Bio-Rad Laboratories, Inc. (
Q4 2011 Earnings Conference Call
February 23, 2012, 17:00 p.m. ET
Ron Hutton - Treasurer
Christine Tsingos - VP and CFO
Norman Schwartz - President and CEO
Brad Crutchfield - VP and Group Manager, Life Science
John Goetz - VP and Group Manager, Clinical Diagnostics
Jon Wood - Jefferies
Reggie Miller - CLSA
Junaid Husain - Dougherty & Company
Jeffrey Matthews - Ram Partners
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Good day, ladies and gentlemen and welcome to the Fourth Quarter 2011 Bio-Rad Laboratories, Inc. Earnings Conference Call. My name is Dana and I will be the operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) And as a reminder today’s conference is being recorded for a replay purposes.
I’d now like to turn the conference over to your host, Mr. Ron Hutton, Treasurer. Please proceed.
Thank you, Dana. Before we begin the call, I’d like to caution everyone that we will be making forward-looking statements about management’s goals, plans and expectations. Because our actual results may differ materially from these plans and expectations, I encourage you to review our filings with the SEC, where we discuss in detail the risk factors in our business. The company does not intend to update any forward-looking statements made during the call today.
With that, I’d like to turn the call over to Christine Tsingos, Vice President and Chief Financial Officer.
Thanks Ron. Good afternoon everyone and thank you for joining us. Today we will review the fourth quarter and full-year financial results for 2011, as well as provide some insight into our thinking for 2012.
Let’s start with a review of the quarterly results. We are pleased to report net sales for the fourth quarter of fiscal 2011 or a record $550.2 million an increase of 3.1% versus the year ago period sales of 533.7 million. On a currency neutral basis quarterly sales grew 2.4%. This year-over-year growth was fueled by continued progress for both our life science and clinical diagnostics segment with specific strength in our real-time PCR and imaging product lines, as well as quality control, blood typing and microbiology products. However, our top line growth continues to be challenged by slowness in Europe.
The consolidated gross margin for the quarter was in line with expectations at 56.5% versus last year’s gross margin of 56.2%. During the quarter we recorded approximately $3.7 million in cost of goods sold for the amortization and purchase accounting expense related to our DiaMed and Biotest acquisitions. In addition, the fourth quarter gross margin includes $2.5 million of amortization related to the recently acquired QuantaLife.
SG&A expense for the fourth quarter was $174.9 million or 31.8% of sales compared to $176.7 million or 33.1% of sales last year. The lower than expected SG&A spend in margin is primarily related to the one-time reversal of our incentive bonus accruals of approximately $9 million as we anticipate a significantly lower bonus payout for our 2011 operating results.
Amortization of intangibles related to our acquisitions reported in SG&A in the fourth quarter was approximately $3 million. Research and development expense in Q4 was 9.1% of sales or $50 million. This increase in spending both sequentially and year-over-year is reflective of our QuantaLife investment as well as focus on the development of new products for market such as diabetes monitoring and blood typing.
Interest and other for the quarter was a net expense of approximately $12 million compared to 20.6 million last year. This lower amount versus last year is primarily related to the debt refinancing completed in December 2010, and the subsequent retirement of our 2014 bonds which resulted in a one-time expense of $5 million last year as well as the resulting benefit of lower interest cost.
The effective tax rate used in the fourth quarter was better than expected at 20% primarily related to the finalization of foreign audit as well as decreases in tax reserves due to statute losses. Remember that last year the fourth quarter effective tax rate was actually a tax benefit related to the one-time repatriation of foreign earnings and the end of year reinstatement of the federal R&D tax credit.
Reported net income for the fourth quarter was $59.2 million or $2.08 per share on a fully diluted basis compared to 67.9 million last year or $2.41 per share. As you may remember, last year we estimated that excluding the unique tax related impact, diluted earnings per share would have been $1.52 in the fourth quarter of 2010.
Our life science group reported record sales for the fourth quarter of $198.9 million, a growth of 3.1% versus last year, which was also a very strong quarter for the group. On a currency neutral basis, sales increased 2.3% for the quarter. These quarterly results reflect strong sales of real-time PCR product, as well as our new line of imaging products.
On a geographic basis, sales in Asia-Pacific and the Americas were especially robust, partially offset by a decline in Europe. Gross margins in life science remains strong in the fourth quarter despite the impact of QuantaLife operations and amortization. In addition, improved SG&A margins helped segment profit for the fourth quarter reach more than $20 million, excluding QuantaLife, life science segment process was more than $27 million.