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Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the third quarter 2010 Harvard Bioscience Inc. earnings call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference is being recorded.
Now I will turn the program over to Mr. Tom McNaughton, CFO. Sir, you may go ahead.
Tom McNaughton - CFO
Thank you. Good morning and thank you for joining us to discuss our results for the third quarter of 2010. Chane Graziano, our CEO, and David Green, our President, are also on the call today. After the Safe Harbor statement, I will turn the call over to Chane and David who will present an overview of the third quarter and comment on our outlook for the year.
Lastly, I will present some additional financial highlights related to our balance sheet. Following those comments, we will open the call for any questions.
In our discussion today, we will make statements that constitute forward-looking statements under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from those projected due to risk and uncertainties including those detailed in our annual report on Form 10-K for the fiscal year ended December 31, 2009, and our other public filings.
Any forward-looking statements including those related to future results 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 today regarding our third-quarter results.
Please note that during this call we will discuss non-GAAP financial measures because we believe those measures provide an enhanced understanding of how our businesses are performing. These non-GAAP measures approximate information used by our management to internally evaluate the operating results of the Company. For each non-GAAP financial measure discussed, we have made available as part of our press release or on our website in the investor relations section a reconciliation to the most directly comparable GAAP financial measure.
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 of our website and then click on the investor presentations or website icon as appropriate.
A replay of this call will also be archived at the same location on our website. Our website is located at www.harvardbioscience.com.
Lastly, all financial information presented on this conference call relates to our continuing operations unless otherwise stated.
Now I will turn the call over to Chane.
Chane Graziano - Chairman and CEO
Thank you, Tom. And good morning, everyone. Harvard Bioscience's growth in revenues for the third quarter of 2010 continue to be driven by our investments in new products, expansion of our direct selling organizations, and the Denville acquisition. We saw strength in most geographies and product lines.
As we look forward, we expect to see some expansion in our operating margins with an increase in the productivity of our investments in the direct selling organizations. At current currency exchange rates, we expect fourth-quarter 2010 revenues to be in the $28 million to $29 million range and non-GAAP diluted earnings per share to be approximately $0.11.
We expect the full year 2010 revenues to be in the guidance range of $106 million to $108 million and non-GAAP diluted earnings per share to be approximately $0.36 based on reported results for the first three quarters and current exchange rates for the fourth quarter. Our guidance does not include the impact of any further acquisitions.
David will now comment further on our third-quarter performance and our current business outlook.
David Green - President
Thank you, Chane, and good morning, everyone. Our Q3 revenue was up 26% over Q3 2009. Foreign exchange was negative 3% for the quarter. Our non-GAAP operating profit was up 18% despite our increased investments in regenerative medicine and expanding our field salesforce.
EPS was flat to Q3 last year primarily due to an increase in our tax rate from 27% to 31% driven by both tax credits in Q3 2009 and with Denville, the shift in our tax base toward the US which has higher tax rates than most other countries in which we operate.
One of the major drivers of the success in Q3 was the acquisition of Denville. Denville has been accretive to our earnings per share in every quarter since the acquisition. In addition to Denville's positive impact on the quarter, the core business also performed well.
Excluding Denville, we delivered 5% organic growth in the quarter with growth coming across most major product lines. Denville's organic growth, as though we had owned it all of Q3 last year, was also 5%. This was against a particularly strong Q3 last year.
The organic growth was widespread and we even saw some recovery in Europe after seeing some weakness in Europe in Q2. The main drivers of organic revenue growth in Q3 were the investments we have made in the new product development and expansion of our salesforce.
In Q3, we launched the fourth of four major new research syringe pumps in the Harvard Apparatus business. Syringe pumps are our single biggest product line. The new pump called the KDS Legato 100 is a major upgrade to our popular KD 100 product line that now incorporates a color touchscreen user interface, method storage and programming without a separate computer and USB connectivity.
New products like this have been contributing to organic growth in Harvard Apparatus especially in the USA.
Also during Q3, we continued to roll out a major upgrade and expansion of our spectrophotometer product line in our Biochrom business. Spectrophotometry is our second biggest overall product line after syringe pumps. We think that these new products will help to drive organic growth during the fourth quarter of 2010 and beyond.
In addition to driving growth in our core research markets, we announced on our February 25, 2010 call that we had started investing to create new products to address a longer-term growth opportunity in the emerging field of regenerative medicine. Regenerative medicine is using stem cells to repair damaged organs and also growing organs outside the body for transplant.
The U.S. Department of Health and Human Services projects that the US market for regenerative medicine is $100 billion. Our strategy is not to become a therapeutics company but instead to provide tools to enable regenerative medicine. These new tools currently fall into two main categories, bioreactors for growing tissue and organs outside the body, and injectors to stem cell therapy.
