Bio Rad Laboratories Inc (BIO.B) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2009 Bio-Rad Laboratories, Incorporated earnings conference call. I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Ron Hutton, Treasurer. Please proceed.

Thank you. Before we begin the call, I would 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 2009, as well as provide some insight into our thinking for 2010. Let's start with a review of the quarterly results. We are very pleased to report that net sales for the fourth quarter of fiscal 2009 were a record $495 million, an increase of 10.5% versus the year-ago period sales of $448 million. On a currency neutral basis, quarterly sales grew 4.3%. This year-over-year growth was fueled by continued progress in our Clinical Diagnostics segment, combined with record sales in our Life Science segment. The consolidated gross margin for the quarter was a reported 54.2%, versus last-year's gross margin of 55.1%. This year-over-year decrease primarily reflects the product mix shifting more towards instrument sales to Life Science customers.

During the quarter we recorded approximately $3.9 million of amortization expense and foregone profit margin as required under purchase accounting for our DiaMed acquisition. SG&A expense for the fourth quarter was $163.9 million, or 33.1% of sales, compared to $154.5 million and 34.5% of sales last year. This improvement in margin is better than expected and reflects our continued focus on headcount control and disciplined spending. Research and development expense in Q4 was 9% of sales, or $44.5 million. This increase in spending, both sequentially and year over year, is reflective of our focus on the development of our new fully-automated instrument for blood typing, which we plan to release later this year, as well as other new endeavors.

During the quarter, we recorded $3.8 million of non-cash expense for the impairment of purchased purchased intangibles associated with the acquisition of the SELDI technology in 2006. Interest and other for the quarter was a net expense of approximately $14.2 million compared to $18 million last year. This improvement versus last year is primarily due to last year's higher-than-typical expense related to the impairment of investments taken in the fourth quarter of 2008. The effective tax rate used in the fourth quarter is unusually low at 8.5%, and is related to favorable audit results, as well as the adjustment of reserves as required under FIN 48. Remember that last year the impairment of goodwill and our investments was not deductible for tax purpose, which makes the effective tax rate used during the fourth quarter of 2008 somewhat meaningless. Reported net income for the fourth quarter was $37.9 million, or $1.35 on a fully-diluted basis, compared to a loss of $8.2 million last year. We are estimating that, excluding the one-time $3.8 million charge for impairment, taken in the fourth quarter of 2009, diluted earnings per share would have been $1.44.

And now for certain segment information. Our Life Science group reported record performance, with sales for the fourth quarter increasing 12.1% from the year-ago period, to $191 million. On a currency neutral basis, sales increased 6.6% for the quarter. Excluding the continued decline in our BSE business, core Life Science sales grew an impressive 9.7%, currency neutral. This year-over-year increase reflects some signs of stimulus benefit, as well as strong sales of amplification instruments, process media, and electrophoresis imaging products. We are estimated -- we are estimating the the benefit from various global stimulus programs to be in the $6 million to $8 million range for the quarter. On a geographic basis, sales in the US, Japan, and Asia-Pacific were especially strong in the quarter. Gross margins in Life Science decreased both sequentially and year over year, primarily due to the product mix shift towards instrument sales. However, this decline was offset by improved SG&A margins leading to operating profit of more than $13.5 million. And, if we exclude the one-time non-cash charge for the impairment of purchased intangibles, Life Science segment profit for the fourth quarter exceeded $17 million, the highest level in more than five years.

Our Clinical Diagnostic group recorded strong sales for the quarter of $300.5 million compared to $274 million last year, an increase of 9.7% on a reported basis and nearly 3% currency neutral. These sales were led by continued strong performance in the quality control and blood typing product lines. The organic growth rate for the quarter is lower than the trend seen in the first nine months of the year, primarily due to the timing of fulfilling a blood screening tender in eastern Europe, which occurred in the third quarter of of 2009, compared to last year when the tender was primarily reflected in the fourth quarter. During the quarter we placed 12 new BioPlex 2200 systems in the US and Europe, which bodes well for continued revenue growth in 2010. Diagnostic gross margins were essentially flat with last year, while investment in research and development increased $3.8 million. As a result, fourth-quarter segment profit for Diagnostics was just under $27 million.

