<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________ to _________________
Commission file number 1-7928
BIO-RAD LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1381833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Alfred Nobel Drive, Hercules, CA 94547
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 724-7000
<TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<CAPTION>
Market Value on
Name of each exchange Shares outstanding March 20, 1997 of stocks
Title of each class on which registered March 20, 1997 held by non-affiliates
------------------- --------------------- ------------------ ------------------------
<S> <S> <C> <C>
Class A Common Stock
Par Value $1.00 per share American Stock Exchange 9,786,229 $215,611,963
Class B Common Stock
Par Value $1.00 per share American Stock Exchange 2,615,803 $ 13,683,695
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Documents Incorporated by Reference
Document Form 10-K Parts
_________________________________________ ____________________
(1) Annual Report to Stockholders for the
fiscal year ended December 31, 1996
(specified portions) I, II, IV
(2) Definitive Proxy Statement to be mailed
to stockholders in connection with the
registrant's 1997 Annual Meeting of
Stockholders (specified portions) III
<PAGE>
P A R T I
ITEM 1. BUSINESS
General
Founded in 1957, Bio-Rad Laboratories, Inc. ("Bio-Rad" or the
"Company") was initially engaged in the development and produc-
tion of specialty chemicals used in biochemical, pharmaceutical
and other life science research applications. In 1967, the Com-
pany entered the field of clinical diagnostics with the develop-
ment of its first test kit based on separation techniques and
materials developed for life sciences research. Recognizing that
the fields of clinical diagnostics and life sciences research
were evolving toward more automated techniques, Bio-Rad expanded
into the field of analytical and measuring instrument systems
through internal research and development efforts and
acquisitions in the late 1970's and 1980's.
As Bio-Rad broadened its product lines, it has also widened its
geographical market. The Company controls its distribution chan-
nels in twenty-two countries outside the U.S.A. through
subsidiaries whose primary focus is customer service and product
distribution.
Bio-Rad manufactures and supplies the life sciences research,
healthcare, analytical chemistry, semiconductor and other markets
with a broad range of products and systems used to separate
complex chemical and biological materials and to identify,
analyze and purify their components.
Business Segments
The Company operates in three industry segments designated Life
Science, Clinical Diagnostics and Analytical Instruments. Each
operates in both the U.S. and international markets. For finan-
cial information on geographic and industry segments, see Note 13
on pages 22 and 23 of Exhibit 13.1, which is incorporated herein
by reference. Exhibit 13.1 is the Company's Consolidated
Financial Statements, which is an excerpt from the Company's 1996
Annual Report to Stockholders.
Description of Business
Life Science
The Life Science segment develops, manufactures, sells and
services electrophoresis, gene transfer, chromatography,
immunoassay, imaging and image analysis products including
specialty chemical and biological materials, separation and
purification systems, laser scanning confocal microscopes and
accessories. These products are used to separate, purify and
analyze complex chemical mixtures and are sold to universities,
private industry, government agencies and clinical and hospital
laboratories. They are used in biochemistry, molecular biology,
cancer research, immunology, and other areas of life science and
genetic research. In addition, these products are sold to
1
<PAGE>
industrial and commercial customers, including pharmaceutical,
biotechnology and food processing companies, for research and
development, manufacturing and quality control applications.
Clinical Diagnostics
The Clinical Diagnostics segment develops and manufactures
automated test systems, test kits and specialized quality
controls for the healthcare market. Hospitals and clinical
laboratories use these products to assist physicians in
diagnosing and monitoring their patients. Many of these products
are based on innovative applications of technologies originally
developed for life science research. Bio-Rad also develops,
manufactures and distributes controls for immunoassay testing,
therapeutic drug monitoring and other applications.
Analytical Instruments
Bio-Rad's Analytical Instruments segment develops, manufactures,
sells and services FT-IR spectrometer systems, semiconductor
measurement test and manufacturing instruments and spectral
reference publications. Purchasers of these products include
government agencies, universities, research institutions and
industrial companies. These products are used in industrial and
scientific research, in manufacturing and in quality control
applications.
