Prompt:
Human: It would be a gross understatement to say that 2020 was a year like no other year.
COVID-19 brought an incredible amount of suffering, inconvenience and unfortunately death with it.
It's humbling that our company benefited from such a tragedy and at the same time it's a tribute to our employees working in the midst of the pandemic and dealing with our own issues caused by it that we were able to respond as well as we did to the increased needs of consumers as they cope with COVID and the resulting quarantine.
Bruce will go through the financial details in a moment, but the headlines for the year are that net sales increased 18.5% to $1.968 billion and adjusted EBITDA increased 19.4% to $361.2 million.
This remarkable increase slowed temporarily in the fourth quarter and I will discuss the factors lead me to use the word temporarily.
As Dave just discussed, we generated unprecedented financial results during fiscal 2020.
Delivering company record net sales, adjusted EBITDA, and adjusted diluted earnings per share for the year.
We reported net sales of $1.968 billion in fiscal 2020, an increase of $307.5 million or 18.5% compared to the prior year.
Fiscal 2020 net sales included approximately $27.8 million in net sales from our acquisition of Crisco.
Crisco closed on December 1, 2020, providing with a full month of net sales.
We generated adjusted EBITDA before COVID-19 expenses of $374.8 million in fiscal 2020, an increase of $72.3 million or 23.9%.
During 2020 we incurred approximately $13.5 million in incremental COVID-19 costs at our manufacturing facilities, which primarily included temporary enhanced compensation for our manufacturing employees, compensation we continue to pay manufacturing employees while in quarantine and expenses related to other precautionary health and safety measures.
Inclusive of these costs, we reported adjusted EBITDA of $361.2 million, which is an increase of $58.7 million or 19.4% compared to last year.
Adjusted EBITDA before COVID-19 expenses as a percentage of net sales was 19% in fiscal 2020.
Adjusted EBITDA as a percentage of net sales after including approximately $13.5 million in COVID-19 costs incurred during the year was 18.4%.
Adjusted EBITDA as a percentage of net sales was 18.2% in fiscal 2019.
We reported net sales of $510.2 million in the fourth quarter, an increase of $40 million or 8.5%.
Fourth quarter 2020 net sales included approximately $27.8 million in net sales from our acquisition of Crisco.
We generated adjusted EBITDA before COVID-19 expenses of $77.6 million in the fourth quarter, an increase of $8.1 million or 11.7%.
During the fourth quarter of fiscal 2020, we incurred approximately $4.3 million in incremental COVID-19 expenses at our manufacturing facilities.
As a result we reported adjusted EBITDA of $73.3 million in the fourth quarter, an increase of $3.8 million or 5.6%, from $69.5 million in the prior year period.
We reported $2.26 adjusted diluted earnings per share in fiscal 2020, an increase of $0.62 per share or 37.8% compared to the prior year.
We reported $0.35 in adjusted diluted earnings per share in the fourth quarter of fiscal 2020, an increase of $0.07 per share or 25% compared to the prior year.
Fiscal 2020 net sales increased by $307.5 million, which included an increase in base business net sales of $244.5 million and an increase in net sales from acquisitions of $63 million.
Of the $244.5 million increase in base business net sales, $209.8 million was attributable to increased base business volume.
Of the $63 million of net sales from acquisitions, $33.7 million was attributable to an additional seven and one-half months of Clabber Girl net sales in fiscal 2020 and $27.8 million was attributable to one month of Crisco net sales.
Fiscal 2020 base business net sales also benefited from $35.8 million in net pricing, inclusive of our spring 2019 list price increase, our 2019 trade spend optimization program as well as the impact of COVID-19, which resulted in lower than average daily trade promotions during the height of the pandemic.
Keep in mind that our pricing calculation also includes an element of favorable mix as we saw less spices in the foodservice channel, which tend to be priced at a lower margin.
FX was a drag on net sales of a little bit more than $1 million for the year.
We estimate that the extra reporting week in fiscal 2020, which occurred in the third quarter contributed approximately $35 million to our net sales.
Leading our brand performance was Green Giant, which reached approximately $639 million in net sales during fiscal 2020, marking an increase of $112.2 million or 21.3% for the year.
Green Giant outperformance was largely led by shelf-stable with Green Giant Le Sueur shelf-stable net sales up by approximately $64.8 million or 39.7% for the year.
Green Giant shelf-stable had COVID-19 enhanced sales that led to extraordinary performance that began in the second half of March and carried through to the end of the third quarter.
As we hit the fourth quarter, we began to manage sales closely through the implementation of certain customer allocations to ensure there we had sufficient product to last us until this summer's pack season.
As a result, Green Giant shelf-stable net sales were flat in the fourth quarter, despite elevated demand and double-digit consumption trends that persist today.
Net sales of Green Giant frozen products were up double digits for the year, plus $47.4 million or 13.1%.
Among our other larger brands, Cream of Wheat had one of the best performances in fiscal 2020, with net sales up by approximately $12.9 million or 21.6% for the year.
Cream of Wheat continue to outperform in the fourth quarter with net sales up by $2.7 million or 16.1% compared to the prior year period.
Clabber Girl also had very strong performance as part of what we believe will be a lasting resurgence in baking.
Net sales of Clabber Girl products were up by approximately $10.2 million or 18.9% during the comparable period of time that we owned it, following the mid May 2019 acquisition.
We have been very pleased with the performance of Clabber Girl business which generated approximately $97.5 million in net sales during our first full year of ownership compared to our expectations at the time of acquisition of approximately $75 million of net sales.
Net sales of Clabber Girl were up by approximately $2.5 million or almost 10% in the fourth quarter compared to the year-ago period.
Net sales of Ortega were also up double digits during fiscal 2020 with an increase of $17.9 million or 12.7% compared to the prior year.
Supply chain constraints, driven by industry wide taco shell capacity constraints, limited the upside for the fourth quarter.
And as a result while our net sales growth was impressive with a $2.5 million increase or 7.3% compared to the prior year period, we could have done much more had we add incremental product supply.
Victoria was also one of the larger gainers in the portfolio, increasing net sales in fiscal 2020 by $11.3 million or 26.4% compared to the prior year.
Net sales of Victoria reached nearly $55 million in 2020.
While consumption remains strong throughout the year, net sales dropped approximately $0.6 million dollars or 4.7% in the fourth quarter, primarily due to the timing shift of a large promotional event with one of our key club customers that moved from fourth quarter 2019 to the third quarter 2020.
Net sales of Maple Grove Farms were up by approximately $6.1 million or 8.7%, impressive performance given that a substantial portion of Maple Grove Farms business is sold through the foodservice channel, which went dark for a significant portion of the year.
Fourth quarter performance showed nice improvement as well, with net sales up $2.1 million or 12.2%, driven by continued strong consumption trends and an improvement in the foodservice side of the business.
Our spices & seasonings, including our legacy brands such as Ac'cent and Dash and the brands we acquired in 2016, such as Tones and Weber were up by $30.9 million or 9.2% for the year.
Net sales of spices & seasonings reached $367.7 million in fiscal 2020.
The retail side of this business began to show strong momentum by June as more and more Americans began to fully embrace cooking and seasoning their meals at home, a trend which continues in 2021.
The foodservice side of the business continues to be down, but it's slowly improving.
In the fourth quarter net sales of our spices & seasonings increased by $2.1 million or 2.4%.
Despite the outsized performance for the year, our spices & seasonings could have increased even more even with a drag from foodservice had we had incremental supply.
Among our other larger brands, New York Style had challenges both in foodservice and to a lesser degree in the retail deli.
Net sales of New York Style were down $1.8 million, 4.5% for fiscal 2020 compared to the prior year.
Gross profit was $481.7 million for fiscal 2020, or 24.5% of net sales.
Excluding the negative impact of approximately $5 million of acquisition divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring event -- expenses included in the cost of goods sold, our gross profit would have been $486.7 million, or 24.7% of net sales.
Gross profit was $383.1 million for fiscal 2019 or 23.1% of net sales.
Excluding the negative impact of approximately $22 million of acquisition divestiture-related expenses, amortization of acquisition-related inventory fair value step-up and non-recurring expenses included in cost of goods sold our gross profit would have been $405.1 million, for 24.4% of net sales.
Outside of COVID-19 related expenses, including those described previously at our factories and those from our co-packers, inflation remained somewhat benign throughout a significant portion of 2020.
However, we did begin to see inflation starting late in the third quarter and accelerated into the fourth quarter particularly for freight costs, certain agricultural products and other ingredient costs and packaging.
I will discuss inflation a little bit more in our 2021 outlook, but we expect to see inflationary pressures continue in the coming months and we are working to alleviate these pressures in our 2021 budget.
Selling, general and administrative expenses for the year were $186.2 million or 9.5% of net sales.