Looking at the full-year results we are pleased to report annual revenues of $1.784 billion, an increase of just over 1% on a reported basis and 5.5% currency neutral, which is slightly ahead of the low to mid single-digit growth guidance we gave at the beginning of the year. Both of our primary segments contributed to the strong performance in 2009. For the year, Bio-Rad Diagnostics sales were $1.140 billion, an annual growth of 3% on a reported basis but more than 8% currency neutral. This growth was fueled by strong performance in blood typing, quality control, and sales of the BioPlex 2200. On a geographical view, all of our primary regions grew double digits with the exception of Europe, which remained somewhat sluggish. Also in 2009, we launched more than 15 new diagnostic products, including four new panels for the BioPlex 2200. During the year we placed a total of 47 BioPlex 2200s in the US and Europe, which brings the installed base to 134 units and more than double the sales recorded in 2008.

Our Immunohematology division based in Switzerland also performed well in 2009, with good growth in both sales and profitability. We look forward to expanding our opportunity in blood typing with the recent addition of Biotest. In light of a tough industry environment in the US and Europe, and a more than 30% decline in our BSE business, our Life Science group also posted good annual sales of $631.5 million, primarily fueled by growth in our core markets of multiplex protein analysis, electrophoresis and gene expressions. Asia-Pacific, Japan and the emerging markets also continue to be very strong growth reasons for the tools business. While the reported sales in Life Science for the full year are down about 2%, currency neutral growth, excluding the BSE headwind, was 3.7%. During the year we introduced several new enhancements to our quantitative PCR product line, including a high-throughput version of our CFX real-time instrument and a series of reagents based on our proprietary so fast enzyme technology. And finally, along with some significant enhancements to our gel imaging product line, in the fourth quarter we introduced a totally new line of precast electrophoresis gels that offer ultra fast run times without sacrificing resolution. All of these new products bode well for growth in 2010.

Total Company gross margins for the full year were slightly ahead of expectations at 56% compared to 54.6% in 2008. This year-over-year improvement is the result of a product mix shifted more towards higher-margin consumables, improved manufacturing efficiency, and a reduction in purchase accounting expense. Research and development expense in 2009 was in line with expectations at $163.6 million, or 9.2% of sales. During the year we launched more than 30 new products worldwide, and have several more in the pipeline to help keep our return on R&D investment strong. Thus, we continue to expect R&D to be in the 9% to 10% of sales range for 2010. SG&A expense as a percent of sales was 33.7% for the year, about flat with last year. Net income for the full year was $144.6 million versus last year's net income of $89.5 million. Excluding the $35 million charge for impairments to goodwill, intangibles and investments during 2008, we estimate net income for 2008 would have been approximately $124 million. The tax rate for 2009 full year of 20% was lower than originally projected, due to the favorable outcome of tax audits, an increase in earnings associated with lower tax jurisdictions, such as Switzerland, and benefit from various research and development tax credits. Going forward, we expect the tax rate to be between 26% and 28%, which, of course, excludes the impact of any discrete events.

For 2009, Bio-Rad's balance sheet finished the year exceptionally strong. As of December 31st total cash and short-term investments were $745 million compared to $243 million at the end of last year. Remember that in May 2009 we completed a subordinated debt offering of $300 million, which helped contribute to the increase in our cash balances. Moreover, a strong focus on headcount and spend control throughout the year, coupled with better inventory and receivables management, has resulted in excellent cash flow for the Company. Net cash generated from operations during the fourth quarter was $115.7 million and $325 million for the full year. This achievement, while certainly adding to our ability to invest in acquisitions and new technology, is not likely sustainable due to our planned investments in infrastructure, as well as the integration of the Biotest operations in the US and Europe.

Net capital expenditures were $17.9 million for r the quarter and $66.8 million for the full year, which is substantially lower than originally projected. Going forward, we expect CapEx to be in the $80 million to $90 million range for 2010, reflecting increased investment in information technology, E-Commerce and facilities. Finally, depreciation and amortization for the quarter was $27.7 million, and $101.7 million for the full year. While we still need to complete the valuation of the Biotest acquisition, our best estimate at this time is that the associated amortization of purchased intangibles will add about $3 million to $4 million of non-cash expense in 2010.

We are pleased with our performance in 2009, which was certainly better than we'd expected at the beginning of the year when the industry was faced with many uncertainties. Looking to 2010 we are estimating currency neutral organic revenue growth to be in the 5% range. On a reported basis, this growth may be higher than 5%, especially in the first half of the year, depending on where exchange rates fall out. On top of our 5% organic growth estimate, our goal is to add $55 million to $60 million in sales from the newly-acquired Biotest business. Full-year gross margins are expected to decline somewhat, due to the anticipation of the product mix shifting more towards instruments, as well as the inclusion of the Biotest operation, which currently carries a gross margin substantially lower than the Bio-Rad average, even before adding anticipated increase in amortization. As a result, we are estimating consolidated gross margin for the full year to be around 55% to 55.5%.

