Ronald W. Hutton - Bio-Rad Laboratories, Inc. Christine A. Tsingos - Bio-Rad Laboratories, Inc. John Hertia - Bio-Rad Laboratories, Inc. John Goetz - Bio-Rad Laboratories, Inc. Annette Tumolo - Bio-Rad Laboratories, Inc..

Tim C. Evans - Wells Fargo Securities LLC Dan Leonard - Deutsche Bank Securities, Inc. David Westenberg - C.L. King & Associates, Inc. Brandon Couillard - Jefferies LLC.

Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year Bio-Rad Laboratories 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. I would now like to turn the call over to Mr.

Ron Hutton, Vice President and Treasurer. Sir, you may begin..

Thank you, Victor. 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..

the Americas, Europe, and Asia. The consolidated gross margin for the quarter was in line with expectations at 54.7% and compares to last year's gross margin of 55%. The slight decrease in margin versus the year-ago period reflects increases in warranty and service costs, largely associated with higher instrument placements.

The gross margin in the fourth quarter also contains some atypical charges and benefits that are more one-time in nature. These unusual items included benefit of $10.8 million related to the successful conclusion of prior legal matters.

This benefit was substantially offset by approximately $9 million of cost of goods expense taken in the fourth quarter that relates to prior periods in the year, the result of our transition to a new business structure and new systems in Europe.

During the fourth quarter, we recorded a total of approximately $4.9 million in cost of goods sold for purchase accounting amortization expense related to acquisition. This compares to $4.5 million of amortization expense in the year-ago period.

SG&A expense for the fourth quarter was $204.2 million or 32.9% of sales, compared to $220 million or 38.5% of sales last year. This lower expense reflects a decrease in ERP-related spend of approximately $2 million, as well as lower litigation-related expense when compared to last year.

Also included in SG&A for the quarter was a contingent consideration benefit of $6.4 million, offset by restructuring cost of approximately $6.9 million for specific head count reduction in the U.S. and Europe.

When comparing to the same period last year, remember that Q4 of 2016 contained increased reserves for legal settlements of $10.9 million, as well as $1.8 million of contingent consideration expense.

And finally in SG&A, amortization of intangibles related to prior acquisitions in the fourth quarter was approximately $2.1 million, up slightly from the year-ago period. Research and development expense in Q4 was significantly higher at 12.4% of sales or $76.8 million versus $57.5 million or 10.1% last year.

This increase in R&D spending when compared to last year reflects nearly $16 million of restructuring charges related to the discontinuation of a diagnostic development project as we continue to turn our investment focus toward higher growth opportunities. Also included in the quarter is $5.5 million of acquisition-related milestone expense.

Another driver of the increased R&D spend relates to our ongoing investment in new applications in markets for our Droplet Digital PCR technology. During the fourth quarter, we impaired goodwill associated with prior acquisitions in our infectious disease and antibody product lines for a total of $11.5 million.

When comparing to the same period last year, remember that we impaired approximately $60 million of goodwill and in-process research and development associated with our acquisition of GnuBIO. The reported operating margin for the fourth quarter was 7.6%.

However, excluding the impairment charge and numerous non-recurring items, both charges and benefits, the operating margin for the fourth quarter was closer to 13%, largely driven by the solid top line performance. Interest and other for the quarter was a net expense of $9.4 million, compared to $5 million last year.

It is important to note that this increase in net expense includes $6.4 million of impairment charges for two prior venture investments. The effective tax rate used in the fourth quarter was an 85.5% benefit.

In the quarter, we recorded an estimated provisional tax benefit related to the 2017 Tax Cuts and Jobs Act of approximately $66 million, primarily driven by a tax benefit of $121 million for the re-measurement of federal net deferred tax liabilities, the result of the reduction of the corporate tax rate to 21%.

This was offset by a tax expense of $55 million for the mandatory deemed repatriation on certain foreign earnings. As we complete our analysis of this new legislation, we may make adjustments to these provisional amounts.