This compares favorably to the prior year as a percentage of net sales, which included $160.7 million in selling, general and administrative expenses or 9.7% of fiscal 2019 net sales.
The dollar increase in SG&A was composed of increases in selling expenses of $8.2 million, increases in consumer marketing investments of $7.7 million, increases of warehousing expenses of $2 million and increases in G&A of $10.7 million.
Increases in SG&A including increases in selling, brokerage, and incentive compensation that are tied to increased sales and profitability.
These increases were offset in part by a reduction in acquisition divestiture-related and non-recurring expenses of $3.1 million.
As I mentioned earlier, we generated $374.8 million in adjusted EBITDA before COVID-19 expenses and after the inclusion of $13.5 million in COVID-19 expenses, adjusted EBITDA of $361.2 million.
This compares to adjusted EBITDA of $302.5 million in 2019.
We generated $2.26 in adjusted diluted earnings per share in fiscal 2020 compared to $1.64 per share in 2019.
The increase was primarily driven by volumes, including COVID-19 driven demand for our products as well as the acquisitions of Clabber Girl in mid May 2019 and Crisco in December 2020.
Adjusted diluted earnings per share were also positively driven by increased adjusted EBITDA margins despite the impact of COVID-19 costs due to the benefits of our increased sales as well as lower effective cost of borrowing.
We had another strong year for cash, with net cash provided by operating activities of $281.5 million, which more than supported our long-standing dividend policy and helped us reduce our net debt before taking into account debt incurred to finance the Crisco acquisition and our pro forma net leverage.
As a reminder, we began the year with net debt to pro forma adjusted EBITDA of approximately 6.12 times, we reached nearly 4.75 times at the end of the third quarter and finished the year with pro forma net debt to adjusted EBITDA before COVID-19 expenses of approximately 5.21 times, which is our consolidated leverage ratio as calculated for purposes of our credit agreement.
Our increase in net cash provided by operating activities allowed us to reduce net debt by approximately $135 million over the course of the year, excluding our acquisition of Crisco.
Our 2021 outlook includes an expectation for elevated net sales of our products in the early month, driven by consumption that has remained over 10% higher than pre-pandemic levels on a blended basis across the B&G Foods portfolio for nearly every week of the last 11 months.
We don't expect to exceed our net sales for March, April or May 2020 when there is a surge in sales driven more by pantry loading than by consumption.
Our current year is off to a tremendous start, as we have strong expectations for fiscal 2021, especially when compared to 2019.
As a result of the challenges faced while trying to forecast COVID-19, we are not able to provide a detailed financial forecast at this time.
However, what I can say is that we expect to generate company record net sales of $2.05 billion to $2.1 billion in 2021 inclusive of the full benefit of a full year of the Crisco acquisition.
We do expect 2021 to bring us a different set of challenges than we faced in 2020 and these challenges will include a return of inflation across a number of key input costs, including certain agricultural products, packaging, and freight as mentioned earlier.
As in prior years, our expectation is that we will manage these costs through a combination of pricing, initiatives, and cost savings activities to preserve our margin profile and our cash flows.
As you can see in those numbers the great majority of our brands grew in fiscal 2020, some substantially because of the dramatic effects of COVID on consumer buying and dining patterns.
E-commerce was a growing driver of those trends and we invested during the year to follow consumers as they bought more through various online means and we saw sales through those means of buying grow in return.
Although there is no precise way to measure this, using IRI and other data sources, we believe that our online sales grew by roughly 150%, albeit from a relatively modest base.
We expect that trend to continue in 2021 and are investing further in building out our online presence and to marketing with various retailers on their site, so that we can be at the forefront of this new way of selling.
Our business also benefited from the low concentration of sales in the foodservice channel versus retail.
Before COVID, roughly 13% of our net sales were to foodservice customers.
In 2020 that number decreased to 9% as foodservice sales softened and retail sales grew.
We are seeing modest recovery in the channel and expected to strengthen as the year progresses.
But in general, declines in brands such as Regina and softness in Wright's New York Style, and Maple Grove are the result of higher proportion of their sales to foodservice.
Several other trends in our business in 2020 are encouraging as we move forward into 2021.
Household penetration of B&G Foods brands grew by 900 basis points and the average sale of B&G products per purchase grew by 25%.
As we expand our digital capabilities, we're able to track the consumers involved in these trends and invest more specifically in reinforcing their purchases.
Our consumption trends consistently showed double-digit increases that placed us at near or at the top of comparable food companies and those trends continue in 2021.
We increased our marketing spending by approximately 20% for the year last year and over 50% in the fourth quarter to reinforce those gains and speak to all consumers about our brands that are driving growth.
Despite all the positives, the year's performance does not reflect the full potential of changes in consumer behavior.
We saw serious supply chain capacity issues in the second and third quarter and were unable to fully meet demand on brands that offered meal solutions such as Ortega and Bear Creek.
Spices & seasonings sales were also affected by manufacturing capacity issues, packaging outages, and absenteeism due to COVID related quarantine.
Our policy at our facilities has been to be very aggressive in terms of quarantine employees with pay who had any type of exposure.
That has paid valuable dividends in terms of employee safety, but often left the facilities short-handed and increased our costs.
Early on in the fourth quarter, we realized that due to crop conditions and co-packer capacity issues, the supply of Green Giant shelf-stable products would not meet the elevated demand we were seeing and place those products on allocation, resulting in relatively flat sales for the quarter.
We will not see meaningful relief in this area until the summer when the new crop arrives.
Since we took that action we've seen competition take similar actions, not surprising since we were all affected by a relatively poor crop last fall.
Turning to a closer look at the fourth quarter, it would be easy to say that the business returned to a more normal footing with base business sales up just 2.5%.
Frankly, we don't see it that way.
One thing I have remarked on since returning is how closely consumption trends track the actual demand we see in the business.
That's more true now than it was six years ago.
As noted earlier, our consumption trends remain very strong.
What we saw in the fourth quarter was a relatively soft November and December and in factory sales do we believe to retailer stocking up late in Q3 in anticipation of strong demand over the holiday season.
That demand did not materialize to the extent they anticipated and inventories had to be worked off.
At the back end of the quarter, there was a shift in timing of the typically soft sales week at year-end.
In 2019, that week fell in our financial January while in fiscal 2020 it fell at the end of December.
The effect is easy to illustrate January 2020, excuse me 2021 base business sales were up 35%.
The year-over-year difference, accounting for roughly 5% of fourth quarter net sales.
Adjusted EBITDA for the fourth quarter was handicapped by $4.3 million in COVID related expenses that were not compensated for by increased sales and an additional spend of $4.5 million in marketing.
Given that we remain very optimistic about 2021.
Our sales continue to be strong, a reflection of the consumption trends and our service levels continue to improve as we add capacity in our workforce strengthens and returns.
While we are still experiencing COVID related expenses, the rate of spending is trending downward and should not be near the $13.5 million cost, we saw in the last three quarters of 2020.
Our growth through innovation was handicapped in 2020 as retailers canceled resets and focused on maintaining inventory of existing products.
Despite that the limited launches, we managed to do in 2020 combined with incremental sales of 2019 new products accounted for roughly 2% of our net sales, or $45 million.
The successful items in that group will see further expansion of the distribution in fiscal 2021 and will be joined by new product introductions and a variety of brands with special focus on Green Giant frozen and Ortega products.
2021 will also see a full year of ownership of the iconic Crisco brand, which we acquired on December 1 and which made significant accretive contributions to our fiscal 2020 results in just one month.
We are integrating the brand into our company as we speak and expect to have it fully integrated by the end of the summer.
The brand brings with it strong sales, reinforced by COVID trends and very attractive margins.
The acquisition profile fits our model perfectly in terms of purchase price, financing costs, tax advantages, EBITDA margin, and free cash flow from EBITDA.
We believe that there are good opportunities for the brand to grow in both new distribution and new products and we will be working to execute both in 2021.
As Bruce mentioned, this year is not without its challenges.
We are seeing significant cost pressure on a variety of fronts, including transportation packaging and commodities.
Our operations group has done a good job of protecting us where possible, but there is still exposure that we must cover.
We plan to do that through a combination of pricing, rationalization of trade programs and an enhanced cost reduction program.
We've already taken some of those actions.
Price increases on the Underwood brand and Green Giant shelf-stable products went into effect last month, more are necessary and will follow.
In my opinion cost relief on some elements of costs such as commodities is uncertain.
There will be significant competition for what crops get planted this year and the outcome is in doubt until the harvest this fall.
Progress in 2020 that's well worth noting includes a heightened recognition of the corporate responsibilities of B&G Foods.
As we approach the threshold of $2 billion in net sales.
The year saw the formation of a new Corporate Social Responsibility committee at the Board of Director level.