This trend will likely flow to the operating margin line as we absorb the Biotest business, which historically has lost money, and also begin to invest in a new global IT system. Our goal is to move Biotest to profitability, including the purchase accounting impact as soon as possible, but we only recently closed the acquisition and it will take some time gor -- to get our arms around the business. With all that in consideration, our goal is for full-year consolidated operating margin to be around 12% of sales. And finally, as I mentioned earlier, we anticipate research and development expense to be between 9% and 10% of sales, and the effective tax rate to be in the 26% to 28% range.

And now I'll turn the call over to Norman for a few comments.

Okay, just a few words. Like most companies I think we began the year not knowing what the ultimate fallout of the financial crisis would be and how it would affect our markets and our customers. I guess I would say in hindsight, there are two positive outcomes. First, for us internally it was a real opportunity for us to re-evaluate the way we were doing some things, and to discover better, I would say more cost-effective ways to operate literally across the Company. Many of these were small things but they all really added up. And I would say many of these improvements I think of as sustainable and ones that would evolve into best practices and really make a good baseline for our ERP project.

I think the second outcome is our results. As Christine mentioned, I think our disciplined approach to the year really did allow us to achieve a healthy bottom line and certainly improve our cash flow. As I think about 2010, looking forward, I think the outlook of our customers is more positive in 2010 than it was as we entered 2009. A lot of fear of the unknown seems to be behind us and I think the various stimulus programs are beginning to take hold around the world. So with that, I think we're certainly encouraged by the outlook and look forward to what the year may bring.

So I think with that we'll open it up for questions.

(Operator Instructions). Your first question comes from the line of Larry Solow with CJS Securities. Please proceed.

Hi, good afternoon, guys. Congratulations on a good quarter and a good year in a tough environment. First question, do you have -- if we assume that currency was neutral from your basically -- if you took an average currency for the year based on where we are today, would you be able to give us an estimate of what you think that would add to your revenue growth?

Boy, Larry, it's tough to say. If -- remember last year was all over the map. It started as -- you start a tailwind, you end with a headwind or vice versa and so it really just depends on where the rates fall out.

Right.

If we look at how the rates played out during 2009 and assume that they don't move from here, maybe that 5% organic growth rate goes up to 6% or 7%, but who knows.

Right.

Just since December 31st, when we look at our budgeted plan, which we do in local currency, just between December 31st and today it's $30 million to $40 million difference on the top line in that short period of time, so who knows where the rates --

And that would be a 30 -- I guess the dollar strengthened so you're saying it would be $30 million to $40 million less?

Yes, just since 12/31, so who knows?

Right. If you took -- to say -- let's just say hypothetically currency where we are today and we take that average for the year, assuming not much change, is a 2% to 3% headwind a good num -- excuse me, tailwind a good number to use right now? Is that ballparkish, or is that too tough for you to really estimate? Again --?

Yes, it is hard to estimate.

Taking the variability of currency out of -- the movement of currency out of -- using a static number as where we stand today?

Yes. So just where we stand today, maybe the mid single digit becomes a mid to middle high. I don't even know how to describe it, Larry. It just depends.

Okay, mid to high, maybe take 5% to 7%, 8% or something?

I don't know where the rates are going.

Okay, that's fair enough. The new IT, I guess that's more along the lines of a new ERP system. Can you maybe discuss a little bit of that and I don't know if you can break out how long the plan is for, or what you expect to spend in total over the two, three years it runs and what you expect this year?

Sure. I think that for us it's probably more than a two or three year program. We don't want to drag it out forever but we want to be very careful on how we plan this, design it and implement it, so it's probably three, four year plus project. This year a lot of the -- both capital and expense that we're assuming is going into the planning phase, forming the team, getting ready, starting with a design that we can use on a worldwide basis. So as such, in terms of capital expenditures in 2010, it's probably a small percent of the total project, maybe in the $10 million range or so, and on the expense side $5 million, $6 million kind of thing, but it'll grow from there as the project grows.

