Life Technologies (LIFE)
Q2 2011 Earnings Call
July 28, 2011 8:00 am ET
David Hoffmeister - Chief Financial Officer and Senior Vice President
Eileen Pattinson - Senior Director of Investor Relations
Mark Stevenson - President and Chief Operating Officer
Gregory Lucier - Chairman and Chief Executive Officer
Jonathan Groberg - Macquarie Research
Ross Muken - Deutsche Bank AG
Nandita Koshal - Barclays Capital
Tycho Peterson - JP Morgan Chase & Co
Quintin Lai - Robert W. Baird & Co. Incorporated
Daniel Arias - UBS Investment Bank
Isaac Ro - Goldman Sachs Group Inc.
Doug Schenkel - Cowen and Company, LLC
Jon Wood - Jefferies & Company, Inc.
Amit Bhalla - Citigroup Inc
Previous Statements by LIFE
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Thank you, Shanon, and good morning, everyone. Welcome to Life Technologies Second Quarter Earnings Conference Call. Joining me on the call today are Greg Lucier, our Chairman and CEO; and David Hoffmeister, Chief Financial Officer. In addition, Mark Stevenson, our Chief Operating Officer, will be available during the Q&A portion of the call. If you haven't received a copy of today's press release, you may obtain one from our website at lifetechnologies.com.
I want to remind our listeners that our discussion today will include forward-looking statements, including, but not limited to, statements about future expectations, plans and prospects for the company. We believe these statements are based on reasonable assumptions, but actual results may differ materially from those indicated. It is our intent that these forward-looking statements be protected under the Safe Harbor created by the Private Securities Litigation Reform Act of 1995. Additionally, we will be discussing GAAP and non-GAAP measures. A full reconciliation of the non-GAAP measures to GAAP can be found in today's press release or on our website.
I will now hand the call over to Greg Lucier.
Thanks, Eileen, and thank you all for joining us. I hope you've had a chance to review the press release that we issued earlier this morning. I'll begin by reviewing our results for the quarter at a high level and provide our outlook for the remainder of the year. Then, I will turn the call over to David to walk you through our financial results in greater detail. To briefly review the highlights, total non-GAAP revenue grew 4% for the quarter to $945 million and grew 3% excluding currency. Non-GAAP earnings per share declined 2% for the quarter to $0.89 and grew 2% excluding the impact of the currency.
Our organic revenue growth was lighter than anticipated during the second quarter due to 3 main factors. I'd like to spend a moment on each factor. But before I do, I want to emphasize that we fully understand the issues, have detailed actions underway to address them and remain confident in our strategic and financial position as well as the direction of the company.
The first factor that impacted our growth is macroeconomic-based. Consistent with what others in the life sciences tool space have seen, we continue to experience lower demand from academic- and government-funded researchers in the U.S. and Europe. If you recall, we also experienced this last quarter, particularly in the U.S. which we attribute into the uncertainty around funding caused by the delay in passing the federal budget. Our expectations at the time were that once the 2011 NIH budget pass in the mid-April, sales growth would return to normalized levels. While we did see some improvement in demand at the larger, better-funded accounts, the return to previous rate of growth in the U.S. did not fully materialize as we had expected.
In Europe, budget pressures continue to impact demand, particularly in the United Kingdom and southern regions, which also lowered our growth in the quarter. As a result of the continued weakness in the funding environment in both the U.S. and Europe, we experienced softer sales in many areas of our business in the second quarter, including instrumentation and basic molecular and cell biology reagents.
In total, we estimate that reduced funding in the U.S. and Europe negatively impacted the growth rate of the company by approximately 1.5 points on a year-over-year basis and also relative to our original expectations.
The second factor that impacted our growth has to do with the lingering effects of the earthquake in Japan, which delayed shipments of the 5500 high-throughput sequencer. Our partner, Hitachi Japan, returned to full production in June. Despite shipping over 170, 5500 units, they were unable to complete all of the shipments that were planned for the second quarter. As a result, several million dollars of revenue will now shift to the third quarter as we continue to clear that backlog.
On the consumables side, because of the delay in shipping instruments, next-generation consumables were down year-over-year as customers transition to the new 5500 platform and begin to ramp up the utilization of that platform. We estimate that the decline in consumable sale has negatively impacted the growth rate of the company by approximately 0.5 point.
The final factor that impacted our organic revenue growth in the second quarter was related to our business in China. As you know, our China business has been growing rapidly over the last several years. During this time, we have been heavily dependent on the local dealer network to market and sell our products. In order to strengthen customer relationships, we took actions to optimize the existing dealer network and supplement it with our own direct sales force. As such, we have been hiring new sales representatives, order entry, technical support personnel to support the strategy, as well as bringing online much larger warehouse facilities across the country in Beijing, Shanghai and Guangzhou to better ensure product availability and faster delivery to our customers.