Applied Biosystems Reports Fourth Quarter and Fiscal 2006 Results.FOSTER CITY, Calif. -- Applied Biosystems Applied Biosystems, Inc. (formerly NASDAQ: ABIO) is the original name of a pioneer biotechnology company founded in 1981 in Foster City, California, among the Silicon Valley cities of the southern San Francisco Bay Area. Group (NYSE NYSE See: New York Stock Exchange : ABI Abi (ā`bī) [short for Abijah], in the Bible, King Hezekiah's mother. (Application Binary Interface) A specification for a specific hardware platform combined with the operating system. ): --Q4 net revenues increased 9% to $523.1 million --Q4 fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.41, including gain on sale of property --Q4 non-GAAP EPS was $0.35, excluding specified items Applied Biosystems Group (NYSE: ABI), an Applera Applera Corporation of Norwalk, Connecticut, at #874 on the 2007 Fortune 1000 list, is one of the largest international biotechnology companies based in the United States. It is the successor company to what was the Life Sciences Division of Perkin-Elmer Corporation. Corporation business, today reported net revenues of $523.1 million for the fourth quarter of fiscal 2006, a 9% increase over the prior year quarter revenues of $478.5 million. Revenues for the quarter increased 6% over the prior year period excluding the impact of the March 2006 acquisition of the Research Products Division of Ambion, Inc. The impact of foreign currency on revenues for the quarter was not material. Net income was $76.7 million, compared to $71.6 million for the prior year quarter, and was affected by specified items in both periods described below. Earnings per share (EPS) for the quarter were $0.41, compared to $0.35 for the prior year quarter. EPS for the quarter on a non-GAAP basis, excluding the specified items described in the reconciliation schedule below, were $0.35, a 13% increase compared to $0.31 for the prior year quarter. The net effect of foreign currency increased EPS by approximately $0.01 compared to the prior year quarter. All per share amounts refer to Applera Corporation-Applied Biosystems Group Common Stock. "This quarter was a continuation of the encouraging momentum that we have experienced all year," said Tony L. White, Chief Executive Officer, Applera Corporation. "I congratulate Cathy Cathy may refer to: In artistry:
"Growth across all major geographies has enabled us to achieve an important milestone in generating quarterly revenues over $500 million for the first time in the Group's history," said Catherine M. Burzik, President, Applied Biosystems. "We are pleased to have delivered consistent revenue and earnings growth throughout the year and remain focused on continuing our performance into fiscal 2007." During the fourth quarters of both fiscal 2006 and 2005, the Group recorded items that affected the comparability of results. For the fourth quarter of fiscal 2006, these items increased income before taxes by $14.0 million. These items included a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta gain of $16.9 million from the sale of a company-owned facility and amortization expense of $2.9 million related to acquired intangibles. The fourth quarter of fiscal 2006 also included a $1.4 million favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax adjustment to a previously recorded charge in the second quarter of fiscal 2006 related to repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of cash balances outside the U.S. During the fourth quarter of fiscal 2005, the Group recorded pre-tax items that decreased income before taxes by approximately $20.5 million, including amortization expense of $0.3 million related to acquired intangibles. Also recorded during the fourth quarter of fiscal 2005 were tax benefits of $23.5 million primarily related to additional U.S. R&D credit carryforwards Carryforwards Tax losses allowed to be applied to offset future income in some specified number of future years. , expected results of Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. examinations, and settlement of certain UK tax matters. The following table summarizes the impact of these items on EPS calculations:
Reconciliation of GAAP amounts to Non-GAAP amounts
(Dollar amounts in millions)
Three months ended Three months ended
June 30, 2006 June 30, 2005
GAAP Non-GAAP GAAP Non-GAAP
amounts Adj. amounts amounts Adj. amounts
-------- ------ -------- ------- ------- --------
Operating income $102.1 $14.0 $88.1 $60.5 $(20.5) $81.0
Income before income
taxes 106.8 14.0 92.8 65.4 (20.5) 85.9
Provision (benefit)
for income taxes 30.1 3.2 26.9 (6.2) (30.2) 24.0
Net income 76.7 10.8 65.9 71.6 9.7 61.9
Earnings per share
allocations(1) 1.3 1.3 (1.1) (1.1)
Adjusted net income
for earnings per
share $ 78.0 $12.1 $65.9 $70.5 $ 8.6 $61.9
Total diluted
earnings per share $ 0.41 $0.06 $0.35 $0.35 $ 0.04 $0.31
(1) Represents allocation of interperiod taxes and intercompany sales
of assets to adjust net income for purposes of calculating
earnings per share.
