賽默飛世爾科技 (TMO) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen.

Welcome to the Q4 2003 BioSource International earnings conference call.

At this time, all participants are in a listen-only mode.

My name is Mike and I will be your conference coordinator today. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded.

I would now like to turn the program over to your host for today's conference, President and Chief Executive Officer, Mr. Terry Bieker.

Good morning and welcome to the fourth-quarter 2003 conference call for BioSource International.

I'm Terry Bieker, President and Chief Executive Officer of BioSource.

Also present with me today is Charles Best, our Chief Financial Officer.

We thank you for joining us as we discuss the financial results for BioSource that were issued this morning.

Hopefully, you have received our press release and have had time to review it in detail.

If you have not, please call Mr. Best at 805-383-5249 and he will send you a copy, or you may obtain a copy by visiting our Web site at www.BioSource.com.

Please note that this presentation is being webcast and will remain on our Web site for a minimum of 30 days.

Before we begin, I would like to remind you that during this call, we will be making forward-looking statements about our business, such as estimates of revenue, operating margins, capital expenditures, cash, earnings before interest, taxes, depreciation and amortization, or EBITDA, and other financial metrics.

We will also be discussing such matters as our growth strategies, R&D output and new product development.

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially.

As much, no assurance can be given that such estimates will be accurate or that the introduction of new products into the biomedical research market will be successful.

Additionally, we undertake no duty to update this information.

Please refer to BioSource's public securities filings, including our 2002 10(k) filed with the Securities and Exchange Commission on March of 2003, for additional information on the uncertainties and risk factors that may impact our business.

While Chuck will provide a detailed overview on the financial results of the Company, before he does that, let me make a few comments about the activities of the Company in the fourth quarter -- specifically, what I saw when I joined the Company in November of 2003, and what we did about it.

After Chuck then details the financial results, I will come back and set the stage for what we see as we move forward into 2004.

As I joined the Company on 1 November 2003, three things were very clear to me.

Number one, the served market is large -- about $1.6 billion; it's dynamic and growing, growing at a rate of about 6 percent.

Number two, within that market, BioSource holds some uniquely-strong market positions.

We are number two in cytokine assays; we're number one worldwide in single-transduction essays.

Number three, the poor financial performance of the Company did not align with the market opportunity, nor did it align with the Company's core competencies and strengths.

Something was wrong and something had to change rapidly.

What was wrong in the short term was that our spending and costs were too high, given our growth rate of about 5 percent; that's 5 percent without foreign exchange gains.

More specifically, what was wrong was that our custom businesses, which are approximately 32 to 33 percent of our total business, was not growing at all.

In fact, the fourth quarter was decreasing -- and we had a cost structure that generated gross margins of about one-third of the gross margin percent we received from our single-transduction, or cytokine, businesses.

Consequently, the first thing we did was to stop the bleeding.

To reduce the cost of the custom manufacturing, we immediately reduced the number of employees.

That impact of that change was a cost-reduction of about $400,000 on an annualized basis.

We also wrote-off about $570,000 of fixed assets that reduced our custom business depreciation about $130,000 on an annualized basis.

We then put in place a small but specialized sales and marketing team to strategize the plan for future market positioning and to reverse the negative growth trends that we had in certain portions of that custom business.

Finally, we realigned and positioned our custom business as a core competency, providing specialized and basic raw material biologicals that would complement the newest strategic business strategy that we were then next going to develop.

Now that the short-term issues have been addressed, we've developed and put in place a three-year business plan that clarifies a single vision around which we will drive the Company forward.

Our fundamental shift in strategy is to focus our time, effort and financial resources on our core strengths as an assay company -- a test kit company.

These assay products are higher-margin products and are where our ultimate value lies.

We are a number two global market leader in the sales of cytokine essays.

We are the number one global market leader in the development and sales of single-transduction essays, or our trademark Phospho ELISAs.

We built a strategic plan to continue to penetrate and increase our market share in the cytokine assay market and continue to maintain a strong leadership position in our Phospho ELISA assay market.

This strategy will focus our energies on these high margin products and allow us to pull through our complementary product lines, including our phosphocite (ph) specific antibodies, or what we call PSO As (ph), our serum media and our custom products, the peptides, antibodies and oligonucleotides.

As a result of this focused, strategic direction, certain assumptions related to fixed, working and human assets were evaluated and changed.

With a more focused approach on assay kits and the directly related product lines, other non-strategic products were discontinued.

