Serologicals Corporation Reports Fourth Quarter and Full Year 2004 Res

Serologicals Corporation Reports Fourth Quarter and Full Year 2004 Results; Record Sales and Pro Forma Earnings for Fourth Quarter and Full Year

    Business Editors
    BIOWIRE2K

    ATLANTA--(BUSINESS WIRE)--Feb. 23, 2005--Serologicals Corporation (NASDAQ:SERO) today announced financial results for the fourth quarter and twelve months ended January 2, 2005. Fourth quarter revenues increased 49.2%, to $69.2 million, compared to $46.4 million in the same period last year. Diluted earnings per share from continuing operations were $0.12 per share compared to $0.23 per share in the same period in the prior year. Revenues for the year ended January 2, 2005 increased 33.4% to $195.9 million, compared to $146.9 million in the year ended December 28, 2003. Diluted earnings per share from continuing operations increased 25.5% to $0.59 per share compared to $0.47 per share for 2003.
    As the result of our numerous acquisitions over the past three years, we have decided to provide pro forma results that exclude acquisition amortization and other similar acquisition related costs. We are providing pro forma information as an addition to, and not as a substitute for, financial measures presented in accordance with GAAP. We believe that the pro forma presentation is a beneficial supplemental disclosure to investors in analyzing and assessing our past and future performance.
    Fourth quarter pro forma net income was $9.2 million, or $0.26 per share, compared with $7.4 million, or $0.24 per share, in the fourth quarter of 2003. Pro forma net income and pro forma earnings per share increased 23.2% and 8.3%, respectively. Pro forma net income from continuing operations for the year ended January 2, 2005 was $24.7 million, or $0.79 per share, compared with $18.8 million, or $0.71 per share for 2003. This represents an increase of 31.1% and 11.3% in pro forma net income and pro forma earnings per share, respectively. Reconciliations between our results and pro forma results are presented in the attached tables and also on our web site (www.serologicals.com) under the Investor Relations tab.

    President & CEO Perspectives

    "We are very pleased with our strong finish for 2004 both in terms of revenue growth and increased profitability in all our business units," said David A. Dodd, President and CEO. "In 2004 we saw a remarkable transformation of Serologicals into becoming a truly global life sciences company focused on all aspects of the biomedical pipeline from drug discovery through bio-manufacturing. While achieving this significant transformation, we are pleased that we were able to exceed the annual guidance for revenue and earnings provided in January 2004 and also to achieve record revenue and pro forma earnings for the quarter and the year."
    "I am also particularly pleased with the pace of integration activities with respect to the acquisition of the Upstate Group. We have made significant progress in a number of critical functional areas including sales and marketing, manufacturing, accounting and finance, human resources, information systems and research and development. The Upstate business unit finished 2004 on a strong note with increased sales and delivery of drug screening services. As a result, for the quarter, Upstate delivered $15.4 million of revenue with increased gross margins and was accretive to our earnings in 2004 by more than $1.1 million in net income or $0.03 per share on a pro forma basis."

    Further commenting on the Company's performance, Mr. Dodd noted:

--	"Yesterday the Company announced it purchased the assets of Specialty Media, a division of Cell & Molecular Technologies. Specialty Media develops and supplies a variety of specialty stem cell culture media formulations and supplements as well as cells and research reagent tools to the life science industry. This acquisition will further strengthen our leadership position in supporting stem cell research.
--	We completed the acquisition of the Upstate Group on October 14, 2004 which represented another significant step in positioning Serologicals as a major partner to our customers providing products and services to support drug research, discovery and development. At the same time, we announced the appointment of Aaron J. Shatkin, Ph.D, to the Company's Board of Directors.
--	On November 15, 2004, we announced the formation of Celliance which will focus on expanding the Company's customer base and revenue growth in the bioprocessing marketplace. The Celliance business unit is responsible for the research, development, manufacturing and commercialization of the Company's cell culture supplement and diagnostic products and contract research services through Celliance BioServices. We recently announced the entire senior management team of Celliance which is led by its business unit president, Dave Bellitt.
--	We continue to see positive results in our EX-CYTE(R) evaluation program. Approximately 500 new evaluations of EX-CYTE(R) were initiated during 2004 and approximately 115 evaluations were completed by year-end. Most promising, 32 of those companies have stated that they expect to use EX-CYTE(R) in their initial production processes. A number of those companies have already purchased EX-CYTE(R), albeit in limited quantities at this time. We continue to believe that this program will result in increased demand for EX-CYTE(R) in future years.
--	Our Celliance business unit recently announced the introduction of Hybri-CYTE(TM), a serum-free cell culture supplement designed for use in hybridoma cell lines. Hybri-CYTE(TM) is the first in a new line of supplements that are designed specifically to eliminate the use of fetal bovine serum while incorporating a number of Celliance's proprietary cell culture products including EX-CYTE(R), Probumin(TM) BSA and Incelligent(TM) animal free insulin. A patent has been filed for Hybri-CYTE(TM).
--	The engineering and customer validation of our new EX-CYTE(R) facility in Lawrence, KS continues on schedule and below budget. We have produced initial lots of EX-CYTE(R) at Lawrence and have demonstrated that the final product meets both our internal, as well as our customer specifications. Formal customer product testing and facility audits are currently commencing. We are also working with our customers to understand customer product demand requirements for 2005 and beyond in order to optimize the performance of our two EX-CYTE(R) manufacturing facilities.
--	Our research business units, Chemicon and Upstate, introduced 254 new products during the fourth quarter. Chemicon introduced 99 products, including new assays and reagents focused in the areas of neuroscience and stem cell research. In addition, Upstate introduced 155 products, including a range of new kinases, multiplex Beadlyte(R) assays and the new KinEase(TM) assays for Fluorescence Polarization (FP) based high throughput screening kinase inhibitors. Upstate is the industry leader in providing kinases used in kinase profiling with a current offering of almost 200 kinases and an aggressive plan to substantially increase its kinase panel by the end of 2005.
--	During the fourth quarter, Upstate completed the expansion of its drug screening facility in Dundee, Scotland. This expansion increased the available square footage from 11,000 square feet to over 25,000 square feet, significantly expanding its drug screening capacity. The expanded facility has been operational since December 2004. In addition, Upstate also recently announced that it has entered into separate agreements to provide drug screening services for four leading companies utilizing Upstate's KinaseProfiler(TM) service for determining selectivity and specificity of potential therapeutic proprietary compounds.
--	In December 2004, we completed the closing of a public offering of 4,830,000 shares of our Common Stock at a price of $22.80 per share. We received net proceeds of $105.2 million. We used approximately $80.0 million of the proceeds to repay our term indebtedness and the balance will provide additional resources to continue to pursue our strategic growth initiatives."

    Fourth Quarter Results Summary

    Revenues for the fourth quarter of 2004 totaled $69.2 million, compared to $46.4 million in the fourth quarter of 2003, an increase of 49.2%. The increase in revenues in the fourth quarter of 2004 over the same period in the prior year was due primarily to the sales increase in the Research segment. The primary reason for the increase in sales in the Research segment is the inclusion of Upstate results for the fourth quarter. Upstate sales for the fourth quarter were $15.4 million. Cell culture sales increased as the result of higher sales of recombinant human insulin during the quarter.
    The following table shows a breakdown of the revenue contribution by segment for the fourth quarter and year ended 2004 and 2003:

$ in Millions Quarter Ended Year Ended -------------------------------------------------------- Jan. 2, 2005 Dec. 28, 2003 Jan. 2, 2005 Dec. 28, 2003 -------------------------------------------------------- Actual %Total Actual %Total Actual %Total Actual %Total -------------------------------------------------------- Revenue: Research $32.8 47% $14.7 32% $78.5 40% $43.0 29% Cell Culture 28.5 42% 24.1 52% 86.6 44% 74.0 51% Diagnostic 7.9 11% 7.6 16% 30.8 16% 29.9 20% -------------------------------------------------------- Total $69.2 100% $46.4 100%$195.9 100%$146.9 100% ========================================================