Quarterly Financial Highlights --Revenues by source and the change relative to the prior year quarter were: $234.8 million for Instruments, a 5% increase; $199.6 million for Consumables, an 11% increase; and $88.7 million for Other Sources, including service and support, royalties, licenses, and consulting, a 19% increase. Quarterly revenues include $14.9 million of Ambion-related revenues. --Revenues for major geographic regions and their change relative to the prior year quarter were: $230.7 million in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , a 15% increase; $184.8 million in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , an 8% increase including
unfavorable foreign currency effects Foreign Currency EffectsThe extent to which the changes in a foreign currency affects the return on a foreign investment. Notes: Foreign investments are complicated by the currency fluctuation and conversion between countries. of approximately 1%; $50.3 million in Japan, a 1% increase including unfavorable currency effects of less than 1%; and $37.4 million in Other Asia Pacific countries, a 4% increase including unfavorable foreign currency effects of approximately 1%. --Gross margin in the fourth quarter of fiscal 2006 was 54.3% versus 53.1% in the prior year quarter. The increase in gross margin was primarily attributable to expanded PCR PCR polymerase chain reaction. PCR abbr. polymerase chain reaction Polymerase chain reaction (PCR) licensing initiatives. --Selling, general, and administrative (SG&A) expenditures in the fourth quarter of fiscal 2006 were $149.9 million, representing 28.7% of revenues, compared to $124.8 million, representing 26.1% of revenues, in the prior year quarter. The increase in SG&A was driven primarily by Ambion-related expenses, employee-related costs, and strategic investments in China. --Research, development, and engineering (R&D) expenditures in the fourth quarter of fiscal 2006 were $46.3 million, representing 8.9% of revenues, compared to $48.2 million, representing 10.1% of revenues, in the prior year quarter. The decrease in R&D expenditures was due primarily to cost savings realized from the transfer of the MALDI MALDI Matrix-Assisted Laser Desorption/Ionization TOF (Top Of Form) The beginning of a physical paper form. To position paper in many printers, the printer is turned offline, the forms are aligned properly and the TOF button is pressed. product line into the Applied Biosystems/MDS Sciex Instruments joint venture with MDS MDS, n See temporomandibular pain-dysfunction syndrome. MDS 1 Maternal deprivation syndrome, see there 2 Myelodysplastic syndrome, see there Inc. in fiscal 2005. --The Group repurchased 5 million shares of Applera Corporation-Applied Biosystems group common stock during the quarter at a cost of $144.8 million. This represents the completion of the supplemental repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. authorization The right or permission to use a system resource; the process of granting access. See access control. announced in January January: see month. 2006. --Cash flow from operations was $111.5 million and capital expenditures were $12.2 million for the quarter. Depreciation and amortization were $20.5 million. As of the end of the quarter, cash and short term investments were $373.9 million, up from $358.4 million as of March 31, 2006. This increase was largely a result of cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying were $373.6 million, representing 54 days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). , and inventory was $129.4 million, representing 2.4 months of inventory on hand. Recent Business Highlights --In July July: see month. , the Group announced that the Technical Board of Appeal of the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. Patent Office (EPO EPO see erythropoietin. EPO Erythropoietin, see there ) has reinstated Applera's European Patent No. 872562 covering real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. PCR thermal cycler The Thermal cycler (also known as a thermocycler, PCR machine or DNA amplifier) is a laboratory apparatus used for PCR. The device has a thermal block with holes where tubes with the PCR reaction mixtures can be inserted. technology, overturning a December December: see month. 2004 decision by the EPO's Opposition Division to revoke To annul or make void by recalling or taking back; to cancel, rescind, repeal, or reverse. revoke v. to annul or cancel an act, particularly a statement, document, or promise, as if it no longer existed. the patent for alleged lack of novelty Novelty is the quality of being new. Although it may be said to have an objective dimension (e.g. a new style of art coming into being, such as abstract art or impressionism) it essentially exists in the subjective perceptions of individuals. . The case will be returned to the Opposition Division for review of other issues. --In July, the Group announced that it completed the acquisition of Agencourt