This strategic shift caused us to review our existing product line and certain inventory levels and valuations of that inventory.

In the fourth quarter of 2003, $1.3 million of our currently-inventory products were discontinued, scrapped or fully reserved.

These actions taken in the fourth quarter, though fundamental in placing the Company on track for future growth, resulted in a fourth-quarter 2003 net loss of 1.4 million and a full-year net loss of $1.1 million.

What that introduction, let me know hand this discussion off to Chuck Best to explain in detail the financial results for the fourth quarter and year ended 31 December, 2003.

After Chuck reviews that in detail, I will close with an overview of how we see BioSource well-poised for performance in 2004 and the future.

Thank you, Terry.

Good morning, everyone.

Let me first start and discuss the results for the year ended December 31, 2003.

Our net sales for the year ended December 31, 2003 were a record $44.1 million, an increase of $4 million, or 10 percent, 5 percent organically compared to the net sales for the year ended December 31, 2002.

For our 2003 year-end, sales of the Company's Signaling product lines grew 31 percent compared to the comparable prior-year period, from 6.9 million to $9.1 million.

The Company's sales growth in its Cytokine product line for 2003 was 10 percent, growing from $18.2 million to 20.1 million.

The Company's sales in its custom product lines remained flat to the comparable prior-year period of $14.9 million.

As Terry mentioned, with our new strategy designed to focus on assays and their directly related products, certain assumptions related to inventory and its valuations changed.

Other non-strategic product lines traditionally offered for sale by the Company were evaluated for inclusion in our new, strategic direction.

Accordingly, in the fourth quarter of 2003, approximately $250,000 of catalog products were discontinued and approximately $1 million of products were scrapped and reserved for.

Included in our 2003 general and administrative expenses was $560,000 related to the hiring of our current CEO in November of 2003 and the resignation of our previous CEO in September of 2003.

We also incurred additional severance costs totaling $130,000 in the latter part of 2003.

In the fourth quarter of 2003, the Company also incurred long-lived (indiscernible) charges totaling $341,000 related to the sale or disposition of certain fixed assets -- primarily related to the Company's oligonucleotide division.

These specific charges, totaling $2.3 million discussed above, contributed to the Company's incurring a net loss for the fiscal year 2003 of $1,070,000.

This was compared to a net loss of $1,052,000 for the comparable period in 2002.

Our operating loss for 2003 was $1,537,000, compared to an operating income of $1,283,000 in 2002.

Also in 2002, the Company recognized a non-cash charge net of applicable income taxes of $2,447,000 representing the cumulative effect of a change in the accounting principle resulting from the implementation of Financial Accounting Standards 142, which is accounting for goodwill and other intangible assets.

Our gross profit margin was 50 percent of the year ended December 31, 2003 and 56 percent for the year ended December 31, 2002.

The Company's margins decreased 6 percent due primarily to the Company's shift in strategic direction and the discontinuation and reservation of certain inventory and to general increases in our scrap and obsolescence, all primarily related to the shift in strategic direction.

Also contributing to this margin decrease were lower margins in our custom product lines during 2003 compared to 2002, particularly our oligonucleotide division.

Specific steps have been taken to reduce our costs, as mentioned before, in our custom product lines and we are projecting to see an improvement in our consolidated gross profit margin in 2004.

Research and Development expense for the ended December 31, 2003 and 2002 were 7 million and 6.2 million and represented 16 percent and 15 percent of sales, respectively.

The increase in Research and Development expenses for 2003, when compared to 2002, reflects the Company's increased expenses in additional personnel and materials in the Cytokine and Signal transduction research areas.

The Company made significant investments in its R&D capabilities during the first six months of 2003.

The results of this investment resulted in development and release of higher-quality novel products and increased sales in both the Cytokine and Signaling product lines.

Selling, Marketing and Administrative expenses were $16.1 million for the year ended December 31, 2003 and 14.3 million for the year ended December 31, 2002, representing 37 and 36 percent of sales, respectively.

Excluding the charges of $690,000 related to the costs incurred in connection with the resignation and hiring of our CEO in 2003 and other severance costs mentioned above, SG&A as a percentage of sales would've been 35 percent.

In 2003, our G&A expenses, excluding those charges of 690,000 mentioned above, increased approximately $250,000 due primarily to increase in general office costs, consulting fees and bad debt expenses.

Our sales and marketing expense for the year ended December 31, 2003 increased approximately $950,000 compared to 2002, due primarily to increased personnel costs.

