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Operator
Hello and welcome to the third-quarter 2015 Harvard Bioscience earnings conference call. My name is Hilda and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions).
I would now like to turn the call over to Miss Cheryl Schneider, Dian Griesel International. Ms. Schneider, you may begin.
Cheryl Schneider - IR Representative
Thank you, Hilda, and good morning everyone. Thank you for joining us for the Harvard Bioscience third-quarter 2015 earnings conference call. Leading the call today will be Jeffrey Duchemin, CEO and President, and Robert Gagnon, Chief Financial Officer of Harvard Bioscience.
Before I turn the call over to management, I will read Harvard Bioscience's Safe Harbor statement. In its discussion today, the Company may make statements that constitute forward-looking statements. The Company's actual results and performance may differ materially from what it has projected due to risks and uncertainties, including those detailed in its annual report on Form 10-K for the periods ending December 31, 2014 and its other public filings. Any forward-looking statements, including those related to the Company's future results and activities, represent its estimates as of today and should not be relied upon as representing its estimates as of any subsequent day.
Now I would like to turn the call over to Jeff Duchemin. Jeff, please go ahead.
Jeffrey Duchemin - President, CEO
Thank you Cheryl. Good morning everyone. Thank you for joining us for our third-quarter 2015 conference call.
In my discussion today, I will begin by giving you a brief overview of our topline results. Our CFO, Robert Gagnon, will then provide more financial details, and then I will delve into our business activities, overall strategy, and other matters.
We reported revenue today of $25.7 million, about 1% higher than last year's third quarter and 4% higher excluding the impact of foreign exchange. Non-GAAP EPS was $0.03, which was below last year's third quarter of $0.06 per share.
As you saw in today's press release, the third quarter presented us with unanticipated challenges. We entered the first two months of the quarter on target with our revenue expectations. However, during September, the landscape changed and we were faced with a slowdown in sales that neutralized the gains that we had been anticipating. The slowdown is expected -- the slowdown in expected revenue was caused by four factors.
First, currency translation has been a significant headwind for us all year. The euro has depreciated more than 15% relative to the dollar year-over-year. As approximately 35% of our revenues are in Europe, these headwinds have impacted us in multiple ways. For example, in addition to foreign currency translation, European customers face constraints as a result of purchasing US priced or manufactured products with euro denominated budgets and grants. As we stated earlier in the year, the impact on the top line is up to $10 million.
Second, recently we were notified by GE of their decision to exit their NanoVue and SimpliNano spectrophotometer product lines. As probably most of you are aware, we have manufactured these products for GE for many years. GE's decision to discontinue it spectrophotometer line of products had an unexpected impact on our third-quarter revenue. We do not anticipate any sales of these products to GE during the fourth quarter. This effect will be temporary. And as we assume direct control of sales and marketing of these products in 2016, we expect this to be an excellent and lucrative long-term opportunity to both grow revenue and expand gross margin. As we eliminate the middleman, GE, we will soon be selling and marketing NanoVue and SimpliNano spectrophotometers to an expanded group of global distributors and customers with new service contracts and customer pull-through for many of our other Harvard Bioscience products. As part of this transition, we will gain the trademarks to the NanoVue and SimpliNano brands. We will gain access to existing distributors and customers, along with revenue from servicing both existing and future spectrophotometer sales, and will begin selling spectrophotometers through our realigned sales force beginning on January 1, 2016. This is an exciting opportunity which we expect will result in higher profitability on the sale of spectrophotometers.
Third, the macro environment that affects our business, including global slowdown in the academic and government research markets due to budgetary constraints, continues to be challenging. The academic government research markets account for approximately 70% of our revenue.
And fourth, there are some minor delayed shippers resulting from the consolidation of our Biochrom manufacturing facility.
Despite this temporary slowdown in growth, I want to emphasize that our long-term plans are in place to improve organic growth. We have reorganized our commercial organization to capitalize on those areas where we believe we have the greatest opportunities for growth, including cell and animal physiology, molecular analysis, and lab supplies and services.
Some of the specific actions we took, including appointing Yong Sun, who has been a key member of our leadership team and Vice President of Strategic Marketing, to oversee our global commercial organization and to assume chief responsibility for our sales, marketing and business development.