These new tools we are creating are being built on our existing technologies such as our market-leading Harvard Apparatus precision syringe pumps and market-leading HUGO SACHS isolated organ systems.
Our first bioreactor product is a product that was used to perform the world's first human transplant of a regenerated bronchus. Dr. Paolo Macchiarini etal. reported their success in the Lancet in November 2008. I am pleased to note we have now taken several orders of this product making it what we believe is the world's first commercially available bioreactor that has been used to perform a human transplant of a regenerated organ.
We are now starting to work with researchers who are interested in extending this technology to other hollow tubular organs such as blood vessels and intestines.
In addition, the paper published by our collaborator, Dr. Harald Ott at Massachusetts General Hospital, who succeeded in regenerating a lung and subsequently transplanting it into a rat has generated interest among other research groups in developing the lung regeneration method and apparatus.
The bioreactor used by Dr. Ott was a specially modified version of one of our market-leading HUGO SACHS isolated organ systems.
In addition to the bioreactors I have described, we also have started the development of a clinical version of one of our market-leading Harvard Apparatus research syringe pumps. We anticipate that this pump will be used to inject cells to damaged tissue in cell therapy. We anticipate launching our first clinical product during 2011.
During Q3, we closed the acquisition of Coulbourn Instruments, which has become part of the Harvard Apparatus business. Coulbourn's behavioral research productline is very complementary to our existing Panlab product line and we expect to sell both product lines together through our field salesforce. We expect Coulbourn will add approximately $4 million in annual revenues.
As always we continue to pursue acquisition candidates and we have a pipeline of potential candidates that if completed would add to our growth in revenue and profits.
In short, we are pleased with our results for the third quarter. Revenue was up 26%, organic growth was 5%, and non-GAAP operating profit was up 18%. We are also pleased to see the effect of the launch of our new syringe pumps, anticipate growth from the launch of our new spectrophotometers and welcome the addition of the Coulbourn business and employees to the Harvard Bioscience family.
Finally, we are making progress in developing bioreactors in stem cell therapy injectors for long-term growth in the very promising new market of regenerative medicine.
I will now turn over the call to Tom for some additional comments.
Tom McNaughton - CFO
Thank you, David. During the first nine months of 2010, we generated $8 million of cash flow from our operations. We deployed most of those funds in acquisitions and share repurchases.
Related to acquisitions, we made the final $1.5 million payment on the Denville acquisition during the second quarter of this year and then we acquired Coulbourn Instruments during the third quarter for $4.6 million. So we have paid out approximately $6.1 million this year pursuing our acquisition strategy.
We entered 2010 with one-half of our $10 million share repurchase program completed. We repurchased approximately 1.4 million shares of our common stock during the second and third quarters of 2010 for a total of $5 million. We made those purchases through a 10b5-1 purchase plan and in so doing, we completed the Company's share repurchase program.
We financed some of the aforementioned investments through our incremental borrowings of $4.7 million on our line of credit during the first three quarters of 2010. At September 30, 2010, our outstanding balance under the line of credit was $18.0 million. However, we also had $17.2 million of cash and cash equivalents at that date.
As David mentioned, acquisitions continue to be an important part of our business strategy. Looking forward we believe that with our cash balances, operating cash flows and bank borrowing capabilities that we can finance up to 20% annual revenue growth through acquisitions.
Lastly, I would like to address an $11.3 million tax benefit that we recognized in the third quarter of 2010. For the past several years, the Company has had deferred tax assets related principally to net operating loss carryforwards at the US federal and state levels, foreign tax credits and R&D tax credits.
However, we have had full valuation allowances against the deferred tax assets because we were unable to support a position stating that it would be more likely than not that we would be able to utilize the deferred tax assets to offset cash tax payments on future income. Due to the improvement over the past few years of our US taxable income and our belief that US taxable income will be sufficient to realize the benefits of our deferred tax assets, we reversed a significant portion of the valuation allowances related to the deferred tax assets in September.
The release of those valuation allowances resulted in $11.2 million income tax benefit for the third quarter. Overall, the deferred tax assets could save up to $12.8 million of tax payments for 2010 and future years.
We will now open the call to any questions.
Operator
(Operator Instructions). I am showing no questions in queue at this time. I would now like to turn it back over to Mr. Graziano for any closing remarks.
Chane Graziano - Chairman and CEO
I would like to thank everyone for joining our call today. We are very pleased with our results for the third quarter and are optimistic about the future outlook for continued growth going forward. Have a great day. Thank you.
Operator
Ladies and gentlemen, thank you for your participation. That concludes the conference. You may disconnect and have a wonderful day.