Its mission to direct and oversee our efforts to meet our corporate social responsibilities to our employees, customers, communities and other stakeholders.
During 2020, we also adopted and published on our website a new human rights policy and a new environmental health and safety policy.
And most recently, we have established an employee directed diversity equity and inclusion counsel to help understand and meet the needs of our employees, while achieving appropriate workforce diversity, equity, and inclusion throughout the company.
While we have already had efforts in place on these fronts, the company has more completely formalized those efforts and is committed to increasing all of our efforts and investments.
When we look at fiscal 2021 and try to estimate how we will perform.
I have to admit that it's a major challenge.
The year has started off with very good momentum, but we will soon reach the sales weeks when consumers were loading their pantries in 2020 with everything and anything and we cannot expect to match those weeks.
But as 2020 stabilized in the third quarter and fourth quarter we saw more of the "new normal" trends that we think will continue and could support increased sales versus fiscal 2019.
There is no doubt that many people will continue to work from home for at least part of their work week.
We like to believe that consumers have discovered or rediscovered the satisfaction of cooking and baking at home.
And the savings that they can reap from doing so.
We are investing to foster more baking at home, in particular, very appropriate since approximately 19% of our sales are in brands that are involved in baking.
And we believe that we can retain many of the new customers who discovered our brands and will market in a traditional way and online to do so.
All of that leads us to estimate that we will have base business net sales that will exceed 2019 net sales by approximately 10%, with 11 months of Crisco net sales incremental to that.
I wish I could call out fiscal 2021 with more precision in that, but we obviously are in very unchartered waters in many ways.
We continue to believe that our shareholders are best served by the operating model that we have had in place since we went public in 2004.
Strived for modest organic growth in our base business of well-established brands, they are on a larger growth component via accretive acquisitions and return a meaningful proportion of free cash flow to shareholders through dividends.
This strategy has resulted in a net sales compound annual growth rate of 11% since our IPO in 2004 and an adjusted EBITDA CAGR of 11.9%.
Since our IPO, B&G Foods has paid out $1.73 billion in dividends.
We believe that we have served our shareholders well by making those payments.
On average over the years, dividends have represented approximately 60% of free cash flow.
In 2020, that payout ratio was about 54%, lower than normal due to the remarkable surge in operating results.
I'd like to conclude with the final shout out to our employees, all of whom have made this company successful in an extremely challenging year and in particular to the workers, who have been on the front line in our manufacturing facilities, distribution centers, and offices.
On a daily basis making sure we can supply the foods that consumers need.
Other workers have made important contributions as well even while working from home, a less than ideal scenario in many cases.
Without all of their dedicated efforts, we could not have achieved the records that were set in fiscal 2020 or have begun 2021 with the prospect of another successful year.
This concludes our remarks.
And now we would like to begin the Q&A portion of our call, operator?
 Assistant:

Chosen response:
sees fy 2021 sales $2.05 billion to $2.1 billion.
q4 sales $510.2 million versus refinitiv ibes estimate of $531.1 million.
q4 adjusted earnings per share $0.35.
unable at this time to provide more detailed guidance for fiscal 2021.


Prompt:
Human: For today's call, Jeff will begin by covering a summary of our third quarter.
Roop will then discuss our detailed third quarter results, including a cash and balance sheet summary and fourth quarter guidance.
Jeff will wrap up with an outlook by market sector, an update on our strategic initiatives and a discussion on our midterm financial model before we conclude the call with Q&A.
We hope you are all staying safe and healthy during these unprecedented times.
In Q3, we delivered revenue of $526 million, which was up 7% sequentially from Q2, supported by strong demand in our defense, semi-cap and telco sectors and improved manufacturing productivity.
With improving operational efficiency, non-GAAP gross margins rebounded 170 basis points to 8.7% for the quarter.
Improved profits and focused expense management resulted in non-GAAP earnings of $0.32 per share, which includes $1.3 million or $0.04 per share of COVID-related costs.
We believe COVID costs are a part of the new operating normal.
And while we believe they will decline to some degree from current levels, they will likely not completely go away.
After a challenging couple of quarters, I'm pleased to report that our manufacturing and engineering services operations have essentially returned to pre-COVID productivity levels, which has supported our improved results for Q3.
This has not been without an incredible amount of work from our COVID task force and our entire employee population to maintain stringent protocols to ensure we keep our workplace safe and healthy, which remains a top priority.
Our cash conversion cycle for the quarter improved to 81 days from 84 days in Q2.
As I've mentioned previously, our go-to-market team continues to deliver exciting opportunities aligned to our complex and focused services and solutions that utilize the full breadth of the One Benchmark capabilities.
And we had another strong quarter of bookings in Q3, where we awarded business that should represent over $200 million of future engineering and manufacturing revenue.
In the medical sector, we were awarded a new program for a lab-free rapid COVID-19 testing device from DnaNudge that has begun production in our Netherlands facility.
We are excited to partner with DnaNudge to provide DFX support and high reliability manufacturing for what has turned out to be a very swift product ramp.
We also had design and manufacturing process wins with two other companies for a pulmonary treatment device and an optical diagnostic product for renal applications.
In the defense vertical, we were awarded new programs for secure communication radio modules that incorporate our design solutions and manufacturing services for electronics that will be deployed in military aircraft.
In industrials, we were awarded the full system box build for a LiDAR application, and we were awarded manufacturing for a new generation of oscilloscopes.
In computing, we were awarded a new prototype for a hyperscale computing customer and a new outsourcing award from an existing customer supporting network control and monitoring electronics.
Our new business pipeline continues to be strong across our targeted sectors and subsectors, and we remain very encouraged about the prospect for continued wins, where the outsourcing environment for both engineering and manufacturing projects remains favorable.
I hope everyone and their families continue to stay safe and healthy.
Total Benchmark revenue was $526 million in Q3, a 7% increase on a sequential basis.
Medical revenues for the third quarter were flat sequentially as expected from moderating demand for products involved in COVID-19 therapies, such as ventilators, x-rays and ultrasound devices.
New product demand is shifting more toward diagnostic devices, such as DnaNudge's diagnostic box, which we were awarded in Q3.
Semi-cap revenues were up 14% in the third quarter and up 45% year-over-year from continued strong demand across our semi-cap customers.
A&D revenues for the third quarter increased 18% sequentially due to strong defense demand in surveillance, connectivity, encryption and digital subsystems and from new program wins.
Conversely, commercial aerospace demand, which was 30% of 2019 revenues, remain muted and declined on certain platforms during the quarter.
Industrial revenues for the third quarter were flat sequentially from continued softness for products in the oil and gas industry, which was approximately 20% of our 2019 revenue.
In addition, demand remains muted for customers that support commercial building infrastructure and transportation markets.
Overall, the higher value markets represented 81% of our third quarter revenue.
In the traditional markets, computing revenues were flat sequentially from stable demand in high-performance computing and data center storage products.
Telco was up 16% from Q2 with improved demand in commercial satellite and network infrastructure products.
Our traditional markets represented 19% of third quarter revenues.
Our top 10 customers represented 42% of sales in the third quarter.
Our GAAP earnings per share for the quarter was $0.16.
Our GAAP results included restructuring and other onetime costs totaling $7.2 million.
$6.3 million of these costs are related to the impairment of assets and severance and other items related to the decision to exit a certain line of business in our A&D sector related to turbine machining.
The remaining $900,000 of restructuring and other onetime costs are due to various restructuring activities around our sites.
$1.6 million insurance recovery related to our Q4 2019 ransomware event.
To date, we have recovered $6.6 million.
Turning to slide eight.
For Q3, our non-GAAP gross margin was 8.7%, a 170 basis point sequential increase.
During the quarter, gross margin was positively impacted by higher revenues, which enabled improved leverage across our cost structure, increased productivity across our sites and lower sequential COVID-19-related costs.
We estimate that we incurred approximately $1.3 million or approximately $0.04 per share of COVID costs in the quarter versus $3.4 million in Q2.
Our SG&A was $29.7 million, an increase of $1.2 million sequentially and a decrease of $1.2 million year-over-year.
We expect that our SG&A costs will be relatively flat sequentially between Q3 and Q4.
Operating margin was 3%, an increase from 1.2% in Q2 due to the higher revenue and increased gross margin.
In Q3, our non-GAAP effective tax rate was 18.6%, which was lower than expected as a result of the insurance recovery reported in Q3 and the distribution of profits around the globe.
Non-GAAP earnings per share was $0.32 for the quarter.
Non-GAAP ROIC was 5.8%.
Our non-GAAP earnings per share improved sequentially based on our improved operational performance, lower net interest expense and lower tax rate.
Our cash balance was $335 million at September 30, with $161 million available in the U.S.
We continue to have a strong capital structure, and our liquidity position provides flexibility to manage our business to support our future strategy.
