Fitch Revises Beckman Coulter's Ratings Outlook to Negative.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed Beckman Coulter's Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ), senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. , and bank loan debt at 'BBB+'. The Rating Outlook has been revised to Negative from Stable. The ratings apply to approximately $744 million of outstanding debt. Fitch's key concern pertains to the negative impact to free cash flow generation from a significant cash outlay dedicated to capitalizing customer equipment on the balance sheet due to the shift of customer contractual terms to operating-type leases from sales-type leases in the U.S. (announced in July 2005). Although the negative effect should ease as 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. 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. for equipment moderates in outer years and amortization of the equipment more fully offsets the capital investment, free cash flow is not anticipated to reach prior year levels through the intermediate term. The Negative Outlook reflects the potential of Beckman Coulter's credit profile to be further stressed by the change in leasing policy in the intermediate term exacerbated by continued shareholder-friendly actions, namely aggressive share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. activity and increasing dividends. The pressure on free cash flow from a larger capital investment and increases in dividend payments coupled with active share repurchases leaves little flexibility to reduce debt. Accordingly, Fitch does not expect significant debt reduction in the long term. The senior notes due in 2008 are expected to be refinanced by a new long-term issuance. Fitch also expects the majority of revolver capacity will be utilized in the long term. Leverage, total debt-to-EBITDA, was 1.8 times (x) at the end of 2005. Fitch will monitor revenues for an indicative growth trend in the fourth quarter of 2006 when the change in leasing policy annualizes. Fitch believes that revenue growth should accelerate through the intermediate term as higher-growth sales of test reagents, instrument consumables, operating-type leases and services represent a greater percentage of overall revenues. After-market sales represented approximately 72% of total revenues in 2005 increasing from 64% in 2004. These longer-term revenues also provide a continuum of earnings and cash flows. Beckman Coulter's rating is supported by continued investment into its R&D program, which has launched both new instrument platforms and tests refreshing the product offerings of virtually every business unit over the past few years. Spending for R&D represented 8.8% of sales ($224 million) for the latest 12-month period ending March 31, 2006 and is projected to increase through the long term. The company's new middle- and high-volume UniCel workstation consolidation product offerings, including the UniCel DxI 600i, will serve to drive future revenue and earnings through incremental demand for after-market items. Beckman Coulter This article needs sources or references that appear in reliable, third-party publications. Alone, primary sources and sources affiliated with the subject of this article are not sufficient for an accurate encyclopedia article. plans to launch four new instrument systems through 2008 and 15-20 new immunodiagnostic immunodiagnostic pertaining to diagnosis by immune reactions. tests per year through 2007. An additional concern pertains to the consummation of a large debt-financed acquisition during the period when the company's credit profile is most heavily affected by the change in leasing policy in the U.S. Fitch still anticipates Beckman Coulter will explore opportunities to boost sales and product offerings through geographic expansion, and technology additions by internal development, moderate acquisition activity or collaborative arrangements. Fitch also recognizes uncertainty of the company's current financial policy in light of the retirement of the present CFO See Chief Financial Officer. , Jim Glover, at the end of June. Fitch will monitor the progress of Beckman Coulter's filing of its first-quarter 2006 10-Q. The company has been granted a filing extension by its bank group until June 20. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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