Excluding the impact of the new legislation as well as numerous non-recurring items in the quarter, we estimate that our base rate would have been approximately 31%. Net income for the fourth quarter was $69.9 million, compared to a loss of $20.6 million in the year-ago period. Reported diluted earnings per share for the quarter were $2.32.

This compares to minus $0.70 last year. Much of the additional income and earnings per share in the fourth quarter are being driven by the initial impact of U.S. tax reform, as well as the lower amount of unusual items in 2017 versus 2016. And now for certain segment information in the quarter.

Life Science reported sales for the fourth quarter increased an impressive 15% compared to last year to nearly $238 million and compares to $206.8 million in the year-ago period. On a currency neutral basis, sales grew 12.3% for the fourth quarter.

This strong performance reflects a double-digit growth for many of our key product areas, including our Droplet Digital PCR instruments and consumables, our cell biology product family, as well as strong sales of our food safety product line.

In addition, growth during the fourth quarter for Life Science was also driven by a sizable increase in sales of process media. And while sales of process media products during 2017 will be down for the full year, we are pleased to see demand returning for this important product line and exiting the year on an upswing.

On a geographic basis, currency-neutral sales growth for Life Science in Q4 was strongest in North America, Europe, and China. And finally for Life Science, sales of RainDance products during the quarter were $2.5 million.

Our Clinical Diagnostics Group achieved good sales for the quarter of $378.4 million, compared to $360.8 million last year, an increase of 4.9% on a reported basis and growth of 1.5% currency-neutral.

These sales were led by continued strong performance in the blood typing and diabetes product lines, as well as solid growth for BioPlex 2200 revenue and quality controls. This performance was offset by another significant decline in our infectious disease sales, particularly in North America.

On a geographic view Diagnostics currency-neutral sales for the quarter increased most notably in EMEA, Asia-Pacific, and Latin America. Looking at the full-year results, we are pleased to report annual revenues of $2,160 million.

While this represents an increase of 4.4% versus last year on a reported basis, on a currency-neutral basis, sales for the year grew 3.5%. These full-year sales includes $14.7 million of acquired revenue associated with RainDance. Excluding acquisitions and currency, organic growth for 2017 was 2.7%.

Our Life Science Group posted record annual sales of $785.2 million, an increase of 7.5% versus 2016 on a reported basis, and growth of 6.8% currency-neutral.

These record sales reflect annual growth in every region and every major product group for Life Science, except our process media product line, which was impacted by biopharma buying patterns during the year.

In particular, sales growth during the year was fueled by continued strong sales of our Droplet Digital PCR instruments and consumables, cell biology, and gene expression products. We also saw good annual growth in western blotting imagers and few food safety products.

From a geographic view, sales in North America, Europe, and China were the biggest contributors to year-over-year growth for the Life Science Group. Also included in the annual results for Life Science are $14.7 million of sales associated with RainDance.

Excluding these acquired sales, organic currency-neutral growth for Life Science in 2017 was 4.8%. For the year, Clinical Diagnostics sales were $1,361 million, an increase of 2.8% on a reported basis, and growth of 1.6% on a currency neutral basis.

This growth was fueled by continued momentum in quality control, blood typing, and diabetes monitoring products. Also important to highlight are sales of our BioPlex 2200 instrument and panels, which posted the highest growth rate for Diagnostics in 2017 as we continue to place new instruments at reference labs and hospitals around the world.

On a geographical view, sales in Europe, China, India, and Latin America were the biggest contributors to year-over-year growth for the Diagnostics Group. Total company growth margins for the full year of 2017 were in line with our annual guidance at 55% and compares to 55% in 2016.

Excluding non-recurring items during the year, the gross margin was 55.1%. Total amortization of intangibles and purchase accounting recorded in cost of goods sold for 2017 was $22 million. This compares to $26.1 million in the year-ago period.