We generated $6 million in cash flow from operations and used $6 million for capital expenditures.
Our accounts receivable balance was $306 million, an increase of $4 million from the prior quarter.
Contract assets were $161 million at September 30 and $154 million at June 30.
Payables were down $22 million quarter-over-quarter.
Inventory at September 30 was $353 million, down $11 million sequentially.
Turning to slide 10 to review our cash conversion cycle.
Our cash conversion cycle days were 81.
Accounts receivable days improved three days.
Inventory days improved six days, and customer deposits improved by one day to help support an overall sequential improvement of three days.
Turning to slide 11 for our capital allocation update.
In Q3, we continue to pay a quarterly cash dividend of approximately $5.8 million.
We expect to continue the recurring quarterly cash dividend.
There were no share repurchases in Q3.
We will consider restarting share repurchases opportunistically in Q4.
Turning to slide 12 for a review of our fourth quarter 2020 guidance.
We expect revenue to range from $500 million to $540 million.
We expect that our gross margins will be 9% to 9.1% for Q4, and SG&A will range between $29 million to $30 million.
This range contemplates the SG&A cost reductions that Jeff will review further in his following comments, the continued reduced travel offset by the reestablishment of certain employee salaries that have been temporarily reduced.
Implied in our guidance is a 3.3% to 3.5% operating margin range for modeling purposes.
The guidance provided does exclude the impact of amortization of intangible assets and estimated restructuring and other costs.
We expect to incur restructuring and other nonrecurring costs in Q4 of approximately $2.8 to $3.2 million.
Our non-GAAP diluted earnings per share is expected to be in the range of $0.32 to $0.36 or a midpoint of $0.34.
We estimate that we will generate approximately $45 million to $50 million cash flow from operations for fiscal year 2020.
capex for the year will be approximately $32 million to $38 million as we prioritize investments to support our new customers and expand our production capacity for future growth.
Other expenses net is expected to be $2.7 million, which is primarily interest expense related to our outstanding debt.
We expect that for Q4, our non-GAAP effective tax rate will be between 18% to 20% because of the distribution of income around our global network.
The expected weighted average shares for Q4 are 36.5 million.
This guidance takes into consideration all known constraints for the quarter and assumes no further significant interruptions to our supply base, operations or customers.
Guidance also assumes no material changes to end market conditions due to COVID-19.
Following Roop's comments on our guidance for the fourth quarter, I wanted to provide additional color on our view of demand by sector, shown on slide 14.
Overall, for the fourth quarter, we expect increased revenues from stronger demand and new programs in defense, industrials and telco to offset anticipated declines in medical as we pivot manufacturing from COVID-19-related therapeutic equipment to diagnostic, trauma and elective surgical devices.
The resulting Q4 revenue should be in line with Q3 levels.
We do not expect a seasonal uptrend in Q4 this year as customers are more cautious on increasing their demand signals given the economic and geopolitical environment.
Now turning to the medical sector.
During the first half of this year, we saw demand reductions in our core medical products in the cardiac, renal and orthopedic markets associated with trauma and elective surgeries as many of our existing customers and new customers reallocated their manufacturing and sales capacity in the fight against COVID.
As reported, one of the existing key cardiac customers, ZOLL Medical, enlisted Benchmark to support a rapid ramp of manufacturing capability to support ventilator production.
In the fourth quarter, we see declining demand for COVID-19 therapy devices, but the corresponding demand recovery for our non-COVID products isn't expected to start until first half of next year.
This anticipated recovery, along with new medical programs, gives us confidence that next year will be another growth year for the medical sector.
In semi-cap, after a stronger-than-expected increase in Q3, demand remained stable for semiconductor capital equipment in Q4.
We remain well positioned in this sector with our advanced precision machining and electronics manufacturing and further demand outlook.
This sector is expected to remain strong as the semiconductor capital equipment index is predicting another growth year in 2021.
Moving to the A&D sector outlook.
Our aerospace and defense sector is comprised of approximately 70% defense-related products and 30% commercial aerospace offerings based on 2019 revenue levels.
Defense demand across the portfolio remained strong in Q4 as we support many funded programs across the United States Armed Forces.
We are anticipating that our commercial aircraft programs, which have declined significantly in first half '20, have a limited demand recovery in Q4 and in fiscal year 2021.
As Roop mentioned earlier, we have not seen an uptick in orders in industrials for oil and gas and the building and transportation infrastructure markets, where many large projects continue to be delayed.
Despite soft demand, we do expect an overall increase in industrials in Q4 for new programs and an increased number of global engineering services projects.
Overall, we see stable demand across our computing and telco customer base.
High-performance computing projects are in flight as expected in the second half but are being offset to some degree with the persistent weakness in higher-value enterprise applications as the remote work trend continues.
In telco, network infrastructure product demand across a number of our customers remain strong from the continued need for greater bandwidth for data services.
After a nice rebound in Q3, demand from our commercial satellite customers remained stable in Q4.
As Roop shared in our guidance, with this revenue and sector mix forecast, we remain on track to achieve at least 9% gross margins in Q4.
We continue to make steady progress on our key strategic initiatives that we laid out for 2020.
My staff and I review progress regularly, and we share updates with our extended teams to ensure all of Benchmark is focused on a common set of goals.
First, customer focus is a top priority at Benchmark.
We are working as an organization using customer feedback to find ways to optimize our engagement model and make it easier to do business with our organization.
This attention, coupled with operational performance, are the cornerstones for customer satisfaction, which I'm happy to report remains at a high level.
With many of our growth and strategic accounts, we are building deliberate long-term technology road maps and business relationships to help inform how we can invest in and be more valuable to our customers in the future.
This customer-centric approach is an important foundation in growing our business.
In our sector strategies, we have a keen focus on selecting the vertical submarkets most aligned to our value proposition.
Our objective within these markets is to expand and scale with strategic customers by selecting the full breadth of services and capabilities.
This includes focused investment in technology innovations that differentiate Benchmark against other competitors and even against prospective customers' internal manufacturing to increase our win rates.
This thesis is playing out well across each of our higher-value sectors.
In fact, over the last year, we have seen improvements in engineering services tied to EMS deals and vice versa.
Next, we continue to drive enterprise efficiencies.
We are continuing work on our global footprint optimization, where we are winding down manufacturing in some locations and ramping up new production in other locations.
The goal is to gain efficiencies with fewer rooftops by selecting locations with operational synergies and align with customer preference.
To this end, in the third quarter, we made the decision to exit a line of business in our A&D sector related to turbine machining.
This is the right decision when we look at strategic alignment of the impacted facility and the prolonged downturn in commercial aerospace demand driven by the pandemic.
These decisions are never easy, but we're focused on our long-term strategy.
In addition, we have a rigorous focus on controlling our costs and expense management through improved processes, G&A centralization activities and intense focus on project and investment prioritization.
We are reshaping our SG&A landscape.
For next year, we are targeting SG&A at or below $130 million even with the end to temporary salary cuts and corporate furloughs, higher travel expenses and higher variable compensation.
The hard work we have invested in our HR, IT, finance and other shared services to enable centralization are yielding lower costs next year.
Unfortunately, this does require restructuring activities, which, as Roop has mentioned, will occur this quarter.
Finally, I want to close with our initiative on engaging talent and shifting our culture.
As I've said, Benchmark has a great cultural foundation that starts with a committed workforce who wants to deliver for our customers.
Our investments in this initiative will include focus on better self-service tools, increased empowerment and critical skills development to ensure the talent the organization needs in future leaders can be found within our own diverse team.
This includes the ongoing commitment to advancing diversity and inclusion efforts at all levels in the company, which we are enhancing as part of our ongoing ESG focus.
For technology companies like Benchmark, competitiveness requires innovation, fresh ideas and creative thinking, all areas fueled by diversity.
The attentive work on these strategic priorities formed the foundation for setting our midterm target model through the year 2022.
The company had a great start at pivoting the higher-value markets before my arrival, and we are now at our target mix between traditional and higher-value splits.
The right markets and customer selection remains key to our strategy.
Setting COVID and the resulting macroeconomic uncertainty aside, we believe that we can grow revenue at a 5% compound annual growth rate over the next two years by growing our current accounts and ramping new programs with our targeted new customers.
While we're overcoming some pretty significant revenue decline headwinds in our aerospace and oil and gas markets and other demand softness in our installed base due to the pandemic recession, our growth expectations speak to the strength in our recent bookings and outsourcing wins.
As the economy picks up later in 2021 and through 2022, we expect our growth can accelerate further with this new win momentum and recovery in our customer installed base.
With our current mix of business, the success of ongoing operational excellence initiatives and our current global footprint, we are targeting gross margins in the range of 9.3% to 9.7%.
