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Harvard Bio (HBIO) Q4/12 And FY12 Results

Net income of $1.2 M and diluted $0.04 per share <consolidated balance sheet>

Revenues from continuing operations were $28.2 M. Q4 revenues were down approximately 2.7% compared to the same period in 2011. Currency exchange rates had a favorable 0.2% effect on revenues in Q4/12 compared with Q4/11. HBIO's acquisition of AHN Biotechnologie GmbH ("AHN") in 2/12 had a positive 1.6% effect on revenues in Q4/12 compared to Q4/11. Excluding the effects of currency exchange rates and acquisitions, HBIO's Q4 revenues were down 4.5% compared to the same period in Q4/11. Cost of revenues were 14.8 M while gross profit log-in at $13.4 M. S& M expenses were $4.9 M, G&A expenses were $5.1 M, R&D expenses were $1.77 M while restructuring charges ($144 K) and amortization ($680 K) contributed to total operating expense of $12.69 M. Operating incomes was $718 K. The organic revenue decline was concentrated in Harvard Apparatus and Hoefer businesses. In Harvard Apparatus, HBIO experienced softer than expected academic and government research markets. In Hoefer, HBIO experienced a decline in revenue from GE Healthcare ("GEHC"), which is Hoefer's largest customer. Shares used in computing net income was basic 28.92 M and diluted shares of 30.1 M

HBIO ended 2012 with cash and cash equivalents of $20.7 M compared to $17.9 M at 2011 end. At the end of FY12 and FY11, HBIO had borrowings of $13 M and $16.3 M, outstanding under credit facilities. The borrowings mainly related to acquisitions and stock repurchase program. During FY12, HBIO made net repayments of $3.4 M under credit facility. AT the end of FY12 and FY11, HBIO had net cash (cash and cash equivalents, less debt) of $7.7 M and $1.6 M. During 2012, HBIO paid $2.9 M from existing cash balance for acquisitions. Trade receivables were $14.4 M and inventories were $17.8 M as of FY12 compared to trade receivables of $15.1 M and inventories of $18.2 M as of FY11.

FY12 Results: Revenues were $111.2 M, an increase of $2.3 M, or 2.1%, compared to revenues of $108.9 M for FY11. Currency exchange rates had a negative 1.1% effect on revenues for 2012 compared with the same period in 2011. HBIO's acquisition of AHN in 2/12 and CMA Microdialysis ("CMA") in 7/11 had a positive 3.1% effect on revenues. Excluding the effects of currency exchange rates and acquisitions, the Company's revenues were up 0.1% from the previous year. Net income <as measured under GAAP> was $1.5 M, or $0.05 per diluted share, for FY12 compared to $3.8 M, or $0.13 per diluted share, for FY11. This year-to-year decrease was mainly due to increased spending in the development-stage RMD business.

Major milestones:

  • Beginning a clinical trial in Russia with 2 trachea transplant patients treated using bio-reactors;
  • The first clinical trial was filmed and is being broadcast on EU television and billed as "The Miracle of Krasnodar";
  • The US FDA approved the first trachea transplant surgery in the US;
  • Establishing trachea scaffold production facility in Holliston, MA facility;
  • Filing an S-1 registration statement with the SEC in December to begin an IPO and separate HART from HBIO".
  • Hiring a new GM for Denville business and restructured its sales team to ensure better productivity;
  • In February, acquired AHN Biotechnologie, a German manufacturer of pipette tips. HBIO restructured the company, repositioned its products to increase gross margin and expanded sales and marketing efforts
  • Increased gross margins and reduced expenses in Hoefer electrophoresis business
  • Reorganized and reduced expenses in Spanish subsidiary
  • Launched a new novel patent pending micro volume cuvette that can effectively turn a standard spectrophotometer into a micro volume unit
  • Launched a new micro volume spectrophotometer in 2012 and will introduce and launch an additional one in mid-2013
  • Developed a new family of products for our BTX Electroporation brand that will enable us to compete in a larger segment of that market"

Note: On 9/30/08, HBIO completed the sale of assets of its Union Biometrica Division ("UBI"). The purchase price paid under the terms of the Asset Purchase agreement included an earn-out based on the revenue generated by the acquired business over a 5 year post-transaction period in an amount equal to 5% of the revenue generated up to and including $6 M and 8% of the revenue generated above $6 M each year. Any earn-out amounts are evidenced by interest-bearing promissory notes due on 9/30/13 or an earlier date based on certain triggering events. Prior to Q4/12, HBIO had recorded a valuation allowance of approximately $0.6 M related to the earn-out promissory notes and the interest thereon as their collectability was uncertain. DuringQ4/12, HBIO determined that the realization is more likely than not. Therefore they made a decision to reverse the valuation allowance and recognize the earn-out amount and the interest thereon of approximately $0.8 M (net of tax) in its financial statements under "Discontinued Operations".

The Bottom Line: Despite the difficult economic environment and political uncertainty, HBIO made significant progress. Revenues from continuing operations were $28.2 M for Q4/12 which was within the guidance range of $28-$30 M. HBIO filed a registration statement with the SEC for an IPO of HART in connection with the separation of HART from HBIO. Ranked a "BUY"

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.