Agencourt is a French commune, situated in the département of Côte-d'Or in the région'' of Bourgogne. External links
1. massively parallel See MPP. next generation sequencing technology that we believe will be applicable to numerous genetic analysis applications, including de novo [Latin, Anew.] A second time; afresh. A trial or a hearing that is ordered by an appellate court that has reviewed the record of a hearing in a lower court and sent the matter back to the original court for a new trial, as if it had not been previously heard nor decided. genome genome: see genetics. genome all the genetic content contained within an organism. An organism's genome is made up of molecules of deoxyribonucleic acid (DNA) that form long strands that are tightly wound into chromosomes, which are found in the sequencing, gene expression, and genotyping Genotyping refers to the process of determining the genotype of an individual with a biological assay. Current methods of doing this include PCR, DNA sequencing, and hybridization to DNA microarrays or beads. . Fiscal 2006 Highlights For fiscal 2006, the Group reported net revenues of $1.91 billion, a 7% increase over fiscal 2005 revenues of $1.79 billion. Revenues for the year include the favorable impact of 1% related to the acquisition of the Research Products Division of Ambion. The net effect of foreign currency decreased net revenues in fiscal 2006 by approximately 1%, compared to the prior year. Net income in fiscal 2006 was $275.1 million, as compared to $236.9 million for the prior year. EPS for fiscal 2006 were $1.43, a 20% increase compared to $1.19 for the prior year. EPS on a non-GAAP basis, excluding the specified items described in the reconciliation schedule below, were $1.24, a 17% increase compared to $1.06 for the prior year. The net effect of foreign currency reduced EPS by approximately $0.02 compared to the prior year. Cash flow from operations for fiscal 2006 was $375.3 million compared to $334.3 million for fiscal 2005. Revenues by source and the change relative to the prior year were: $836.3 million for Instruments, a 4% increase; $734.6 million for Consumables, an 8% increase; and $340.3 million for Other Sources, including service and support, royalties, licenses, and consulting, a 13% increase. Fiscal year revenues include $20.4 million of Ambion-related revenues. During both fiscal 2006 and 2005, the Group recorded items that affected the comparability of results. For fiscal 2006, these items decreased income before taxes by $19.1 million. These items included: net charges of $27.5 million related to resolutions of legal disputes; a charge of $3.4 million to write off the value of acquired in-process research and development in connection with the Ambion acquisition; a gain of $16.9 million related to the sale of a company-owned facility; and amortization expense of $4.8 million related to acquired intangibles. Fiscal 2006 also included: tax benefits of $63.3 million related to a completed IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. exam, a state valuation allowance reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its , and research and development credits; tax benefits of $13.5 million related to the settlement of certain transfer pricing Transfer pricing refers to the pricing of goods and services within a multi-divisional organization, particularly in regard to cross-border transactions. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be matters in Japan; and tax charges of $26.6 million related to the repatriation of cash balances held outside the U.S. During fiscal 2005, the Group recorded pre-tax items that increased income before taxes by approximately $5.1 million, including amortization expense of $1.3 million related to acquired intangibles. In addition, fiscal 2005 results included $23.5 million for the above mentioned tax benefits. The following table summarizes the impact of these items on EPS calculations:
Reconciliation of GAAP amounts to Non-GAAP amounts
(Dollar amounts in millions)
Twelve months ended Twelve months ended
June 30, 2006 June 30, 2005
GAAP Non-GAAP GAAP Non-GAAP
amounts Adj. amounts amounts Adj. amounts
-------- ------ -------- ------- ------ ---------
Operating income $297.0 $(19.1) $316.1 $280.1 $ 5.1 $275.0
Income before income
taxes 317.2 (19.1) 336.3 297.2 5.1 292.1
Provision for income
taxes 42.1 (55.4) 97.5 60.3 (21.5) 81.8
Net income 275.1 36.3 238.8 236.9 26.6 210.3
Earnings per share
allocations(1) 0.1 0.1
Adjusted net income
for earnings per
share $275.2 $ 36.4 $238.8 $236.9 $26.6 $210.3
Total diluted
earnings per share $ 1.43 $ 0.19 $ 1.24 $ 1.19 $0.13 $ 1.06
(1) Represents allocation of intercompany sales of assets to adjust
net income for purposes of calculating earnings per share.
