使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good day ladies and gentlemen. And welcome to the fourth quarter 2005 Harvard Bioscience earnings conference call. My name is Colby and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session toward the end of this conference. (OPERATOR INSTRUCTIONS). I would now like to turn the presentation over to your host for today's call, Mr. Bryce Chicoyne, Chief Financial Officer. Please proceed sir.
Bryce Chicoyne - CFO
Thank you. Good afternoon. This is Bryce Chicoyne, Chief Financial Officer of Harvard Bioscience. Thank you for joining us today to discuss the results of our fourth quarter and full year ended December 31st, 2005. Chane Graziano, our CEO, and David Green, our President, are also on the call today. After the Safe Harbor statement, Chane will present an overview of the quarter, David will go into more detail on our results, and I will present some additional financial highlights.
In our discussion today we may make statements about our future expectations, plans and prospects that constitute forward-looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from those projected due to risks and uncertainties, including those detailed in our annual report on Form 10-KA for the fiscal year ended December 31st, 2004, and other public filings.
Any forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates of any subsequent day. Further information regarding forward-looking statements and risk factors is included in the press release issued earlier this afternoon reporting the fourth quarter and full year results.
Please note that during this call, we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed, a presentation of the most directly comparable GAAP financial measure, and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure, is available on the investor relations section of our website as part of our press release.
Additionally, any material financial or other statistical information presented on the call which is not included in our press release will be archived and available in the investor relations section of our website. Look on the investor relations section and click on the investors' presentation or website icon as appropriate. A replay of this call will also be archived at the same location on our website. I would now like to turn the call over to Chane.
Chane Graziano - CEO
Thank you Bryce. I am pleased to announce that we continue to show improvements in our continuing operations. During the second half of 2005, we successfully refocused our resources on our core Apparatus and Instrumentation business which has been the cornerstone to our success over the last decade. As a result of these efforts during the fourth quarter we have increased our organic growth rate to 7%, steadily improved gross margin, and improved non-GAAP adjusted operating income of over 16% of revenue.
Our organic sales growth has been driven by the continued strength in our core physiology products and our spectrophotometer product line and an increase in international sales, particularly in Europe. Looking forward to 2006, we remain encouraged by the continued strengthening of our international sales and in the life science market.
We want to reiterate that we remain committed to our goal of high revenue and profit growth through a combination organic growth and tuck under acquisitions. In fact, March 15, 2006 is the ten-year anniversary of Harvard Bioscience undercurrent management. During this period, we have grown our revenues from continuing operations from 10 million to 57.4 million, a compounded annual growth rate of over 20%.
Let me now talk about our guidance. For the first quarter of 2006, we expect to generate revenue between $16.5 and $17 million and non-GAAP adjusted earnings per diluted share from continuing operations of $0.05. For the full year 2006, we expect to generate revenues between $70 and $72 million and non-GAAP adjusted earnings per diluted share from continuing operations of $0.22. This does not include the impact of any potential acquisitions. I will now hand the call over to David.
David Green - President
Thank you, Chane. Fourth quarter results for the Apparatus and Instrumentation business was strong, with organic revenue growth over 7% versus Q4 last year. Organic growth improved throughout the year as we started to see the benefit of sales and marketing investments we started making earlier in the year. As Chane mentioned, core product lines like pumps, ventilators, and spectrophotometers all did well in 2005.
Gross margin also improved throughout the year. In Q1, it was 47.5%; in Q2, 49.1%; in Q3, 49.5%; and in Q4, 51.1%. Gross margin improvements were driven by an improved product mix and improved factory efficiencies. This combination of improved revenue growth and gross margin expansion led a significant improvement in operating margin throughout the year, culminating in adjusted non-GAAP operating margin of 15.4% of revenues in Q4.
To reiterate Chane's earlier comment, we continue to pursue tuck under acquisitions as part of our growth strategy. We believe the environment for these acquisitions remains favorable.
I also wanted to give a quick update on the divestiture of our Capital Equipment business. The divestiture process is continuing to move forward and we are in discussions with a number of potential acquirers of this business. We believe we will complete this process in a timely fashion. When we have reached a definitive agreement, we will announce it in a press release.
I would now like to turn the call over to Bryce to go over some additional financial highlights.
Bryce Chicoyne - CFO
Thank you David. The Company ended the year with a strong balance sheet. We held $9.7 million in cash and $8.5 million in debt. $7.6 million of cash was held in our continuing businesses and $2.1 million in cash was held in our discontinued businesses. During the year, the Company took advantage of the Federal Jobs Creation Act and repatriated $5.1 million of cash held in our foreign subsidiaries to the United States.
