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| 8-K - 8-K FEBRUARY 27, 2018 - BIO-RAD LABORATORIES, INC. | bio-8k2272018.htm |
Exhibit 99.1
Press Release
Bio-Rad Reports Fourth-Quarter and Full-Year 2017 Financial Results
HERCULES, Calif.-February 27, 2018-Bio-Rad Laboratories, Inc. (NYSE: BIO and BIOb), a global leader of life science research and clinical diagnostic products, today announced financial results for the fourth quarter and fiscal year ended December 31, 2017.
Fourth-quarter 2017 net sales were $620.4 million, an increase of 8.6 percent compared to $571.5 million reported for the fourth quarter of 2016. On a currency-neutral basis, quarterly sales increased 5.4 percent compared to the same period in 2016. Fourth-quarter gross margin was 54.7 percent compared to 55.0 percent during the fourth quarter in 2016.
Life Science segment net sales for the fourth quarter were $237.9 million, an increase of 15.0 percent compared to the same period in 2016. On a currency-neutral basis, Life Science segment sales increased by 12.3 percent compared to the same quarter in 2016. Currency-neutral sales growth was primarily attributed to sales of Droplet Digital PCR, cell biology product lines, and process media. The currency-neutral sales increase reflected growth in North America, Europe, and Asia Pacific.
Clinical Diagnostics segment net sales for the fourth quarter were $378.4 million, an increase of 4.9 percent compared to the same period in 2016. On a currency-neutral basis, net sales were up 1.5 percent. Currency-neutral sales from the fourth quarter reflected growth in blood typing, immunology, diabetes, and quality control product lines. The currency-neutral sales increase for the quarter was principally due to growth in EMEA, Asia Pacific, and Latin America.
Net income for the fourth quarter of 2017 was $69.9 million, or $2.32 per share on a diluted basis, compared to a net loss of $20.6 million, or ($0.70) per share on a diluted basis, during the same period in 2016. Net income for the fourth quarter 2017 was impacted by numerous non-cash or non-recurring items and by a substantial benefit as a result of the 2017 Tax Cuts and Jobs Act.
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The following table compares certain non-cash or non-recurring items from Q4 2017 to Q4 2016:
(in millions) | Q4 2017 | Q4 2016 | |
Purchase accounting amortization | |||
COGS | $4.9 | $4.5 | |
SG&A | $2.1 | $1.7 | |
Acquisition-related expense | |||
R&D | $5.5 | – | |
Contingent consideration | |||
SG&A | $(6.4) | $1.8 | |
Restructuring | |||
COGS | $2.4 | – | |
SG&A | $6.9 | – | |
R&D | $15.9 | – | |
Legal matters | |||
COGS | $(11.0) | – | |
SG&A | $0.2 | $10.9 | |
Period Adjustment | |||
COGS | $9.3 | – | |
Impairment of goodwill and long-lived assets | $11.5 | $59.9 | |
Total impact to operations | $41.3 | $78.8 | |
The effective tax rate for the fourth quarter of 2017 was an 85.5 percent benefit compared to a 27 percent benefit for the same period in 2016. The lower effective tax rate is primarily due to an estimated provisional tax benefit from the 2017 Tax Cuts and Jobs Act (“Tax Act”) of approximately $66 million. The fourth quarter tax rate includes a $121 million benefit for the remeasurement of federal net deferred tax liabilities as a result of the reduction in the corporate tax rate from 35 percent to 21 percent, offset by a tax expense of $55 million for the mandatory deemed repatriation on certain foreign earnings. The provisional estimate of the impact of U.S. tax reform is based on our initial analysis of the Tax Act and may be adjusted in future quarters.
Full Year 2017 Results
For the full year of 2017, net sales were $2,160.2 million compared to $2,068.2 million in 2016, an increase of 4.4 percent. On a currency neutral basis, sales increased by 3.5 percent. Full-year gross margin was 55.0 percent, unchanged, compared to the same period reported in 2016. Full-year reported sales for the Life Science segment were $785.2 million, an increase of 7.5 percent. On a currency-neutral basis, full-year sales increased 6.8 percent compared to the same period in 2016. Full-year reported sales for the Clinical Diagnostics segment were $1,360.8 million, an increase of 2.8 percent compared to the same period in 2016, or an increase of 1.6 percent on a currency-neutral basis.
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Full-year net income in 2017 was $114.7 million, or $3.82 per share on a fully diluted basis, compared to $28.1 million, or $0.95 per share in 2016. Net income for the full year 2017 was impacted by numerous non-cash or non-recurring items and by a substantial benefit as a result of the 2017 Tax Cuts and Jobs Act.