    The comments in this paragraph regarding gross margins refer to pro forma gross margins, excluding acquisition related costs that impacted gross margins. Pro forma gross margins for the fourth quarter of 2004 increased slightly when compared to the pro forma gross margins in the fourth quarter of 2003. Pro forma research margins increased as the result of higher margins from the Upstate business unit and continued strong margins at Chemicon. Pro forma Cell Culture margins decreased as the result of higher insulin sales which is a distributed product. Pro forma gross margins for our Diagnostic business continued to trail 2003 because of excess manufacturing capacity and the negative impact of currency fluctuations. However, as expected, pro forma Diagnostic margins increased to 44% in the fourth quarter of 2004 from 42% in the third quarter of 2004 as the result of improved manufacturing efficiency.
    The following table shows a breakdown of the gross margin contribution by segment on a pro forma basis for the fourth quarter and year ended 2004 and 2003:

$ in Millions Quarter Ended Year Ended -------------------------------------------------------- Jan. 2, 2005 Dec. 28, 2003 Jan. 2, 2005 Dec. 28, 2003 -------------------------------------------------------- Pro forma GM% Pro forma GM% Pro forma GM% Pro forma GM% -------------------------------------------------------- Gross Margin: Research $21.8 66% $9.2 63% $51.3 65% $27.1 62% Cell Culture 14.2 50% 13.1 54% 44.0 51% 38.6 52% Diagnostic 3.5 44% 3.7 49% 13.6 44% 15.9 53% -------------------------------------------------------- Total $39.5 57% $26.0 56% $108.9 56% $81.6 56% ========================================================

    Operating income for the fourth quarter of 2004 was $8.8 million, or 12.7% of revenue, compared to $10.9 million, or 23.6% of revenue, in the fourth quarter of 2003. Pro forma operating income before acquisition related amortization and other similar acquisition related costs was $15.3 million, or 22.1% of revenue in 2004 compared to $11.6 million or 24.9% of revenue in 2003.
    Cash flows from operating activities were $16.9 million in the fourth quarter of 2004 and $37.9 million for all of 2004. This compares to cash flows from operating activities of $14.8 million in the fourth quarter of 2003 and $18.1 million for the full year 2003.

    Performance Highlights: Research Products and Services

    Research revenue in the fourth quarter of 2004 increased approximately $18.1 million, or 123.6%, over the prior year quarter. In addition to the increased revenue recorded as the result of the Upstate acquisition, Chemicon achieved revenue growth of 21% which was driven by significant contributions in the areas of neuroscience, molecular biology, bulk reagents and custom services. Upstate revenue, while not included in the 2003 operating results for the Company, grew 29% compared to the fourth quarter of 2003. Upstate growth was driven primarily by a 94% increase in revenue from Kinase Profiling services. Geographically, Research revenues increased 85% in Asia, 119% in Europe and 135% in North America.

    Performance Highlights: Cell Culture Products and Services

    Cell Culture revenue increased 18.2% to $28.5 million over the fourth quarter of 2003. EX-CYTE(R) sales in the quarter were $8.7 million, compared to $9.7 million in the fourth quarter of 2003. Sales of the Company's proprietary bovine serum albumin (Probumin(TM) BSA) in the fourth quarter of 2004 were $4.7 million, compared to $4.8 million in the fourth quarter of 2003. Sales of recombinant human insulin (Incelligent)(TM) were $11.2 million for the quarter compared with $6.7 million in the fourth quarter of 2003. Geographically, the quarterly revenue growth in Cell Culture products came from North America where revenue was up 24% over 2003 and up 26% in European sales over 2003. Sales to the rest of the world were down about $0.4 million for the fourth quarter compared to the fourth quarter of 2003.

    Performance Highlights: Diagnostic Products

    Diagnostic revenues were $7.9 million in the fourth quarter of 2004, compared with $7.6 million in the fourth quarter of 2003. Sales of diagnostic monoclonal antibodies and related products were $6.9 million in the fourth quarter of 2004, compared with $6.1 million in the prior year quarter. Sales of disease state antibodies, detection products and other diagnostic products decreased from the prior year, primarily because the prior year included sales of diagnostic products that were sourced from our donor center network, which was sold as part of the therapeutic plasma divestiture.

    Other Q4 2004 Financial Information

--	Our available cash and short-term investments at the end of the quarter were $62.1 million, compared with $48.6 million at the end of 2003. Accounts receivable totaled approximately $46.9 million at the end of 2004, compared with $34.1 million at the end of 2003.
--	Capital expenditures for the fourth quarter of 2004 were $5.0 million and $19.8 million for the full year 2004.