In addition, today we announced the restructuring plan, which includes eliminating certain positions within the organization across several of the Company's locations as well as other expenses. The Company expects to realize $1 million in savings starting in 2016.
Let me now drill down on our strategy and turn to some initiatives this quarter that are building blocks of our long-term initiatives. Our overall mission continues to be deliver on each element of our strategy, which is operational efficiencies, new product development, business development and acquisitions, and commercial excellence.
Let me take a moment to update you on all four phases of our strategy. First, operational efficiencies. We have made tremendous progress this quarter on our consolidation plans. In addition to completing the consolidation of our Coulbourn business into our Holliston, Massachusetts headquarters, and HEKA Canada into HEKA Germany operations, we successfully executed the shutdown and manufacturing transfer of our Biochrom business from Cambridge, UK to Holliston, Massachusetts. This completes our fifth site consolidation project in the last year. Having completed these consolidations during this time period was an enormous feat and we are extremely proud of the team that made them happen.
New product development. Developing new products is part of our core growth strategy and we showcased several new products last week at the Society for Neuroscience Annual Meeting in Chicago. We were encouraged by the interest we received for existing and new products being presented. Some of the new products included Harvard Apparatus VentElite, a ventilator with new touchscreen graphic user interface and real-time graphical display, Panlab's Treadmill equipment for exercise training and fatigue resistance studies, now with touchscreen interface, and Multi Channel Systems' Patch Server, an automated patch clamp now available in four-channel version, as well as many others.
Acquisitions. Our three acquisitions performed well this quarter and continue to meet our expectations. Triangle BioSystems, Multi Channel Systems, and HEKA Electronik, which have helped us become a market leader in electrophysiology, contributed as expected to both topline and bottom-line results. These three acquisitions have been successfully integrated into our organization and have been strong contributors to our growth. These three companies we believe demonstrate our ability to successfully increase sales and integrate operations, creating topline growth, bottom-line efficiencies, and cross-selling opportunities. We continue to actively evaluate acquisitions, concentrating on those that we believe will fit well into our growth initiatives and that will be accretive to earnings.
Commercial excellence and organic growth. Earlier I mentioned organizational changes which include the realignment of our sales and marketing teams into three commercial business units -- cell and animal physiology, molecular analysis, and lab supplies and services. Within each one of these commercial business units, we have initiated tactical growth initiatives, including sales promotions around new product launches, targeted sales incentives, and sourcing of new products.
So, to recap the elements of our strategy, we continue to focus on organic growth, new product development in order to deliver innovative products to our customers, acquisition targets, and operational efficiencies throughout our global footprint. With that said, let me sum up Q3.
It was a challenging quarter. Revenue grew, albeit below our expectations, and we have taken immediate actions to refine but continue our long-term growth strategy. Although we faced challenges in Q3, bookings grew 6% and backlog was up 32%.
We thank our employees, our customers, our shareholders for their continued support as we as a team continue to execute on our long-term strategy.
With that, I will turn the discussion over to Rob Gagnon, our CFO, who will provide more insight into our financials. Rob?
Robert Gagnon - CFO
Thanks Jeff. As in previous quarters, much of my focus will be on non-GAAP quarterly results, which we believe better represent the ongoing economics of the business, reflects how we set and measure our incentive compensation plans, and how we manage the business internally. However, I will briefly review the GAAP results, the differences of which are outlined in the earnings release we issued today, which can be found on our press release under Press Releases. Additionally, any material financial and other statistical information presented on the call which is not included in our press release will be archived and available in the Investor Relations section of our website. And a replay of this call will also be available for one week at the same location on our website at HarvardBioscience.com.
Revenues in the third quarter were $25.7 million, an increase of $283,000 or 1.1% compared with revenues of $25.4 million in the third quarter of last year. The negative impact of currency translation was $710,000 and was due mostly to the weakened euro relative to the US dollar. Revenues on a constant currency basis would have been $26.7 million, or an increase of $1 million or 3.9%.
As we have discussed all year, foreign currency headwinds have had a significant negative impact on reported results for the year. Based on current FX levels, currency translation is expected to continue to adversely impact our revenues through the end of the year.