On the SG&A expense line, I'm committed to effective overhead management and have taken the necessary actions to drive an efficient organization that is rightsized to support our customers and employees effectively.
As the company expands and needs greater investments and capabilities, we will keep expenses aligned to our future revenue growth.
The resulting non-GAAP operating margin target range will be between 3.4% to 3.8%.
With this model, we feel comfortable that we can grow earnings faster than revenue.
As operating margins improve, we see resulting improvement in ROIC.
I am confident and remain excited about our team's ability to capitalize on the growth opportunities in our diverse end markets, where our deal pipeline in win rate is increasing, and we remain focused on executing our ongoing initiatives to increase incremental value for our customers, employees and shareholders.
 Assistant:

Chosen response:
q3 non-gaap earnings per share $0.32.
q3 gaap earnings per share $0.16.
q3 revenue $526 million versus refinitiv ibes estimate of $511.3 million.
sees q4 2020 non-gaap earnings per share $0.32 to $0.36 excluding items.
sees q4 2020 revenue $500 million to $540 million.
benchmark electronics - continue to make progress on improving gross margins as co expect to achieve our 9% target in q4.
restructuring charges are expected to range between $2.8 million to $3.2 million in q4.


Prompt:
Human: Today, we will review the second quarter 2021 financial results and provide an update on key business trends for Bio-Rad.
With me on the phone today are Norman Schwartz, our Chief Executive Officer; Ilan Daskal, Executive Vice President and Chief Financial Officer; Andy Last, Executive Vice President and Chief Operating Officer; Annette Tumolo, President of the Life Science Group; and Dara Wright, President of the Clinical Diagnostics Group.
Our actual results may differ materially from these plans and expectations, and the impact and duration of the COVID-19 pandemic is unknown.
Finally, our remarks today will include references to non-GAAP net income and diluted earnings per share, which are financial measures that are not defined under Generally Accepted Accounting Principles.
So I'd like to take a few minutes to review our current state of operations around the world.
Overall, Bio-Rad has adapted well to the working constraints that COVID has imposed upon us, and we find ourselves able to respond and react well to everyday operational changes and demands.
We continue to make solid progress on our core strategies, support of our customers and the safety of our employees.
With improvement in our end markets after the significant downturn a year ago, we're responding well to increased demand.
But as with other manufacturers in life sciences, we are having to work hard to procure raw materials in some challenged areas, such as plastics and electronic components, as well as dealing with increased pressure on raw material costs.
We also continue to experience higher than typical logistics costs as indicated in our Q1 call.
With the emergence of the COVID-19 delta variant, we are maintaining our work from home policies for the near term as we work on return to the workplace plans targeted for later this quarter, and we continue to monitor the global pandemic situation carefully given the fluidity the delta variance has created.
Employee safety remains a principal focus, and we are pleased with our safety record and the growing vaccination status of our organization.
As we enter Q3, we expect the emergence of the delta variant will continue to create some challenges, and we are maintaining vigilance and flexibility as a result.
Overall, we expect to see continued improvement in our end markets through the second half of the year as our customers continue to adapt.
However, the new delta variant clearly introduces an element of uncertainty as we move forward.
Now I would like to review the results of the second quarter.
Net sales for the second quarter of 2021 were $715.9 million, which is a 33.4% increase on a reported basis versus $536.9 million in Q2 of 2020.
On a currency-neutral basis, sales increased 27.5%.
On a geographic basis, we experienced currency-neutral growth across all three regions.
Sales of our core products in the second quarter of last year were negatively impacted by the pandemic.
And generally, we are seeing a continued gradual capacity improvement at both academic and diagnostic labs, which we estimate between 90% and 95% of pre-COVID levels.
We estimate that the COVID-19-related sales were about $68 million in the quarter.
Sales of the Life Science group in the second quarter of 2021 were $334.2 million compared to $252.1 million in Q2 of 2020, which is a 32.6% increase on a reported basis and a 27.1% increase on a currency-neutral basis.
The year-over-year sales growth in the second quarter was driven mainly by increases in western blotting, Droplet Digital PCR and qPCR products.
We have seen strong growth in the biopharma market for our Droplet Digital PCR platform.
We are also seeing a healthy uptake for ddPCR in wastewater solutions.
Government funding toward public health labs is driving increased demand for our ddPCR products that offer automated solutions with high accuracy and sensitivity.
Process Media, which can fluctuate on a quarterly basis, saw a year-over-year double-digit growth versus the same quarter last year.
Excluding Process Media sales, the underlying Life Science business grew 29.1% on a currency-neutral basis versus Q2 of 2020.
On a geographic basis, Life Science currency-neutral year-over-year sales grew across all regions.
Before moving on, I would like to highlight the broad legal settlement with 10 times Genomics announced earlier this week.
This settlement resolves the multiyear global litigation with 10 times over outstanding issues in the field of single cell and includes a global cross-license agreement.
In addition to past and future royalties, Bio-Rad received broad freedom to operate in the single-cell market and maintained exclusivity to our microwell single-cell IP.
We estimate that the future royalty payments from this legal settlement could total $110 million to $140 million over the life of the agreement, which runs through the year 2030.
This includes payments of $32 million in the third quarter for back royalties owed to Bio-Rad for the period from November 2018 through December 2020 as well as for settlement fees and interests.
Sales of the Clinical Diagnostics group in the second quarter were $380.2 million compared to $283.2 million in Q2 of 2020, which is a 34.3% increase on a reported basis and a 28% increase on a currency-neutral basis.
During the second quarter, the diagnostics group posted double-digit growth across all of its product lines.
The year-over-year growth was driven by a recovery of routine testing.
Elective surgery recovery is still progressing although at a slower pace.
On a geographic basis, the diagnostics group currency-neutral year-over-year sales grew across all regions.
Our diagnostics group announced last month a partnership with Seegene, which is a global leader in multiplex molecular diagnostics.
Bio-Rad will exclusively market the Seegene tests in the U.S., pending regulatory approvals.
Seegene's diagnostic products have high sensitivity and specificity and are optimized to work with Bio-Rad's CFX Real-Time PCR Systems.
The reported gross margin for the second quarter of 2021 was 56.1% on a GAAP basis and compares to 54.6% in Q2 of 2020.
Recall that the gross margin in Q2 of 2020 included an $8 million customs duty charge.
And excluding that charge, the Q2 gross margin further improved this quarter as a result of our productivity and efficiency initiatives.
However, as mentioned, we currently see increased pressure on raw material costs and higher logistics costs.
Amortization related to prior acquisitions recorded in cost of goods sold was $4.6 million and compares to $5 million in Q2 of 2020.
SG and A expenses for Q2 of 2021 were $213.4 million or 29.8% of sales compared to $189.3 million or 35.3% in Q2 of 2020.
Increases in SG-and-A expenses was mainly the result of employee-related performance compensation expense.
Total amortization expense related to acquisitions recorded in SG and A for the quarter was $2.4 million versus $2.3 million in Q2 of 2020.
Research and development expense in Q2 was $63.4 million or 8.9% of sales compared to $52 million or 9.7% of sales in Q2 of 2020.
Q2 operating income was $124.8 million or 17.4% of sales compared to $51.7 million or 9.6% of sales in Q2 of 2020.
Looking below the operating line, the change in fair market value of equity securities holdings added $1.031 billion of income to the reported results and is substantially related to the holdings of the shares of Sartorius AG.
Also during the quarter, interest and other income resulted in net other income of $1.3 million primarily due to foreign exchange and compared to $10.7 million of income last year.
Q2 of 2020 includes an $8.9 million dividend from Sartorius, which was declared in June and was paid in July.
In 2021, the Sartorius dividend was declared in the first quarter.
The effective tax rate for the second quarter of 2021 was 21% compared to 22.4% for the same period in 2020.
The tax rate for both periods were driven by the large unrealized gain in equity securities.
In addition, the second quarter of 2021 effective tax rate was lower also due to a lapse of statute of limitations of certain tax reserves.
Reported net income for the second quarter was $914.1 million, and diluted earnings per share were $30.32.
This is a decrease from last year and is related to changes in valuation of the Sartorius holdings.
Moving on to the non-GAAP results.
Looking at the results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins as well as other income.
Looking at the non-GAAP results for the second quarter.
In cost of goods sold, we have excluded $4.6 million of amortization of purchased intangibles and $1.2 million of restructuring-related expenses.
These exclusions moved the gross margin for the second quarter of 2021 to a non-GAAP gross margin of 56.9% versus 55.5% in Q2 of 2020.
Non-GAAP SG-and-A in the second quarter of 2021 was 29.2% versus 33.9% in Q2 of 2020.
In SG-and-A, on a non-GAAP basis, we have excluded amortization of purchased intangibles of $2.4 million, legal-related expenses of $8.8 million and restructuring and acquisition-related benefits of $7 million.
