Good day ladies and gentlemen and welcome to the Q4 and Full Year Bio-Rad Laboratories Inc. Earnings Financial Results Conference Call. My name is Kay and I’ll be your operator for today. And at this time, all participants are in listen-only mode. We will conduct the question-and-answer session towards the end of this conference. [Operator Instructions] And as a reminder, this call is being recorded for replay purposes. I’d like to turn the call over to Ron Hutton, Vice President and Treasurer. Please proceed sir.

Thank you, Kay. 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. Because our actual results may differ materially from these plans and expectations, 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.

Thanks, Ron. Good afternoon everyone, and thank you for joining us. Today, we will review the fourth quarter and full year financial results for 2014 as well as provide some insight into our thinking for 2015. With me today, our CEO, Norman Schwartz, COO, John Goetz, Shannon Hall, President of our Life Sciences Group, and John Hertia, President of our Diagnostics Group. Let’s start with a review of the quarterly sales or results. Today, we are pleased to report net sales for the fourth quarter of fiscal 2014 of $598.2 million, a slight decrease when compared to the year ago period sales of $602.6 million. On a currency neutral basis, however, quarterly sales actually grew 4.5%. This dramatic difference represents a currency headwind of more than $30 million on the top-line. During the quarter, we experienced good currency neutral sales growth across many of our product lines, most notably in our life science group including continued strong sales of our Droplet digital PCR products and our cell biology product line. Our diagnostics group also posted good growth for the quarter with strong sales of our diabetes monitoring, autoimmune and blood typing products as well as quality controls. The consolidated growth margin for the quarter was 53.1% and compares to last year’s gross margin of 53.6%. This reported gross margin is lower than expected and reflective of approximately $8.4 million of one-time cost associated with the discontinuation of a small product line. Excluding this charge, the consolidated gross margin for the fourth quarter would have been 54.5%. In addition, during the quarter, we recorded a total of approximately $7 million in cost of goods sold for the non-cash purchase accounting expense related to prior acquisitions. This compares to $8.3 million of amortization expense in the year ago period. SG&A expense for…

[Operator Instructions] Please standby for your first question, which comes from the line of Brandon Couillard, Jefferies. Please go ahead.

Hi, this is Justin [ph] in for Brandon.

Hi.

Would you give us an update on the U.S. launch of the new blood typing platform?

Sure, I’ll turn that one over to John Hertia.

So the U.S. launch of the new blood typing platform, so we’ll be introducing in the later part of this year, a blood typing platform has been available in the rest of world called the IH 1000, it hasn’t been available in the U.S. because of the FDA we’re going through FDA registration and approval right now. We also will be launching this year Justin on the IH 500 in Europe and parts of Asia-Pacific, which is also a new blood typing platform that’s sort of a logical extension of the IH 1000 name targeted for the sort of mid-market blood typing segment.

I think Justin in terms of the model, the expectations is entering the U.S. market comes later in the year, and so it’s probably a bigger impetus growth in 2016, but we’re hopeful that will get that FDA approval this year.

Got it. Very helpful. Moving towards the ERP, will you quantified the expected impact on the P&L from the ERP expenses in 2015?

Sure, I think for spending on ERP for the project itself, the spending in 2015 should be pretty similar to what we’ve spent in 2014 and that’s kind of $25 million to $30 million range in terms with the expense and around $40 million in terms of capital. The one thing that I would keep in mind is we are right now scheduled to go live with our next appointment in the July, August timeframe, in which case we’ll take on some depreciation expense and that will probably be an incremental $5 million to $10 million between depreciation and support during ’15. So net-net with the go live we may pickup $10 million of additional expense with the project spend itself should remain fairly flat year-over-year.

Got it. Thanks. Speaking of go live, we comment on which business divisions or geographies will migrate onto the new platform?

Of course. As a reminder first go live was in April 2013 and it was a smaller portion of U.S. business that included our U.S. diagnostic sales and a smaller division. Deployment number two, which as I mentioned we’re hoping to go live in July and August, and brings in the rest of the U.S. and actually North America and what that means are more about our diagnostics operations in the U.S. as well as our life science operations in the U.S. and some of our selling entities in Canada. And once we complete that then our plan is to move into the European theatre, which is a very difficult implementation for us, its several deployments, but one that probably have the greatest benefit and payback for us and that will be our focus on late this year and certainly throughout ’16.