SG&A expense as a percent of sales was 37.4% for 2017 or $809 million and compares to $816.7 million or 39.5% in 2016, excluding more than $12 million of net benefit to SG&A in the year, driven by $20 million of contingent consideration benefit, the margin was approximately 38%.

When comparing to last year, remember that 2016 included more than $37 million of non-recurring expense associated with restructuring in Europe, legal settlements, and changes in contingent considerations, and excluding those items, SG&A as a percent of sales was approximately 37.7%.

And finally in SG&A, total expense for acquisition-related amortization was $7.9 million for the full year 2017. Research and development expense in 2017 was $250.3 million or 11.6% of sales and compares to $206 million or 10% of sales last year.

During the year, we recorded more than $43 million of non-recurring expense in R&D, and when excluded, R&D as a percent of sales was 9.6% for the year.

These non-recurring expenses primarily impacted our Diagnostics segment by approximately $30 million, and is largely related to the shutdown of our GnuBIO operation, as well as the discontinuation of the development project I mentioned earlier. We also recorded approximately $13 million of acquisition-related R&D expense in our Life Science segment.

Looking to 2018, R&D expense as a percentage of sales are targeted to be slightly lower in the 9% to 9.5% level, as we move a number of projects through the product development pipeline. The full-year reported operating margin of 5.4% was significantly negatively impacted by the various accounting charges taken throughout the year.

If we exclude the non-recurring $45 million of net expense related to the acquisitions, restructuring, and impairments of acquired assets, the operating margin for the full year is estimated to be approximately 7.5%.

The effective tax rate for the full year 2017 was substantially lower than our original guidance, primarily due to the late New Year U.S. tax reform legislation. As such, the full year 2017 effective tax rate is provisionally calculated at 17.3%. Excluding tax reform, our more normalized rate for 2017 is estimated to be 31%.

For 2018, we expect the effective tax rate excluding any discrete items that may occur to be significantly lower than our historical levels, moving to the 26% to 27% range. This substantially lower tax rate reflects benefits from our new operating structure in Europe, as well as a small benefit from changes in the U.S. rate.

Reported net income for the full year was $114.7 million with fully diluted earnings per share for the year of $3.82. Moving to the balance sheet as of December 31, total cash and short-term investments were $760.5 million, compared to $844 million at the end of last year.

The decrease in cash balances from the year-ago period is most directly related to our spending more than $100 million for acquisitions throughout the year. Net cash generated from operations during the fourth quarter was higher at $69 million for a total of $104 million for the full year 2017.

This compares to net cash generated from operations in 2016 of $216 million. The year-over-year decrease in cash flow is substantially related to our transition to a new ERP in Europe. Since go-live, we have experienced a slowing in our key processes such as customer collections and the reclaim of VAT.

We have seen this before with our deployment in the U.S. a few years ago and are confident that our process will continue to improve moving forward. Additionally, with regards to the lower cash flow, we ended the year with a relatively high inventory level.

However, these higher levels are most notable in areas such as blood typing and process media, where we are seeing accelerated demand in 2018. EBITDA adjusted for the impairment charges was $97 million for the first quarter of 2017 and $280 million or 13% of sales for the full year. Net capital expenditures for the quarter were $26 million.

Total CapEx was $111 million for the full year, slightly below the $115 million to $125 million range estimated on our last call. Looking to 2018, we estimate that CapEx spending will decrease to the $100 million to $110 million range, as we have completed our last major deployment of SAP and other foundational projects in Europe.

And finally, depreciation and amortization for the quarter was $42.6 million and $148.7 million for the full year. Now, let's move to the outlook for 2018. We are excited to share our thinking for 2018, which anticipates acceleration of sales growth, as well as significant expansion in margins and cash flow. Let's start with the top line.

For 2018, we are guiding currency-neutral sales growth to be 3.5% to 4%. This outlook anticipates continued strong sales in our Life Science segment and increased growth for Diagnostics. The momentum we are seeing in many of our Life Science product lines is encouraging for continued growth.