Non-GAAP R-and-D expense in the second quarter of 2021 was 9.1% versus 9.8% in Q2 of 2020.
In R-and-D, on a non-GAAP basis, we have excluded $2.1 million of restructuring benefits.
The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 17.4% on a GAAP basis to 18.5% on a non-GAAP basis.
This non-GAAP operating margin compares to a non-GAAP operating margin in Q2 of 2020 of 11.8%.
We have also excluded certain items below the operating line, which are the increase in value of the Sartorius equity holdings of $1.031 billion and the $1.8 million loss associated with venture investments.
The non-GAAP effective tax rate for the second quarter of 2021 was 21.5% compared to 23.8% for the same period in 2020.
The lower rate in 2021 was driven by the geographic mix of earnings.
And finally, non-GAAP net income for the second quarter of 2021 was $106.6 million or $3.54 diluted earnings per share compared to $48.3 million or $1.61 per share in Q2 of 2020.
Moving on to the balance sheet.
Total cash and short-term investments at the end of Q2 were $1.167 billion compared to $1.025 billion at the end of Q1 of 2021.
During the second quarter, we did not purchase any shares of our stock.
For the second quarter of 2021, net cash generated from operating activities was $154.6 million, which compares to $92.1 million in Q2 of 2020.
This increase mainly reflects higher operating profits.
The adjusted EBITDA for the second quarter of 2021 was 22.3% of sales.
The adjusted EBITDA in Q2 of 2020 was 18.6% and excluding the Sartorius dividend was 16.9%.
Net capital expenditures for the second quarter of 2021 were $23.4 million, and depreciation and amortization for the second quarter was $33.7 million.
Moving on to the guidance.
Andy previously alluded to continued uncertainties surrounding the pandemic, which could create some challenges and we look -- sorry, as we look to the better half of this year.
That being said, with customers continuing to adapt in this environment, we assume a gradual return to pre-pandemic activity and the more normalized business mix during the second half of 2021.
We are now guiding non-GAAP currency-neutral revenue growth to be between 10% and 10.5% for 2021 versus our prior guidance of 5.5% to 6%.
This updated outlook assumes the full year COVID-related sales to be between $200 million and $210 million, of which approximately $40 million to $50 million are projected for the second half of 2021.
Excluding COVID-related sales, the non-GAAP year-over-year currency-neutral sales growth in the second half is expected to be between 13% and 14%.
This represents between 4.5% and 5.5% growth in the second half of 2021 over the first half of 2021.
Full year non-GAAP gross margin is now projected to be between 57% and 57.5%.
Full year non-GAAP operating margin is forecasted to be about 19%, which assumes higher operating expenses in the second half of 2021 versus the first half as we are anticipating continued gradual return to more normal activity levels.
This guidance excludes any benefit related to the settlement with 10 times Genomics.
Our updated annual non-GAAP effective tax rate for 2021 is projected to be between 23% and 24%.
Full year adjusted EBITDA margin is forecasted to be between 23% and 23.5%.
 Assistant:

Chosen response:
q2 non-gaap earnings per share $3.54.
q2 earnings per share $30.32.
q2 sales rose 33.4 percent to $715.9 million.
sees 2021 non-gaap currency-neutral revenue growth between 10.0 to 10.5 percent.


Prompt:
Human: We will review the third quarter 2021 financial results and provide an update on key business trends for Bio-Rad.
With me on the phone today are Norman Schwartz, our Chief Executive Officer; Ilan Daskal, Executive Vice President and Chief Financial Officer; Andy Last, Executive Vice President and Chief Operating Officer; Annette Tumolo, President of the Life Science Group; and Dara Wright, President of the Clinical Diagnostics Group.
Our actual results may differ materially from these plans and expectations, and the impact and duration of the COVID-19 pandemic is unknown.
Finally, our remarks today will include references to non-GAAP net income and diluted earnings per share, which are our financial measures that are not defined under generally accepted accounting principles.
With that, I now turn over the call to Ilan Daskal, our Executive Vice President and Chief Financial Officer.
Before I begin the detailed third quarter discussion, I would like to ask Andy Last, our Chief Operating Officer, to provide an update on Bio-Rad's operations in light of the current pandemic-related environment that we are experiencing globally.
Annette's efforts and leadership have contributed to significant growth for the Life Science Group and Bio-Rad, and the company has started a search for a successor, and we will provide an update in the coming months.
Now I'd like to take a few minutes to review our current state of operations around the world.
We're now entering the seventh consecutive quarter of operating within the COVID pandemic, and so I shall make my comments brief as we have now established an operating cadence with embedded employee safety practices.
Our end markets continued to show improvement during Q3, with demand pickup in both life science and diagnostic markets in all regions.
The supply chain constraints highlighted in our Q2 call, however, have persisted in particular, for supply and cost of plastic raw materials, electronic components and higher logistics costs.
To date, we have been able to balance supply and demand through careful management.
However, we see this supply constraint trends continuing through year-end and into 2022, and thus increasing the challenge of adequately meeting customer demand.
As a result of the COVID-19 Delta variant, we recently pushed out our return to the workplace date for the U.S. into early November.
During Q3, we introduced a mandatory vaccination requirement for all employees in the U.S. and are extremely pleased with the results of this decision.
We are believing -- we believe we are maintaining our commitment to a safe workplace for all our employees.
As we enter Q4, we expect COVID-related demand for our products to be sequentially lower.
And overall, we believe the majority of our end markets are approaching close to normal operations, although we recognize that COVID will continue to create dynamic market challenges.
Now I would like to review the results of the third quarter.
Net sales for the third quarter of 2021 were $747 million, which is a 15.4% increase on a reported basis versus the $647.3 million in Q3 of 2020.
On a currency-neutral basis, sales increased 13.8%.
The third quarter sales include a $32 million settlement for back royalties from 10 times.
Excluding the back royalties, the Q3 year-over-year currency-neutral revenue growth was 9%.
On a geographic basis, we experienced strong currency-neutral growth in the Americas and in Asia, while growth in Europe declined slightly due to a tough year-over-year compare of COVID-related sales.
We estimate that COVID-19-related sales were about $57 million in the quarter as we continue to benefit from spikes in demand in geographies where new outbreaks have occurred.
Sales of the Life Science Group in the third quarter of 2021 were $373.5 million compared to $324 million in Q3 of 2020, which is a 15.3% increase on a reported basis and a 13.9% increase on a currency-neutral basis.
Excluding the $32 million settlement for back royalties, the underlying Life Science business grew 4.1% on a currency-neutral basis versus Q3 of 2020.
The year-over-year sales growth in the third quarter was driven mainly by increases in Droplet Digital PCR products and excluding COVID-related sales, our core qPCR business also experienced nice growth driven by strong uptake of our newer generation CFX Opus platform.
Process Media, which can fluctuate on a quarterly basis, saw strong year-over-year double-digit growth versus the same quarter last year.
Excluding Process Media sales and the $32 million settlement for back royalties, the underlying Life Science business declined 2% on a currency-neutral basis versus Q3 of 2020 due to lower COVID-related sales.
When also excluding COVID-related sales, Life Science year-over-year currency-neutral revenue growth was 21.8%.
Overall, we have seen strong growth in the biopharma market for our Droplet Digital PCR platform.
We also continue to see steady adoption of ddPCR in wastewater solutions, supported by government funding toward public health labs.
On a geographic basis, Life Science currency-neutral year-over-year sales grew across the Americas and Asia but declined in Europe.
When excluding COVID-related sales, European region revenue posted a double-digit increase from the year-ago period.
Sales of the Clinical Diagnostics Group in the third quarter were $372.2 million compared to $322.2 million in Q3 of 2020, which is a 15.5% increase on a reported basis and a 13.7% increase on a currency-neutral basis.
During the third quarter, the Diagnostics Group posted growth across all of its product lines.
The year-over-year growth was driven by a recovery of routine testing, which appears to be approaching normal levels, with the exception of blood typing, which is progressing at a slower pace.
On a geographic basis, the Diagnostics Group currency-neutral year-over-year sales grew double digits across all regions.
The reported gross margin for the third quarter of 2021 was 58.6% on a GAAP basis and compares to 56.7% in Q3 of 2020.
The Q3 2021 gross margin improvement was mainly driven by the settlement payments as well as our productivity and efficiency initiatives.
Amortization related to prior acquisitions recorded in cost of goods sold was $4.7 million as compared to $4.8 million in Q3 of 2020.
SG&A expenses for Q3 of 2021 were $216.2 million or 28.9% of sales compared to $198.2 million or 30.6% in Q3 of 2020.
Increases in SG&A spend was mainly the result of employee-related expense.
Total amortization expense related to acquisitions recorded in SG&A for the quarter was $2.4 million versus $2.3 million in Q3 of 2020.
