BEC » Topics » Operating Expenses

These excerpts taken from the BEC 10-K filed Feb 23, 2009.

Operating Expenses

 

     Years Ended  
   December 31,
2008
    December 31,
2007
    Percent
Change
 

(in millions)

      

Selling, general and administrative (“SG&A”)

   $ 823.0     $ 731.1     12.6 %

As a percentage of total revenue

     26.6 %     26.5 %   0.1 %

SG&A was up 12.6% (10.7% in constant currency) in 2008 compared to 2007. The increase was primarily attributed to:

 

   

increased spending on selling and marketing activities to support our revenue growth;

 

   

increased costs as a result of the translation of international costs due to comparative weakness of the U.S. dollar during 2008 as compared to 2007; and

 

   

incremental operating expenses from our flow cytometry acquisition including additional amortization.

 

     Years Ended  
   December 31,
2008
    December 31,
2007
    Percent
Change
 

(in millions)

      

Research and Development (“R&D”)

   $ 280.1     $ 274.0     2.2 %

As a percentage of total revenue

     9.0 %     9.9 %   (0.9 )%

Research and development (“R&D”) expense increased 2.2% as we funded significant R&D programs delivering four new work cells and our next-generation cellular analysis system. Investment in our molecular diagnostics program was also expanded. Included in R&D expense for 2008 are:

 

   

$12.0 million in connection with the acquisition of a non-exclusive, non-transferable, sub-license to receive certain patent rights to testing for the hepatitis C virus. Under the sublicense, we can develop, manufacture and sell a quantitative viral load HCV blood test for use on our molecular diagnostic instrument that is in development.

 

   

$11.7 million charge in connection with buying out our future U.S. royalty for preeclampsia tests from Nephromics LLC. This fully paid license relates to future U.S. sales of a number of markers including a preeclampsia panel covered by patents licensed exclusively to Nephromics.

 

 

32    BEC 2008 FORM 10-K


Table of Contents

The products under the above agreements have not received regulatory clearance, are still in the development stage and do not have alternative future use; therefore the costs were charged to R&D.

R&D for 2007 included a charge of $35.4 million for in-process R&D acquired as part of NexGen.

 

     Years Ended  
   December 31,
2008
   December 31,
2007
   Percent
Change
 

(in millions)

        

Environmental remediation

   $ 19.0    $ —      100 %

Restructuring

     21.4      17.7    20.9 %

Environmental Remediation - During 2008 we began conducting soil and groundwater environmental studies at our Fullerton, California site in connection with our Orange County consolidation and planned closure of the Fullerton site. These studies indicate that the soil and groundwater at the Fullerton site contain chemicals previously used in operations at the facility. As a result, we recorded a $19.0 million environmental remediation charge related to our Fullerton facility. The $19.0 million represents our best estimate of future expenditures for evaluation and remediation at the site. The ultimate costs may range from $10 million to $30 million.

Restructuring Charges - In connection with our previously announced supply chain initiatives, we recorded charges of $21.4 million during 2008, related to severance, relocation, and other duplicative exit costs. The charge includes a net gain of $3.0 million related to the sale of buildings and land in Hialeah, Florida. Also, an impairment charge of $1.3 million was recorded in the fourth quarter of 2008 in connection with our Orange County consolidation project, as we identified assets that will no longer be needed due to the consolidation. Additionally, we analyzed the remaining useful life of certain assets, which in some cases resulted in a shorter life than our initial useful life. Based on this revised and shortened useful life, we expect to accelerate depreciation expense, which we expect will result in approximately $2 million of higher depreciation during 2009.

