A Diagnostics & Imaging Week

Laboratory equipment manufacturer Beckman Coulter (Fullerton, California) reported a restructuring plan that includes job cuts, reorganization of its business structure and a noteworthy change in its instrument leasing policy.

In reporting 2Q05 financial results that included a sharp decline in net income, Beckman Coulter said it also would be reviewing minor product lines, facilities and other assets that do not support its new "one company" strategy.

Scott Garrett, president and CEO, said that in response to what he termed "changing market preferences," the company would "immediately shift our diagnostic system placements from predominately sales-type leases to predominately operating-type leases." He said that change "should further improve competitiveness, sales efficiency and product margins."

Garrett said Beckman Coulter would adopt the one-company structure by combining its two existing operating divisions, Clinical Diagnostics and Biomedical Research. "This will allow us to more effectively address opportunities wherever they may arise across the biomedical testing continuum," he said.

The new structure will involve two separate commercial organizations focused on domestic and international markets, and will include the creation of four business groups:

Chemistry Systems

Immunoassay Systems

Cellular Systems

Discovery and Automation Systems

Garrett said the reorganization would create synergies and improve focus "as we address the entire biomedical testing continuum."

The company is expected to take a one-time restructuring charge of up to $60 million in the second half to "realign and optimize operations."

He said the shift to operating-type leases "moves the recognition of instrument revenues and earnings from a single transaction to smaller monthly installments made over the life of the lease agreement, which is typically five years. The change will result in a reduction in reported sales and earnings and higher gross margins, Garrett said. "Once fully implemented, the shift will also result in faster growth, allowing us to equal our previously established internal financial targets within five years."

In its report on the second quarter ended June 30, Beckman Coulter said it had sales of $619 million, up 3.6% from $597.3 million in the prior-year period. Earnings, however, slipped to $47.7 million or 73 cents a share from $58.3 million or 88 cents a share a year earlier.

Garrett said that consumables product sales were up 10% in the quarter, "but total sales growth was below our expectations, principally due to a shortfall in U.S. diagnostics, which more than offset excellent total company results in Europe."

He said overall sales were impacted by two factors – a slowdown in U.S. automation purchase decisions as customers "evaluate a growing range of newly available products, and an increase in the percentage of instruments placed on operating-type leases."

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