Okay, got you. Just back to the currency, do you happen to have just some estimate for 2009 on how much that actually hurt you, because obviously it hurt your revenue growth. Is there any way to say if currency was neutral what earnings would have been or what operating income would have been or anything like that?

For --

For 2009.

Operating income is harder for me to get to.

Right.

Again, if we had this IT system I could probably answer it off the top of my head.

Right. No, I understand.

I can tell you that in terms of on the revenue line where we talked about reported growth just over 1% and currency neutral 5.5% --

Right.

-- $77 million difference in sales.

Got you, got you. Okay. And then just looking at the BioPlex 2200, you used to put out some targets on what interim placements you thing were going to be per quarter. It looks like you did about ten, 15 per quarter this year. Do you see that -- do you have a target? You must have a target but I don't know if you can share that target with us. And do you see things starting to maybe pick up as you build more of a critical mass with the panels themselves and do you have any expectations for new panel launches in 2010?

This is Norman. I think currently what we're looking at is something like five to seven a quarter. That's --

Okay.

That's what we're looking at right now and we've got about three panels that are in the FDA now and we would hope that those would all come out sometime soon.

Okay.

And remember, Larry, last year the BioPlex installations were skewed with that one-time or single large order from lab Corp., so the five, six units a quarter is more the run rate.

Okay, and then just last question, just a housekeeping. On the tax rate, the effective tax rate, I understand was 8.5% this quarter with some credits. Do you have the number, what it would have been if you take out the -- is it the 26% to 28% going forward number, so could I just ballpark it and say without those credits it would have been about 25%? Is that a fair ballpark number?

No, I think that on an ongoing base rate, around that 26% plus range is a decent ongoing base rate for us, whether it was in 2009 or 2010.

Okay.

There's no point in estimating what a Q4 tax rate would have been because, frankly --

Doesn't matter. Going forward you're going to be at 26% or 28%, that's fair enough. Okay, great. Thanks a lot, guys. Appreciate it.

Your next question comes from the line of Jon Wood with Jefferies. Please proceed.

Hey, thanks for taking the question. This is actually [Brandon Culyerd] in for John tonight. Inventory levels looked like they were down about 9% sequentially, was that a function of FX or better inventory management and should we expect a greater-than-seasonal inventory build in the first half of the year? And then secondly, how should we think about operating cash flow in 2010?

Well, those are great questions, Brandon. Certainly we had very good inventory planning and use in the fourth quarter. I would attribute it to that more than FX. FX, if it had any impact, it would be fairly small, so a lot of credit goes to the groups for good planning and. of course. very good sales. Certainly as we move into 2010, with the anticipation of the stimulus coming into play in the US and around the world, and just some better economic climate, obviously building inventory will be part of that. Trying to do it very managed, et cetera, but as I said before, the cash flow this year is fairly extraordinary and I think as we go forward we'll probably move back towards the levels that we've seen more historically.

Okay, thanks. And then your organic revenue growth forecast, does that include an assumption for stimulus contribution? Can you give us a sense of the balance of growth between Life Sciences and Clinical Diagnostics?

Well, we don't really break out our estimates. Well, we do break out our actuals, we don't break out our estimates by group, but clearly, the Life Science group is expected to grow well this year, partially because of the stimulus, partially because of the comparisons are a little easier. On the Diagnostic side they had excellent, excellent growth in 2009. Some of that is very much related to the business and the industry but some of it, quite frankly, was more unique to the year, bringing on some of the DiaMed distributors, this one-time -- or single sell sale, if you will, to Labcorp on the BioPlex side. So I think they have a tougher compare.

Thanks, but can you -- would you care to quantify the amount of stimulus that's baked in to your revenue outlook?

No.

Okay, fair enough. All right, I'll jump back in the queue. Thanks.

Your next question comes from the line of Stephen Simpson with Northland Securities. Please proceed.

Thank you. Now that the Biotest deal has closed, could you give us a sense of what Biotest adds to the Company that you didn't already have?

It really does broaden our product line in the immunohematology area. There's certainly some overlap with what we had, but it does broaden the line and I think especially what it gives us is access to the US market.

Okay. And as an unrelated follow up, you mentioned earlier, I guess last year now, that the debt was issued in part -- at least potentially to be -- to allow you be opportunistic on the M&A front. Given that you guys generate more than enough cash to pay for your CapEx, is there any fill or a point where if you can't find adequate deals you'll start paying down the debt, or is the interest expense not a major concern at this point?

I would say it's not a major concern at this point. We see a lot of opportunities, it's just a matter of lassoing a few of them and bringing them in.