Jeff has already mentioned GE. As a result of that decision, there were reduced sales of spectrophotometers of approximately $900,000 in Q3. And we do not anticipate any sales of this product line to GE in the fourth quarter. We expect the impact to be $1 million in lower revenue in Q4.
Bookings in Q3 were $27.3 million, an increase of $1.6 million, or 6%, compared with bookings of $25.7 million in the third quarter of last year. And we finished Q3 with backlog of approximately $8.2 million, up 33% compared to backlog of $6.2 million at the end of Q3 last year.
Also, as Jeff mentioned, in the third quarter, we completed the consolidation of three of our facilities with Biochrom Manufacturing and Coulbourn Instruments now part of the Company's Holliston headquarters and HEKA Canada consolidated into HEKA Germany. At the end of the quarter, we experienced approximately $500,000 of delayed shipments to some customers resulting from consolidation of our Biochrom operations to our Massachusetts headquarters. This partially accounts for the year-over-year increase in backlog. Shipments of these products successfully resumed in early October.
Now, turning to costs and expenses, cost of revenues were $14 million for both Q3 this year and last year. As a result, our gross profit was $11.8 million in this quarter compared with $11.5 million for last year's third quarter. And gross profit margin was 45.7% in Q3, up from 45.1% in Q3 of last year.
Operating expenses for Q3 were $10.3 million, an increase of $1.8 million compared to $8.6 million in Q3 of last year. Included in Q3 results this year are the operating expenses of the three acquisitions.
Operating income in Q3 decreased to $1.4 million as compared to $2.9 million in Q3 of last year.
In Q3, we incurred approximately $200,000 in move for sites and consolidations. These costs are reported in cost of revenues and in operating expenses. This is in addition to the $600,000 of total costs incurred through the second quarter of this year for these moves. These costs are recorded in the non-GAAP results. We still plan to incur a total of $800,000 to $1 million in costs this year to reduce our manufacturing footprint. As this is a major milestone for the Company with regard to its plans to optimize its manufacturing footprint, we still expect to realize between $750,000 and $1 million of savings from these consolidations in 2016.
Operating margin in Q3 was 5.5% on a non-GAAP basis, and this is indicative of the investments that we are making on the expense side. This compares to an operating margin in Q3 last year of 11.5% on a non-GAAP basis. While the costs incurred to consolidate sites contributed to the decrease in operating margin, we continue to believe that the payoff of these investments will result in higher operating margins beginning next year.
Our non-GAAP effective tax rate was 27.9% in Q3 compared to 28.8% in Q3 of last year. The decrease in effective tax rate was due to lower profit before tax and geographic mix. Our GAAP net loss was $847,000 in Q3, or $0.02 per diluted share, compared with GAAP net income of $633,000, or $0.02 per diluted share, for Q3 of last year.
Our non-GAAP net income for Q3 was $905,000, or $0.03 per diluted share, a decrease of $0.03 per diluted share or 50% compared with $0.06 per diluted share in Q3 of last year. Weighted average shares outstanding was 33.9 million in Q3 compared to 33.4 million in Q3 of last year.
Now turning to the balance sheet, we finished Q3 with approximately $6.1 million of cash and equivalents, a decrease of approximately $8 million compared to $14.1 million from Q4 last year. The decrease is primarily due to the acquisition of HEKA in Q1 and scheduled debt payments in the first nine months of the year.
Accounts Receivable as of Q3 were $15.6 million compared to $16.1 million as of Q4 last year, a decrease of $550,000. This decrease is attributable to our team's hard work with collections during the quarter.
Inventory at the end of Q3 was $23 million compared to $20.5 million at the end of Q4 last year. Inventory turns were 2.4 times compared to 3.4 times for Q4 last year. In addition to the inventory associated with the acquisitions, the increase relates to the temporary inventory needed to accommodate the consolidation of the Biochrom facility. We expect, over the next six months, these balances will decrease as we work through this temporary inventory.
Capital expenditures were $658,000 for Q3 compared to $600,000 for Q2, $1 million in Q1, and $781,000 for Q4 last year. Our capital expenditures have begun to decrease as we enter the later stages of our infrastructure and stage one of our ERP implementation, as well as build-outs related to the consolidation of our Biochrom facility and our new Denville facility. We expect capital expenditure levels will be lower and more comparable to historical levels following completion of these programs.
