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Harvard Bioscience Inc. Reports Operating Results (10-Q)

May 07, 2009 | About:

Harvard Bioscience Inc. (HBIO) filed Quarterly Report for the period ended 2009-03-31.

HARVARD BIOSCIENCE develops manufactures and markets tools used in drug discovery research at pharmaceutical and biotechnology companies universities and government laboratories. Harvard Bioscience Inc. has a market cap of $82.6 million; its shares were traded at around $2.76 with a P/E ratio of 12.1 and P/S ratio of 1. Harvard Bioscience Inc. had an annual average earning growth of 4.5% over the past 5 years.

Highlight of Business Operations:

Cost of product revenues decreased $2.0 million, or 16.9%, to $9.7 million for the three months ended March 31, 2009 compared with $11.6 million for the three months ended March 31, 2008. The decrease in cost of product revenues was primarily due to a $1.4 million effect of a strengthened U.S. dollar and cost reductions in the Companys Biochrom group. Gross profit as a percentage of revenues increased to 49.3% for the three months ended March 31, 2009 compared with 47.0% for the same period in 2008. The increase in gross profit as a percentage of revenues was primarily due to write-downs in the prior year first quarter related to the consolidation of manufacturing facilities, production efficiency improvements and mix.

Other income, net, was $0.1 million and $0.2 million for the three months ended March 31, 2009 and 2008, respectively. Net interest expense was $38,000 for the three months ended March 31, 2009 compared to net interest expense of $52,000 for the three months ended March 31, 2008. The decrease in net interest expense was primarily due to lower average debt balances in the first quarter of 2009 compared to the first quarter of 2008. Other income, net, also included foreign exchange gains of $0.1 million and $0.2 million for the three months ended March 31, 2009 and 2008, respectively. These exchange gains were primarily the result of currency fluctuations on intercompany transactions between our subsidiaries.

During the quarter ended March 31, 2009, no charges were recorded relating to the 2008 restructuring. During the quarter ended March 31, 2008, we recorded charges relating to the 2008 restructuring of approximately $0.8 million. These charges were comprised of $0.4 million in severance payments, $0.3 million in inventory impairment charges related to the discontinuance of certain product lines (included in cost of product revenues) and $0.2 million in various other costs.

During the quarter ended March 31, 2009, the management of Harvard Bioscience initiated a plan to relocate the Scie-Plas operation and exit its general fabrication business as part of the Companys ongoing initiative to improve operating results. During the quarter ended March 31, 2009, we recorded charges relating to this plan of approximately $55,000. These charges were comprised of approximately $9,000 in severance payments, approximately $28,000 in inventory impairment charges related to the discontinuance of certain product lines (included in cost of product revenues) and approximately $18,000 in various other costs.

Our investing activities used cash of $0.3 million in the three months ended March 31, 2009 compared to $0.7 million in the three months ended March 31, 2008. Investing activities during both 2008 and 2009 included purchases of property, plant and equipment and expenditures for our catalogs. Catalog costs were approximately $11,000 for the three months ended March 31, 2009, compared to $0.4 million for the same period last year. The greater spending during the first quarter of 2008 reflected the cost of issuing a 900-page Harvard Apparatus catalog. We spent $0.3 million in the three months ended March 31, 2009 and 2008 on capital expenditures. During the next twelve months, we expect to spend approximately $1.2 million on capital expenditures.

During 2003, we entered into a $20.0 million credit facility with Brown Brothers Harriman & Co. On December 1, 2006, we amended the terms of the credit facility. This amendment changed the terms of our current $20.0 million credit facility, by allowing borrowing of up to $10.0 million in British Pound Sterling or Eurocurrency and extending the maturity date from January 1, 2007 to December 1, 2009. The amended credit facility bears interest at either (1) the base rate announced by BBH from time to time, (2) the London Interbank Offered Rate (LIBOR) or (3) the Eurocurrency base rate, plus, in the case of LIBOR or the Eurocurrency base rate, a margin of 2.5% or 2.75% depending on our debt service leverage ratio. As of March 31, 2009, we were in compliance with the financial covenants contained in the credit facility involving income, debt coverage and cash flow, as well as minimum working capital requirements. Additionally, the credit facility also contains limitations on our ability to incur additional indebtedness and requires creditor approval for acquisitions funded with cash, promissory notes and/or other consideration in excess of $6.0 million and for acquisitions funded solely with equity in excess of $10.0 million. We do not believe that these requirements will be a significant constraint on our operations or on the acquisition portion of our growth strategy. As of March 31, 2009 and December 31, 2008, we had no borrowings outstanding under the credit facility. We were not subject to any borrowing restrictions under the covenants and we had available borrowing capacity under our revolving credit facility of $20.0 million as of March 31, 2009.

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