The Company is recognizing an income tax benefit of $884,000 for 2003.

The Company's income taxes have and may continue to fluctuate in the future, depending on a number of factors, including the ability to use its deferred tax assets as of December 31, 2003.

The Company does believe it is more likely than not that it will be able to use those assets.

In addition, the Company continues to benefit from R&D and other tax credits which, when applied to income levels for the periods presented, is resulting in effective tax rates lower than the current applicable federal and state statutory rate.

Let me now discuss briefly a few financial highlights for the quarter ended December 31, 2003.

Net sales were $10.7 million, an increase of $800,000 or 8.5 percent compared to net sales for the quarter ended December 31, 2002.

The Company's revenues benefited by a $571,000 positive impact of foreign exchange for the quarter ended December 31, 2003.

For the three months ended December 31, 2003 sales of the Company's Signaling product lines grew 24 percent compared to the comparable prior-year period from 1.9 to $2.3 million.

The Company's growth in its Cytokine product line for the quarter ended December 31, 2003 was 13 percent, going from 4.4 to $5 million.

The Company's sales in its custom product line for the fourth quarter decreased 5 percent compared to the comparable prior-year quarter from $3.5 million to $3.4 million.

Two million dollars of the $2.3 million of fixed working (indiscernible) asset expenses mentioned above were incurred in the fourth quarter of 2003.

Consequently, the Company did incur a net loss in the fourth quarter of $1,417,000, compared to a net income of $46,000 for the fourth quarter of 2002.

Our gross profit margin was 37 percent for the quarter ended December 31, 2003 and 54 percent for the three months ended December 31, 2002.

This margin decrease was primarily due to the Company's shift in strategic direction and the discontinuation and reservation of certain inventory and to generate increases in its scrap and obsolescence in 2003 compared to 2002.

Also contributing to this margin decrease were lower margins in our custom product lines and as mentioned before, this was primarily in our oligonucleotides division.

Our R&D expenses for the quarter ended December 31, 2003 and 2002 were $1.5 million and $1.8 million respectively and represented 14 percent and 18 percent of sales.

This decrease reflects the Company's focused efforts to manage costs and align them with the new strategic direction in the fourth quarter of 2003.

For the year, the Company increased R&D spending by 13 percent and expects to keep its spending in line in 2004 with 2003 spending levels.

This total investment in the Company's research capability has resulted in development of higher quality and novel products, which have helped increased sales in both our Cytokine and Signaling product lines.

Our selling, marketing and administrative expenses were $4.4 million for the quarter ended December 31, 2003 and $3.7 million for the quarter ended December 31, 2002, representing 41 percent and 31 percent of sales, respectively.

Our general and Administrative expenses were approximately $600,000 higher in the quarter ended December 31, 2003 compared to the comparable prior-year quarter due primarily to $435,000 of charges related to the hiring of the Company's new CEO and certain other severance costs.

Sales and Marketing expenses increased $130,000 in the fourth quarter of 2003, compared to 2002, due primarily to an increase in personnel costs.

The Company does anticipate a continued investment in its Sales and Marketing capabilities but will manage this investment in line with anticipated 2004 sales growth.

Finally, in the fourth quarter of 2003, the Company was not active under its stock repurchase program.

The total number of shares repurchased since inception in October, 2001 has been 1.5 million shares and total cash outlays have been $8.7 million.

We will continue to monitor our stock price and our alternatives for the best uses of our cash resources.

I hope this summary has been helpful.

I would now like to turn the discussion back to Mr. Bieker.

Thank you, Chuck.

Our goal is to increase our market share in the cellular pathway markets through increased market penetration of the Cytokine and Signal transduction assays and related product lines.

This approach centers our thinking and our operational approach on our core strengths and our higher-margin products.

In addition, we will be placing an additional emphasis on uncompromising customer support.

This is an integral part of our strategy to differentiate ourselves as a leader in our industry.

(inaudible) properly position to support our customers, both internal and external, we have realigned our organizational structure in lines of reporting.

We have created a new, corporate-wide quality function and centralized all the technical operation of the Company, manufacturing and R&D, under that quality umbrella and promoted Kevin Reagan to Executive Vice President, Technical Operations.

Kevin assumed his new role 15 February of this year.

We're now centralizing all of our global customer interface functions under one leadership also so that we can provide a unified and superior support network for our customers.