Debt at the end of Q3 was $20.2 million compared to $21.5 million at the end of Q4 last year. The decrease was due to principal payments made during the first nine months offset by net draws on the revolving credit facility to fund the temporary inventory requirements to accommodate the site moves.
I will now turn to guidance. Today, we are updating our financial guidance for full-year 2015 to reflect our Q3 results and expectations for Q4. We now expect revenues of approximately $105 million to $108 million, resulting from lower expectations around academic markets and following GE's decision. While the impact on GE is temporary, revenue in 2015 will be lower by approximately $2 million because of it. We expect revenues to resume in Q1 2016.
For Non-GAAP EPS, we expect to report $0.14 to $0.16. Also reflected in this guidance is the costs we have incurred in 2015 to relocate and consolidate manufacturing and distribution facilities of $800,000 to $1 million, or approximately $0.02 per diluted share. And while this applies more for 2016, we still expect to realize between $750,000 and $1 million of savings from these consolidations. In addition, as Jeff discussed today, we announced a restructuring plan to eliminate $1 million in costs, effective immediately.
As mentioned on past calls, the differences between our GAAP and non-GAAP financial guidance, including EPS and reconciliations, are outlined in the earnings release we issued today, which can be found on our website under Press Releases.
We will now open the call to questions from participants. Operator?
Operator
(Operator Instructions). Paul Knight, Janney Montgomery.
Paul Knight - Analyst
Hey Rob. What was the adjusted op margin in 3Q, did you say?
Robert Gagnon - CFO
It is 5.5%.
Paul Knight - Analyst
And what does all of this translate into to a targeted op margin for 2016?
Robert Gagnon - CFO
If you adjust for -- we have the timing issues with Biochrom, which was $0.5 million of sales. There's GE, which was about -- it's $900,000, about $1 million in the quarter. If those two items hadn't happened in the quarter, we would've had revenue around $27 million or $27.1 million. That would have been an operating margin in the mid $2 million range, $2.5 million, $2.6 million. And then you layer on top of that the restructuring we announced today. That has a full-year impact of $1 million. You layer on top of that the consolidation costs that we incurred as well as the savings we will have next year. If you crosswalk all of that math, it will put you in the 12% to 13% range. That's not official guidance for next year, because it doesn't reflect any of our organic growth plans or the tactical plans that Jeff was referring to earlier, but that's what it would have looked like in Q3 if we didn't have those items.
Paul Knight - Analyst
Right. And then -- okay. And then on the general -- organic growth in the quarter was what do you think?
Robert Gagnon - CFO
I think the best measure of the health of this business is to look at probably bookings. And if you take out the FX impact, which is in the range of $0.75 million to $1 million, and if you take out the acquisitions, the acquisitions do about $12 million annually, so approximately in the range of $3 million a year, without the GE impact, bookings grew about 2%, 2.5%, in that range.
Paul Knight - Analyst
Okay.
Robert Gagnon - CFO
Now, we know that contributed to some of that backlog build that we experienced, but we were -- aside from GE and some of the other challenges, I think we were pleased with where bookings came up on the base business.
Paul Knight - Analyst
Now, was GE on a contract? Was that contract expiring in the third quarter, Jeff?
Jeffrey Duchemin - President, CEO
The contract was a contract that had a six-month exit clause. And as you know and many other people know that GE has been an OEM partner of ours for many years. We were notified recently that they were going to execute on their six-month ability to exit the contract. So this all came about during the quarter. The way it will transition moving forward, I just want to add some color to this. This was actually probably the best case scenario for us with GE.
GE has been somewhat of a disappointing partner for many reasons. They just really didn't have a focus on the spectrophotometer line of business. They sold the product through a series of distributors on a global basis.
The contract will end December 31 of this year. We will take over the business, the spectrophotometer business, January 1. GE has allowed us to acquire -- really not acquire, they have given us their brand names, the SimpliNano and NanoVue brand names. All we have to do is basically go through the registration process for those brands. They have allowed us to contact all of their distributors; they have allowed us to contact their customers. We will be taking over the service element of these products, both past products, current products and future products, which will become a revenue source for us. So this is actually a very good thing that happened. Unfortunately, it set us back in Q3; it will set us back in Q4. But moving forward, we take out this middleman, who has been GE, our margins will improve moving forward, and we will really be able to focus and grow this business. So we are really excited about this.