Applied Biosystems Outlook The Group believes that its fiscal year 2007 outlook and financial performance will be affected by, among other things: the introduction and adoption of new products; the level of commercial investments in life science R&D; the level of government funding for life science research; the outcome of pending litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. matters; competitive product introductions and pricing; and the continued integration of Ambion-related products. Subject to the inherent uncertainty associated with these factors, Applied Biosystems has the following expectations for fiscal year 2007. --Fiscal 2007 Revenue Growth Rate: The Group expects mid to high single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. revenue growth for fiscal 2007. This outlook includes the full fiscal year impact from the March 2006 acquisition of Ambion and the impact of currency. Revenues are expected to increase for both instruments and consumables. The Group anticipates revenue growth in the Real-Time PCR/Applied Genomics and Mass Spectrometry mass spectrometry or mass spectroscopy Analytic technique by which chemical substances are identified by sorting gaseous ions by mass using electric and magnetic fields. product categories and revenue declines in the Core PCR and DNA Synthesis DNA synthesis commonly refers to:
The determination of the sequence of nucleotides in a sample of DNA. product category are expected to approximately equal those in fiscal 2006. Quarterly year-over-year revenue changes may be different from our annual expectations due to a variety of factors, including the timing of customer orders and disbursements of government funding. --Fiscal 2007 Margins and Expenses: The Group anticipates gross margin to equal or slightly exceed the fiscal 2006 gross margin of 54.7%. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. as a percentage of total revenues in fiscal 2007 are expected to be approximately equal to those in the prior year. SG&A as a percentage of total revenues is expected to be approximately equal to or less than the prior year level of 28.7%. R&D as a percentage of total revenues, and including the impact of Agencourt, is expected to be equal to or slightly above the prior year level of 9.4%. The Group expects operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in fiscal 2007 to increase modestly from the fiscal 2006 level of 16.5%, excluding special items in both fiscal years as described in the Use of Non-GAAP Financial Information section below. --Fiscal 2007 Effective Tax Rate: The Group expects the effective tax rate to be approximately 31%, compared to 29% in fiscal 2006. Factors contributing to the anticipated increase in the effective tax rate include the phase out of export benefits, lower R&D credits, and lower overseas dividends, excluding special items in both fiscal years as described in the Use of Non-GAAP Financial Information section below. --Fiscal 2007 non-GAAP Earnings Per Share Growth: The Group expects earnings per share to increase at a rate slightly below the annual revenue growth rate. This outlook excludes the special fiscal 2006 items mentioned above, the adjustment for the amortization of acquired intangibles, and the other items described in the Use of Non-GAAP Financial Information section below. Excluding the impact of the Agencourt acquisition, the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. impact of stock based compensation, and the increase in the effective tax rate, the Group believes that earnings per share would increase at a low double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" rate over the fiscal 2006 level. The total impact of these three items on fiscal 2007 EPS is expected to be approximately $0.12. --Fiscal 2007 Capital Spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. : Capital spending is expected be in the range of $65-75 million. The Group anticipates that year over year revenue growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. will be higher in the first three quarters of the fiscal year than in the fourth quarter primarily due to the acquisition of Ambion in March 2006. Additionally, due to the Ambion and Agencourt acquisitions, the Group anticipates higher incremental operating expenses as a percentage of total first quarter fiscal 2007 revenues compared to the prior year period. As a result, the Group expects a mid single digit year over year growth rate in non-GAAP EPS for the first quarter of fiscal 2007, excluding the fiscal 2006 special items mentioned above, the adjustment for the amortization of acquired intangibles, and the other items described in the Use of Non-GAAP Financial Information section below. The Group also expects that the third quarter year over year non-GAAP EPS growth rate will be negatively impacted due to income from licensing fees and royalties associated with a litigation settlement in the third quarter of fiscal 2006. The Group anticipates special adjustments in fiscal 2007 related to the amortization of acquired intangibles and also anticipates potential in process R&D charges from the Agencourt acquisition that have not yet been quantified. The total pre-tax impact of FAS 123R (accounting for stock based compensation) in fiscal 2007 is expected to be approximately $14 million, with an EPS impact of approximately $0.05. Other risks and uncertainties that may affect Applied Biosystems' financial performance are detailed in the "Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " section of this release. The comments in the Outlook section of this press release reflect management's current outlook. Applera does not have any current intention to update this outlook and plans to revisit re·vis·it tr.v. re·vis·it·ed, re·vis·it·ing, re·vis·its To visit again. n. A second or repeated visit. re the outlook for its businesses only once each quarter when financial results are announced. Use of Non-GAAP Financial Information This press release contains non-GAAP financial information, both historical and forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. , and including earnings per share and operating margin adjusted to exclude certain costs, expenses, gains and losses and other specified items. These measures are not in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with, or an alternative for, generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting and may be different from non-GAAP measures used by other companies. Among the items included in GAAP earnings but excluded for purposes of determining adjusted earnings or other non-GAAP measures that we present are: gains or losses from sales of operating assets Operating Assets Another term for working capital. and investments; restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , including severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when charges; charges and recoveries relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc significant legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. ; asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges; and amortization of acquired intangibles. In addition, for non-GAAP measures, we have also excluded the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of interperiod taxes and intercompany sales. We believe the presentation of non-GAAP information provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when GAAP information is viewed in conjunction with non-GAAP information, investors are provided with a more meaningful understanding of our ongoing operating performance. In addition, this information is among the primary indicators we use as a basis for evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods. This information is not intended to be considered in isolation or as a substitute for GAAP financial information. To the extent this release contains historical non-GAAP financial information, we have also provided corresponding GAAP financial information for comparative purposes. However, in the case of forward-looking non-GAAP financial information, we have not provided any corresponding GAAP information because this information is not accessible to us. We cannot predict the occurrence, timing, or amount of all special items that we exclude from our non-GAAP measures but which could potentially be significant to the calculation of our GAAP information for future fiscal periods. Conference Call & Webcast A conference call with Applera Corporation executives will be held today at 11:00 a.m. (ET) to discuss these results and other matters related to the businesses. The call will be formatted to focus on each Applera business separately, approximately at the times indicated below, although the exact timing may be different as the call will proceed without pause between segments:
-- Applied Biosystems Group 11:00 a.m. (ET)
-- Celera Genomics Group 11:45 a.m.
