15. QUARTERLY FINANCIAL DATA (UNAUDITED)

During the third quarter of 2013, we identified errors in the consolidated financial statements for the years 2011 and 2012 (and for all interim periods therein) and in the unaudited interim condensed consolidated financial statements for the three month periods ended March 31, 2013 and June 30, 2013, related to the valuation of finished goods inventory in our Life Science segment. We were inappropriately expensing inventory in amounts greater than actual costs for non-sales transactions, primarily related to inventory being used for demonstration purposes and product samples that are recorded to Selling, general and administrative expense. In addition, the Life Science segment inventory error affected cost of goods sold as we relieved inventory at a higher cost than incurred on limited sales to third parties produced in a non-U.S. manufacturing facility.

During the third quarter of 2013, we revised the classification of one item for all periods presented from “Provision for income taxes” to “Research and development expense” in our Consolidated Statements of Income to conform to the current year presentation. The item reclassified pertains to a refundable French R&D tax credit, which after the reclassification reduces Research and development expense. We believe this presentation is appropriate as we are not required to have taxable income in order to earn the credits.

Management evaluated the materiality of all the errors described above from a qualitative and quantitative perspective. Based on such evaluation, we have concluded that while the accumulation of these errors was significant to the three months ended September 30, 2013, their correction would not be material to any individual prior period, nor did they have an effect on the trend of financial results, taking into account the requirements of the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). Accordingly, we are correcting these errors in every affected period in the 2013 Financial Statements included in this Form 10-K.

The impact of the immaterial error correction, and the reclassification, both described above are presented on a as reported, adjustment and as revised basis in the following summarized quarterly financial data for 2013 and 2012 (in millions, except per share data):



As reported:	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
2013
Net sales	$	499.7	$	525.3	$	505.1		$	602.6
Gross profit	271.4		300.1		284.2			322.7
Net income (loss) attributable to Bio-Rad	19.5		34.7		(7.1		)	30.1
Basic earnings (loss) per share	$	0.68	$	1.22	$	(0.25	)	$	1.05
Diluted earnings (loss) per share	$	0.68	$	1.20	$	(0.25	)	$	1.04

2012
Net sales	$	486.3	$	510.4	$	498.7		$	573.8
Gross profit	278.6		287.9		273.5			314.1
Net income attributable to Bio-Rad	31.0		48.3		42.4			42.0
Basic earnings per share	$	1.10	$	1.71	$	1.50		$	1.48
Diluted earnings per share	$	1.09	$	1.69	$	1.48		$	1.46



Adjustments:	First Quarter		Second Quarter			Third Quarter		Fourth Quarter
2013
Net sales	$	—	$	—		$	—	$	—
Gross profit	—		—			—		—
Net income (loss) attributable to Bio-Rad	0.7		(0.1		)	—		—
Basic earnings (loss) per share	$	0.03	$	(0.01	)	$	—	$	—
Diluted earnings (loss) per share	$	0.02	$	—		$	—	$	—

2012
Net sales	$	—	$	—		$	—	$	—
Gross profit	0.1		0.2			0.3		0.4
Net income attributable to Bio-Rad	0.5		(0.2		)	0.2		1.2
Basic earnings per share	$	0.02	$	(0.01	)	$	0.01	$	0.04
Diluted earnings per share	$	0.01	$	(0.01	)	$	0.01	$	0.05



As revised:	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
2013
Net sales	$	499.7	$	525.3	$	505.1		$	602.6
Gross profit	271.4		300.1		284.2			322.7
Net income (loss) attributable to Bio-Rad	20.2		34.6		(7.1		)	30.1
Basic earnings (loss) per share	$	0.71	$	1.21	$	(0.25	)	$	1.05
Diluted earnings (loss) per share	$	0.70	$	1.20	$	(0.25	)	$	1.04

2012
Net sales	$	486.3	$	510.4	$	498.7		$	573.8
Gross profit	278.7		288.1		273.8			314.5
Net income attributable to Bio-Rad	31.5		48.1		42.6			43.2
Basic earnings per share	$	1.12	$	1.70	$	1.51		$	1.52
Diluted earnings per share	$	1.10	$	1.68	$	1.49		$	1.51

During the first quarter of 2012, we identified an error in the consolidated financial statements for the years 2007 through 2011, related to a foreign supplemental tax associated with social benefits. We incorrectly interpreted and applied the local statutes to our circumstances. We accrued $6.1 million for these foreign supplemental taxes, including penalties and interest, during the first quarter of 2012, all of which has been paid. The foreign supplemental tax, and the related penalties and interest, were not deductible for income tax purposes, and as such this error did not have an impact on Bio-Rad's provision for income taxes.

We evaluated the materiality of this error from a qualitative and quantitative perspective. Based on such evaluation, we concluded that while the accumulation of this error was significant to the three-month period ended March 31, 2012, the correction was not material to any individual prior period or for the year ended December 31, 2012, nor did it have an effect on the trend of financial results, taking into account the requirements of the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108).