Also during 2005, we paid down our debt balance by approximately $8 million, leaving us with a balance of 8.5. $6 million of these repayments were made during the fourth quarter.
As of December 31st, 2005 accounts receivable balances are 10.1 million in inventory was 9.1 million. DSOs for the fourth quarter were 53 days, down from 54 days compared to a year ago. Inventory turns during the quarter were 3.7 times, up from 3.5 times last year.
The comparative period excludes the Capital Equipment business, which is classified as discontinued operations unless it was specifically mentioned.
On a final note, during the second quarter of 2005, as a result of the decrease in revenues and operating profit margin in the Capital Equipment Business Segment, the Company recorded impairment charges on intangible assets and valuation allowances on its deferred tax assets. With these non-cash charges, our reported loss per diluted share was $0.90 in the second quarter of 2005.
During the preparation of the year-end tax provision, the Company identified that it had incorrectly increased the valuation allowances deferred tax assets above the amount required. The correction of this error will reduce the second quarter loss per diluted share from a reported $0.90 to $0.78. The adjustment does not affect previously reported revenue, operating profit, or adjusted non-GAAP earnings per diluted share, nor does it affect any future revenue, earnings, or cash flow. The Company will correct this error by restating the quarterly financial information included in the footnotes to its Form 10-K for the year ended December 31st, 2005.
We'll now open the call for any questions.
Operator
(OPERATOR INSTRUCTIONS). Paul Knight, Thomas Weisel Partners.
Paul Knight - Analyst
Can you talk about the SG&A line of 5.6 million? Did that include some of the activities going on at Harvard, such as the revaluation item that occurred in the quarter?
David Green - President
It's David. No, the SG&A line doesn't include any of the revaluation stuff. That included as a separate line item.
Paul Knight - Analyst
The other is the organic growth of 7% seems to be improving. What are the dynamics you see driving organic growth as we go into '06? Are there new catalogs? What's the catalyst behind organic growth for this current year?
Chane Graziano - CEO
Yes, Paul, we do have new catalogs, particularly in the cell biology area as well as in our electroporation product line. And we've also launched new products in the [hope of] -- electrophoresis product line. But the other thing that we see is, we did see a strengthening in the marketplace, particularly in the academic segment in the fourth quarter. And Europe was quite strong in the second half of the year.
Paul Knight - Analyst
Can you talk about your Amersham relationship? When did that come -- when is that renewed and where are we with it?
Chane Graziano - CEO
Yes, that is due for renewal during this year and it's in process as we speak. There is significant interest in their part in continuing that relationship. We don't see any risk there. In fact, there are several new products that they would like -- that we've been working on that they would like to have on an exclusive basis going forward.
Paul Knight - Analyst
What do you think you're normalized EBIT-A margin would be, Chane, and let's call it normal market and conditions or post restructuring?
David Green - President
I can answer that if you like, Paul. Normally we you think of operating margin rather than EBIT-A margin, but it's probably not much difference between the two. In the last two quarters, Q3 and Q4, we reported over 15% operating margin as the [potential] revenues for the continuing businesses. Our goal for the business is to get it into the 20% range. We thing that's feasible, but I think the 15% range is a pretty good number for the last two quarters.
Paul Knight - Analyst
Okay. And the last question is, is all of this debt -- it's a short-term bank line of credit?
David Green - President
Yes. It is a revolving credit facility.
Paul Knight - Analyst
Why the paydown in Q4?
David Green - President
Well, we had significant positive cash flow for a couple of reasons. Part of that was positive cash flow from operations and part of it was the repatriation of cash under the Federal Jobs Creation Act. We brought back about 6 million under that program and we used that to repay the line.
Operator
(OPERATOR INSTRUCTIONS). Paul Knight.
Paul Knight - Analyst
What would you expect of your tax rate, Chane or David?
Bryce Chicoyne - CFO
The ongoing tax -- this is Bryce. The ongoing tax rate is estimated to be between 36 and 38%.
Operator
At this time, there are no further questions in queue.
Chane Graziano - CEO
If there are no further questions, I'd like to thank you all for joining our fourth quarter conference call today. We are pleased with the results from the fourth quarter and optimistic about 2006. Thank you and good evening.
Operator
Thank you for your participation in today's conference. This includes the presentation. You may now disconnect.