During each segment, the management team will make prepared remarks and answer questions from securities analysts and investment professionals. Investors, securities analysts, representatives of the media and other interested parties who would like to participate should dial 706.634.4992 (code "Applera") at any time from 10:45 a.m. until the end of the call. This conference call will also be webcast. Interested parties who wish to listen to the webcast should visit the "Investors & Media" section of either www.applera.com or www.celera.com, or the "Investors" section of www.appliedbiosystems.com. A digital recording will be available approximately two hours after the completion of the conference call on July 27 until August 13, 2006. Interested parties should call 706.645.9291 and enter conference ID 2959424. Applera also encourages stockholders to submit questions for management consideration by e-mail in advance of today's conference call. Such questions, which should be brief and reasonably related to the releases, may be submitted to inna.kats@applera.com. While management cannot commit to answer all such submissions, it will endeavor to do so during the available time of the conference call. About Applera Corporation and Applied Biosystems Applera Corporation consists of two operating groups. The Applied Biosystems Group serves the life science industry and research community by developing and marketing instrument-based systems, consumables, software, and services. Customers use these tools to analyze nucleic acids Nucleic acids The cellular molecules DNA and RNA that act as coded instructions for the production of proteins and are copied for transmission of inherited traits. (DNA DNA: see nucleic acid. DNA or deoxyribonucleic acid One of two types of nucleic acid (the other is RNA); a complex organic compound found in all living cells and many viruses. It is the chemical substance of genes. and RNA RNA: see nucleic acid. RNA in full ribonucleic acid One of the two main types of nucleic acid (the other being DNA), which functions in cellular protein synthesis in all living cells and replaces DNA as the carrier of genetic ), small molecules, and proteins to make scientific discoveries and develop new pharmaceuticals. Applied Biosystems' products also serve the needs of some markets outside of life science research, which we refer to as "applied markets," such as the fields of: human identity testing (forensic Belonging to courts of justice. forensic 1) adj. from Latin forensis for "belonging to the forum," ancient Rome's site for public debate, and currently meaning pertaining to the courts. and paternity testing paternity testing see parentage testing. ); biosecurity biosecurity security from transmission of infectious diseases, parasites and pests. , which refers to products needed in response to the threat of biological terrorism Noun 1. biological terrorism - terrorism using the weapons of biological warfare bioterrorism act of terrorism, terrorism, terrorist act - the calculated use of violence (or the threat of violence) against civilians in order to attain goals that are and other malicious Involving malice; characterized by wicked or mischievous motives or intentions. An act done maliciously is one that is wrongful and performed willfully or intentionally, and without legal justification. DESERTION, MALICIOUS. , accidental accidental /ac·ci·den·tal/ (ak?si-den´t'l) 1. occurring by chance, unexpectedly, or unintentionally. 2. nonessential; not innate or intrinsic. , and natural biological dangers; and quality and safety testing, for example in food and the environment. Applied Biosystems is headquartered in Foster City, CA, and reported sales of over $1.9 billion during fiscal 2006. The Celera Genomics Group is primarily a molecular diagnostics (1) Software routines that test hardware components (memory, keyboard, disks, etc.). Diagnostics are often stored in ROM chips and activated on startup. (2) Error messages in a programmer's source code that refer to statements or syntax that the compiler or assembler business that is using proprietary genomics and proteomics pro·te·o·mics n. The analysis of the expression, localization, functions, and interactions of the proteins produced by the genes of an organism. discovery platforms to identify and validate To prove something to be sound or logical. Also to certify conformance to a standard. Contrast with "verify," which means to prove something to be correct. For example, data entry validity checking determines whether the data make sense (numbers fall within a range, numeric data novel diagnostic markers, and is developing diagnostic products based on these markers as well as other known markers. Celera Genomics maintains a strategic alliance with Abbott Laboratories Abbott Laboratories (NYSE: ABT) is a diversified pharmaceuticals and health care company. It has over 65,000 employees and operates in 130 countries. The corporate headquarters are in Abbott Park, Illinois, a neighborhood of North Chicago, Illinois. for the development and commercialization of molecular, or nucleic acid-based, diagnostic products, and