In addition, funding for research in our major markets seems to be holding steady. As such, we are targeting Life Science currency-neutral growth to be in the 4.5% to 5% range for 2018. On the Diagnostics side of the business, we also see opportunities for currency-neutral growth in many of our core businesses.

During 2017, we placed more than 2,000 new instruments in laboratories around the world, which bodes well for higher margin growth over the next few years. For Diagnostics in 2018, we are targeting currency-neutral sales growth to be higher in the 3.5% to 4% range, which compares to currency-neutral growth of 1.6% this past year.

Overall, the combined result of the opportunities across both businesses leads us to the expectation for annual sales growth in 2018 of around 3.5% to 4% on a currency-neutral basis. And it's also important to note that given the substantial change in foreign exchange rates, reported sales growth in 2018 could actually exceed 6%.

With regards to margins, we are anticipating improvement in our gross margins and targeting 55.5% to 56% for the full year. This margin expansion opportunity reflects benefit from our new operating model and organizational structure, allowing us to have a more streamlined logistics footprint and increased purchasing power.

And thinking about the operating margin for 2018, we see sizable expansion opportunity, not only from the improvement in the gross margin, but also from a reduction in ERP-related spend and the reduction stemming from the shutdown of our GnuBIO operation. As such, we are targeting 10% as the full-year operating margin.

This compares to an operating margin of 7.5% in 2017, even when we've adjusted for numerous non-recurring items. For 2018, we expect the full year tax rate excluding any discrete items that may occur to be in the 26% to 27% range.

And finally, as I mentioned earlier, the higher sales growth combined with significant margin expansion should in turn drive a substantial improvement in cash flow for 2018. And one final comment that's important to note about the outlook for 2018 is that what we are discussing today is outlook on a GAAP basis.

Beginning with the first quarter of 2018, we will begin reporting quarterly results on both a GAAP and non-GAAP basis. In today's press release, we have highlighted areas that will be excluded in our non-GAAP reporting.

We believe that these additional measures will provide useful information to the investment community to better evaluate our performance on an operational basis, provide better quarter-over-quarter comparisons excluding unusual items, show better comparisons among our peers, and provide additional transparency.

And now we're happy to take your questions..

Yes, ma'am. Our first question will come from the line of Tim Evans from Wells Fargo. You may begin..

Hi, Christine. Thank you for the comments. On your 2017 margin comments, if I take the chart that you have in the press release, the table that have all the kind of the one-timers, and I recalculate the margin, I'm coming up with 8.8%, and you were citing 7.5%. I just want to....

Yeah. I think....

...make sure that the – yeah. Go ahead..

Yeah. I think the difference is when I estimate, I really am looking at non-recurring as opposed to including non-cash. So I think the difference in the press release, you probably included the ongoing amortization of acquired intangible, and I did not, because that is more recurring in nature. But either way, I think we get to the same..

Right. Okay. That's understood. And I just wanted to make sure that that table in there is reflective of the way that you will be reporting your non-GAAP financials going forward..

Well, certainly, if you look at the categories that we list in the press release and you look at the categories on this chart, many of them would fit the definition of non-GAAP that we've identified..

Okay.

And then lastly, 10% operating margin target in 2018 under GAAP, are you in a position to tell us what that would look like under non-GAAP?.

Well, I think under non-GAAP, that this is going to be mostly items that we're probably not aware of yet that are more non-recurring in nature, the one item that's on the list that is more known is amortization, and you can see what the number is in Q4 and use that as a baseline. But other than that, these are not items that we could predict..

Okay.

So you don't have anything, any non-recurring items baked into that number?.

Into the 10% number?.

Correct..

Only amortization..

Understood. Thank you very much..

You're welcome..

And our next question comes from the line of Dan Leonard from Deutsche Bank. You may begin..