Research and development expense in Q3 was $64.5 million or 8.6% of sales compared to $59.5 million or 9.2% of sales in Q3 of 2020.
Q3 operating income was $156.8 million or 21% of sales compared to $109.6 million or 16.9% of sales in Q3 of 2020.
Looking below the operating line, the change in fair market value of equity securities holdings added $4.869 billion of income to the reported results and is substantially related to holdings of the shares of Sartorius AG.
Also during the quarter, interest and other income resulted in a net expense of $3.2 million, primarily due to foreign exchange losses and compared to $5.5 million of expense last year.
The effective tax rate for the third quarter of 2021 was 21.8% compared to 21.9% for the same period in 2020.
The tax rate for both periods were driven by the large unrealized gain in equity securities.
Reported net income for the third quarter was $3.928 billion, and diluted earnings per share were $129.96.
This is an increase from last year and is largely related to changes in valuation of the Sartorius holdings.
Moving on to the non-GAAP results.
Looking at the results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margin as well as other income.
Looking at the non-GAAP results for the third quarter, in sales, we have excluded $32 million related to 10 times legal settlement.
In cost of goods sold, we have excluded $4.7 million of amortization of purchased intangibles, $4.1 million in IP license costs associated with the debt royalty payment and a small restructuring cost.
These exclusions moved the gross margin for the third quarter of 2021 to a non-GAAP gross margin of 57.9% versus 57.5% in Q3 of 2020.
Non-GAAP SG&A in the third quarter of 2021 was 29.6% versus 29.4% in Q3 of 2020.
In SG&A, on a non-GAAP basis, we have excluded amortization of purchased intangibles of $2.4 million, legal-related expenses of $2.3 million and a small restructuring and acquisition-related benefit.
Non-GAAP R&D expense in the third quarter of 2021 was 9% versus 9.2% in Q3 of 2020.
In R&D, on a non-GAAP basis, we have excluded a small restructuring cost.
The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 21% on a GAAP basis to 19.4% on a non-GAAP basis.
This non-GAAP operating margin compares to a non-GAAP operating margin of 18.8% in Q3 of 2020.
We have also excluded certain items below the operating line, which are the increase in value of the Sartorius equity holdings of $4.869 billion and about a $2 million loss associated with venture investments.
The non-GAAP effective tax rate for the third quarter of 2021 was 18% compared to 22.5% for the same period in 2020.
The low rate in 2021 was driven by the geographic mix of earnings.
In addition, the effective tax rate was lower as a result of an increase in compensation-related tax deductions.
And finally, non-GAAP net income for the third quarter of 2021 was $112.2 million or $3.71 diluted earnings per share, and that compares to $90.3 million and $3 per share in Q3 of 2020.
Moving on to the balance sheet.
Total cash and short-term investments at the end of Q3 were $1.343 billion compared to $1.167 billion at the end of Q2 of 2021.
During the third quarter, we did not purchase any shares of our stock.
For the third quarter of 2021, net cash generated from operating activities was $230.4 million, which compares to $135.7 million in Q3 of 2020.
This increase mainly reflects higher operating profits.
Following the end of the quarter, we completed the acquisition of Dropworks for approximately $125 million in cash.
Dropworks is developing a droplet-based digital PCR system that could provide a more cost-effective solution to streamline the digital PCR workflow for life science research and diagnostic applications.
We see Dropworks as accelerating Bio-Rad's entry into the lower-end segment of the digital PCR business and allow for expansion in the $2.5 billion to $3 billion qPCR segment, thereby significantly increasing the opportunity for our ddPCR platforms.
The adjusted EBITDA for the third quarter of 2021 was 23.1% of sales.
The adjusted EBITDA in Q3 of 2020 was 22.9%.
Net capital expenditures for the third quarter of 2021 were $34.6 million, and depreciation and amortization for the third quarter was $33.7 million.
Moving on to the guidance.
Overall, we expect a continued trend to a more normalized growth rate.
However, we are seeing increased supply chain constraints that creates an elevated level of uncertainty around timing of customer deliveries.
We are now guiding full year 2021 non-GAAP currency-neutral revenue growth to be between 12% and 13% versus our prior guidance of 10% to 10.5%.
This updated outlook reflects a wider revenue range due to the supply challenges, which we are experiencing.
Full year COVID-related sales are now expected in the range of $240 million and $245 million versus our prior guidance of $200 million to $210 million.
Full year non-GAAP gross margin is now projected to be between 57.5% and 57.8% versus prior guidance of 57% and 57.5%.
Full year non-GAAP operating margin is forecasted to be about 19.5% versus prior guidance of 19%.
Our updated guidance assumes higher operating expenses in Q4 as we continue to anticipate a gradual return to more normal activity levels.
Our updated annual non-GAAP effective tax rate is projected to be between 21% and 22%.
The lower rate versus our prior guidance is mainly due to an increase in compensation-related tax deductions.
Full year adjusted EBITDA margin is now forecasted to be between 23.5% and 24% versus prior guidance of 23% and 23.5%.
Lastly, with the uncertainties surrounding COVID, we are now planning to hold our Investor Day in February due to our preference to host an in-person event.
 Assistant:

Chosen response:
q3 non-gaap earnings per share $3.71.
q3 sales rose 15.4 percent to $747 million.
bio rad laboratories - now anticipates 2021 non-gaap currency-neutral revenue growth between 12 to 13 percent.
sees 2021 estimated non-gaap operating margin of about 19.5 percent.
qtrly gaap income per share $129.96.


Prompt:
Human: Joining us today are Cindy Baier, our President and Chief Executive Officer; and Steve Swain, our Executive Vice President and Chief Financial Officer.
These statements are made as of today's date and we expressly disclaim any obligation to update these statements in the future.
I direct you to the release for the full safe harbor statement.
For reconciliations of each non-GAAP measure from the most comparable GAAP measure, I direct you to the release and supplemental information which may be found at Brookdale.com/investor, and was furnished on an 8-K yesterday.
I am pleased that occupancy began to grow by the end of the first quarter and continued in April.
For the last year, we have been in the toughest battle in the company's history.
We have been fighting for the health and well-being of our residents, patients and associates.
While the battle is not over, we have created and implemented highly effective tools to help us reduce COVID-19 cases, including hosting thousands of vaccination clinics in our communities.
So our residents, patients and associates could receive the lifesaving COVID-19 vaccines.
Together our frontline, regional and corporate associates stepped up and rapidly executed a series of carefully considered actions to do everything we could to support those who live in, or served by and work within our communities and agencies.
I'm especially grateful to our associates who recently led through the historic ice storms in Texas.
I'm so proud of everything you have accomplished.
The genuine affection for our associates and the gratitude that you expressed means a great deal to us.
We are also beyond grateful for the scientists who created the vaccines, the people that produce them, the government agencies who prioritize shot for our community, residents and associates, as well as CVS Health, Public Health Departments and other pharmacy partners who helped administer these life saving vaccines.
With more Americans vaccinated every day, we're hopeful the end of the pandemic is within sight.
And I am proud of Brookdale's unique and vital role during this crisis.
Let's review our journey.
Just over a year ago we closed all of our communities to non-essential guests to help protect against the novel coronavirus that was ravaging the country and the world.
Today, I'm thrilled that all of our communities have reopened to loved ones.
We have resumed many of our resident's favorite group activities and social events.
You can feel a renewed sense of hope and vitality in our communities.
We believe that the COVID-19 vaccines are critically important in changing our business trends.
Early on we realized the importance of vaccines and we took a leadership role in successfully advocating for priority vaccine access for assisted living residents and associates and worked closely with public and private officials to improve the vaccine rollout.
I am incredibly proud of Brookdale's herculean effort to schedule the clinics and educate individuals within our communities at lightening fast speeds.
Through unwavering perseverance in less than four months, we hosted at least three clinics in every one of our communities and over 125,000 COVID-19 vaccine doses were administered to our residents and associates.
With 93% of our residents benefiting from the protection of these life saving vaccine, we have made a significant positive impact in helping our nation's seniors reduce their chances of contracting COVID-19.
I believe our relentless focus on making vaccines available as quickly as possible saved many lives.
The benefit of the vaccine clinics is already reflected in the 97% decline of resident COVID-19 cases in our communities since the peak in mid-December.
With the high vaccination rate.
we believe that we have broken the link with COVID-19 case trends in the metropolitan areas surrounding our communities.
Our 695 communities across the country, combined have an incredibly small number of current cases.
We are pleased with these results, yet we remain diligent with our science-based approach to help protect our communities through PPE use, cleaning protocols and other best practices.
As always, the health and well-being of our residents and associates is our top priority.
Let me turn to our financial highlights for the first quarter.