it is also developing new diagnostic products outside of this alliance. Through its genomics and proteomics research efforts, Celera Genomics is also discovering and validating val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. therapeutic targets, and it is seeking strategic partnerships to develop therapeutic products based on these discovered targets. Information about Applera Corporation, including reports and other information filed by the company with the Securities and Exchange Commission, is available at http://www.applera.com, or by telephoning 800.762.6923. Information about Applied Biosystems is available at http://www.appliedbiosystems.com. Forward-Looking Statements Certain statements in this press release, including the Outlook section, are forward-looking. These may be identified by the use of forward-looking words or phrases such as "believe," "expect," "should," "anticipate," and "planned," among others. These forward-looking statements are based on Applera Corporation's current expectations. The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for such forward-looking statements. In order to comply with the terms of the safe harbor, Applera Corporation notes that a variety of factors could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks and uncertainties that may affect the operations, performance, development, and results of Applied Biosystems businesses, including its new activities in the clinical diagnostics instrumentation instrumentation, in music: see orchestra and orchestration. instrumentation In technology, the development and use of precise measuring, analysis, and control equipment. market, include but are not limited to: (1) rapidly changing technology could adversely affect demand for Applied Biosystems' products, and its business is dependent on development and customer acceptance of new products; (2) Applied Biosystems' sales are dependent on customers' capital spending policies and government-sponsored research; (3) Applied Biosystems has significant overseas operations, and fluctuations in the value of foreign currencies could affect Applied Biosystems' financial and operating results; (4) Applied Biosystems' growth depends in part on its ability to acquire complementary technologies through acquisitions, investments, or other strategic relationships or alliances, which may not be successful, may absorb significant resources, may cause dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. , and may result in impairment or other charges; (5) Applied Biosystems may be subject to liabilities related to its use, manufacture, sale, and distribution of hazardous materials; (6) some of Applied Biosystems' principal facilities are subject to the risk of earthquakes Earthquakes See also geology. bathyseism an earthquake occurring at very deep levels of the earth. bradyseism the slow upward and downward motion of the earth’s crust. — bradyseismic, adj. , which could interrupt A signal that gets the attention of the CPU and is usually generated when I/O is required. For example, hardware interrupts are generated when a key is pressed or when the mouse is moved. Software interrupts are generated by a program requiring disk input or output. operations; (7) Applied Biosystems' products are based on complex, rapidly developing technologies, which has resulted in some ongoing legal actions against Applied Biosystems and which creates a constant risk of lawsuits, arbitrations, investigations, and other legal actions with private parties and governmental entities, particularly involving claims for infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. of patents and other intellectual property rights; (8) Applied Biosystems may need to license intellectual property from third parties to avoid or settle legal actions brought against Applied Biosystems; (9) Applied Biosystems is dependent on the operation of computer hardware, software, and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the applications and related technology for its businesses, particularly those focused on the development and marketing of information-based products and services; (10) new clinical diagnostic instruments to be developed by Applied Biosystems may not receive required regulatory clearances and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. may be accepted and adopted by the market; (11) Applied Biosystems relies on a single supplier or a limited number of suppliers for some key products and key components of some of its products; and (12) other factors that might be described from time to time in Applera Corporation's filings with the Securities and Exchange Commission. All information in this press release is as of the date of the release, and Applera does not undertake any duty to update this information, including any forward-looking statements, unless required by law. Copyright 2006. Applera Corporation. All Rights Reserved. AB (Design), Applied Biosystems and Celera are registered trademarks, and Applera, and Celera Genomics are trademarks of Applera Corporation or its subsidiaries in the U. S. and/or certain other countries.