Thank you. So one more question about the EBIT margin target 2018. Christine, you said that's currency-neutral.

What currency is included in that 10% number? Is it December run rates, is it something different?.

No. So, good question, Dan. When we talk about currency-neutral, we were actually looking at our plan as it would unfold in 2018, and then comparing that to the rate that 2017 unfolded, if you know what I mean. So there's kind of a Q1 way to two, three (00:30:21), it actually goes monthly.

To make it a true currency-neutral, if we think about it using December 31 rate that it changed quite dramatically, then we would have the benefit of both higher growth and perhaps a little better margin expansion on a reported basis..

Okay.

So the currency-neutral reflects more of an average 2017 rate when you're forecasting 2018?.

Basically..

Yeah, okay.

And then on the tax rate, the 26% to 27% target for 2018, is that now the normalized rate or is there still room to work that down over time as you bring up your tax planning in Europe?.

Well, certainly, it is a new level for us. Majority of that benefit is coming from the European structure. We do have to make some benefit from U.S. tax reform. But remember that historically the majority of our profits have been outside the United States.

Having said that and directly to your question, as the business grows over time, so should the benefit. And so, while we look to 26% to 27% in 2018, depending on business performance, that could improve in 2019, 2020 and beyond..

Okay. And then maybe just one final question on the operating business. If John Hertia is there, John, perhaps you can comment on what you're seeing in the North American Diagnostics market, whether you think that customers are still being hesitant due to oncoming Medicare cuts, and then finally if you can talk about the blood typing ramp.

Thank you very much..

Sure. Blood typing, I'd say for both the fourth quarter and the year in the U.S. went very well. The introduction of the IH-1000 went very, very well.

This year, we exceeded our placement plan, and we also announced at the Investors Day last November that we've picked up LabCorp as a large account for blood typing, the majority of that was implemented toward the end of last year, and then in the first quarter of – it will include implementations of systems over the first quarter of this year.

So I'd say blood typing is going very well. We also had FDA approval for our main workstations (00:33:02) that we announced in January that gets us into both the smaller labs and will act as a backup system for the placement – backup systems for the placement of additional IH-1000, so another good stimulus.

And that's just the second step of a four-part program, we started with the IH-1000, we have manual systems. We'll be introducing later this year the IH-124, the IH-24, and then into next year, the IH-500, which gets sort of complete the product portfolio.

Harnessing (00:33:33) in the slowness in the U.S., some of that was related to, for us, significant declines in our infectious disease business, some of that was a one-time headwind due to a loss of a particularly large customer which won't be reoccurring in 2018.

With respect to PAMA and reimbursement, I think it's still an uncertain picture, materials count for a percentage of laboratory operating costs. And so as our labs are being hit with reductions in reimbursement rates, a portion of that would be included in materials and we would be working with the laboratories on how to help mitigate that.

But they'd also be looking for ways to improve their operating efficiency as they're looking to reduce overhead and the labor costs, and that opens up opportunities for us in automation of any of our assays. So, I'm still uncertain, but both positive and negative..

Appreciate all the color. Thank you..

And our next question comes from the line of David Westenberg from C.L. King. You may begin..

Hi. Thank you for taking my question. So congrats to John on his retirement.

So I just wanted to ask, what are you looking for in a new COO? Do you think you're going to be looking at an internal or an external candidate, and what specific kind of experience are you looking for here?.

So obviously, this is a kind of a – what I think of is a kind of a heavy operational role, obviously somebody with a kind of good overall general management experience in a larger environment like the one we're in, we have and we'll look at both internal and external candidates and that process is ongoing..

Great. Thank you. And just as a reminder, this one is probably a little bit more for Christine in terms of cadence. I know you're starting to lap the ERP. So, I think in Q1 you had some ordering, and then in Q2, you had made the ERP go-live.

So can you just give us – I know you don't want to give quarter-by-quarter guidance, but just kind of a way to think about the growth rates in the first half of the year around ERP and just kind of give us a reminder of what exactly we'd be lapping here..