Paul Knight - Analyst
Did GE decide just to leave the business or are they finding another product line?
Jeffrey Duchemin - President, CEO
No. Had they found another product line, that would have been the alternative, which would've been very bad for us. GE has decided to exit the product line. It's just another strategic fit for them at this point moving forward. Had that happened, had they gone in a different direction, it would've been another competitor in the marketplace for us. This was really the best case scenario for us, and they have been great to work with.
Paul Knight - Analyst
Okay. I'll let others ask questions.
Operator
Raymond Myers, Benchmark.
Raymond Myers - Analyst
Thank you. Let me shift over to the consolidations. Can you give us an update on which facilities that you have consolidated and what additional facility consolidation is remaining in Q4, including any associated expenses that are specifically in Q4?
Jeffrey Duchemin - President, CEO
I'll start off. Really, for the quarter, the major site consolidation was our Biochrom manufacturing facility, which was our second largest manufacturing site globally. That was in Cambridge, UK. We've completed that project. It has been transferred here to Holliston, Massachusetts. It was a major milestone for the Company. Coulbourn, which is a facility in Pennsylvania, we were able to shut that down and move that here to Holliston also.
One of our recent acquisitions, HEKA Electronik, had multiple sites, manufacturing sites. Their main facility is in Germany. We are keeping that facility up and running, but they had a small facility in Nova Scotia which we shut down and transferred that to Germany. They also had a small location in Long Island. We were able to shut that down and move it to Germany also.
So, we are very excited to have these projects complete. It was a major milestone for us. It's something that we have worked on really since day one, since this management team got together. You've heard a lot of us talk about the number of sites on a global basis. It really just didn't fit the size of this business. So this has been a project that's been in place for a couple of years now. We are very excited that it's complete.
Robert Gagnon - CFO
And through the third quarter, we spent $800,000 for these moves. And as Jeff mentioned, they're essentially done at this point, and the largest one being Biochrom, which was completed right at the end of the quarter.
So, in terms of Q4, to answer that question, there will be some costs that will trickle in the fourth quarter, but they will be rather de minimis. They won't be like what we incurred this quarter at all. And we will start to realize the benefits.
I just want to highlight, I know that we had about $0.5 million that didn't ship at the end of the quarter because of transition requirements associated with these moves. But I think it is a real positive sign that those products were able to ship the first week of October successfully through QC and to customers. So we were excited and pleased with that.
Raymond Myers - Analyst
Thanks Rob. Can you elaborate on this delay just a little bit? Because investors will be interested to understand what impact these consolidations had on your business going forward, and it kind of makes it sound like there was some impact due to this shift. Is that impact over?
Robert Gagnon - CFO
I don't want to overplay this. We are talking a span of probably a week or less and in the range of $0.5 million. So, it wasn't all that significant.
Raymond Myers - Analyst
So all of the plant consolidations are wrapped up and over, and no impact going forward?
Robert Gagnon - CFO
That's right. And I think we categorized heading into 2015 as being a year of investment and embarking on a lot of these consolidations and site moves. 2016 will be an opportunity for us to reap the benefits of all of the work that we've done this year because, to Jeff's point, we've tackled the largest pieces of our footprint at this point. So, we are excited about that.
Raymond Myers - Analyst
That's great, good. Let's move on to the next point that Jeff mentioned in his prepared remarks, the slowdown in academic market. Is that something that's new, or is this a continuing headwind?
Jeffrey Duchemin - President, CEO
It's Jeff. I think you've heard us talk about the academic market all year and the ups and downs that we have seen. We are hoping for a stronger second half of the year coming from the academic segment, which is 70% of our business. And unfortunately, we are not seeing that.
And I think, if you look around the industry right now, the positive results that are coming out through the industry are products that are being sold into biopharma, and products that are being sold into applied markets. Products that are being sold into academia, most of the companies out there right now are struggling and it's relatively flat. We continue to hear positive things coming from the government in regards to NIH funding for next year, so we are very excited about that. But it was our expectations for a better second half in terms of funding, it just hasn't happened yet.