    Q4 2004 Earnings Conference Call

    We will hold our fourth quarter earnings conference call at 9:00 a.m. (Eastern Time) on Thursday, February 24, 2005. The conference call dial in number is (800) 299-7635 (domestic) and (617) 786-2901 (international), confirmation code 62608388. The live broadcast will also be available online at our website at www.serologicals.com and at www.StreetEvents.com.
    If you are unable to participate in the call, a 14-day playback will start on February 24, 2005 at 11:00 a.m. (Eastern Time). To listen to the playback, please call (888) 286-8010 (domestic) or (617) 801-6888 (international) and enter access code 15059434 or access the archived web cast on our website at www.serologicals.com.

    About Serologicals

    Serologicals Corporation (NASDAQ: SERO), headquartered in Atlanta, GA., is a global leader in developing and commercializing consumable biological products, enabling technologies and services in support of biological research, drug discovery, and the bioprocessing of life-enhancing products. Our customers include researchers at major life science companies and leading research institutions involved in key disciplines, such as neurology, oncology, hematology, immunology, cardiology, proteomics, infectious diseases, cell signaling and stem cell research. In addition, Serologicals is the world's leading provider of monoclonal antibodies for the blood typing industry.
    Serologicals employs a total of more than 1,000 people worldwide in three Serologicals' companies: Chemicon International, headquartered in Temecula, California, Upstate Group, LLC, headquartered in Charlottesville, Virginia and Celliance Corporation, headquartered in Atlanta Georgia.
    For more information, please visit our website: www.serologicals.com.

    Statement Regarding Use of Non-GAAP Measures

    The financial results that we report on the basis of the GAAP include substantial cash and non-cash charges and tax benefits related to our acquisition of Chemicon, AltaGen BioSciences and Upstate Group, Inc. and to our integration of the acquired business with our existing businesses. We are presenting pro forma financial information in this press release because we believe that the information is a beneficial supplemental disclosure to investors in analyzing and assessing our past and future performance. We believe the pro forma financial information is useful because, among other things, by eliminating the effect of one-time acquisition and integration costs and the related tax benefits, it provides an indication of the profitability and cash flows of the acquired businesses.
    Our pro forma financial information, excluding acquisition related amortization and other similar costs, are limited because they do not reflect the entirety of our business costs. Therefore, we encourage investors to consider carefully our results under GAAP, as well as our pro forma disclosures and the reconciliation between these presentations to more fully understand our business. Reconciliations between our GAAP results and the pro forma information are presented in the attached tables and also on our web site (www.serologicals.com) under the Investor Relations tab.

    Safe Harbor Statement

    This release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 about Serologicals Corporation and its subsidiaries (collectively, "Serologicals" or the "Company" or "we" or "our" or "us") that are subject to risks and uncertainties, including, without limitation, statements regarding our ability to increase sales of EX-CYTE(R) as a result of the evaluation program, our ability to develop and market additional cell-culture-supplement products, our ability to optimize the manufacturing capacity of our two EX-CYTE(R) manufacturing facilities, and Upstate's ability to increase its kinase panel. Additional information concerning these and other risks and uncertainties is outlined in our filings with the Securities and Exchange Commission, including our Annual Report on Forms 10-K and 10-K/A filed with the Securities and Exchange Commission on March 12, 2004 and June 4, 2004, respectively, and our Registration Statement on Form S-3 filed with the Securities and Exchange Commission on November 10, 2004. These forms are available online at http://www.sec.gov. Forward-looking statements are only predictions and are not guarantees of performance. Forward-looking statements are based on current expectations of future events and are based on our current views and assumptions regarding future events and operating performance. You should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made, and we undertake no obligation to publicly update these statements based on events that may occur after the date of this press release.
    Serologicals(R) and EX-CYTE(R) are registered trademarks of Serologicals Royalty Company.

