Bio-Rad Laboratories, Inc. (NYSE:BIO.B) Q2 2016 Earnings Conference Call - Final Transcript

Aug 03, 2016 • 05:00 pm ET

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Bio-Rad Laboratories, Inc. (NYSE:BIO.B) Q2 2016 Earnings Conference Call - Final Transcript

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Operator
Operator

Good day ladies and gentlemen and welcome to the Second Quarter 2016 Bio-Rad Laboratories Incorporated Earnings Conference Call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] I would now like to turn the conference over to your host for today, Ron Hutton, Vice President and Treasurer. You may begin.

Executive
Ron Hutton

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, our future financial performance and other matters. Because our actual results may differ materially from these plans and expectations, you should not place undue reliance on these forward looking statements and 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, Executive Vice President and Chief Financial Officer.

Executive
Christine Tsingos

Thanks, Ron. Good afternoon everyone and thank you for joining us. Also on the call today are Norman Schwartz, John Goetz, Shannon Hall, President of our Life Science Group; and John Hertia, President of our Diagnostics Group. Today we are pleased to report net sales for the quarter of $516.8 million, an increase of 2.1% on a reported basis versus the same period last year's sales of $506.1 million. On a currency neutral basis, year-over-year sales grew 2.8%.

During the quarter we had good growth across many of our key life science and diagnostic markets, most notably in our Droplet Digital PCR and process media product lines, as well as sales of diagnostic product for autoimmune testing and blood typing and quality control. If we look geographically, the quarterly top line growth was led by strong sales in the US, China, Asia Pacific and the emerging markets. The reported gross margin for the second quarter was below expectations at 54.2% compared to 55.2% last year. On a sequential basis, the decline in margin is primarily reflective of changes in sales mix, as well as additional expense related to higher manufacturing costs. Additionally, the second quarter costs of goods includes $1.7 million of employee related expense associated with a planned restructuring of our European operation.

For the quarter, the total non-cash purchase accounting expense recorded in cost of goods sold related to acquisitions was $7.2 million, which compares to $7.3 million in the second quarter of last year. SG&A expense for the quarter was $205.5 million or 39.8% of sales compared to $192.8 million in the year ago period. The increase in SG&A spending is driven substantially by discrete expenses of approximately $10 million for the planned European restructuring, as well as more than $3 million associated with various legal matters. When comparing to last year, remember that the second quarter of 2015 reflected a sizable currency benefit which