February 23, 2017
Bio-Rad Reports Fourth-Quarter and Full-Year 2016 Financial Results
HERCULES, Calif.–February 23, 2017–Bio-Rad Laboratories, Inc. (NYSE: BIO and BIOb), a global provider of life science research and clinical diagnostic products, today announced financial results for the fourth quarter and fiscal year ended December 31, 2016.
Fourth-quarter 2016 reported revenues were $571.5 million, an increase of 0.2 percent compared to $570.6 million reported for the fourth quarter of 2015. On a currency-neutral basis, quarterly revenues increased 0.8 percent compared to the same period in 2015. Fourth-quarter gross margin was 55.0 percent compared to 54.1 percent during the fourth quarter in 2015.
Life Science segment net sales for the fourth quarter were $206.8 million, a decrease of 5.2 percent compared to the same period in 2015. On a currency-neutral basis, Life Science segment sales decreased by 4.3 percent. As noted during our third-quarter 2016 earnings conference call, revenues were unusually low for the third quarter of 2015 due to the rollout of our ERP system in our Life Science segment. As a result, performance in the fourth quarter of 2015 was unusually strong; this atypical situation results in a difficult year-over-year comparison for the same period in 2016. Underlying this comparison was good growth of Droplet Digital™ PCR and food testing products.
Clinical Diagnostics segment net sales for the fourth quarter were $360.8 million, an increase of 3.5 percent compared to the same period in 2015. On a currency-neutral basis, net sales were up 4.0 percent. Results from the fourth quarter were primarily attributed to growth in diabetes, immunology, and quality control product lines.
The fourth quarter of 2016 showed a net loss of $20.6 million, or $0.70 per share on a diluted basis, compared to net income of $49.5 million, or $1.68 per share during the same period in 2015. The decrease in net income was largely due to several non-cash charges including $59.9 million goodwill and in-process research & development (IPR&D) impairment, increases in expenses related to the revaluation of contingent consideration, and increases in certain legal reserves.
The following table compares these items from Q4 2016 to Q4 2015:
|Q4 2016||Q4 2015|
|Purchase accounting amortization
and contingent consideration
|Certain legal-related reserves||$10.9||$5.5|
|Impairment of goodwill and
|Total impact to income from operations||$78.8||$8.9|
The effective tax rate for the fourth quarter of 2016 was 27.0 percent compared to 8.7 percent for the same period in 2015. The lower effective tax rate in 2015 was due to the tax benefit of foreign repatriations and the permanent reinstatement of the federal R&D credit in the fourth quarter of 2015.
Full Year 2016 Results
For the full year of 2016, net sales were $2,068.2 million compared to $2,019.4 million in 2015, an increase of 2.4 percent. On a currency neutral basis, sales increased by 4.0 percent. Full-year gross margin was 55.0 percent compared to 55.5 percent reported in 2015. Full-year reported sales for the Life Science segment were $730.7 million, an increase of 5.1 percent compared to the same period in 2015. On a currency-neutral basis, full-year sales increased 6.5 percent. Full-year reported revenues for the Clinical Diagnostics segment were $1,323.3 million, an increase of 1.0 percent compared to the same period in 2015, or an increase of 2.6 percent on a currency-neutral basis.
Full-year net income in 2016 was $28.1 million, or $0.95 per share on a fully diluted basis, compared to $113.1 million, or $3.85 per share in 2015. The year-over-year decrease in net income was primarily the result of lower margins, $62.3 million in non-cash impairment of goodwill and long-lived assets, increased SG&A expenses associated with various legal matters, $11.7 million in restructuring costs associated
with the upcoming implementation of our global ERP system in Western Europe, and increased purchase accounting.
The following table compares certain non-cash or non-recurring items
from 2016 to 2015:
|Purchase accounting amortization
and contingent consideration
|Certain legal-related reserves||$21.0||$7.4|
|Impairment of goodwill and
|Total impact from operations||$127.6||$36.8|
The effective tax rate in 2016 was 32.3 percent compared to 22.5 percent in 2015. The effective tax rate for 2016 and 2015 included a tax benefit of $16.8 million and $6.3 million, respectively, for foreign repatriations. 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 encouraged by our overall topline performance for the year, which was higher than our guidance,” said Norman Schwartz, Bio Rad President and Chief Executive Officer. “All of this growth is organic and represents good progress for the year. Although our continued investment in our operations coupled with unusual expenses during the year affected our profitability, these investments are necessary to support growth and improved profitability for the years to come.”
2016 Full-Year Highlights
- Full-year sales were $2,068.2 million compared to $2,019.4 million in 2015. After normalizing for the impact of currency, full year sales increased 4.0 percent.
- Year-over-year net income in 2016 was $28.1 million, or $.95 per share on a fully diluted basis, compared to $113.1.million, or $3.85 per share in 2015.