All right, thank you very much.

Your next question comes from the line of Junaid Husain with Soleil Securities. Please proceed.

Good afternoon, everyone.

Hello.

Relative to the stimulus plan and your Life Sciences business, I don't know if Brad's on the line but it sounds like stimulus is really starting to help the numbers. After the stimulus planned spending is exhausted, what would you say happens to the incremental business that you were able to capture? Does it come down or do you think that there might be some degree of stickiness to these dollars?

Brad, do you want to take that?

Okay, yes. Yes, I'll take that. Yes, I think that's a very good question. I think some of the stimulus dollars are baked into building infrastructure in the academic research sector, as far as putting platforms that themselves will consume reagents and we see that continuing. There is another component of the stimulus, which is more one-time, the so-called challenge grants, and those are going to be for larger capital instruments and those would be certainly a one-time -- certainly have a bigger impact one time. We don't have a lot of products in that range, so overall we're fairly optimistic that this will see -- give us some consistency going forward. On the other hand, you still just have this -- other factors, which relate to the amount that state governments spend on their state university systems. That's certainly a headwind. And the consolidation within our biopharma customer space resulted in reductions in research, facilities being closed. And then on a positive side, a lot of that is heading to China in terms of contract research, contract manufacturing, and just flat out our customers making investments in China. So it's kind of a rough dynamic there but overall I think we should see some ongoing benefit from what has been invested and will largely be funded in 2010.

That's helpful. And then if I might throw out the obligatory hospital spending question and hospital CapEx -- I don't know if John's on the line -- could you give us a sense for spending at hospitals for clinical diagnostic systems, and directionally speaking do you get the sense that those budgets at hospital will be up, down, or net neutral for 2010?

John is actually not on the line.

Well, Norman, maybe you have an opinion.

But I think it's probably going to be basically more of the same. They're -- in certain areas there're always pressures. I don't see any giant change in 2010 over 2009.

That's helpful. And then Christine, I've got a couple of financial odds and ends for you. Could you remind you which quarter you give out incentive comp to your sales force and your other execs? Is it done on a quarterly basis or --?

No, it's Q1 so that's a good prompt to remind everyone that if you look back historically, you see that in the first quarter of every year, our cash flow from Ops often runs a negative number because it is the quarter where we are paying annual bonuses, royalties, commissions, and of course this year we have $65 million or so for the Biotest acquisition, so I'm anticipating a good cash drain, if the you will, in Q1.

Got you, and then last question for you. Do you have a dale -- the day sales outstanding number handy?

We had good improvement in the end of the year. I think I want to say it's about 62 days or so, but I'll look that up while we move on.

And then actually one last question for you. Do you have the free cash flow number for the year, for 2009?

I do. Free cash flow, where we would just take the income from Ops less the CapEx?

Yes. Okay, I can just --

It's about $250 million.

Okay, good enough. Thanks so much, guys, that's all I've got.

Your next question comes from the line of Dan Leonard with First Analysis. Please proceed.

Hi, thanks. I have a question on your revenue growth outlook in 2010. Norman, you mentioned that the outlook for your customers is improving and you sounded rather positive but you're expecting organic revenue growth to be at roughly the same level it was in 2009, so are there offsets or is it just a conservative view?

Are there offsets or -- I didn't get that all.

I'm sorry. I said are there offsets to the positive commentary you gave that would be headwinds in 2010 or are you just being conservative by assuming that your growth rate is consistent with 2009 levels despite all of the positive commentary?

Well, we tend to be a little bit on the conservative side and then you have to account for some of the one-time events in 2009, as well.

Could you quantify the benefit of the DiaMed -- bringing the DiaMed distribution in house in 2009?

I think the incremental revenue in 2009 from acquiring some of these distributors and the lab Corp deal, et cetera, probably is $15 million to $20 million.

Okay. And then I just have a couple housekeeping questions, Christine. The DiaMed amortization on the quarter, you said that was $3.8 million?

Yes, $3.9 million.

In the fourth quarter, $3.9 million --

Yes.

-- so down from $5 million and change in prior quarters?

Well, yes -- well, no, it's about flat with what it was last year. We've been running lower most of the year compared to last year. This is probably not a bad level to use going forward from here on out.

Okay. And that includes amortization that would show up on COGS, as well as the operating expenses, right?

No, the $3.9 million is just the COGS one. There was probably another million or so in OpEx.