APPLERA CORPORATION
APPLIED BIOSYSTEMS GROUP
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Dollar amounts in millions except per share amounts)
(Unaudited)
Three months ended Twelve months ended
June 30, June 30,
2006 2005(1) 2006 2005(1)
------------ ------------ ------------ ------------
Net revenues $523.1 $478.5 $1,911.2 $1,787.1
Cost of sales 238.8 224.5 866.4 834.4
------------ ------------ ------------ ------------
Gross margin 284.3 254.0 1,044.8 952.7
Selling, general
and administrative 149.9 124.8 548.4 485.6
Research, development
and engineering 46.3 48.2 180.3 192.1
Amortization of
purchased
intangible assets 2.9 0.3 4.8 1.3
Employee-related
charges, asset
impairments and other 20.2 0.4 31.8
Asset dispositions and
legal settlements (16.9) 10.5 (38.2)
Acquired research
and development 3.4
------------ ------------ ------------ ------------
Operating income 102.1 60.5 297.0 280.1
Interest income, net 2.9 4.5 14.7 13.9
Other income
(expense), net 1.8 0.4 5.5 3.2
------------ ------------ ------------ ------------
Income before
income taxes 106.8 65.4 317.2 297.2
Provision (benefit)
for income taxes 30.1 (6.2) 42.1 60.3
------------ ------------ ------------ ------------
Net income $ 76.7 $ 71.6 $ 275.1 $ 236.9
============ ============ ============ ============
Earnings per share
analysis
------------------
Net income $ 76.7 $ 71.6 $ 275.1 $ 236.9
Allocated intercompany
sales of assets 0.1
Allocated interperiod
taxes(2) 1.3 (1.1)
------------ ------------ ------------ ------------
Total net income
allocated 78.0 70.5 275.2 236.9
Less dividends
declared on
common stock 7.7 8.4 31.7 33.4
------------ ------------ ------------ ------------
Undistributed
earnings $ 70.3 $ 62.1 $ 243.5 $ 203.5
============ ============ ============ ============
Allocation of basic
earnings per share
Basic distributed
earnings per share $ 0.04 $ 0.04 $ 0.17 $ 0.17
Basic undistributed
earnings per share 0.39 0.32 1.30 1.04
------------ ------------ ------------ ------------
Total basic earnings
per share $ 0.43 $ 0.36 $ 1.47 $ 1.21
------------ ------------ ------------ ------------
Allocation of diluted
earnings per share
Diluted distributed
earnings per share $ 0.04 $ 0.04 $ 0.17 $ 0.17
Diluted undistributed
earnings per share 0.37 0.31 1.26 1.02
------------ ------------ ------------ ------------
Total diluted
earnings per share $ 0.41 $ 0.35 $ 1.43 $ 1.19
============ ============ ============ ============
Weighted average
number of
common shares
Basic 182,858,000 197,585,000 186,955,000 196,358,000
Diluted 188,726,000 200,310,000 191,914,000 199,017,000
(1) Certain prior period amounts have been reclassified for
comparative purposes.
(2) Represents allocation of interperiod taxes to adjust net income
for purposes of calculating earnings per share.
APPLERA CORPORATION
APPLIED BIOSYSTEMS GROUP
Revenues By Product Categories
(Dollar amounts in millions)
(Unaudited)
Three months ended
June 30,
2006 2005 Change
---------- --------- ------
DNA Sequencing $ 137.8 $ 143.5 -4%
% of total revenues 26% 30%
Real-Time PCR/Applied Genomics* 169.7 138.5 23%
% of total revenues 32% 29%
Mass Spectrometry 134.7 118.9 13%
% of total revenues 26% 25%
Core PCR & DNA Synthesis 51.7 46.3 12%
% of total revenues 10% 10%
Other Product Lines 29.2 31.3 -7%
% of total revenues 6% 6%
--------- ---------
Total $ 523.1 $ 478.5 9%
========= =========
Twelve months ended
June 30,
2006 2005 Change
--------- --------- ------
DNA Sequencing $ 539.9 $ 544.2 -1%
% of total revenues 29% 30%
Real-Time PCR/Applied Genomics* 600.4 514.5 17%
% of total revenues 31% 29%
Mass Spectrometry 465.3 426.5 9%
% of total revenues 24% 24%
Core PCR & DNA Synthesis 198.4 191.2 4%
% of total revenues 10% 11%
Other Product Lines 107.2 110.7 -3%
% of total revenues 6% 6%
--------- ---------
Total $1,911.2 $1,787.1 7%
========= =========
* Fiscal 2006 amounts include revenue related to the acquisition of
the Research Division Products of Ambion, Inc.
Certain prior year amounts have been reclassified for comparative
purposes.