Serologicals Corporation Consolidated Statements of Income Fourth Quarter and Year Ended January 2, 2005 and December 28, 2003 (Unaudited)

Quarter Ended Year Ended ------------------------ ----------------------- (In thousands, except share and per share Jan. 2, Dec. 28, Jan. 2, Dec. 28, amounts) 2005 2003 2005 2003 ----------- ----------- ----------- -----------

Net revenues $ 69,162 $ 46,360 $ 195,923 $ 146,915 Cost of revenues 30,103 20,333 87,482 65,675 ----------- ----------- ----------- ----------- Gross profit 39,059 26,027 108,441 81,240 Operating expenses: Selling, general and administrative 21,264 12,552 59,293 43,668 Research and development 4,032 1,916 10,144 6,214 Amortization of intangibles 1,707 624 3,771 2,175 Purchased in-process research and development 3,263 -- 3,263 -- Special charges -- -- -- 2,778 ----------- ----------- ----------- ----------- Operating income 8,793 10,935 31,970 26,405 Other expense (income), net 177 (68) (54) 180 Write-off of deferred financing costs 965 -- 965 4,492 Interest income (201) (112) (783) (255) Interest expense 2,721 1,288 6,248 4,384 ----------- ----------- ----------- ----------- Income from continuing operations, before income taxes 5,131 9,827 25,594 17,604 Provision for income taxes 1,590 2,811 7,933 5,537 ----------- ----------- ----------- ----------- Net income from continuing operations 3,541 7,016 17,661 12,067 Discontinued operations, net of taxes -- (2,127) -- (10,561) ----------- ----------- ----------- ----------- Net income 3,541 4,889 17,661 1,506 Add-back interest expense on convertible debt net of tax 1,017 811 3,320 1,269 ----------- ----------- ----------- ----------- Numerator for diluted earnings per share $ 4,558 $ 5,700 $ 20,981 $ 2,775 =========== =========== =========== ===========

Basic earnings (loss) per common share: Continuing operations $ 0.12 $ 0.28 $ 0.68 $ 0.49 Discontinued operations -- (0.08) -- (0.43) ----------- ----------- ----------- ----------- Net income $ 0.12 $ 0.20 $ 0.68 $ 0.06 =========== =========== =========== ===========

Diluted earnings (loss) per common share: Continuing operations $ 0.12 $ 0.23 $ 0.59 $ 0.47 Discontinued operations -- (0.06) -- (0.37) ----------- ----------- ----------- ----------- Net income $ 0.12 $ 0.17 $ 0.59 $ 0.10 =========== =========== =========== ===========

Weighted average shares: Basic 29,494,853 24,691,618 26,148,124 24,549,322 =========== =========== =========== =========== Diluted 38,938,091 34,011,671 35,524,576 28,134,277 =========== =========== =========== ===========

Serologicals Corporation Condensed Consolidated Balance Sheets (Unaudited) (In thousands)

January 2, December 28, Assets 2005 2003 ----------------------- Current assets: Cash and short-term investments $ 62,054 $ 48,564 Trade accounts receivable, net 46,899 34,126 Inventories 49,846 33,826 Other current assets 15,226 10,982 Discontinued operations --- 7,019 --------- --------- Total current assets 174,025 134,517 Property and equipment, net 96,887 73,204 Goodwill 241,038 93,577 Other intangible assets, net 121,647 49,881 Other assets 6,210 1,386 Discontinued operations --- 5,613 --------- --------- Total assets $ 639,807 $ 358,178 ========= =========

Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 11,827 $ 4,547 Current maturities of capital lease obligations 2,419 --- Accrued liabilities and other 37,336 22,346 Discontinued operations --- 2,864 --------- --------- Total current liabilities 51,582 29,757 4.75% Convertible debentures 130,395 130,916 Capital lease obligations 2,194 --- Deferred income taxes 38,012 18,181 Other liabilities 1,093 180 Discontinued operations --- 172 Stockholders' equity 416,531 178,972 --------- --------- Total liabilities and stockholders' equity $ 639,807 $ 358,178 ========= =========

Serologicals Corporation Condensed Consolidated Statements of Cash Flows For the Years Ended January 2, 2005 and December 28, 2003 (Unaudited) (In thousands)

------------------- 2004 2003 ------------------- Operating Activities: ---------------------

Net income $ 17,661 $ 1,506 Loss from discontinued operations -- (10,561) ------------------- Net income from continuing operations 17,661 12,067 Non-cash and working capital changes, net 20,200 5,948 ------------------- Net cash provided by operating activities 37,861 18,105 -------------------