Yeah. No, good question. And you're right, we don't give quarterly guidance, but it is important to kind of know some of the unusual patterns of 2017. As you pointed out, the second quarter of 2017 was a very difficult quarter for us with the go-live in Europe.

And so as such, as we look at the second quarter of 2018, it's probably a relatively easier compare than others. And perhaps in Q3, maybe some of the reverse of that is true because in 2017, we made up so much in Q3. In the first quarter, I think especially when we look at the compare, Diagnostics had a very big quarter in Q1 of 2017.

So that's a bigger hill for them. And now we've just reported a very impressive fourth quarter of 2017. So I'm not sure what that means for Q4 of 2018, but that's a big one to beat..

Got it. Now that's just very helpful. And then historically, you've been fairly disciplined buyers. And I think in the past, you said you used a DCF to evaluate acquisition targets.

So with valuations currently where they're at, are you having any change in the way you're looking at acquisitions, and is there any change in terms of the importance of how near-term accretive these acquisitions that you're looking for will be?.

No, I don't think there is any fundamental change in the way we think about acquisitions. I think that we look for kind of payback on these on kind of a cash-to-cash basis. And there continue to be opportunities that we're looking at, and we'll see what happens throughout the year..

Yeah. I think that's fair. I mean, you're right, the multiples are fairly high. There are certain assets we would love to acquire, but we remain pretty disciplined with our model as Norman says, and we run a discounted cash flow model and are very much looking at that cash-to-cash payback.

And with that being said, some of the businesses out there carry high multiples deservedly so, and others don't, so we're going to keep looking at this on a deal-by-deal basis..

All right. And thank you very much..

Our next question comes from the line of Brandon Couillard from Jefferies. You may begin..

Thanks. Good afternoon.

Christine, a few for you, just starting with the fourth quarter of 2017, can you tell us how much the process media business grew year-over-year in terms of dollars? And then secondly, do you have a sense of, even if it's just ballpark, what the Diagnostics business would have done in terms of core growth in the fourth quarter if we strip out the infectious disease customer loss in the U.S.? And did I hear John correctly that that will not be a headwind at any point in 2018, that loss?.

So, for Life Science and the process media business in the fourth quarter, that was up about $7 million year-over-year. Infectious disease across the board for Diagnostics, this is probably the fourth or fifth year in a row that that business has declined, and for the full year, it's 15-or-so-plus million dollars.

And part of being able to accelerate growth next year is hopefully not seeing that same level of decline..

Okay. That's helpful.

And then as far as the 2018 outlook goes, I mean, on a year-over-year basis, you're going from 7.5% to 10%, it's seemingly a big move, but relative to the second half of the year, where you did double digits on an adjusted basis LTM in the second half of the year, so can you help us sort of quantify the buckets of the expense savings that you expect between ERP, supply chain, GnuBIO, and so forth?.

So, we certainly haven't quantified every bucket. We have talked about the GnuBIO savings of about $15 million a year, ERP savings of about $15 million a year, obviously improvement in the gross margins.

I think one of the many benefits to move into non-GAAP reporting is that we'll be able to have all of this on the same page in terms of how we're looking at the base operations of the business.

And what I mean by that goes back to that earlier question about – that Tim had and viewing the margins with or without purchase accounting as we've made adjustments in our little table over the years and called it out on our script, it really was focused on the atypical or unusual non-recurring things, and as we move to non-GAAP, then we would also include amortization in that.

So I think that'll get us all in a level....

Okay..

...playing field. And then the other thing I missed is....

Okay..

...Brandon, is that on a reported basis, with the weakening of the dollar now compared to where it's been over the past year, that not only will on a reported basis accelerate our top line growth rate, but could also help with some margin expansion beyond the 10% target..

Okay. Thank you. Question for Annette, would love to get an update on the single-cell opportunity. I've always viewed that as very much incremental to the main ddPCR opportunity.