Jeff Vangenechten, currently the managing director of our European operations, will assume the new role of Executive Vice President of Commercial Operations as soon as we finalize his transfer from Belgium.

When Jeff's transfer is complete, he will assume responsibility for our global sales, marketing and custom businesses.

He will also continue his role as managing director of BioSource Europe but will relocate to corporate headquarters here in Camarillo, California.

Our capabilities and strengths in developing and distributing our traditional Cytokine ELISAs and our market leadership position in our newer Signal transduction Phospho ELISA product line are where we will be putting our effort and our spending. the products directly related to these assays, including antibodies, proteins and serum media, will be equally important as complementary growth factors for the Company.

To that end, we have just finalized our three-year R&D plan and will now invest approximately 80 percent of our R&D efforts into pathway assays and the basic biologicals related to those assays.

We will invest the remaining 20 percent of our R&D into discovery of the future -- the discovery of those highly important biomarkers for the understanding of the disease process.

Finally, the success of our company resides with our customers and our employees.

We've made some significant changes in the manner in which we serve our customer and manage our business.

The biggest challenge we face is focused access to the vast market we serve.

As I stated earlier, the global cellular pathway market is $1.6 billion.

To maximize our growth, we have focused on the smaller -- about $140 million market, the fastest growing -- currently at 10 percent and we see it moving to 20 percent -- portion of that market where we can create maximum differentiation and receive the best return on our core competencies and investments.

This focused direction, combined with the dedication and commitment of our employees, from our European manufacturing R&D and marketing operations, to our global network of distributors, to our US-based operations to all 270 BioSource employees worldwide focus on one vision of serving our customers.

With this, we will be successful.

I see BioSource becoming a global leader in the development and commercialization of cellular pathway assays and related biologicals.

We intend to differentiate and to build value by leading certain high-volume test markets, by creating secreting superior customer support, and by annually and consistently improving our financial performance.

For 2004, we are projecting a total sales growth of 8 to 10 percent and a minimum EBITDA of $3 million.

Our goal is to achieve consistent improvement in revenue and EBITDA over the next three years.

Building shareholder value through increased financial performance is the highest priority of this company.

In closing, I must note that in accordance with Regulation G, you can see a reconciliation of our actual and projected EBITDA numbers, which I mentioned on this conference call, to our Generally Accepted Accounting Principles, or GAAP, net income numbers at the end of this conference call script, which will soon be posted on our Investor Relations section of our Web site at www.BioSource.com.

Thank you very much.

We would like now to open the forum to questions.

(OPERATOR INSTRUCTIONS).

Paul Knight with Thomas Weisel Partners.

This is Tim Mung (ph) here.

Could you give a little bit more color on the restructuring of the custom business? (indiscernible) business (indiscernible) properly discontinued and what happened to the custom (indiscernible) custom antibody and also cell culture and media business within that segment?

Hello, Tim.

I understood your question to imply that we had discontinued pieces of the custom business.

Specifically, you mentioned the oligo business.

That is not the case.

What we have done is we have lowered significantly the cost of production of these custom products, and we have focused the business from a customer interface standpoint to be packaged, to be bundled if you will, with our emphasis on going after the large, high-volume assay customer.

And that assay customer who traditionally buys the test kits, again at higher volume, they also have requirements for customized biologicals.

So we will leave that customer base with the high-volume assay test kits and then we will complement and sell out our offering in this cellular pathway area by providing additional biologicals through our custom business.

So we do not intend to discontinue the business.

What we did was we reduced the cost and focused it such that it was complementary to this new direction of focusing on high-volume product lines.

I have a follow-up question.

With the inventory write-down of $1.3 million in the quarter, the gross margin return to a mid 50 percent level in '04 -- where did that fall into?

I will answer that question.

The amount of adjustments we made to inventory in the fourth quarter were about $1.3 million.

Then we had some other charges in G&A and some long-lived asset impairments that made the total charges reach 2.3 million.

Certainly, the effort was to realign and look at our inventory and align it with our new strategy.

As I mentioned before, we do expect to see margin improvements in 2004.

That margin improvement -- we expect to see, exclusive of some of these charges that were taken in the fourth quarter that were related to inventory valuation adjustments.

So your comment about getting back to the mid 50s in terms of margin is exactly the direction that we're moving to, and that will be something that we believe will be within a percent on one side of that fence or the other by the end of 2004.

Thank you, Chuck.

(OPERATOR INSTRUCTIONS).

