APPLIED BIOSYSTEMS REPORTS $29.9 MILLION NET INCOME 2ND QTR.

Applied Biosystems Group (NYSE:ABI), Foster City, Calif., an Applera Corporation business, has reported that earnings per share in the second quarter of fiscal 2003, ended December 31, 2002, were $0.14 per diluted share versus $0.23 per diluted share for the prior year second quarter.

Included in these earnings per share amounts were special charges totaling $33.8 million, consisting of a $9.5 million non-cash pre-tax charge for asset write-offs and a $24.3 million pre-tax charge for severance costs and office closures, recorded during the second quarter of fiscal 2003, and a $2.2 million pre-tax charge for acquired in-process R&D associated with the acquisition of Boston Probes, Inc. recorded in the prior year quarter. For fiscal 2003, the estimated annual tax rate was reduced from 28 percent to 27 percent due to the special charges, and as a result, the second quarter tax rate was 26 percent. The special charges reduced diluted earnings per share by $0.11 for the second quarter of fiscal 2003 and by $0.01 for the prior year quarter. All per share amounts refer to per share of Applera Corporation-Applied Biosystems Group Common Stock.

Operating income in the second quarter of fiscal 2003 was $33.9 million, including the special charges of $33.8 million, compared to $65.9 million, including the special charge of $2.2 million, in the prior year quarter. Net income in the second quarter of fiscal 2003 was $29.2 million compared to $49.0 million in the same quarter last year. The special charges reduced net income by $23.4 million in the second quarter of fiscal 2003 and by $2.2 million in the prior year quarter. The effective tax rate for the second quarter of fiscal 2003 was 26 percent versus 30 percent in the prior year quarter. This decline in the tax rate in the second quarter of fiscal 2003 reflects the anticipated higher utilization of foreign tax credits, as well as the impact of the special charges in both fiscal years. The net effect of foreign currency on net income during the second quarter was not material.

Net revenues for the Group for the second quarter of fiscal 2003 were $444.7 million, an 8 percent increase over the $411.1 million reported in the prior year quarter. Excluding the effects of foreign currency, revenues increased approximately 7 percent over the prior year quarter. Sales to Celera Genomics were $0.7 million in the second quarter of fiscal 2003 versus $8.8 million in the prior year quarter.

Revenues from instrument sales in the second quarter of fiscal 2003 were $225.9 million, a 13 percent increase over the $199.7 million reported for the prior year quarter. This increase was driven primarily by the success of the Applied Biosystems 3730 DNA Analyzer product line, the QSTAR(R) XL LC/MS/MS System, the Q TRAP(TM) LC/MS/MS System, and the Applied Biosystems 4700 Proteomics Analyzer with TOF/TOF(TM) optics. Revenues from sales of consumables were $144.0 million, 4 percent below the $150.1 million reported in the year-ago quarter. This decrease was the result of a decline in DNA sequencing consumable revenues, which more than offset the growth of Sequence Detection System (SDS) and other consumable revenues. Revenues from other sources, including service contracts, royalties, licenses and contract research, increased 22 percent, to $74.8 million from $61.3 million in the same quarter last year. This increase resulted primarily from higher service revenues and license fees, including $6.7 million for a license relating to certain genetic analysis technology.

The gross margin in the second quarter of fiscal 2003 was 49.2 percent versus 52.2 percent in the prior year quarter. The special charges reduced gross margin in the second quarter of fiscal 2003 by $9.5 million, or 2.2 percentage points. The operating margin in the second quarter of fiscal 2003 was 7.6 percent, compared with 16.0 percent in the same period a year ago. The special charges reduced operating margin in the second quarter of fiscal 2003 by 7.6 percentage points and by 0.6 percentage points in the prior year quarter.

Research, development and engineering expenditures in the second quarter of fiscal 2003 increased 12 percent to $59.2 million from $52.7 million in the second quarter of fiscal 2002. This increase resulted primarily from the support for Knowledge Business initiatives and new products in development. As a percentage of sales, research, development and engineering expenditures were 13.3 percent in the fiscal 2003 second quarter compared to 12.8 percent in the prior year quarter. SG&A expenditures in the second quarter of fiscal 2003 increased 8 percent to $101.5 million from $93.6 million in the prior year quarter, and remained constant as a percentage of revenue in the two quarters.

For the first six months of fiscal 2003, the Group reported net revenues of $840.6 million compared to $777.7 million in the same period in the prior year. Earnings per diluted share from continuing operations in the first six months of fiscal 2003 were $0.30 compared to $0.38 in the same period last year. The special charges reduced earnings per diluted share from continuing operations by $0.11 in the first six months of fiscal 2003. For the first six months of fiscal 2003, earnings per diluted share, which included a $16.4 million net loss, or $0.08 per diluted share, from discontinued operations related to a patent lawsuit verdict, were $0.22 versus $0.38 in the prior year period.

Six-month operating income for fiscal 2003 was $77.2 million versus $109.0 million in the prior year period. The special charges reduced six-month operating income by $33.8 million in fiscal 2003 and by $2.2 million in fiscal 2002. Fiscal 2003 six-month income from continuing operations was $63.4 million compared to $81.2 million in the previous year period, and fiscal 2003 net income was $47.0 million compared to $81.2 million in the prior year period. The special charges reduced both six-month income from continuing operations and net income by $23.4 million in fiscal 2003 and by $2.2 million in fiscal 2002. Six-month net income for fiscal 2003 included a $16.4 million loss from discontinued operations. The net effect of foreign currency on fiscal 2003 six-month net income was an increase of approximately $2 million, or $0.01 per diluted share.

"During the second quarter, Applied Biosystems achieved revenue growth despite broad macro-economic challenges that included the delay in the passage of the fiscal 2003 National Institutes of Health (NIH) budget and continued uncertainty about public sector life science funding in Japan and Europe and pharmaceutical R&D spending," said Tony L. White, Chief Executive Officer of Applera Corporation. "Importantly, we saw our commitment to innovation in genetic analysis pay off as strong sales of the 3730 product line led to 12 percent year- over-year revenue growth in our DNA sequencing product line after five quarters of revenue declines."

For more information, visit http://www.applera.com or call 800.762.6923 or call 650/638-6130 and visit http://www.appliedbiosystems.com.