I'm curious as to – perhaps you could give us a ballpark range of how much of that business is just single-cell today, and what inning you think we're in in terms of the liquid biopsy market developments at this stage.

And then secondly, whether you do expect – so you're currently evaluating licensing opportunities which you've alluded to a little bit at the Analyst Day, how those conversations are kind of progressing..

Okay. Well, I think our experience entering the single-cell market this year really validated our view of customer interest in this very new emerging market. So it certainly is a new part of the droplet-based business that we're growing. Our business in Digital PCR is larger as you could imagine.

But I think we're very encouraged by customer demand and interest in this area. So happy there, and we're going to grow that into a whole new area of business for our droplet partitioning technologies.

We are making progress in liquid biopsy, we have released our first CE IVD platform and kit for monitoring blood cancers, PCR-ABL specifically, and we're getting a lot of interest outside the U.S., where we can sell those products and we're about to submit to the FDA for the U.S. base.

So we're very encouraged in that area, it continues to grow, and we're investing more aggressively in that area.

And I think the last question you asked for was about our licensing program, and we're working on a commercial use license program that we're hoping to roll out in first quarter or the early second quarter, and considering where we might have opportunities to license the significant intellectual property that we have in this area..

It's very helpful. One last one for John Goetz, couldn't let you sneak off the call without speaking here.

Just curious, as far as your retirement goes, just you can help us understand so sort of why now, and to what extent the margin expansion plan blueprint, if you will, is somewhat institutionalized in the organization and also the independence of yourself?.

Well, Brandon, I sat down and asked myself, how many good years do I still have left. And that's a pretty sobering question to ask. And there are personal priorities that start to change. I'm very much looking forward to spending time with my grandkids.

I've done a lot of traveling for the company, and I kind of like my wife to be able to actually see one or two of these very interesting places I've been to. I also want to do a lot more in terms of volunteering. I'd like to kind of give back a little bit, so I got some good plans there. So I got a small vineyard at the back of my property.

I'd like to try my hand at making some wine, and I'm a big college football fan. So I'd like to take in a couple of home games in Pullman, Washington, and aside from that, my wife Linda (00:46:44) has got quite a list of things for me to do. So, I'm certainly not going to be looking for anything to do.

Why now? I think I feel really good about where the company is today in terms of its seriousness, planning towards improving its top and bottom lines.

We've done some really good planning over the course of the last couple of years and it's kind of culminated this year with a very specific idea of cascading of goals from the top of the company throughout the whole organization. I feel really good about it, I feel very proud about it.

And handing this off to the next guy or gal, I think we've really set the stage for success in my opinion. So for me, it's a pretty good time to take a step back, and a lot of my personal wealth is tied to Bio-Rad stock, so I'm going to be watching that pretty carefully as I read the newspapers and watch my cellphone stock quotes..

Very good. We wish you the best of luck. Closing the loop, last one, Christine, on the balance sheet, so it's been about eight months since the final module of the ERP system was deployed in Europe.

I mean, should we start to begin to see this net working capital build begin to taper in the first quarter? And anything you can tell us in terms of range for operating cash flow expectations for 2018?.

Sure. Yeah. So, certainly, as we move through the year, we're going to see improvement. Our experience in the past has been it's generally taken us at least a year for things to more normalize and then little bit longer than that to really start to reap the benefits, and we don't anniversary that one year since go-live until the second quarter.

But a lot of this will be driven by continued top line growth in generation, as well as process improvement in stabilization. So I think it builds through the year..

Very good. Thank you..

And I'm showing no further questions at this time. And I'd like to turn the call back to Ms. Christine Tsingos for closing remarks..

Tsingos. Thank you, Victor. All right, everyone, thank you very much for taking the time to be with us today. As always, we appreciate your interest in Bio-Rad and look forward to seeing you soon. Bye-bye..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day..