Raw Materials and Components
The Company utilizes a wide variety of chemicals, biological
materials, electronic components, machined metal parts, optical
parts, minicomputers and peripheral devices. Most of these
materials and components are available from numerous sources and
the Company has not experienced difficulty in securing adequate
supplies.
Patents and Trademarks
The Company owns numerous U.S. and international patents and
patent licenses. Bio-Rad believes, however, that its ability to
develop and manufacture its products depends primarily on its
know-how, technology and special skills. Under several patent
license agreements, Bio-Rad pays royalties on the sales of
certain products. Bio-Rad views these patents and license
agreements as valuable assets, however, no individual agreement
is of material importance to any segment or to the Company's
business as a whole.
2
<PAGE>
Seasonal Operations and Backlog
The Company's business is not inherently seasonal, however, the
European custom of concentrating vacation during the summer
months usually has had a negative impact on third quarter sales
volume and operating income.
For the most part, the Company operates in markets characterized
by short lead times and the absence of significant backlogs. The
Company produces several analytical instruments against an order
backlog. Management has concluded that backlog information is
not material to the Company's business as a whole.
Sales and Marketing
Each of Bio-Rad's divisions maintains a sales force or works in
conjunction with other divisions to sell its products on a direct
basis. Each sales force is technically trained in the
disciplines associated with its products. Sales are also
generated through direct mail advertising, exhibits at trade
shows and technical meetings, and by extensive advertising in
technical and trade publications. Sales and marketing efforts
are augmented by technical service departments that assist
customers in effective product utilization and in new product
applications. Bio-Rad also produces and distributes technical
literature and holds seminars for customers on the use of its
products.
Bio-Rad products are sold to a broad and diversified customer
base. In 1996, no single customer accounted for as much as 2% of
Bio-Rad's total sales. A number of the Company's customers,
particularly in Life Science, are substantially dependent for
their funding on government grants and research contracts. A
portion of the Analytical Instruments segment is dependent upon
large semiconductor manufacturers; the loss of these customers or
a severe downturn in the semiconductor market would have a
detrimental effect on the results of the segment.
Most of the Company's international sales are generated by
wholly-owned subsidiaries and their branch offices in Australia,
Austria, Belgium, Canada, Denmark, England, Finland, France,
Germany, Hong Kong, India, Israel, Italy, Japan, Korea, the
Netherlands, New Zealand, People's Republic of China, Singapore,
Spain, Sweden and Switzerland. Certain of these subsidiaries
also have manufacturing facilities. While Bio-Rad's
international operations are subject to certain risks common to
foreign operations in general, such as changes in governmental
regulations, import restrictions and foreign exchange
fluctuations, the Company's international operations are
principally in developed nations, which the Company regards as
presenting no significantly greater risks to its operations than
3
<PAGE>
are present in the United States.
Competition
Most markets served by Bio-Rad's product groups are competitive.
Bio-Rad's competitors range in size from start-ups to large
multi-nationals. Reliable independent information on sales and
market share of products produced by Bio-Rad's competitors is not
generally available. Bio-Rad believes, however, based on its own
marketing information, that while some competitors are dominant
with respect to certain individual products, no one company,
including Bio-Rad, is dominant with respect to a material portion
of any segment of Bio-Rad's business.
Product Research and Development
The Company conducts extensive product research and development
activities in all areas of its business, employing approximately
345 people worldwide in these activities. Research and
development have played a major role in Bio-Rad's growth and are
expected to continue to do so in the future. New products and
new applications for existing products are being developed
continuously by Bio-Rad's researchers. In its development and
testing of new products and applications, Bio-Rad consults with
scientific and medical professionals at universities, at
hospitals and medical schools, and in industry. Bio-Rad spent
approximately $39.6 million, $34.7 million and $30.2 million on
R&D activities during the years ended December 31, 1996, 1995 and
1994, respectively.
