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Article Excerpt
PARTICIPANTS
. Ronald Hutton, Bio-Rad Laboratories, Inc., Treasurer . Christine Tsingos, Bio-Rad Laboratories, Inc., CFO, VP . Norman Schwartz, Bio-Rad Laboratories, Inc., CEO, President . John Wood, Bank of America, Merrill Lynch, Analyst . Bradford Crutchfield, Bio-Rad Laboratories, Inc., VP, GM Life Science Group . Amy Wilson, Ramsey Asset Management, Analyst . Steven Jelman, Private Investor . Carthig Krishnan, ING, Analyst . Doug Fisher, Kennedy Capital, Analyst . John Gibbons, Odin Partners, Analyst
OVERVIEW
BIO reported 2008 GAAP revenues of $1.764b and GAAP net income of $89.5m. 4Q08 GAAP net sales were $448m and GAAP reported net income was a loss of $8.2m or negative $0.30 a share on a diluted basis.
FINANCIAL DATA
A. Key Data From Call 1. 2008 GAAP revenues = $1.764b. 2. 4Q08 GAAP net sales = $448m. 3. 2008 GAAP net income = $89.5m. 4. 4Q08 GAAP reported net loss = $8.2m. 5. 4Q08 GAAP reported net loss per diluted share = $0.30. 6. 2008 GAAP GM = 54.6%. 7. 4Q08 consolidated GM was a reported 55.1%. 8. 2008 net CapEx = $84.8m. 9. 4Q08 net CapEx = $22.1m. 10. Total cash and short-term investments at 12/31/08 = $243m.
PRESENTATION SUMMARY
S1. 4Q08 Results (C.T.) 1. Note: 1. Reports financial results on a GAAP basis, which includes several one-time and non-cash impacts to 4Q08. 2. Results: 1. Net sales, $448m. 1. Down 2.6% vs. year-ago period sales of $459.7m. 2. On a currency neutral basis, sales grew 3%. 1. YoverY growth was fueled by solid performance in Clinical Diagnostics segment, somewhat tempered by some industry challenges in Life Science segment. 3. Consolidated GM was a reported 55.1%, up significantly vs. last year's GM of 50.8%. 1. Improvement reflects a more favorable product mix and improved capacity utilization. 4. During 4Q08, reported approx. $3.5m of amortization expense and foregone profit margins as required under purchase accounting for Co.'s DiaMed acquisition. 1. This compares to just over $6m of expense in 4Q07. 5. SG&A expense was $154.5m or 34.5% of sales. 1. Improvement reflects disciplined spending and some positive currency effects. 2. During 4Q08, reported in SG&A is approx. $2.3m of amortization expense related to DiaMed, about equal to last year's impact. 6. R&D expense, 9.2% of sales or $41m. 1. Increase in spending both sequentially and YoverY is reflective of: 1. Co.'s focus on development of new panels for BioPlex 2200. 2. Co.'s new fully-automated instrument for blood typing, which it plans to release late in 2009. 7. During 4Q08, recorded more than $28m of non-cash expense for goodwill impairment and a small amount of purchased intangibles. 1. Impairment primarily relates to goodwill associated with 1999 acquisition of Pasteur Sanofi Diagnostics and subsequent decline of value in Co.'s BSE testing business, a business that has been severely impacted over past years by a decline in test volumes and pricing. 8. Interest and other was a net expense of approx. $18m vs. $10.5m last year. 1. This net amount includes a one-time foreign currency loss of $5.2m related to significant and extraordinary swings in some of Co.'s major currencies during Dec. 2. 4Q08 other expense reflects impairment of investments of $6.2m. 9. Because the goodwill impairment in Co.'s investments is not deductible for tax purposes, effective tax rate used during 4Q08 is somewhat meaningless. 1. Excluding these one-time cash events, quarterly effective tax rate was approx. 29%. 10. Reported net income was a loss of $8.2m or negative $0.30 a share on a diluted basis. 1. Estimating that excluding one-time charges for goodwill impairment, purchased intangibles, and investments of $35m, coupled with FX losses of $5m, diluted EPS would be $1.16. 11. Life Science reported sales decreased 7.7% from year-ago period to $170.3m. 1. On a currency neutral basis, sales decreased 3%. 1. YoverY decrease reflects industry-wide drop in capital instrument sales and a tough compare to 2007, which included a sizeable process media order. 2. During 4Q08, continued to see strong sales of amplification products and approaching expression, separation, and analysis products. 3. GM increased significantly both sequentially and YoverY, primarily due to a more favorable product mix towards consumables and improved manufacturing costs and absorption. 4. In addition to improved GM, posted good operating leverage. 5. Segment profits, excluding impairment charges, increased to more than $13m as a result. 12. Clinical Diagnostic group reported strong sales of $274m. 1. Up about 1% on a reported basis, but more than 7% currency neutral. 2. Sales were led by continued strong performance and quality controls and Co.'s blood virus, autoimmune and diabetes product lines. 3. GM was up sequentially and vs. last year, primarily reflecting a more favorable product mix. 1. As a result, reported 4Q08 segment profit increased to just over $30m.
S2. 2008 Results (C.T.) 1. Results: 1. Annual revenues, $1.764b. 1. Up nearly 21% over 2007. 2. 17.8% increase on currency-neutral basis. 3. In line with high-teens guidance given at beginning of the year. 4. Both primary segments contributed to growth in 2008. 2. Diagnostics sales were just over $1.1b. 1. Annual...
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