Investing Activities: ---------------------

Purchases of property and equipment (19,829) (19,644) Purchase of business, net of cash acquired (120,282) (97,344) Disposition of business 3,500 --- Proceeds (purchases of) short-term investments (2,045) (21,485) Other, net 200 (246) ------------------- Net cash used in investing activities (138,456) (138,719) -------------------

Financing Activities: ---------------------

Net cash provided by financing activities 110,059 122,994 -------------------

Net cash provided by (used in) discontinued operations (1,538) 11,282 Effect of foreign exchange on cash 3,519 (1,825) -------------------

Net increase in cash and cash equivalents 11,445 11,837 Cash and cash equivalents, beginning of period 23,079 11,242 ------------------- Cash and cash equivalents, end of period $ 34,524 $ 23,079 ===================

Serologicals Corporation RECONCILIATION OF GAAP TO PRO FORMA STATEMENT OF INCOME (Unaudited)

------------------------------- For the Three Months Ended January 2, 2005 -------------------------------- (in thousands, except per share data) GAAP Adjustments Pro Forma -------- ----------- --------

Net revenues $69,162 $ - $69,162 Cost of revenues 30,103 (414)(1) 29,689 ------- ------- ------- Gross profit 39,059 414 39,473 Margin % 56.5% 57.1%

Selling, general and administrative 21,264 (1,126)(2) 20,138 Research and development 4,032 - 4,032 Amortization of intangibles 1,707 (1,707)(3) - Purchased in-process research and development 3,263 (3,263)(4) - ------- ------- ------- Operating income 8,793 6,510 15,303 Operating margin % 12.7% 22.1%

Other expense 177 (353)(5) (176) Write-off of deferred financing costs 965 (965)(6) (0) Interest income (201) - (201) Interest expense 2,721 (328)(7) 2,393 ------- ------- ------- Income before continuing operations before income taxes 5,131 8,156 13,287 Provision for income taxes 1,590 2,528 (8) 4,118 ------- ------- ------- Net income from continuing operations 3,541 5,628 9,168 Add back interest expense on convertible debt, net of taxes 1,017 - 1,017 ------- ------- ------- Numerator for diluted earnings per share $ 4,558 $ 5,628 $10,185 ======= ======= =======

Net income per share from continuing operations: Basic $ 0.12 $ 0.19 $ 0.31 Diluted $ 0.12 $ 0.14 $ 0.26

Weighted average shares used in per share calculation: Basic 29,495 29,495 29,495 Diluted 38,938 38,938 38,938

(1) Add back costs for purchase accounting inventory revaluations related to acquisition of Upstate. (2) Add back business integration costs. (3) Add back purchased intangible asset amortization. (4) Add back purchased in-process research and development related to acquisition of Upstate. (5) Add back loss on renegotiation of terms of notes receivable from sale of discontinued operations. (6) Add back write-off of unamortized deferred costs related to debt financings. (7) Add back imputed interest expense on purchase price of acquisition of Upstate. (8)The income tax effect at prevailing rate for period.

Serologicals Corporation RECONCILIATION OF GAAP TO PRO FORMA STATEMENT OF INCOME (Unaudited)

------------------------------- For the Three Months Ended December 28, 2003 -------------------------------- (in thousands, except per share data) GAAP Adjustments Pro Forma -------- ----------- --------

Net revenues $46,360 $ - $46,360 Cost of revenues 20,333 - 20,333 ------- ------- ------- Gross profit 26,027 - 26,027 Margin % 56.1% 56.1%

Selling, general and administrative 12,552 - 12,552 Research and development 1,916 - 1,916 Amortization of intangibles 624 (624)(3) - ------- ------- ------- Operating income 10,935 624 11,559 ------- ------- ------- Operating margin % 23.6% 24.9%

Other expense (68) - (68) Write-off of deferred financing costs - - - Interest income (112) - (112) Interest expense 1,287 - 1,287 ------- ------- ------- Income before continuing operations before income taxes 9,828 624 10,452 Provision for income taxes 2,812 196 (8) 3,008 ------- ------- ------- Net income from continuing operations 7,016 428 7,444 Add back interest expense on convertible debt, net of taxes 811 - 811 ------- ------- ------- Numerator for diluted earnings per share $ 7,827 $ 428 $ 8,255 ======= ======= =======

Net income per share from continuing operations: Basic $ 0.27 $ 0.02 $ 0.29 Diluted $ 0.23 $ 0.01 $ 0.24

Weighted average shares used in per share calculation: Basic 24,692 24,692 24,692 Diluted 34,012 34,012 34,012

(3)Add back purchased intangible asset amortization. (8)The income tax effect at prevailing rate for period.

