QIAGEN N.V. — FY 2013 Form 20-F
Reporting period: Fiscal year ended December 31, 2013. This is an annual report, not a standalone fourth-quarter filing; quarterly Q4 results are not clearly provided in the filing text. Amounts are in U.S. dollars unless stated otherwise. Financial statements are prepared under U.S. GAAP.
Business context
QIAGEN supplies sample and assay technologies, consumables, instruments and bioinformatics solutions for molecular diagnostics, applied testing, pharmaceutical research and academia. Approximately half of 2013 sales came from Molecular Diagnostics; consumables and related revenues were about 88% of sales. The company reported one operating segment.
Financial performance
| Metric | FY 2013 | FY 2012 | Change / context |
|---|---|---|---|
| Net sales | $1,302.0 million | $1,254.5 million | +4% |
| Gross profit / margin | $815.5 million / 62.6% | $824.0 million / 65.7% | Gross profit down; margin fell about 3.1 percentage points |
| Operating income / margin | $63.3 million / 4.9% | $169.8 million / 13.5% | Operating income down 63% |
| Income before taxes | $37.3 million | $145.2 million | Down substantially |
| Income taxes | Benefit of $31.8 million | Expense of $15.6 million | 2013 benefit materially supported reported net income |
| Net income attributable to QIAGEN | $69.1 million | $129.5 million | Down 47%; diluted EPS $0.29 vs. $0.54 |
| Operating cash flow | $259.0 million | $244.9 million | Up about 6% |
| Capital expenditures | $84.5 million | $102.0 million | Down |
| Cash and cash equivalents | $330.3 million | $394.0 million | Down $63.7 million; short-term investments were $49.9 million at year-end |
| Working capital | $583.9 million | $725.8 million | Down $141.9 million |
| Long-term debt | $845.5 million | $847.0 million | Nearly unchanged; $0.2 million current. Credit facilities were undrawn |
Cash used in investing activities was $251.7 million, including $170.5 million net cash paid for acquisitions. Financing activities used $68.8 million, primarily reflecting $86.0 million of treasury-share purchases. Cash plus short-term investments totaled $380.2 million at year-end. Long-term debt contractual payments, including interest, totaled $1.137 billion; this differs from the reported debt balance.
Changes versus the prior year
- Sales growth was driven by Molecular Diagnostics (+7%) and Applied Testing (+6%); consumables and related revenues rose 5%, while instrument sales fell 4%.
- Emerging-market sales grew 24% and represented about 14% of total sales. Academia sales declined 2%, amid constrained research funding.
- Global HPV product sales declined 4%; U.S. HPV sales fell approximately 14%. QuantiFERON-TB sales grew more than 25% and represented about 6% of total sales.
- Gross margin and operating income were pressured by restructuring charges, impairments and higher operating expenses. FY 2013 included $40.6 million of restructuring-related cost-of-sales charges and $78.1 million of restructuring costs in general and administrative, restructuring, integration and other expenses.
- Research and development expense rose 19% to $146.1 million, while sales and marketing expense rose 8% to $371.5 million. Interest expense increased to $30.9 million from $23.5 million.
Outlook, management commentary and risks
- Management identified five growth priorities: QIAsymphony, Personalized Healthcare, QuantiFERON-TB, bioinformatics and next-generation sequencing. It targeted 1,250 cumulative QIAsymphony placements by year-end 2014; the installed base exceeded 1,000 at year-end 2013.
- The GeneReader benchtop sequencer was planned for commercialization in 2014. QIAGEN had submitted the QIAsymphony RGQ MDx platform to the FDA for review. The filing does not provide a clear numerical sales or earnings forecast.
- Ingenuity and CLC bio were acquired in 2013 to expand bioinformatics capabilities. Management expected further integration and restructuring costs in 2014, while stating it did not expect significant additional charges in 2014 from the existing transformation program.
- Key risks include reimbursement and pricing pressure, reliance on HPV products and a limited number of U.S. reference-laboratory customers, research-funding uncertainty, competition, regulatory approvals, acquisition integration, foreign-exchange movements, and potential supply or logistics interruptions.
- Potential acquisition-related contingent cash payments were up to $120.3 million, including up to $65.7 million in 2014; $6.1 million was accrued at year-end. The filing said pending litigation was not expected, based on information then available, to materially adversely affect financial position or results.
- The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- How much of the 2013 earnings decline reflects restructuring and impairments, and whether cost savings materialize after those charges.
- The underlying tax position and sustainability of reported net income, given the $31.8 million tax benefit and negative 85% effective tax rate.
- Progress against the 2014 QIAsymphony placement target, FDA review timing, and commercialization of GeneReader and new assays.
- HPV sales trends, customer concentration and pricing terms, along with reimbursement developments affecting companion diagnostics.
- Cash generation and liquidity after acquisitions, share repurchases, capital spending and any contingent acquisition payments; also review debt maturities and conversion-related dilution exposure.