Raymond Myers - Analyst
Great. Let me understand the reduction in implied guidance for the fourth quarter. If you do the math on the three quarters and your changing guidance for the full year, it implies what your guidance is for the fourth quarter. And the reduction in revenue was a little bit more than the $1 million of impact that you are talking about from GE. Can you help us understand what all of the components are to that implied guidance cut?
Robert Gagnon - CFO
So, GE, yes, you are right. You can do the year-to-date math back into what essentially would be a range of $26 million, $28 million. And I would say GE is clearly $1 million of that decline. The other decline, there's a $1 million to $2 million decline expectation around overall academic softness, and it's getting at what Jeff talked about in his prepared remarks. We experienced a strong July and August and a pretty strong pull-back in September that continued a bit into October. And so we are looking at all of the information we have available today as of the end of October, and we're resetting that guidance based on what we are experiencing. And that's how we are looking at that, Ray.
Raymond Myers - Analyst
Was there anything that happened in the industry or globally in those months that may have driven that?
Jeffrey Duchemin - President, CEO
I think there's many different factors. I don't think we need to go into all of them here, but there's government issues in different parts of the world, there's currency issues, but overall, I think the main driver this year, from what we are hearing, is foreign currency. When the foreign currency impact happened in Q1, it just sent this rippling effect through funding, especially our European customers that just really hasn't allowed them to bounce back at all this year, just reduced dollars of spend on products that we sell. So that's I think the main driver right now for us.
Robert Gagnon - CFO
If I may, I just want to add a little bit more color, some numbers around that. We haven't got into quarterly disclosures in the past around sales by geographic region. But I will tell you, in the third quarter, in the US, our sales grew 7%. That's in contrast to Europe where sales declined 7%. And I know we've been looking at a flat business for a while, but that's a trend that we have seen throughout the year, and it's a combination of just the FX translation, but even more so the ability of customers to buy products with reduced purchasing power in their grants and their budgets. So that's had a major impact this year.
Raymond Myers - Analyst
That's very helpful. Thank you. And could you touch on a little more about the GE transition, and how you expect that cadence to go from I suppose impact in the fourth quarter to opportunity for 2016? You mentioned needing to register the brand names in the end markets. When do we expect revenue from that to begin to return, and how long before the impact is neutralized?
Jeffrey Duchemin - President, CEO
Yes, I think, as I mentioned in my remarks, we will not be selling any more instruments to GE this year, which will have an impact in Q4. Starting in January, January 1, the way the contract is constructed, we will start to sell direct. We will start to gain revenue. GE will have some inventory that they will deplete, so the ramp up will take several months but we will start to see the impact immediately in January.
Raymond Myers - Analyst
So, in January, you'll start to make of sales, but they will still be -- when do you think during the year that you will make up the margin that you would've made through GE?
Jeffrey Duchemin - President, CEO
Well, you know, the historical gross margins on that business, they were well below our average as a business. Because of the OEM nature of the contract, those margins would have been the low 30% range. Going forward, by eliminating that middleman, we expect the margins to be a minimum of 50%. And that would be right out of the gate once we first -- we ship that first spectrophotometer in January, it would be at that higher margin to the business.
Raymond Myers - Analyst
Do you have the capability to service these accounts, or do you need to hire new people? Is this a new effort for you?
Jeffrey Duchemin - President, CEO
Yes, we've had -- we have a plan in place. We have a project team working on the transitional agreement with GE. We have hired people. We will hire some additional people moving forward to allow us to do a couple of things.
Number one, we're going to be servicing product instruments, so we're going to have to hire some technicians to service product. We're going to have to hire salespeople or channel managers to manage the distribution network, specifically in Asia, for GE. But overall, we are fortunate enough where we, through the realignment of our commercial organizations which I spoke about in my comments, we are just shifting some of our people that currently work for Harvard Bioscience into different responsibilities, which will manage the spectrophotometer line of products moving forward. So we are in really good shape.
Robert Gagnon - CFO
We're talking a few headcount. This isn't a substantial investment, sort of in the $4 million to $5 million range. We have some service technicians today that can be leveraged, and there will likely be a partner that we'll work with in Asia, but this isn't a substantial investment to take this piece of work on.
Raymond Myers - Analyst
Great. And then just to wrap up, maybe you could give us any kind of guidance on outlook for next year, the possibility of a share buyback now that the stock has fallen as well as any other concluding comments or remarks. Thank you.