Serologicals Corporation RECONCILIATION OF GAAP TO PRO FORMA STATEMENT OF INCOME (Unaudited)

---------------------------------- For the Year Ended Ended January 2, 2005 ---------------------------------- (in thousands, except per share data) GAAP Adjustments Pro Forma --------- ----------- ---------

Net revenues $195,923 $ - $195,923 Cost of revenues 87,482 (414)(1) 87,068 -------- ------- -------- Gross profit 108,441 414 108,855 Margin % 55.3% 55.6%

Selling, general and administrative 59,293 (1,126)(2) 58,167 Research and development 10,144 - 10,144 Amortization of intangibles 3,771 (3,771)(3) - Purchased in-process research and development 3,263 (3,263)(4) - -------- ------- -------- Operating income 31,970 8,574 40,544 Operating margin % 16.3% 20.7%

Other expense (54) (353)(5) (407) Write-off of deferred financing costs 965 (965)(6) - Interest income (783) - (783) Interest expense 6,248 (328)(7) 5,920 -------- ------- -------- Income before continuing operations before income taxes 25,594 10,220 35,814 Provision for income taxes 7,933 3,168 (8) 11,101 -------- ------- -------- Net income from continuing operations 17,661 7,052 24,713 Add back interest expense on convertible debt, net of taxes 3,320 - 3,320 -------- ------- -------- Numerator for diluted earnings per share $ 20,981 $ 7,052 $ 28,033 ======== ======= ========

Net income per share from continuing operations: Basic $ 0.68 $ 0.27 $ 0.95 Diluted $ 0.59 $ 0.20 $ 0.79

Weighted average shares used in per share calculation: Basic 26,148 26,148 26,148 Diluted 35,525 35,525 35,525

(1) Add back costs for purchase accounting inventory revaluations related to acquisition of Upstate. (2) Add back business integration costs. (3) Add back purchased intangible asset amortization. (4) Add back purchased in-process research and development related to acquisition of Upstate. (5) Add back loss on renegotiation of terms of notes receivable from sale of discontinued operations. (6) Add back write-off of unamortized deferred costs related to debt financings. (7) Add back imputed interest expense on purchase price of acquisition of Upstate. (8) The income tax effect at prevailing rate for period.

Serologicals Corporation RECONCILIATION OF GAAP TO PRO FORMA STATEMENT OF INCOME (Unaudited)

--------------------------------- For the Year Ended Ended December 28, 2003 ---------------------------------- (in thousands, except per share data) GAAP Adjustments Pro Forma --------- ----------- ---------

Net revenues $146,915 $ - $146,915 Cost of revenues 65,675 (400)(9) 65,275 -------- ------- -------- Gross profit 81,240 400 81,640 Margin % 55.3% 55.6%

Selling, general and administrative 43,668 - 43,668 Research and development 6,214 - 6,214 Amortization of intangibles 2,175 (2,175)(3) - Special charges 2,778 (2,778)(10) - -------- ------- -------- Operating income 26,405 5,353 31,758 Operating margin % 18.0% 21.6%

Other expense 180 - 180 Write-off of deferred financing costs 4,492 (4,492)(6) - Interest income (255) - (255) Interest expense 4,384 - 4,384 -------- ------- -------- Income before continuing operations before income taxes 17,604 9,845 27,449 Provision for income taxes 5,537 3,096 (8) 8,633 -------- ------- -------- Net income from continuing operations 12,067 6,749 18,816 Add back interest expense on convertible debt, net of taxes 1,269 - 1,269 -------- ------- -------- Numerator for diluted earnings per share $ 13,336 $ 6,749 $ 20,085 ======== ======= ========

Net income per share from continuing operations: Basic $ 0.49 $ 0.27 $ 0.77 Diluted $ 0.47 $ 0.24 $ 0.71

Weighted average shares used in per share calculation: Basic 24,549 24,549 24,549 Diluted 28,134 28,134 28,134