Operating Expenses

 

     Years Ended  
   December 31,
2007
    December 31,
2006
    Percent
Change
 

(in millions)

      

Selling, general and administrative (“SG&A”)

   $ 731.1     $ 687.6     6.3 %

As a percentage of total revenue

     26.5 %     27.2 %   (0.7 )%

SG&A was up 6.3% (4.8% in constant currency) in 2007 compared to 2006. The increase was primarily attributed to:

 

   

increased spending on selling and marketing activities to support our revenue growth,

 

   

increased amortization and costs related to our ERP implementation, and

 

   

the impact of foreign currency changes on expenses; partially offset by

 

   

the pension curtailment loss of $4.0 million in 2006, which did not recur in 2007.

SG&A as a percentage of sales improved as a result of the benefits of the restructuring activities completed in 2006.

 

     Years Ended  
   December 31,
2007
    December 31,
2006
    Percent
Change
 

(in millions)

      

Research and Development (“R&D”)

   $ 274.0     $ 264.9     3.4 %

As a percentage of total revenue

     9.9 %     10.5 %   (0.6 )%

The R&D increase in 2007 was primarily related to an IPR&D charge of approximately $35 million incurred in connection with our acquisition of the remainder of NexGen, which was formed in connection with the acquisition of Lumigen in 2006. Included in 2006 were charges for the Applera license of $18.9 million and the $27.5 million charge incurred in connection with the acquisition of a clinical diagnostic license for real time PCR. R&D expense increased by approximately $20 million excluding these items from both 2007 and 2006. This incremental R&D expense was primarily spent on development of our new molecular diagnostics system, the DxN, and our next generation hematology system, the DxH.

 

     Years Ended  
   December 31,
2007
    December 31,
2006
    Percent
Change
 

(in millions)

      

Restructuring

   $ 17.7      $ 16.6      6.6 %

Litigation settlement

     —          (35.0 )     100 %

Restructuring Charges - The increase in restructuring charges for 2007, compared to 2006, was mainly attributed to the announced closure of our manufacturing site in Palo Alto, California as part of our supply chain initiatives. In connection with this and other site relocations we recorded charges of $16.9 million related to severance, relocation and duplicative site costs and $0.8 million of asset impairment charges. The 2006 charges related to the completion of our restructuring program announced in 2005.

Litigation Settlement - During 2006, we received a $35.0 million litigation settlement from Applera for our release of any and all claims of infringement relating to Applera’s DNA sequencing and thermal cycler products.

Operating Expenses

 







































































   Years Ended 
  December 31,
2007
  December 31,
2006
  Percent
Change
 

(in millions)

    

Selling, general and administrative (“SG&A”)

  $731.1  $687.6  6.3%

As a percentage of total revenue

   26.5%  27.2% (0.7)%

SG&A was up 6.3% (4.8% in constant currency) in 2007 compared to 2006. The increase was
primarily attributed to:

 







  

increased spending on selling and marketing activities to support our revenue growth,

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

increased amortization and costs related to our ERP implementation, and

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

the impact of foreign currency changes on expenses; partially offset by

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

the pension curtailment loss of $4.0 million in 2006, which did not recur in 2007.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">SG&A as a percentage of sales improved as a result of the benefits of the restructuring activities completed in 2006.

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 







































































   Years Ended 
  December 31,
2007
  December 31,
2006
  Percent
Change
 

(in millions)

    

Research and Development (“R&D”)

  $274.0  $264.9  3.4%

As a percentage of total revenue

   9.9%  10.5% (0.6)%

The R&D increase in 2007 was primarily related to an IPR&D charge of approximately $35
million incurred in connection with our acquisition of the remainder of NexGen, which was formed in connection with the acquisition of Lumigen in 2006. Included in 2006 were charges for the Applera license of $18.9 million and the $27.5 million
charge incurred in connection with the acquisition of a clinical diagnostic license for real time PCR. R&D expense increased by approximately $20 million excluding these items from both 2007 and 2006. This incremental R&D expense was
primarily spent on development of our new molecular diagnostics system, the DxN, and our next generation hematology system, the DxH.