Jeffrey Duchemin - President, CEO
It's Jeff. Our strategy is in place. We are continuing to stay focused to the four elements of our strategy. We are focused. The teams, now they need to go out and execute, but I don't see any dramatic changes coming in terms of the way we go to market or the strategy that we have in place for managing the business today.
Robert Gagnon - CFO
And I know we haven't set guidance for 2016, and we will do that when we talk at Q4. But again, I'll just reiterate what I said earlier. 2015 was a year of investment in this business. 2016 will be an opportunity to realize those benefits.
There's been a number of timing activities in 3Q, like GE and the manufacturing transfer. Those will be behind us by the time we get to 2016. We will have to of this $1 million restructuring that we announced today, and we will have the benefits of the site consolidations, the five that we've made this year. And the site consolidations, just to reiterate, we won't have the one-time costs, which are $800,000, through the third quarter. And we will have on top of that up to $1 million in benefits from the moves. So we are rather excited to see what we will do in 2016, both for finalizing our plans now, and we look forward to updating you on that next call.
Raymond Myers - Analyst
Thank you.
Operator
(Operator Instructions). Will Settle, Woodmont.
Will Settle - Analyst
Thanks. Just real quick on the GE business, you didn't have any service revenue. Do you have an idea how big the service revenue component could be going forward?
Robert Gagnon - CFO
It's Rob. I'll give you a ballpark estimate, but I think, at this point, we are remaining conservative on it. But we think it could be in the range of $800,000 to $1 million for us going forward. We need to settle in, get familiar with our business, add a couple of resources. Perhaps it would grow from there, but that's what we are thinking. We are not placing too significant of a bet on that piece.
Will Settle - Analyst
And you said GE wasn't real focused. As you think about now you have opportunity to market this, was GE hitting half the market or were they hitting all of it? Any idea for how many distributors out there could promote this product or sell this product currently?
Jeffrey Duchemin - President, CEO
They actually were hitting the entire market. I think what's happened with GE is they just lost their focus with this specific product category over the last several years. If you followed the Company, you know that sales have been declining for many years now with GE because of that.
The number of distributors, there's many distributors out there. And once again, part of the transitional service agreement we have with GE, they provided us information on all of their distributors. We are in the process of reaching them and building relationships with these distributors. And one of the upsides for Harvard Bioscience as we meet and build relationships with these new distributors, there's the opportunity to cross-sell existing Harvard Bioscience products through some of these new distributors on a global basis. So that's the upside in regards to allowing us to take over that segment of business.
Will Settle - Analyst
So a lot of them -- as you look at the list that GE gave you, so there are a lot of them out there that you don't have current relationships with?
Jeffrey Duchemin - President, CEO
That's correct.
Will Settle - Analyst
Okay, great. On the currency issue, are you comfortable that your customers in Europe are just deferring purchases as opposed to you losing share to non-dollar-denominated revenue?
Jeffrey Duchemin - President, CEO
We feel as though we are not losing share. There's not a sense of competitive activity and we are losing out on price or just new products in the marketplace. Our customers just don't have the dollars to spend at this point in time. Their budgets have been reduced.
Will Settle - Analyst
Right, sure.
Jeffrey Duchemin - President, CEO
It may take until Q1 of next year before we start to see a pickup when new budgets are in place.
Will Settle - Analyst
Right. And then I think I heard Rob say, obviously September, things kind of dramatically fell off, particularly in Europe. Can you give me a little color, more color on October and how long kind of that September trend persisted, or is it seeing reversal at all?
Robert Gagnon - CFO
Yes, like I said, we had a strong -- we have a really good July, a good August, and experienced an unexpected pullback in September. We had expected that trend to continue into September. And now as we sit here in October, that's continued. So it's difficult for us to say whether that will continue through the quarter or if we will experience a rebound in November, but it's something we are keeping an eye on.
Will Settle - Analyst
Do you think the government shutdown -- obviously everybody expected or most people expected some things to be resolved, but just in the academic and NIH dependent segments, were there people holding onto things a little more than usual?
Jeffrey Duchemin - President, CEO
I think, once again, if you look at the numbers, and Rob had mentioned about the US, the performance of the US, the US was okay. It was basically Europe that was the --
Will Settle - Analyst
No, I was talking more into October for the US customer.