The following table compares certain non-cash or non-recurring items from 2017 to 2016:
(in millions) | 2017 | 2016 | |
Purchase accounting amortization | |||
COGS | $21.9 | $26.1 | |
SG&A | $7.9 | $6.9 | |
Acquisition-related expense | |||
COGS | $10.0 | – | |
R&D | $20.0 | – | |
Contingent consideration | |||
SG&A | $(20.1) | $ (0.4) | |
Restructuring | |||
COGS | $2.4 | $1.7 | |
SG&A | $8.5 | $10.0 | |
R&D | $23.5 | – | |
Legal matters | |||
COGS | $(10.4) | – | |
SG&A | $(0.7) | $21.0 | |
Impairment of goodwill and long-lived assets | $11.5 | $62.3 | |
Total impact to operating income | $74.5 | $127.6 | |
The effective tax rate in 2017 was a 17.3 percent benefit compared to an expense of 32.3 percent in 2016. The effective tax rate for 2017 included a tax benefit of $66 million related to the 2017 Tax Cuts and Jobs Act. The effective tax rate for 2016 included additional tax liabilities for unrecognized tax benefits of $17.5 million related to the non-deductibility of interest expense in foreign jurisdictions.
“We are pleased with the growth and operating performance in the fourth quarter and for the year,” said Norman Schwartz, Bio‑Rad President and Chief Executive Officer. “Reflecting on 2017, I would describe it as a year of focus and accomplishment. We are beginning to see the benefit of investments we have made over the past few years along with changes to both our structure and operations. This gives us good momentum as we enter 2018,” he said.
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2017 Full-Year Highlights
• | Full-year sales were $2,160.2 million compared to $2,068.2 million in 2016. After normalizing for the impact of currency, full year sales increased 3.5 percent. |
• | Year-over-year net income in 2017 was $114.7 million, or $3.82 per share on a fully diluted basis, compared to $28.1 million, or $0.95 per share, on a fully diluted basis, in 2016. |
• | In January, Bio-Rad and Illumina, Inc. (NASDAQ: ILMN) announced the launch of the Illumina® Bio-Rad® Single-Cell Sequencing Solution, the first next-generation sequencing (NGS) workflow that enables a deep view into the gene expression of individual cells to better understand their functions in complex tissues. |
• | In February, Bio-Rad acquired RainDance Technologies, Inc. The intellectual property portfolio and product lines of RainDance encompass a wide range of biological reactions in droplets, with applications in life science research and clinical research. |
• | Also during the first quarter, Bio-Rad launched the ChemiDoc MP Digital Imaging System for imaging and analyzing gels and western blots, offering precise, reproducible fluorescence, chemiluminescence, and colorimetric gel and blot detection, analysis, and documentation in a single system. |
• | In May, Bio-Rad announced that it had received 510(k) clearance from the U.S. Food and Drug Administration (FDA) for enhanced capability with its IH-Com data management software to manage patient results with the company’s IH-1000 automated blood typing instrument. |
• | In June, the company announced that it had received FDA clearance for its BioPlex 2200 Syphilis Total & RPR assay, a one-step universal testing method to aid in the diagnosis of syphilis infection. |
• | In July, the company announced FDA clearance for its BioPlex 2200 ToRC IgM Assay for the detection of IgM class antibodies to Toxoplasma gondii, rubella, and cytomegalovirus (CMV) offered in a multiplexed panel, offering a rapid and comprehensive prenatal testing solution for three of the most clinically significant diseases. |
• | Also during the third quarter, Bio-Rad announced that the D-10 Hemoglobin A1c assay received clearance from the FDA to aid in diagnosing pre-diabetes and diabetes, augmenting the use of the company's D-10 System beyond a monitoring method. |
2018 Financial Outlook
For the full year 2018, the company anticipates currency neutral revenue growth of approximately 3.5 to 4.0 percent and improved profitability with a currency neutral operating margin target of 10 percent. Management will discuss this outlook in greater detail on the fourth-quarter and full-year 2017 financial results conference call.
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“Looking ahead to 2018, we expect another year of growth in many of our key product areas and geographies,” Mr. Schwartz said. “The anticipated expansion in our operating margin for 2018 represents a significant step toward achieving our longer term goal of an EBITDA margin of 20 percent or better in 2020. Moreover, we will continue to look for ways to deploy our capital in a manner that enhances long-term shareholder value.”
Non-GAAP Reporting
Bio-Rad will begin to report non-GAAP results in the first quarter of 2018. Non-GAAP results will exclude amortization of acquired intangible assets, acquisition-related costs, restructuring charges, asset impairment, valuation changes of equity owned, and significant legal-related charges or benefits and associated legal costs, and if applicable, duplicate or non-recurring operating costs. The company will also exclude tax effects associated with these exclusions as well as significant discrete tax events. Management believes that these non-GAAP measures will provide useful information to investors to evaluate performance on an operational basis, provide quarter-over-quarter comparisons excluding unusual items, show better comparisons among company peers, and provide additional transparency to the financial community.
