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Life Technologies (LIFE)

Q4 2011 Earnings Call

February 07, 2012 4:30 pm ET

Executives

Carol Cox -

Gregory T. Lucier - Chairman and Chief Executive Officer

David F. Hoffmeister - Chief Financial Officer and Senior Vice President

Mark P. Stevenson - President and Chief Operating Officer

Analysts

Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division

Jonathan P. Groberg - Macquarie Research

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Amit Bhalla - Citigroup Inc, Research Division

Ross Muken - Deutsche Bank AG, Research Division

Bill Bonello - RBC Capital Markets, LLC, Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Life Technologies Corp. Q4 and Year-End 2000 (sic) [ 2011 ] Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host for today, Ms. Carol Cox, VP, Investor Relations. Ma'am, you may begin.

Carol Cox

Thank you, Mary. Good afternoon, everyone. Welcome to Life Technologies' Fourth Quarter and Full Year 2011 Earnings Conference Call. A press release was issued today at 1 p.m. Pacific Time or 4 p.m. Eastern Time today and posted on our website at lifetechnologies.com, as well as filed in Form 8-K with the Securities and Exchange Commission. We also posted a deck of slides to accompany today's webcast which may be found in the Events and Presentations section of the Life Technologies Investor Relations website with our other earnings materials.

And joining me on today's call are Greg Lucier, our Chairman and CEO; David Hoffmeister, our Chief Financial Officer. Additionally, Mark Stevenson, our Chief Operating Officer, will be available during the Q&A portion of the call. If you have not received a copy of today's press release, you may obtain one from our website at lifetechnologies.com.

I want to remind our listeners that our discussion today will include forward-looking statements, including, but not limited to, statements about future expectations, plans and prospects for the company. We believe these statements are based on reasonable assumptions, but actual results may differ materially from those indicated. Important factors which could cause actual results to differ materially from those in forward-looking statements are detailed in filings made by Life Technologies with the SEC. It's our intent that these forward-looking statements be protected under the Safe Harbor created by the Private Securities Litigation Reform Act of 1995.

Additionally, we will be discussing GAAP and non-GAAP measures. A full reconciliation of the non-GAAP measures to GAAP can be found in today's press release or on our website.

I will now hand the call over to Greg Lucier.

Gregory T. Lucier

Thanks, Carol, and thanks, everyone, for joining us on today's call. It's fair to say that 2011 was a challenging year for the company as we faced macroeconomic headwinds and constrained spending by some of our customers. At that time, we evaluated what actions we needed to undertake in an uncertain environment and started executing against them. I'm pleased to announce that even in the face of these obstacles, we were able to deliver top line growth and increased our bottom line for the 12th consecutive year since the IPO of Invitrogen.

For the year, we grew our revenue 4% and took prudent efforts to reduce our costs, helping drive a 40-basis-point increase in operating margins and 5% increase in our non-GAAP earnings per share for the year.

If we exclude the impact of currency, our operating margins actually expanded an impressive 110 basis points for the year. We continue to expect to grow our operating margins at a rate of about 50 basis points per year and ultimately believe we can achieve operating margins in the mid-30% range.

Our free cash flow for the year totaled $710 million, a new record high. These results are a testament to the strength of our core businesses, our market expansion strategies and our ability to quickly take actions to reduce operating expenses and optimize our investment spend.

We finished the year strong, growing our revenue in the fourth quarter 4%, increasing our operating margins 470 basis points and increasing our non-GAAP EPS by 18%. This growth was driven by solid performance in our consumables products, a record number of Ion Torrent PGM shipments, which I'll talk more about later, and continued strength in our BioProduction business even as we faced hard comps from last year's fourth quarter.

During 2011, we made solid progress expanding our business in emerging markets, where we are developing a local presence to take better advantage of the opportunities. We named a new head of Greater China, which includes mainland China, Taiwan and Hong Kong, to take our operations to the next level. Today, we have nearly 900 employees in this region, and we expect to add another 250 in 2012. We're building a direct sales force across China to ensure broader and deeper penetration of our products and, earlier in the year, brought online much larger warehouse facilities across that country in Beijing, Shanghai and Guangzhou to better ensure product availability and faster delivery to our consumers.

In early 2012, we continued to make progress, announcing an agreement to form a joint venture diagnostics business with China, DaAn company, a leading company in the molecular in-vitro diagnostics to form Life Technologies DaAn Diagnostics. We expect to leverage both companies' clinical sales forces to drive acceptance of a broad menu of CE-based kits and instruments in the Chinese market. This approach leverages our expertise in platform development and DaAn's expertise in regulated markets with kit development and commercialization.

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