and molecular diagnostics business grew 2.3 percent to $176.9 million, while the chemistry and clinical automation business fell 4 percent to $207 million. Beckman Coulter’s cell analysis business slipped 7.8 percent, falling to $213.5 million from $231.5 million in the first quarter of 2008.
Revenue for the firm’s life sciences business dropped 14.7 percent, or 10 percent excluding currency effects, to $94.2 million.
“We are affirming our outlook, despite the potential for lower cash instrument sales in 2009,” Garrett said in a statement. “Solid constant currency recurring revenue gains are expected to continue with full-year growth of 6 percent to 7 percent. As a result, on a constant currency basis, our 2009 full year outlook for revenue growth remains at 4 percent to 6 percent, or flat on a reported basis.”
Moog Inc. Reports 17.2 PercentEarnings Dip in Second Quarter
It’s been a long time since Moog Inc. failed to turn a quarterly profit.
So long, in fact, that two U.S. presidents have been elected into office, control of Congress has shifted to a different political party and gas prices have more than doubled. Plus, people have found more ways than ever to stay connected, whether it is through Facebook, Twitter or text messages.
The world was certainly a different place in 1995.
The last 14 years have been good to Moog—the manufacturer of precision control components has found ways to consistently improve its financial performance in spite of a recession (2001) and the bursting of the dot-com bubble.
Moog’s steady growth, however, has come to an end. Its second-quarter earnings fell 17.2 percent, slipping to $23.6 million from $28.6 million in the comparable period of 2008. Net earnings per share took a similar nosedive, going from 67 cents in 2008 to 56 cents for the three months ending March 28.
“Initially, we had hoped that the recession was going to be confined to real estate development and financial services, but as we all now know, its impact is being felt in many different industries,” said Robert T. Brady, Moog chairman, president and CEO. “The impact on our company is most importantly on some of our industrial product lines, particularly those in Europe and Asia…So, for the first time in 14 years, we find ourselves in the circumstance where we are unable to project growth in earnings and sales.”
Moog’s net sales of $453.3 million decreased 3 percent from the $468.8 million the company reported in the second quarter of 2008. Gross profit totaled $135.7 million, a 9.2 percent decrease compared with the $149.6 million Moog posted in the comparable period last year.
Most of Moog’s individual business segments reported slight sales increases or remained flat compared with its 2008 second-quarter performance. Sales rose in the company’s Aircraft Controls, Industrial Systems, and Components segments, while sales slipped in the Space and Defense division.
Sales in the company’s Medical Devices segment totaled $34 million, a 50 percent increase compared with the $22.7 million the division posted in the second quarter of 2008. Moog executives attributed the increase to higher sales of intravenous and enteral pumps and an infusion of $6.7 million in revenue from the acquisitions of AITECS Medical UAB and Ethox International.
Moog acquired AITECS late last year for $21 million in cash. The Lithuanian firm manufactures syringe-style infusion therapy pumps and devices designed to give patients steady doses of intravenous drugs. Moog executives said they expect the purchase to lead to a gain of $6 million in revenue in fiscal 2009.
Less than a month after it purchased AITECS, Moog acquired Ethox for $15.2 million in cash.
The Buffalo, N.Y.-based company, which reported revenues of $27 million last year, provides microbiology, toxicology, and sterilization services. Executives said the merger—announced in late January—will broaden Moog’s product base in disposables.