Management will discuss fourth quarter and fiscal year ended December 31, 2017
results in a conference call at 2 PM Pacific Time (5 PM Eastern Time) February 27, 2018. Interested parties may access the call at 855-779-9068 within the U.S. or 631-485-4862 outside the U.S., conference ID: 3097736. You may also listen to the conference call via a webcast that is available in the "Investor Relations" section of our website under “Quarterly Results” at www.bio-rad.com. The webcast will be available for up to a year.
Bio-Rad, BioPlex, ChemiDoc, D-10, and Droplet Digital are trademarks of Bio-Rad Laboratories, Inc. in certain jurisdictions.
About Bio-Rad
Bio-Rad Laboratories, Inc. (NYSE: BIO and BIOb) is a global leader in developing, manufacturing, and marketing a broad range of innovative products and solutions for the life science research and clinical diagnostic markets. With a focus on quality and customer service for over 65 years, our products advance the discovery process and improve healthcare. Our customers are university and research institutions, hospitals, public health and commercial laboratories, biotechnology, pharmaceutical, as well as applied research laboratories that include food safety and environmental quality testing. Founded in 1952, Bio-Rad is based in Hercules, California, and has a global network of operations with more than 8,000 employees worldwide. Bio-Rad had revenues exceeding $2.1 billion in 2017. For more information, please visit www.bio-rad.com.
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This release may be deemed to contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements we make regarding estimated future financial performance or results, the growth of our business, momentum for our performance as we enter 2018, expectations regarding the benefits of investments in our structure and operations, anticipating growth and margin expansion in 2018 and beyond, the significance of steps towards achieving our longer term goal of an EBITDA margin of 20% or better in 2020, continuing to look for ways to deploy our capital in a manner that enhances long-term shareholder value, and our expectations regarding our products and our release of new products. Forward-looking statements generally can be identified by the use of forward-looking terminology such as, “anticipate,” “believe,” “expect,” “assume,” “continue,” “may,” “will,” “intend,” “estimate,” or similar expressions or the negative of those terms or expressions, although not all forward-looking statements contain these words. Such statements involve risks and uncertainties, which could cause actual results to vary materially from those expressed in or indicated by the forward-looking statements. These risks and uncertainties include our ability to develop and market new or improved products, difficulties in implementing our global enterprise resource planning system, recent and planned changes to our global organizational structure and executive management team, our ability to compete effectively, foreign currency exchange fluctuations, product quality and liability issues, our ability to integrate acquired companies, products or technologies into our company successfully, international legal and regulatory risks, reductions in government funding or capital spending of our customers, supply chain issues, changes in the healthcare industry, global economic conditions, and natural disasters and other catastrophic events beyond our control. For further information regarding the Company's risks and uncertainties, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s public reports filed with the Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2017, and its Annual Report on Form 10-K for the fiscal year ended December 31, 2017 to be filed with the SEC. The Company cautions you not to place undue reliance on forward-looking statements, which reflect an analysis only and speak only as of the date hereof. Bio-Rad Laboratories, Inc. disclaims any obligation to update these forward-looking statements.
Investor & Financial Contacts:
Bio-Rad Laboratories, Inc.