Doug Fisher with Matador Capital.

Hi, guys.

I just wanted to ask a question about the Signal transduction area.

If I kind of look at the kind of quarter-to-quarter trends, you did demonstrate nice growth on a full-year basis, but just trying to understand the drivers a little bit better.

I think for the full year it was something like 9.5 million up from 7.2, but if I look at the way it played out sequentially, you kind of got a bump-up in the first quarter last year and then it pretty much went sideways for the rest of the year.

So, I wonder if you can just talk a little bit about what kind of a trend we should expect to see there as 2004 plays out.

That's a very observant comment.

As our base grows in the Signal transduction area, our percent growth has declined; it has declined over the period of the year.

For the year, in Signaling, we drew it 31 percent; for the year, in the cytokines, we grew about 10 percent.

We are still growing faster than the market.

We are increasing our market share in the Signal transduction area, and we believe that with our focus on specifically on the assay market (sic) within signal transduction -- again Signal transduction is a cellular pathway inside of the cell.

We believe that with our focus on the assay portion of that, that our growth in that area is going to further accelerate.

Okay, that's somewhat helpful.

I guess I'm really trying to understand maybe if we can talk about 2003 and what happened there.

Again, not looking more sequentially than year-over-year, you got the big bump in the first quarter, and so I guess if you could talk to whether that was a function of a bolus of new products hitting the market, or pricing or some other factors.

Then help meet understand how we would get a similar bump in 2004 and whether I should expect the same kind of a quarterly progression with kind of a bump-up and then a flattish sequential progression, or if I should expect kind of a more gradual quarter-on-quarter improvement or what I should really look for.

There were industrial trends in 2003 that moved the market growth in Signal transduction down as we progressed through the year.

We suffered because of that.

Again, I say we grew faster than the market but the market did decrease with certain large pharmal consolidations and with the general economic climate.

We see that turning around from an industry standpoint.

We see positive trends, particularly in the pharma and biotech areas.

We see the budgets loosening up and that market regaining strength.

So, I would not be forecasting that we should see a large pop-up in the first quarter and then a subsequent decline throughout the year in 2004, like we did see in 2003.

I really believe that that trend was not related to our performance in the market but was a result of the market per se.

Okay, that color is helpful.

Can you talk a little bit about new product introductions?

I don't know to what extent you can quantify kind of the number of introductions you had in 2003 and what you anticipate for 2004.

The direction really is changing in terms of considering the future potential of our company by the number of new products that we introduce.

The past strategy has been to be basically BioSource, a single source for all of your biological needs.

As we are focusing now towards assays, that strategy changes.

With a general, single source for all biological needs, we introduced lots of new products, lots of new products that were of a biological nature rather than assay test kits.

Many of those products were -- it was more of a menu-driven -- completing out the menu-driven type of an approach.

Our approach, as we go forward, and the approach that we feel will give us the best return on our investment is that we are taking about 80 percent of our R&D and focusing that on assay test kits and then the biologicals or antibodies and recombinants that relate directly to those assay kits.

Then we are spending the other 20 percent sort of looking around the corner to see what's in the future for these new biomarkers.

Having said all of that, you will see a lesser number, if you will, of product introductions in 2004 and 2005 and 2006, but you will also see, though, with that lesser number of product introductions, you'll see a much higher revenue per product and a better return for the Company.

That's helpful.

You may have -- (technical difficulty) -- this before when you were addressing kind of the markets in which you participate in and their growth rates, but I was wondering, for the Signal transduction category in particular, you mentioned that market slowed somewhat and you expect it to pick back up.

What was that growing at, kind of market-wise, in 2001-2002?

What did that decelerate to by kind of the second half of 2003?

What do we think that can rebound to in 2004?

I don't have the specific numbers, Doug, here but it was a couple of percentage points lower than our growth.

As I say, we did continue to gain market share throughout the year and as our growth decelerated, the reports that we had coming back from the market was that that was also decelerating.

I just don't have those numbers here in front of me, Doug.

That's understandable.

Thank you.

Paul Knight with Thomas Weisel Partners.

Sorry, this is Tim again.

I was on mute.

Can you hear me?

I was wondering, if you looked at Q4, was the pharma and biotech customer base improving as it wrapped up in that period?

Did it improve as the quarter finished?

It did, but just a little bit.

I wouldn't say it was a fundamental shift.

We did see the turn around.

We are seeing a better resurgence.