 







































































   Years Ended 
  December 31,
2007
  December 31,
2006
  Percent
Change
 

(in millions)

    

Restructuring

  $17.7   $16.6   6.6%

Litigation settlement

   —      (35.0)   100%

Restructuring Charges - The increase in restructuring charges for 2007, compared to 2006,
was mainly attributed to the announced closure of our manufacturing site in Palo Alto, California as part of our supply chain initiatives. In connection with this and other site relocations we recorded charges of $16.9 million related to severance,
relocation and duplicative site costs and $0.8 million of asset impairment charges. The 2006 charges related to the completion of our restructuring program announced in 2005.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Litigation Settlement - During 2006, we received a $35.0 million litigation settlement from Applera for our release of any and all claims of
infringement relating to Applera’s DNA sequencing and thermal cycler products.

This excerpt taken from the BEC 10-Q filed May 7, 2008.

Operating Expenses

 

     Three Months Ended
March 31,
     2008    2007    Percent
Change

(in millions)

        

Selling, general and administrative

   $  203.6    $  175.4      16.1%

As a percentage of total sales

            27.9%             28.6%        (0.7)%

The increase in selling, general and administrative was primarily attributed to:

 

  ·  

increased spending on selling and marketing activities, including compensation costs, to support our revenue growth.

 

  ·  

increased costs as a result of the translation of international costs due to comparative weakness of the U.S. dollar.

 

  ·  

increased stock compensation expense in the first quarter 2008 as a result of changes in the vesting terms of newly issued share-based grants in 2008, increasing selling, general and administrative by $3.5 million.

 

  ·  

incremental operating expenses from our flow cytometry acquisition.

 

     Three Months Ended
March 31,
     2008    2007    Percent
Change

(in millions)

        

Research and Development

   $  62.7    $  57.8      8.5% 

As a percentage of total sales

            8.6%             9.4%     (0.8)%

The increase in research and development of $4.9 million in the first quarter of 2008 compared to the same quarter last year is mainly due to our increased investment in our molecular diagnostics development project.

These excerpts taken from the BEC 10-K filed Feb 29, 2008.

Operating Expenses

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 








































































   Years Ended 
   December 31,
2007
  December 31,
2006
  Percent
Change
 

(in millions)

    

Selling, general and administrative (“SG&A”)

  $731.1  $687.6  6.3%

As a percentage of total revenue

   26.5%  27.2% (0.7)%

SG&A was up 6.3% (4.8% in constant currency) in 2007 compared to 2006. The increase was
primarily attributed to:

 







  

increased spending on selling and marketing activities to support our revenue growth,

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

increased amortization and costs related to our ERP implementation, and

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

the impact of foreign currency changes on expenses; partially offset by

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

the pension curtailment loss of $4.0 million in 2006, which did not recur in 2007.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">SG&A as a percentage of sales improved as a result of the benefits of the restructuring activities completed in 2006.

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 








































































   Years Ended 
   December 31,
2007
  December 31,
2006
  Percent
Change
 

(in millions)

    

Research and Development (“R&D”)

  $274.0  $264.9  3.4%

As a percentage of total sales

   9.9%  10.5% (0.6)%

 


33







Table of Contents


The R&D increase in 2007 was primarily related to an IPR&D charge of approximately $35 million
incurred in connection with our acquisition of the remainder of NexGen, which was formed in connection with the acquisition of Lumigen in 2006. Included in 2006 were charges for the Applera license of $18.9 million and the $27.5 million charge
incurred in connection with the acquisition of a clinical diagnostic license for real time PCR. R&D expense increased by approximately $20 million excluding these items from both 2007 and 2006. This incremental R&D expense was primarily
spent on development of our new molecular diagnostics system, the DxN, and our next generation hematology system, the DxH.

