QIAGEN N.V. — FY 2011 Form 20-F
Reporting period: Fiscal year ended December 31, 2011. This is an annual report, not a standalone fourth-quarter filing; the supplied filing text does not provide a clear standalone Q4 income statement or cash-flow value. Financial statements are prepared under U.S. GAAP and reported in U.S. dollars.
Business context
QIAGEN supplies sample and assay technologies, consumables and laboratory automation systems across Molecular Diagnostics, Applied Testing, Pharma and Academia. Consumables and related revenues were 87% of 2011 sales; instrumentation was 13%. Molecular Diagnostics represented approximately 47% of sales. The company acquired Cellestis and a controlling stake in Ipsogen during 2011.
Financial performance
| Metric | FY 2011 | FY 2010 | Change |
|---|---|---|---|
| Net sales | $1,169.7 million | $1,087.4 million | +8% |
| Gross profit / margin | $749.8 million / 64% | $715.6 million / 66% | Margin down 2 percentage points |
| Operating income | $99.6 million | $188.5 million | -47% |
| Net income | $94.9 million | $144.3 million | -34% |
| Net income attributable to QIAGEN owners | $96.0 million | $144.3 million | — |
| Diluted EPS attributable to QIAGEN owners | $0.40 | $0.60 | Down |
| Cash from operating activities | $244.8 million | $250.8 million | Down slightly |
Sales growth comprised 2% organic growth, 2% from acquisitions and a 4% favorable foreign-exchange effect. Gross margin fell partly because of acquired QuantiFERON sales, lower-margin companion-diagnostic milestone revenue, production relocation, disaster-related costs and restructuring. The operating-income decline chiefly reflected fourth-quarter restructuring and acquisition-related costs. The effective tax rate was 1.3%, versus 16.6% in 2010, benefiting from tax planning and the mix of earnings; the filing cautions that subsidiary tax rates vary widely.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $221.1 million at year-end, down from $828.4 million; short-term investments were $54.6 million. Working capital fell to $266.8 million from $976.2 million.
- Operating cash flow was $244.8 million. Capital expenditures for property and equipment were $86.8 million; investing activities used $540.3 million, including $457.5 million net cash paid for acquisitions. Financing activities used $310.6 million, including $469.9 million of debt repayments.
- Year-end debt included $142.3 million of short-term borrowings and $447.6 million of long-term debt; capital lease obligations totaled $23.5 million. A €400 million revolving facility, expiring in 2016, had €110 million drawn at year-end. The short-term borrowing was due and paid in January 2012.
- Goodwill was $1.734 billion and intangible assets were $819.5 million. Total assets were $3.756 billion and total equity was $2.558 billion.
Material changes, outlook and risks
- Management launched a productivity and restructuring program late in 2011, recording $74.9 million of pretax fourth-quarter charges, including a $42.1 million asset-abandonment impairment and $20.1 million for workforce reductions. The company reduced its workforce by approximately 8–10% at year-end and early 2012.
- Management expected approximately $50 million of annual pretax savings in 2012, with most savings to be reinvested in strategic initiatives. Further restructuring costs were expected in 2012. No full-year 2012 revenue or earnings guidance is stated in the supplied text.
- QIAsymphony installations exceeded 550 in 2011; management targeted more than 750 by year-end 2012. Adoption, assay availability and regulatory approvals remain important to platform economics.
- Key risks include dependence on HPV-related products (about 20% of sales), reduced U.S. HPV demand, reimbursement and healthcare cost pressures, research-budget uncertainty, competition, acquisition integration, regulatory approvals, foreign-exchange exposure and reliance on certain single-source components. The filing also identifies up to $103.1 million of contingent acquisition payments, of which approximately $39.8 million was accrued at year-end.
- Management expected operating cash flow, existing resources and financing facilities to fund planned operations and expansion in the coming year, while warning that weaker sales or constrained credit access could require reduced or delayed spending. The 2.3% U.S. medical-device excise tax was scheduled to apply after December 31, 2012; management expected increased healthcare coverage to have a net positive effect, partly offset by the tax.
- The independent auditor issued an unqualified opinion on the financial statements and internal controls over financial reporting as of December 31, 2011. Management reported effective disclosure controls and internal controls.
Important facts for investors to verify
- Whether the 2011 operating-profit decline and lower gross margin are temporary effects of restructuring, acquisitions and transition costs, or indicate sustained pressure.
- Actual 2012 restructuring charges, realized savings and how much savings are reinvested versus retained.
- Cash generation, liquidity after the January 2012 repayment, and the ability to address the $300 million debt maturity in 2014.
- Progress toward QIAsymphony placement targets and growth in recurring consumables and approved assays.
- Cellestis and Ipsogen integration, acquisition-related amortization, contingent payments and the value of acquired goodwill and intangible assets.