Got it. Thank you.

Thank you. And the next question comes from the line of Dan Leonard, Leerink. Please proceed.

Hi, good afternoon. This is Justin on for Dan. So just in terms of the EBIT guidance for 2015, what’s baked in there?

So I think what baked in there is improvement from some of the consolidation that we’ve done improvement from some of the underwater businesses if you will, becoming less underwater. It’s also baked in an incremental probably $13 million to $15 million of spend is related to GnuBIO. But so tremendous amount of progress in savings taking on some additional spend with GnuBIO and assuming a 3% currency neutral top-line gets us to this operating margin of around 9% and then using current exchange rates, it takes us backwards because of the translation.

Okay. So, the 150 plus FX impact is factored in there and you’re using current spot rates.

Right. So, the 150 debt is really kind of what happens to that 9% margin as currency rates stay where they are – that 9% margin goes to 8 or lower, because $175 million, $200 million sales are not recognized or on a reported basis, they are not there and it’s just translation.

Okay, understand. Thank you. And then in terms of GnuBIO and kind of the dPCR synergy there, can you just give us an update on your efforts there?

Well, we continue to make progress on the – with the GnuBIO platform, it certainly still underdevelopment, a tremendous amount of synergy between the Droplet technology that we have developed and acquired few years ago and in this operation, so it’s a – we really been able to leverage that pretty well. Again making progress, we continue to – there is obviously still work to be done to get to a product probably take us most of this year.

Okay. And then it’s the first time we mentioned cell bio and process media is a kind of source of strength and why also could you just kind of talk about what you’re seeing in that – in those product lines.

Well, I think that especially in the cell bio area, this is an area we started investing in few years ago and I think that what you’re seeing today just represents some momentum that we’re starting to achieve from these many products and the new thing that we’re just introducing, so I think that’s what you’re seeing.

Okay. And it sounds like China came in especially in life sciences a little better that what you are talking about in the last quarter. Can you just talk about what you are seeing in that geography and maybe just how things are trending in the first quarter?

Well, I think last year, little bit of hiccup early in the year when China was kind of doing their corruption crack down and it’s kind of spooked everyone there and in terms of buying and that slowed us down quite a bit. And I think then we kind of probably pull back a little bit on our outlook. But seem to comeback especially at the end of the year really well and we ended up the year in a good position. I think we continue to have momentum in China both in the life science area and in diagnostics.

Great. And just one last one thought on capital deployment.

Sure, so as I mentioned in the scripts, our expectation for CapEx in 2014 is that $130 million to $140 million and that includes about $40 million, $45 million of capital spend for this project to roll out SAP on a global basis. Within our CapEx, we also have our reagent rental, the instruments that we place on the diagnostic side, and that varied from year-to-year but generally that’s $40 million to $50 million range is the portion that relates to that and then the remaining third is more either facilities, investments or maintenance type CapEx.

Alright, thank you.

Thank you. [Operator Instructions] And the next question comes from Jason Lazarus, Intrepid Capital. Please proceed.

Hi, guys, thanks for taking my question. Almost everything has been asked really around ERP system. Is it still expected cost $300 million?

Yes and it could be more. A lot of the unknown is as we rollout other parts of the world, complexity of this implementation both unwinding systems that are already in place, as well as bringing our international operations on to this standardized system. It has and we’ve learned our lesson through these past years that it’s often harder than we originally anticipate and these projects, the majority of the cost is human capital, whether it’s outside capital or own people working on the project. So that’s – that’s my caution that I think $300 million is probably a minimum to assume for the project and we are continually working to be a decision as we can. But we are about to embark on the most difficult faces of the project as we take it outside of the U.S.

Understand and appreciate the extra color on that. Can you tell me how much of that has been spent so far? And I have a good idea, but some more concrete figures would be helpful?

We are probably a little over half way through that amount and again, the ultimate total will be the ultimate total. But depending on how you want to measure it, we did a lot of upfront work before we really started the project. If you want to include that amount of money, then we’re probably further along in the stand. But the true project itself is probably around $150 million to $170 million.

Okay. That’s all I got. Thanks.

Thank you. [Operator Instructions] You have no questions at this time.

Okay. Thank you, Kay. Thank you everyone for taking the time to join us today. We appreciate your interest in your support. Bye-bye.