- In January 2016, Bio-Rad and Illumina, Inc. (NASDAQ: ILMN) announced an exclusive partnership to develop the most comprehensive next-generation sequencing (NGS) workflow for single-cell analysis. The Illumina® Bio-Rad® Single-Cell Sequencing Solution launched in early 2017 and enables high-throughput sequencing of thousands of individual cells, traditionally a challenging, costly, and time-consuming process.
- Also during the first quarter of 2016, Bio-Rad acquired a high performance analytical flow cytometer platform from Propel Labs that will enable advanced and novice users to perform basic and multi-parameter cytometry for a wide range of applications and chemistries. Bio-Rad expects to launch the instrument in 2017.
- In February, the Company announced it had received CE IVD marking for its QX200™ Droplet Digital™ PCR (ddPCR™) System, the first digital PCR system with the CE IVD mark for use as an in vitro diagnostic (IVD) in the European Union. With the CE IVD mark, medical practitioners in Europe can use the QX200 system for highly-accurate detection and quantification of nucleic acids, aiding clinical decision-making in the treatment of diseases ranging from cancer to transplant rejection and viral infection.
- In April, Bio Rad announced the launch of five Droplet Digital PCR Multiplex Mutation Screening Kits for detecting multiple cancer mutations. The combination of ddPCR and multiplexing technologies increases the throughput of genetic analysis to give clinical researchers more information per patient sample.
- During both the second and third quarters, Bio Rad added to its Amplichek line of infectious disease quality controls for the molecular diagnostic testing market with Amplichek™ I and Amplichek™ II.
- During the third quarter, Bio-Rad announced the launch of two residual DNA quantification (RDQ) kits designed for use with the Company’s Droplet Digital PCR Systems. The kits simplify the quantification of host-cell DNA (HCD) in process development, quality control, and biomanufacturing processes.
- In October, Bio-Rad announced that it had received clearance from the U.S. Food and Drug Administration (FDA) for its IH-1000 blood typing instrument along with approvals for a wide range of associated gel cards and reagents for the U.S. blood typing market. The system offers full automation and reliability, allowing laboratories to more efficiently manage their blood testing workload.
- Also in October, Bio-Rad released Nuvia™ IMAC Resin, a chromatography resin optimized for use from lab scale to process-scale manufacturing.
In January, 2017 Bio-Rad announced that it had entered into a definitive agreement to purchase RainDance Technologies, Inc. Bio-Rad completed the transaction in February, acquiring RainDance for an estimated $87 million plus certain assumed net liabilities. RainDance’s intellectual property portfolio and product lines encompass a wide range of biological reactions in droplets, with applications in life science research and clinical research. These genomic tools provide ultra-sensitive detection of genetic variations in cancer as well as inherited and infectious diseases, enabling research in areas such as non-invasive liquid biopsy.
“We welcome the opportunity to expand our product offering with RainDance products and technologies,” Mr. Schwartz said. “Our combined droplet-based solutions will enable life science and clinical diagnostics customers to implement a broad range of applications that include digital PCR and next-generation sequencing.”
2017 Financial Outlook
For the full year 2017, the Company anticipates continued strength with currency neutral revenue growth of approximately 4 percent, and improved profitability with a currency neutral operating margin of 7 percent. This current estimate does not include the impacts of the recent acquisition of RainDance. Management will discuss this outlook in greater detail on the fourth-quarter and full-year 2016 financial results conference call.
“While 2017 will be another year of relatively modest operating margin, we are committed to successfully completing these foundational investments, which will allow us to realize significant improvement in profitability in the medium term and drive sustainable shareholder value over the long term,” Mr. Schwartz said.
Management will discuss these results in a conference call at 2 PM Pacific Time (5 PM Eastern Time) February 23, 2017. Interested parties may access the call at 855-779-9068 within the U.S. or 631-485-4862 outside the U.S., conference ID: 56053006. 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 Laboratories, Inc. (NYSE: BIO and BIOb) develops, manufactures, and markets a broad range of innovative products and solutions for the life science research and clinical diagnostic markets. The company is renowned for its commitment to quality and customer service among university and research institutions, hospitals, public health and commercial laboratories, as well as the biotechnology, pharmaceutical, and food safety industries. Founded in 1952, Bio-Rad is based in Hercules, California, and serves more than 100,000 research and healthcare industry customers through its global network of operations. The Company employs more than 8,250 people worldwide and had revenues exceeding $2 billion in 2016. For more information, please visit www.bio-rad.com.
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, expectations regarding operational investments, realizing significant improvement in profitability in the medium term, driving sustainable shareholder value over the long term, our release of new products and our expectations regarding our products. Forward-looking statements generally can be identified by the use of forward-looking terminology such as, “believe,” “expect,” “anticipate,” “may,” “will,” “intend,” “estimate,” “continue,” 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, our ability to compete effectively, foreign currency exchange fluctuations, product quality and liability issues, recent and planned changes to our global organizational structure and executive management team, 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, 2015, and its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016, and its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 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.