Okay. And then finally, the impairment charge in the quarter, that was tax deductible?

I believe it was, because it was in the US, whereas what we had last year was not in the US.

Okay. Thank you very much.

(Operator Instructions). We have a follow-up question from the line of Jon Wood with Jefferies. Please proceed.

Hey, good evening.

Hey, Brandon.

Hey. So, Brad, would you just comment on the outlook for the pharma customer base in 2010, specifically comment on the R&D side versus the bioproduction side. Do you expect higher spending levels and is that weighted more towards instrumentation, or is the environment expected to be fairly difficult again in 2010?

Overall, I would say that it would be fairly challenging because, again, with the consolidation and facilities being moved. Again, the upside of a lot of the footprint being expanded in China and we're very well positioned to take advantage of that, but overall I think the pharma customers are conservative. There's certain areas where they're investing very heavily in, which certainly could be more impact on capital instruments, certainly some of the fast-sequencing areas are interesting, protein interaction where we're well positioned to participate in. But overall, I would say it to be fairly conservative, but not that much different than what we were experiencing going into last year.

Understood, thanks. On the bioproduction business, any change in the trends there? I know it's been lumpy, but my perception, it was a decent year. If you could just comment on your expectations for '10, 2010 there?

Yes, I think it's -- I think we're pretty positive there. Again, the quar -- you can't really look at it on a quarterly basis because some of the -- really few orders really affect a lot, but overall we consider -- consistently see growth in this business in 2010 and then really going forward.

Okay, thanks. So, Christine, on the operating margin guidance I'm assuming there's no FX in that number, is that correct?

I'm not sure what you mean by assuming there's no FX in the number, only that if FX affects the top line then that obviously affects what flows to the margin.

Right. So you've guided, obviously, organic revs and then the contribution from Biotest, but if there is an impact on the top line, that would obviously affect the operating margin guidance, is that correct?

Well, if sales are bigger because of currency expenses will be bigger because of currency, and remember our -- kind of our historical rule of thumb -- for whatever it's worth -- is that for every $5 million of impact on the revenue line, whether that's going up or going down, it's about $1 million on the operating line.

All right, so a little bit of impact from margins but not much?

A little bit. Yes, I think the greatest impact, Jon, to both our gross margin and operating margin outlook for 2010 relates to the Biotest acquisition. First, because they have lower margins, they are losing money, and second because we know there will be some sort of non-cash amortization associated with the deal. We've just closed it, our folks are in there now, we're working to integrate the business and really hopefully drive that top line, which will help the margins of that business more than anything. But it'll take some time for us to really understand if there's cost paradigms going on in there that we can fix and, therefore, help the margins that way, as well.

Typically, how quickly can you realize -- I guess you would call it a revenue synergy, but how quickly can you realize a faster organic growth trajectory for a tuck-in blood bank acquisition like this? Does it take six months or is it fairly rapid?

Oh, gosh, it just depends.

Yes. Yes, it's just a fact and circumstances thing. Some can be quicker and some can be longer, but I think you should plan on a year being a good timeframe.

Okay. All right, sounds good. Thanks.

We have a follow-up question from the line of Larry Solow with CJS Securities. Please proceed.

Just on the Biotest, you said the amortization will be $3 million to $4 million, is that correct?

Yes, and then that's really almost a loose estimate -- I was going to say a guess at this point -- because during this first quarter we will do the valuation of the business itself, which will then lead us to conclusions about tangible assets, intangible assets, goodwill, et cetera, and that will help us then determine what the non-cash amortization expense and, frankly, if there's any write-up for foregone profit and things like that with this deal. It's our best guess at this time for whatever it's worth. We'll obviously have an update when we do the Q1 results.

And that's an annual number, I assume?

Yes, $3 million to $4 million for the full year.

So it's about $1 million a quarter and that'll probably all flow through the gross mar -- cost of goods.

It'll be both, but --

It'll be cost of goods.

-- primarily cost of goods. Okay. Some SG&A, too, then? Yes. So primarily cost of goods, you're right.

Got it. Okay, great. Thank you.

At this time there are no further questions. I would now like to turn the call back over to Christine Tsingos for any closing remarks.

Okay. Thank you, everyone, for taking the time to join us today as we talk about our 2009 year-end results. We very much appreciate the support that you've given us over the the past year and we look forward to another great year together. And as always, Norman and I are available for any follow-up questions you may have. Bye.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect, have a great day.