Bio-Rad Laboratories, Inc. (NYSE:BIO.B) Q3 2016 Earnings Conference Call - Final Transcript

Nov 01, 2016 • 05:00 pm ET

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Bio-Rad Laboratories, Inc. (NYSE:BIO.B) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good day, ladies and gentlemen, and welcome to the Third 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 follow at that time (Operator Instructions)

As a reminder this conference may be recorded. I'd now like to introduce your host for today's conference, Mr. Ron Hutton, Vice President and Treasurer. Mr. Hutton you may begin.

Executive
Ronald Hutton

(Forward-Looking Cautionary Statements) With that, I'd like to turn the call over to Christine Tsingos, EVP and CFO.

Executive
Christine Tsingos

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 third quarter of $508.7 million, an increase of 8.3% on a reported basis and versus the same period last year's sales of 470 million. On a currency neutral basis, sales increased an impressive 9.1%, when compared to last year.

During the quarter, we experienced good currency neutral sales growth across many of our regions with North America, Asia Pacific and China all up double digits. We also experienced good currency -- good growth across many key Life Science and diagnostic product areas, including strong sales of our Droplet Digital PCR instruments and consumables, process chromatography media, and products for diabetes monitoring and autoimmune testing.

You may remember that in the third quarter of last year, our Life Science Group faced a significant slowdown, primarily related to system and productivity challenges associated with the go live of our new SAP system in North America. At the time, we estimated that the system adoption issues negatively impacted sales by $5 million to $10 million in the third quarter of 2015.

Even with this relatively easier to compare to last year, and assuming the impact to be at the top of the range of $10 million, currency neutral sales would have increased more than 6% in the third quarter of 2016.

The reported gross margin for the quarter was essentially in line with expectations at 54.9% and compares to 54.2% last quarter and 56.1% in the year ago period. This decline in margin versus last year is related to higher manufacturing and logistics costs, increased amortization of intangibles and a shift in the product mix, which included a higher level of instruments.

During the quarter, the number of diagnostic instrument placements increased by more than 20% versus the same period last year. This change in the product mix put downward pressure on the margin in the short-term, but bodes well for higher margin consumable growth in the future.

The total non-cash purchase accounting expense recorded in cost of goods sold related to prior acquisitions was $7.2 million for the quarter and compares to $6.7 million in the year ago period. The increase in amortization is related to the new flow cytometry technology purchased earlier this year.

SG&A