(3) Add back purchased intangible asset amortization. (6) Add back write-off of unamortized deferred costs related to debt financings. (8) The income tax effect at prevailing rate for period. (9) Add back costs for purchase accounting inventory revaluations related to acquisition of Chemicon. (10) Add back special charges for 2003 restructuring activities

Serologicals Corporation EBITDA and Adjusted EBITDA

Three Months Ended Twelve Months Ended ---------------------- ---------------------- 1/2/2005 12/28/2003 1/2/2005 12/28/2003 --------- ----------- --------- ----------- Income from continuing operations under GAAP $ 3,541 $ 7,016 $ 17,661 $ 12,067 Interest expense (income), net 2,520 1,175 5,465 4,129 Provision for income taxes 1,590 2,812 7,933 5,537 Depreciation 2,092 1,777 7,249 6,577 Amortization of intangibles 1,707 624 3,771 2,175 --------- ----------- --------- ----------- EBITDA 11,450 13,404 42,079 30,485 --------- ----------- --------- -----------

Other Adjustments: Purchase accounting revaluations and business integration costs 1,868 - 1,868 400 Write-off of deferred financing costs 965 - 965 4,492 Loss on renegotiated notes receivable 353 - 353 - Purchased in-process research and development 3,263 - 3,263 - Special charges - - - 2,778 --------- ----------- --------- ----------- Adjusted EBITDA $ 17,899 $ 13,404 $ 48,528 $ 38,155 ========= =========== ========= ===========

Note: Income from continuing operations before net interest expense, including amortization of debt issuance costs, provision for income taxes, depreciation, amortization and special charges ("Adjusted EBITDA") is not a measure of performance defined in accordance with accounting principles generally accepted in the United States of America. However, we believe that Adjusted EBITDA is useful to investors in evaluating our performance because it is a commonly used financial analysis tool for measuring and comparing life science companies in areas of operating performance. Adjusted EBITDA should not be considered as an alternative to net income as an indicator of our performance or as an alternative to net cash provided by operating activities as a measure of liquidity and may not be comparable to similarly titled measures used by other companies. In addition, the definition of Adjusted EBITDA as presented herein differs from the definition of Consolidated EBITDA used in the Company's revolving credit facility.

    Other Matters

    In accordance with Emerging Issues Task Force 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share" ("EITF 04-8") the Company has retroactively adjusted its earnings per share for the fourth quarter of 2003 and the year ended December 28, 2003 due to the dilutive effect of its convertible debentures. The following table sets forth the reconciliation of the calculation of diluted earnings per share and weighted average shares outstanding as previously reported to the presentation required in EITF 04-8:

Serologicals Corporation

Earnings per Share Calculations for Adoption of EITF 04-8 (Unaudited) ----------- ----------- Q4 2003 2003 ------------ -----------

Diluted earnings per share computation: Weighted average shares for diluted earnings per share, as previously reported 25,221,942 24,960,208 Adjustment for effect of change in accounting method required under EITF 04-8 "Effect of Contingently Convertible Debt on Diluted Earnings per Share" 8,789,729 3,174,069 ----------- ----------- Weighted average shares for diluted earnings per share, as adjusted 34,011,671 28,134,277 =========== ===========

Net income per share from continuing operations, as previously reported $ 0.27 $ 0.48 Effect on net income per share from dilutive convertible debentures (0.04) (0.01) ----------- ----------- Net income per diluted share from continuing operations, as adjusted 0.23 0.47 ----------- -----------

Loss per share from discontinued operations, as previously reported (0.08) (0.42) Effect on earnings per share from dilutive convertible debentures 0.02 (0.05) ----------- ----------- Loss per diluted share from continuing operations, as adjusted (0.06) (0.37) ----------- -----------

Net income per share, as previously reported 0.19 0.06 Effect on earnings per share from dilutive convertible debentures (0.02) 0.04 ----------- ----------- Net income per diluted share, as adjusted $ 0.17 $ 0.10 =========== ===========

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CONTACT: Serologicals, Atlanta Bud Ingalls, 678-728-2115

KEYWORD: GEORGIA INDUSTRY KEYWORD: BANKING BIOTECHNOLOGY EARNINGS CONFERENCE CALLS SOURCE: Serologicals Corporation

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