 















































































   Years Ended 
   December 31,
2007
  December 31,
2006
  Percent
Change
 

(in millions)

     

Restructuring

  $16.9  $14.3  18.2%

Asset impairment charges

   0.8   2.3  (65.2)%

Litigation settlement

   —     (35.0) 100%

Restructuring and Asset Impairment Charges - The increase in restructuring and asset
impairment charges for 2007, compared to 2006, was mainly attributed to the announced closure of our manufacturing site in Palo Alto, California as part of our supply chain initiatives. In connection with this and other site relocations we recorded
charges of $17.7 million related to severance, relocation costs and asset impairment charges. The 2006 charges related to the completion of our restructuring program announced in 2005.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Litigation Settlement - During 2006, we received a $35.0 million litigation settlement from Applera for our release of any and all claims of
infringement relating to Applera’s DNA sequencing and thermal cycler products.

Operating Expenses

 

     Years Ended  
     December 31,
2006
    December 31,
2005
    Percent
Change
 

(in millions)

      

Selling, general and administrative (“SG&A”)

   $ 687.6     $ 652.3     5.4 %

As a percentage of total revenue

     27.2 %     26.7 %   0.5 %

Selling, general and administrative (“SG&A”) expenses increased $35.3 million . The increase in SG&A expenses was primarily due to:

 

   

the incremental impact of share-based compensation expense as required by SFAS 123(R), which increased SG&A expenses by $13.6 million;

 

   

incremental operating expenses from the Agencourt, DSL, and Lumigen acquisitions;

 

37


Table of Contents
   

an incremental curtailment charge of $2.3 million associated with changes to our pension plans in the U.S; and

 

   

approximately $3 million of costs incurred in connection with an inquiry directed by the Audit and Finance Committee of the Board of Directors, wherein allegations made by a former employee were determined to be unsubstantiated.

 

     Years Ended  
     December 31,
2006
    December 31,
2005
    Percent
Change
 

(in millions)

      

Research and Development (“R&D”)

   $ 264.9     $ 208.9     26.8 %

As a percentage of total revenue

     10.5 %     8.5 %   2.0 %

Research and development (“R&D”) expenses increased $56.0 million. This increase in R&D spending is due primarily to:

 

   

$27.5 million to obtain a clinical diagnostic license to certain real time PCR thermalcycling technologies acquired from Roche Diagnostics;

 

   

$18.9 million for license rights in the diagnostic market for certain real time PCR thermalcycling technologies acquired from Applera;

 

   

incremental R&D charges from recent acquisitions; and

 

   

the incremental impact of SFAS 123(R) share-based compensation expense, which increased R&D expenses by $6.3 million.

This excerpt taken from the BEC 10-Q filed May 8, 2007.

Operating Expenses

 

                     Three Months Ended March 31,          
     2007    Percentage of
Total Revenue
   2006    Percentage of
Total Revenue
   Percent
Change

(in millions)

              

Selling, general and administrative (“SG&A”)

   $  175.4    28.6%    $  163.4    28.7%        7.3%

Research and development (“R&D”)

         57.8      9.4%          54.6      9.6%        5.9%

Restructuring

           6.9      1.1%            1.1      0.2%    527.3%

Asset impairment charges

   -            0.0%            0.9      0.2%    (100.0)%

The SG&A increase of $12.0 million for the first quarter of 2007 compared to the same period a year ago was primarily attributed to:

 

  ·  

increased spending on selling and marketing activities related to our chemistry, immunoassay and other new product offerings,

 

  ·  

increased amortization and costs related to our ERP implementation in January 2007, and

 

  ·  

the impact of foreign currency changes on expenses.

The R&D increase of $3.2 million is mainly due to incremental R&D charges from recent acquisitions and increased investment in next generation systems and tests.

The increase in restructuring charges was attributed to the planned closure of our manufacturing site in Palo Alto, California. In connection with this relocation we recorded charges of $6.9 million related to severance and other exit activity costs.

Asset impairment charges were recorded in the first three months of 2006, related to certain non-strategic products and services that were exited by the Company, which did not occur in the first quarter 2007.

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