APPLERA CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2006
(Dollar amounts in millions except per share amounts)
(Unaudited)
Applied Celera
Biosystems Genomics
Group Group Eliminations Consolidated
----------- -------- ------------ ------------
Net revenues $523.1 $ 17.8 $(1.2) $539.7
Cost of sales 238.8 5.2 (0.5) 243.5
----------- -------- ------------ ------------
Gross margin 284.3 12.6 (0.7) 296.2
Selling, general and
administrative 149.9 9.1 0.1 159.1
Research, development
and engineering 46.3 15.7 (0.8) 61.2
Amortization of
purchased intangible
assets 2.9 2.9
Employee-related charges,
asset impairments and other 5.3 5.3
Asset dispositions and
legal settlements (16.9) (16.9)
----------- -------- ------------ -----------
Operating income (loss) 102.1 (17.5) 84.6
Interest income, net 2.9 6.0 8.9
Other income (expense),
net 1.8 1.8
----------- -------- ------------ -----------
Income (loss) before
income taxes 106.8 (11.5) 95.3
Provision (benefit) for
income taxes 30.1 (6.2) (1.3) 22.6
----------- -------- ------------ -----------
Net income (loss) $ 76.7 $ (5.3) $ 1.3 $ 72.7
=========== ======== ============ ===========
Net income (loss)
per share
Basic $ 0.43 $(0.07)
Diluted $ 0.41 $(0.07)
APPLERA CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2005
(Dollar amounts in millions except per share amounts)
(Unaudited)
Applied Celera
Biosystems Genomics
Group Group Eliminations Consolidated
---------- -------- ------------ ------------
Net revenues $478.5 $ 14.4 $(1.9) $491.0
Cost of sales 224.5 3.7 (1.2) 227.0
---------- -------- ------------ ------------
Gross margin 254.0 10.7 (0.7) 264.0
Selling, general and
administrative 124.8 10.4 135.2
Research, development and
engineering 48.2 35.1 (0.8) 82.5
Amortization of
purchased intangible
assets 0.3 0.7 1.0
Employee-related
charges, asset
impairments and other 20.2 (0.2) 20.0
---------- -------- ------------ ------------
Operating income (loss) 60.5 (35.3) 0.1 25.3
Interest income, net 4.5 4.8 9.3
Other income (expense),
net 0.4 0.1 0.5
---------- -------- ------------ ------------
Income (loss) before
income taxes 65.4 (30.4) 0.1 35.1
Benefit for income
taxes (6.2) (14.0) 1.1 (19.1)
---------- -------- ------------ ------------
Net income (loss) $ 71.6 $(16.4) $(1.0) $ 54.2
========== ======== ============ ============
Net income (loss) per
share
Basic $ 0.36 $(0.22)
Diluted $ 0.35 $(0.22)
Certain fiscal 2005 amounts have been reclassified for comparative
purposes.
APPLERA CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Twelve Months Ended June 30, 2006
(Dollar amounts in millions except per share amounts)
(Unaudited)
Applied Celera
Biosystems Genomics
Group Group Eliminations Consolidated
----------- -------- ------------ ------------
Net revenues $1,911.2 $ 46.2 $(8.0) $1,949.4
Cost of sales 866.4 19.7 (4.9) 881.2
----------- -------- ------------ ------------
Gross margin 1,044.8 26.5 (3.1) 1,068.2
Selling, general and
administrative 548.4 36.1 584.5
Research, development
and engineering 180.3 94.3 (3.2) 271.4
Amortization of
purchased intangible
assets 4.8 1.1 5.9
Employee-related
charges, asset
impairments and other 0.4 26.2 26.6
Asset dispositions and
legal settlements 10.5 0.7 11.2
Acquired research and
development 3.4 3.4
----------- -------- ------------ ------------
Operating income
(loss) 297.0 (131.9) 0.1 165.2
Gain on investments,
net 7.6 7.6
Interest income, net 14.7 22.4 37.1
Other income
(expense), net 5.5 (0.2) 5.3
----------- -------- ------------ ------------
Income (loss) before
income taxes 317.2 (102.1) 0.1 215.2
Provision (benefit)
for income taxes 42.1 (39.4) 2.7
----------- -------- ------------ ------------
Net income (loss) $ 275.1 $(62.7) $ 0.1 $ 212.5
=========== ======== ============ ============
Net income (loss) per
share
Basic $ 1.47 $(0.83)
Diluted $ 1.43 $(0.83)
APPLERA CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Twelve Months Ended June 30, 2005
(Dollar amounts in millions except per share amounts)
(Unaudited)
Applied Celera
Biosystems Genomics
Group Group Eliminations Consolidated
---------- -------- ------------ ------------
Net revenues $1,787.1 $ 66.5 $(8.5) $1,845.1
Cost of sales 834.4 19.9 (5.7) 848.6
---------- -------- ------------ ------------
Gross margin 952.7 46.6 (2.8) 996.5
Selling, general and
administrative 485.6 39.8 525.4
Research, development
and engineering 192.1 141.4 (2.9) 330.6
Amortization of
purchased intangible
assets 1.3 2.9 4.2
Employee-related
charges, asset
impairments and other 31.8 2.6 34.4
Asset dispositions and
legal settlements (38.2) (38.2)
---------- -------- ------------ ------------
Operating income (loss) 280.1 (140.1) 0.1 140.1
Interest income, net 13.9 14.9 28.8
Other income (expense),
net 3.2 1.3 4.5
---------- -------- ------------ ------------
Income (loss) before
income taxes 297.2 (123.9) 0.1 173.4
Provision (benefit) for
income taxes 60.3 (46.8) 0.1 13.6
---------- -------- ------------ ------------
Net income (loss) $ 236.9 $(77.1) $ - $ 159.8
========== ======== ============ ============
Net income (loss) per
share
Basic $ 1.21 $(1.05)
Diluted $ 1.19 $(1.05)
Certain fiscal 2005 amounts have been reclassified for comparative
purposes.
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