Jeffrey Duchemin - President, CEO
I don't know. I don't know. I don't think so. I think it's just a continued flatness that we've experienced all year.
Will Settle - Analyst
Okay, great. Last one for me, on cash flow, working capital, it's been a drag this year despite the declining sales. Do you expect a reversal there to help with the cash flow picture?
Robert Gagnon - CFO
There's a couple of things going on. If you look at receivables this quarter relative to last quarter, in my prepared remarks, I referenced December 31, just because that's how we do it and how everybody does it. But if you look at our receivables as of Q1 and as of Q2 and where they are in Q3, there's been a substantial decline. And the teams -- I give credit to a few folks. They have done a nice job of getting receivables to a good level.
Inventory, our Denville move, which took place in Q2, there was transitional inventory in the build associated ahead of that move. That inventory has since stabilized. And now we are addressing Biochrom. We had the Biochrom move. That's our second, one of our largest sites and we have pretty substantial inventory transition requirements. And it's going to take us a couple of quarters to work that down, but I would expect we will see improvement in the fourth quarter and we will see further improvement in Q1, and working capital, which should be in a good place as we go through the first half of next year.
And in terms of looking at cash flow and EBITDA, I just referenced all of the costs we've incurred this year to facilitate these moves.
Will Settle - Analyst
Okay, great. And Jeff, I do appreciate your open market purchase earlier in the month and further alignment with shareholders.
Jeffrey Duchemin - President, CEO
Thank you.
Will Settle - Analyst
Thanks.
Operator
Matt Campbell, Latter Day Capital.
Matt Campbell - Analyst
Good morning gentlemen. Jeff, I was wondering if you could expand on some of the anecdotes you're hearing from the government to stimulate the academic market.
Jeffrey Duchemin - President, CEO
The only information I have is information I have read, the 20th Century Cares Act, which will add additional $8 billion to NIH funding. That's out there for 2016, not sure where that stands today. I know that the government has passed, or the House has passed a bill that's going to the Senate to will keep the government up and running, which I think is favorable for progression with NIH. That's really all of the information I have at this point in time.
Matt Campbell - Analyst
Thank you.
Operator
(Operator Instructions). Paul Knight, Janney Montgomery.
Paul Knight - Analyst
One quick follow-up, and that is the China strategy. You've been fairly aggressive. What's the color on that market? Most have shown some acceleration in organic growth. Can you talk about what's happening for you in that marketplace?
Jeffrey Duchemin - President, CEO
Yes. China was favorable for us in Q2. I think we were up 12% or 13%. Q3, China was relatively flat, but with acquisitions, we grew about 12%. So we are happy with where we are in China. I would say, as a whole, Asia, Asia was a good quarter for us. We continue to progress throughout Asia. And Asia is still a strong part of our strategy moving forward.
Paul Knight - Analyst
And the M&A environment, are prices changing at all in this period we've had the last 90 days of uncertainty, or is it kind of as is right now?
Jeffrey Duchemin - President, CEO
I think there's -- companies that we are attracted to that make strategic sense for us are in the same situation. Their numbers are soft. So, I think valuations have gone down because of what's happening. So it's a very attractive market. It's just everyone is in the same situation right now. It's been specifically around academia. Biopharma people are doing well, and I'm sure valuations are going up for biopharma companies. But what we're seeing is very similar to kind of the situation we are in right now.
Paul Knight - Analyst
And then lastly, do you see more facility consolidation in 2016?
Jeffrey Duchemin - President, CEO
The phase that we just completed was a two-year project. It was a lot of work and a lot of energy by many of our employees. We are real happy with where we are, Paul. It was very successful. Next year, I think we will continue to look at anywhere we can save costs, but there's no major projects to be announced today.
Paul Knight - Analyst
Okay. Thank you.
Operator
(Operator Instructions). At this moment, we show no further questions. I would like to turn the call back over to Jeff Duchemin for any closing remarks.
Jeffrey Duchemin - President, CEO
Thank you Hilda. I would like to thank our employees, customers and shareholders for their continued support. Thanks for calling in today everyone. We appreciate it, and we will talk to you soon. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes today's conference. We thank you for your participation. You may now disconnect.