We continued to deliver sequential move-in improvement every month since November.
Move-ins increased 29% from the fourth quarter to the first quarter.
This is significant progress, particularly in light of the fact that the first quarter started with the pandemic's third wave ravaging the nation.
Our sales force transformation is delivering results.
The team is driving positive momentum with leads and visits increasing sequentially.
I'm proud our sales associates are attracting many seniors to Brookdale, so that we can help more people navigate the challenges of aging.
In March, net move-ins and move-outs, also known as MIMO turned positive.
What is especially exciting about March is that the net MIMO was positive in each of our three senior living segments.
This is the first positive net MIMO since before the pandemic began.
I am delighted that we concluded March with sequential occupancy growth and we accomplished this while maintaining rate discipline.
We continue to focus on driving occupancy improvement and our profitable growth strategy.
Now turning to an update on government grants.
To date, providers have been able to request funding for COVID-19 expenses and lost revenue for the first and second quarters of 2020.
The Provider Relief Fund portal has not yet opened to submit third and fourth quarter 2020 requests.
When the portal opens, we are prepared to file our request as soon as possible.
We are grateful that the bipartisan Senate letter to HHS signed by a full quarter of the Senate requested a portion of the remaining Provider Relief Fund to be dedicated to senior living.
In addition, 59 representatives signed the Companion House letter.
As the largest senior living operator, we will continue to be an advocate for the senior living industry, reinforcing the vital role our industry plays in the healthcare continuum and it's critical role to help protect a vulnerable population.
Starting with our Health Care Services.
The transaction to sell a majority stake of Brookdale Health Care Services to HCA Healthcare continues to be on track for a mid-year closing.
Our teams are working well together on the transition plan and we remain excited about the benefits of this transaction for our residents and patients.
When the transaction closes, we expect to receive approximately $300 million in net cash proceeds which will strengthen Brookdale's liquidity position.
For our senior living business, we are seeing the first green shoots of growth.
Demand for our communities is returning and gaining momentum.
Independent market research showed unaided awareness for Brookdale is 2.5 times higher than that of the a next identified competitor.
Our sales force transformation is taking hold, as seen in our sequential move-in growth every month since November.
With our recent occupancy growth and net MIMO results, we believe that we are at a positive inflection point.
On a sequential basis, we expect growth in the second quarter and stronger growth in the third quarter.
While we can't tell you the exact timing of the recovery based on our recent experience and with a dramatically lower construction starts and the accelerating demographic tailwind, I am confident that demand will continue to improve.
I am very optimistic about our future.
Our business at its core is providing high quality needs based services for a rapidly growing senior population.
We enable seniors to spend more time doing the things that give their life meaning and provide joy by helping them manage the challenges of aging.
We will continue to make the best of our leadership position, especially with our clinical and operational expertise.
There are three takeaways related to first quarter results.
Occupancy inflected positive in March and the positive growth continued in April.
We maintained rate discipline with our pricing strategy and we continue to face a challenging labor environment.
However, as occupancy grows, margins will improve based on operating leverage.
Let me provide context for the three highlights, starting with occupancy.
Looking back to January of this year, the country including our industry felt the pressure of the third wave resurgence.
Even so, we are pleased with the strengthening move-ins during the first quarter and into April.
With the benefit of our communities completing 100% of first vaccine clinics in February, our occupancy decline rapidly moderated.
In March, net move-ins and move-outs or net MIMO turn positive for the first time since the beginning of the pandemic and by March month end, occupancy had turn positive on a sequential basis.
While COVID-19-related occupancy losses that occurred over the past year will have a negative impact on year-over-year comparisons, the positive net MIMO in March was an important milestone.
Turning to rate or RevPOR, the first quarter was 2.9% higher year-over-year and 3.3% higher on a sequential same-community basis.
For most of our communities, our annual price increase took effect at the beginning of the year.
The rate increases will help mitigate higher labor costs and lower occupancy.
While market conditions remain dynamic, we have balanced rate discipline with targeted discounting to respond to the competitive environment in specific markets.
The third key highlight is opex.
On a same community basis, the first quarter senior housing operating expense improved 1% year-over-year.
The primary driver of the favorability was from variable costs, such as supplies and food, and it was a linked to lower occupancy levels that occurred as we progressed through 2020.
The variable cost favorability more than offset higher wage rates resulting from the difficult labor environment and incremental work and staffing related to the pandemic.
Let me briefly discuss our Health Care Services segment results.
The revenue decrease was mainly impacted by the pandemic with fewer services within our communities due to lower occupancy along with the impact of the severe winter storm in Texas.
To mitigate a significant portion of the revenue loss, the team continued their strong cost controls, matching their operating expenses to the current business and payment model.
For senior housing and Health Care Services combined in the first quarter of this year, we recognized $11 million of CARES Act related income.
$9 million was for the employee retention credit associated with wages paid through the end of September 2020 along with approximately $2 million related to government grants.
As Cindy mentioned, we look for HHS to provide an updates on the use of the remaining Provider Relief Fund and the opportunity to submit request to mitigate second half 2020 COVID-related expenses and lost revenue.
Turning to G&A, over the past few years, we took actions to reduce our G&A costs to match our smaller community footprint.
The last significant transaction was related to the Healthpeak unconsolidated CCRC venture completed in the first quarter 2020.
This transaction delivered that the majority of our year-over-year G&A reduction as well as tighter controls on G&A costs.
Adjusted EBITDA for the first quarter 2021 was $35 million compared to $185 million for the prior year quarter, of which $100 million was from the one-time management termination fee related to the Healthpeak transaction, I just mentioned.
The other major driver of lower adjusted EBITDA is lower revenue due to the pandemic.
Adjusted free cash flow was $56 million lower in the first quarter compared to the prior year period.
Two items helped to mitigate the impact of lower EBITDA.
The working capital change was a benefit of $49 million.
This favorability was mainly due to lower accounts payable payments and timing of payroll.
Non-development capex was $33 million lower than the prior year due to timing of elective projects.
Turning to liquidity, as of March 31st, total liquidity was $439 million compared to $575 million at year-end.
The $137 million change was primarily from $67 million of infrequent items, including pay down of debt and letters of credit and our annual insurance funding, $51 million of negative adjusted free cash flow and $19 million of ongoing debt principal payments.
As I described last quarter, the expected sale of our Health Care Services segment will provide approximately $300 million of liquidity and will be reported as net cash provided by investing activities.
To wrap-up, let me share high level comments about the second quarter 2021.
With our recent occupancy growth, we believe we are at a positive inflection point.
On a sequential basis, we expect growth in the second quarter and stronger growth in the third quarter.
In the second quarter, we expect a sizable step down in COVID-related expenses due to the low number of active cases in our communities.
We anticipate capex projects will accelerate in the second quarter now that our communities are open and we expect to see continued move-in growth.
Annual non-development capex investment remains at approximately $140 million for 2021.
For working capital in 2020, we benefited from two CARES Act programs that require repayment.
We received accelerated Medicare payments and we elected to defer payment of the employer portion of the social security payroll tax.
The program balances related to the Health Care Services segment will be deducted from the sale proceeds.
As of quarter end, these amounts were $84 million.
The remaining senior housing program balances of $76 million will be paid half in 2021 and half in 2022.
For Health Care Services, we will continue reporting the results as a segment until the transaction closes, which we expect to occur mid-year, subject to final regulatory approvals.
Upon the closing of the transaction, the net proceeds of approximately $300 million will strengthen our liquidity position.
We are encouraged by several leading business indicators.
Occupancy has inflected to positive growth.
We maintained rate discipline through the toughest part of the pandemic and expect our pricing strategy will continue to provide benefits in the future.
Construction has decidedly slowed.
For instance, according to NIC assisted living units under construction is at a six-year low.
When looking within 20 minutes of Brookdale's owned and leased portfolio, construction starts have dropped 80% from the peak.
The current low construction starts will provide a tailwind for several years.
The upcoming baby boomer opportunity is strong with nearly 1 million potential new residents starting within a year.
And we are seeing increasing needs based demand from higher acuity care where 75% of residents are diagnosed with at least two chronic diseases.
I'm incredibly proud of our associates and cannot express the depth of my admiration for their tremendous dedication.
They have focused on what matters most, enriching the lives of those we serve, our residents, patients and their families.
We are coming through the pandemic with grit and determination and it puts a smile on all of our faces to have begun a new year that promises a return to enrichment and growth in our communities.
 Assistant:

Chosen response:
brookdale senior living - net move-ins and move-outs turned positive in march for first time since covid-19 pandemic began, remained positive in april.
brookdale senior living - q1 revenue per occupied unit (revpor) increased by 2.9% year-over-year on a same community basis.
brookdale senior living inc - qtrly total revenue and other operating income $749.4 million versus $1,014.1 million.