QIAGEN N.V. — FY2010 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2010; filed March 18, 2011. This is an annual filing, not a standalone fourth-quarter report. Financial statements are prepared under U.S. GAAP and audited; the auditor issued an unqualified opinion. Management and the auditor reported effective internal control over financial reporting.
Business context
QIAGEN supplies sample- and assay-preparation technologies, consumables and automated laboratory instruments across molecular diagnostics, pharmaceutical research, academia and applied testing. Consumables and related revenues accounted for 86% of 2010 sales; instruments accounted for 14%. Molecular diagnostics represented about 47% of sales. The company reported one operating segment.
Key financial metrics
| Metric | FY2010 | FY2009 | Change / context |
|---|---|---|---|
| Net sales | $1,087.4 million | $1,009.8 million | Up 8%; management attributed 4% to organic growth and 4% to acquired businesses |
| Gross profit / margin | $715.6 million / 66% | $667.1 million / 66% | Margin unchanged |
| Operating income / margin | $188.5 million / about 17.3% | $180.2 million / about 17.8% | Income up 5%; margin lower |
| Net income | $144.3 million | $137.8 million | Up about 5% |
| Diluted EPS | $0.60 | $0.64 | Down despite higher net income; weighted average diluted shares rose to 240.5 million from 213.6 million |
| Operating cash flow | $250.8 million | $217.0 million | Up about 16% |
| Cash and cash equivalents | $828.4 million | $825.6 million | Short-term investments were an additional $106.1 million |
| Working capital | $976.2 million | $957.9 million | Up modestly |
| Total debt | $873.0 million | $920.0 million | $75.8 million current; $796.7 million scheduled in 2012 |
| Shareholders’ equity | $2,476.4 million | $2,291.2 million | Up about 8% |
Investing activities used $215.5 million, including $79.7 million for property and equipment, $44.2 million for intangible assets and $37.0 million net cash for acquisitions. Financing activities used $35.2 million, chiefly reflecting $50.0 million of debt repayment. Cash generation from operations covered reported investment outflows, while the company also held substantial cash and short-term investments.
Changes versus FY2009
- Sales rose across customer classes: molecular diagnostics and academia each grew 8%, Pharma 6% and applied testing 15%. Management cited lower growth in molecular-diagnostic assay volumes amid fewer patient visits; it expected that trend to continue into 2011.
- Consumables and related revenues increased to $937.7 million from $870.2 million; instrumentation sales rose to $149.7 million from $139.6 million.
- R&D expense increased 17% to $126.0 million, about 12% of sales. Sales and marketing expense rose 9% to $267.5 million. General, administrative, integration and other costs fell 5% to $110.0 million.
- Acquisition-related intangible amortization in operating expenses increased to $23.5 million from $18.2 million; amortization in cost of sales also rose. These charges reflect acquired businesses and are expected to continue.
- Cash from operations improved, but 2010 did not include the large equity-offering proceeds that drove 2009 financing cash flow.
Outlook, risks and unusual items
- Outlook: Management expected continued growth in consumables and instruments, but warned growth could be below historical levels amid economic uncertainty. It expected fewer healthcare patient visits to persist into 2011 and stimulus-related academic demand to remain supportive. The filing does not provide a clear quantified full-year 2011 revenue or earnings forecast.
- Debt and liquidity: Management said operating cash flow, cash and available facilities were expected to fund planned operations and expansion in the coming year. Significant maturities are concentrated in 2012, including the $425 million term loan and $445 million of notes payable. The company was refinancing the $145 million QIAGEN Finance note to a maturity no earlier than July 2012. It reported compliance with debt covenants at year-end.
- Investment and contingent commitments: Facility expansions in Germany and Maryland were expected to continue into 2012, with estimated total cost of about $94 million; $33.5 million had been incurred by year-end. Acquisition-related contingent payments could total up to $85.4 million, of which $28.7 million was accrued.
- Unusual items: FY2010 included a $12.0 million tax benefit from internal restructuring of former Digene subsidiaries. A nonmonetary asset exchange generated $11.0 million of reported sales and $19.3 million of deferred revenue, with $30.3 million of intangible assets recorded. The company incurred $7.4 million of restructuring costs and $10.1 million of integration costs.
- Major business risks: HPV products may represent as much as 25% of sales, with most sales in that product group concentrated among a limited number of reference laboratories. Demand is exposed to screening adoption, reimbursement and patient testing patterns. Other risks include product-development and regulatory delays, competition and pricing pressure, acquisition integration, foreign-exchange movements, research funding, supplier/logistics interruptions, and potential impairment of substantial goodwill and intangible assets.
- Subsequent event: The filing identified potential disruption to Japanese-sourced instrument components following the March 2011 earthquake and tsunami; the impact was still under evaluation.
- The company reported no cash dividends paid and no near-term plan to pay them. Goodwill impairment testing found no impairment in 2010.
Important facts for investors to verify
- Whether the 2012 debt maturities were refinanced or repaid on acceptable terms, and how much debt remained due after refinancing.
- Whether operating cash flow and cash balances continued to support capital spending, acquisitions and contingent payments.
- Whether growth in HPV testing and other molecular-diagnostic assays recovered despite fewer patient visits and reimbursement pressures.
- How much reported growth reflected organic demand versus acquisitions, and whether acquisition integration costs and amortization affected subsequent margins.
- Whether the Japanese supply disruption, healthcare-device excise tax effective after 2012, or any regulatory or litigation developments materially affected results.
- The full-year outlook: the filing discusses expected trends but does not provide a clear quantified 2011 earnings or sales target.