I think most of these pharma companies do their budgeting on an annualized basis and as we look into January and February, we are seeing more of a resurgence.

Okay, thank you.

A follow-up from Doug Fisher with Matador Capital.

Hi, just a couple of small things -- you talked to the R&D spend and sales and marketing.

Maybe you did, but I didn't get that for the G&A line, where you thought that would go in 2004.

Also, if you could be a little more specific in terms of the tax rate and what you expect that to be in '04, even if you need to just put kind of brackets around it.

Then also, in '05, I know it's a bit of a moving target, but will that start to normalize?

I will answer those for you.

Yes.

In terms of G&A spend, if you look at the numbers in our press release for the end of the year, we are targeting our G&A expense to the relatively flat, slightly increasing but very, very modestly and certainly will be managed -- as will our R&D in particularly our sales and marketing line with our sales growth for '04 -- which as you probably noticed in the prior year, the managing of those costs was a little bit behind the curve in terms of the growth that we were getting.

So we are acutely aware of managing those.

With expect to the effective tax rate, obviously, our history has said we've been in a position where our credits, if you will, for tax purposes have benefited us and in the loss position that we were in in '03, we are getting a big benefit.

We do have a lot of deferred tax assets on the book.

We do believe that we will be able to utilize them, which is a very positive sign because it does give us the ability to have lower-than-statutory tax rates, going forward.

As we continue improved financial performance, we will see an ever-increasing effective tax rate.

So for '04 and '05, we are obviously projecting positive net income positions and so we will start seeing our effective tax rate and get back up to the 20, 25, 30 percent rate over the next two or three years.

Okay.

On the custom business, I'm wondering if there are -- or I imagine that, just given the pricing trends, the oligo business remains difficult.

I am wondering if there are pockets of that, say, like cell culture, where you are seeing pretty decent results.

There are pockets and those are exactly the pockets that we're going to focus on.

Cell culturing was growing 13, 14 percent a year in that marketplace.

It's a market that's growing in total about 5 percent, so we're not only growing faster than the market, there's nice, reasonable growth on that piece of the business.

You've touched on the right thing.

I mean, we have to look into those markets and focus on the areas of growth and focus on the areas that are complementary to this new vision that we have.

That's why I say, the custom businesses -- although the performance, the financial performance was far from satisfactory in 2003, they can play a very key role in our future if we properly position him.

We feel that we have taken the actions to do that.

A last question -- the 8 to 10 percent topline growth for the full year '04 for all the businesses -- can you just give me a feel for what the individual segments are expected to do?

I can answer that for year, Doug.

Outside of getting too specific in those segments, we do see and our goal in the custom business is to maintain and slightly increase the levels that we're seeing now.

As Terry mentioned, we've really reduced some of the manufacturing costs in those areas but we've also put some costs in on the sales and marketing side to position ourselves to succeed really from a margin level in the custom businesses.

In addition, we absolutely have our Signaling product line growing at accelerated rates for the Company, as compared to our Cytokine business, which as you know is a much more mature market.

So, we've absolutely got our highest percentage growth in our Signaling market.

Then we've positioned ourselves to succeed in the Cytokine markets as well but we've positioned with a little bit lower growth.

So, without getting too specific, those are the three areas that we are -- that's pretty much how we are positioning our growth.

As Terry mentioned, we're looking for a minimum of 3 million EBITDA and so we feel pretty comfortable with the plan that we have that we will reach certainly the minimum target.

With that EBITDA target, do you have a corollary cash flow from operations, or a free cash flow objective for the year?

You know, at this point, we're not in a position to want to comment on the cash flow just because there are certain activities related to stock repurchase and capital expenditures that are somewhat -- we can make choices in and so we haven't really wanted to disclose that end-of-the-year cash position but I could say and certainly should say that our cash position at the end of September was $1.5 million and our cash position at the end of December was 3.2.

So, even though we were in a loss position for the quarter, we certainly had some positive cash running through the business.

That's helpful.

Thank you.

(OPERATOR INSTRUCTIONS).

There are no further questions at this time.

Please proceed.

Well, just in closing, then, I'd like to comment that the Company is not comfortable or by any means satisfied with the financial performance of 2003, but we have the utmost confidence that we've taken the right actions here to properly position ourselves for the future.

We thank you for your participation in this call and we thank you for your support as we move forward into success in 2004.

Thank you.

This concludes your Q4 2003 BioSource International earnings conference call.

Thank you for your participation today.

You may now disconnect.