Christine Tsingos
Executive Vice President and Chief Financial Officer
510-724-7000
investor_relations@bio-rad.com
Ron Hutton
Vice President and Treasurer
510-724-7000
investor_relations@bio-rad.com
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Bio-Rad Laboratories, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 620,433 | $ | 571,453 | $ | 2,160,153 | $ | 2,068,172 | |||||||
Cost of goods sold | 280,840 | 257,096 | 972,754 | 930,085 | |||||||||||
Gross profit | 339,593 | 314,357 | 1,187,399 | 1,138,087 | |||||||||||
Selling, general and administrative expense | 204,206 | 220,020 | 808,942 | 816,724 | |||||||||||
Research and development expense | 76,818 | 57,543 | 250,301 | 205,864 | |||||||||||
Impairment losses on goodwill and long-lived assets | 11,506 | 59,945 | 11,506 | 62,305 | |||||||||||
Income (loss) from operations | 47,063 | (23,151 | ) | 116,650 | 53,194 | ||||||||||
Interest expense | 5,506 | 5,096 | 21,914 | 21,942 | |||||||||||
Foreign currency exchange losses, net | 1,460 | 966 | 9,128 | 4,542 | |||||||||||
Other (income) expense, net | 2,414 | (1,026 | ) | (12,197 | ) | (14,850 | ) | ||||||||
Income (loss) before income taxes | 37,683 | (28,187 | ) | 97,805 | 41,560 | ||||||||||
Benefit from (provision for) income taxes | 32,216 | 7,617 | 16,935 | (13,435 | ) | ||||||||||
Net income (loss) | $ | 69,899 | $ | (20,570 | ) | $ | 114,740 | $ | 28,125 | ||||||
Basic earnings per share: | |||||||||||||||
Net income (loss) per basic share | $ | 2.35 | $ | (0.70 | ) | $ | 3.87 | $ | 0.96 | ||||||
Weighted average common shares - basic | 29,765 | 29,552 | 29,655 | 29,440 | |||||||||||
Diluted earnings per share: | |||||||||||||||
Net income (loss) per diluted share | $ | 2.32 | $ | (0.70 | ) | $ | 3.82 | $ | 0.95 | ||||||
Weighted average common shares - diluted | 30,108 | 29,552 | 30,034 | 29,646 | |||||||||||
Note: As a result of the net loss for the three months ended December 31, 2016,
all potentially issuable common shares have been excluded from the diluted shares
used in the computation of earnings per share as their effect was anti-dilutive.
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Bio-Rad Laboratories, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, 2017 | December 31, 2016 | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 383,824 | $ | 456,264 | |||
Short-term investments | 376,714 | 387,736 | |||||
Accounts receivable, net | 464,847 | 372,348 | |||||
Inventories, net | 594,804 | 524,961 | |||||
Other current assets | 156,946 | 103,215 | |||||
Total current assets | 1,977,135 | 1,844,524 | |||||
Property, plant and equipment, net | 493,496 | 488,614 | |||||
Goodwill, net | 506,069 | 477,115 | |||||
Purchased intangibles, net | 174,113 | 161,609 | |||||
Other investments | 1,027,736 | 830,790 | |||||
Other assets | 93,472 | 47,852 | |||||
Total assets | $ | 4,272,021 | $ | 3,850,504 | |||
Current liabilities: | |||||||
Accounts payable, accrued payroll and employee benefits | $ | 306,814 | $ | 296,473 | |||
Current maturities of long-term debt | 420 | 334 | |||||
Income and other taxes payable | 39,941 | 28,124 | |||||
Other current liabilities | 155,521 | 146,391 | |||||
Total current liabilities | 502,696 | 471,322 | |||||
Long-term debt, net of current maturities | 434,581 | 434,186 | |||||
Other long-term liabilities | 404,404 | 358,237 | |||||
Total liabilities | 1,341,681 | 1,263,745 | |||||
Total stockholders’ equity | 2,930,340 | 2,586,759 | |||||
Total liabilities and stockholders’ equity | $ | 4,272,021 | $ | 3,850,504 | |||
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Bio-Rad Laboratories, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Year Ended | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Cash received from customers | $ | 2,093,948 | $ | 2,074,024 | |||
Cash paid to suppliers and employees | (1,918,971 | ) | (1,810,844 | ) | |||
Interest paid, net | (21,124 | ) | (21,318 | ) | |||
Income tax payments, net | (52,136 | ) | (38,442 | ) | |||
Other operating activities | 2,168 | 13,013 | |||||
Net cash provided by operating activities | 103,885 | 216,433 | |||||
Cash flows from investing activities: | |||||||
Payments for acquisitions and long-term investment | (76,645 | ) | (14,165 | ) | |||
Other investing activities | (98,927 | ) | (199,715 | ) | |||
Net cash used in investing activities | (175,572 | ) | (213,880 | ) | |||
Cash flows from financing activities: | |||||||
Payments on long-term borrowings | (316 | ) | (303 | ) | |||
Other financing activities | 657 | 9,323 | |||||
Net cash provided by financing activities | 341 | 9,020 | |||||
Effect of foreign exchange rate changes on cash | (1,094 | ) | (12,858 | ) | |||
Net decrease in cash and cash equivalents | (72,440 | ) | (1,285 | ) | |||
Cash and cash equivalents at beginning of year | 456,264 | 457,549 | |||||
Cash and cash equivalents at end of year | $ | 383,824 | $ | 456,264 | |||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 114,740 | $ | 28,125 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 148,682 | 142,897 | |||||
Impairment losses on goodwill and long-lived assets | 11,506 | 62,305 | |||||
Changes in working capital | (155,545 | ) | (10,367 | ) | |||
Other | (15,498 | ) | (6,527 | ) | |||
Net cash provided by operating activities | $ | 103,885 | $ | 216,433 | |||
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