Regulatory Matters
Certain of the Company's products (primarily diagnostic products)
are subject to regulation in the United States by the Center for
Devices and Radiological Health of the United States Food and
Drug Administration (FDA) and in other jurisdictions by state and
foreign government authorities. FDA regulations require that
some new products have pre-marketing approval by the FDA and
require certain of Bio-Rad's products to be manufactured in
accordance with "good manufacturing practices", to be extensively
tested and to be properly labeled to disclose test results and
performance claims and limitations.
As a multinational manufacturer and distributor of sophisticated
instrumentation equipment, Bio-Rad must meet a wide array of
electromagnetic compatibility and safety compliance requirements
to satisfy regulations in the United States, the European
Community and other jurisdictions. The Company is also subject
to government regulation of the use and handling of radioactive
materials and controlled substances. The Company believes it is
in compliance with these and other regulations.
4
<PAGE>
Certain of the Company's production processes involve the use of
materials whose use is subject to federal, state and local
environmental regulations. The Company regularly evaluates its
processes and procedures to ensure compliance with applicable
environmental standards and regulations. Although, from time to
time, modification of processes and procedures may be required
which will require additional capital expenditures, the Company
presently believes that any such expenditures will have no
material adverse effect on the future results of operations or
the financial position of the Company.
Employees
At December 31, 1996, Bio-Rad had approximately 2,535 full-time
employees. Fewer than 8% of Bio-Rad's employees are covered by a
collective bargaining agreement which will expire on October 31,
1998. Bio-Rad considers its employee relations in general to be
good.
ITEM 2. PROPERTIES
Bio-Rad owns its Corporate headquarters located in Hercules,
California. The principal manufacturing and research locations
for each segment are as follows:
Life Science Richmond, California Owned/Leased
Hercules, California Owned
Hemel Hempstead, England Leased
Milan, Italy Leased
Clinical Diagnostics Hercules, California Owned/Leased
Anaheim, California Leased
Munich, Germany Leased
Analytical Instruments Cambridge, Massachusetts Owned/Leased
York, England Owned
Philadelphia, Pennsylvania Owned
Most manufacturing and research facilities also house
administration, sales and distribution activities for the
segment.
In addition, the Company leases office and warehouse facilities
in California, Colorado, New Mexico, Australia, Austria,
Belgium, Canada, Denmark, England, Finland, France, Germany, Hong
Kong, India, Israel, Italy, Japan, Korea, the Netherlands, New
Zealand, People's Republic of China, Singapore, Spain, Sweden and
Switzerland. These facilities are used principally for
administration, sales, service and distribution for all three
segments.
The company has leased space in California, Canada, England and
5
<PAGE>
New York that is not currently being utilized. For the most
part, reserves for future lease payments were recorded at the
time the Company stopped using these facilities. The Company has
subleased or is attempting to sublease these properties.
The Company has recently leased a new facility in California that
will replace the existing research, manufacturing and warehouse
facilities in Anaheim California during 1997. All facilities are
believed to be adequate to support the Company's current and
anticipated production requirements. Historically, adequate
space to expand sales and distribution channels has been
available and is leased as needed.
ITEM 3. LEGAL PROCEEDINGS
Note 11, "Legal Proceedings", appearing on pages 20 and 21 of
Exhibit 13.1 is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's
security holders during the fourth quarter of the fiscal year
covered by this report.
P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Note 15, "Information Concerning Common Stock", appearing on
pages 24 and 25 of Exhibit 13.1 is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The table headed "Summary of Operations" appearing on page 1 of
Exhibit 13.1 is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The section headed "Management's Discussion and Analysis of
Results of Operations and Financial Condition" appearing on pages
27 through 31 of Exhibit 13.1 is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Public Accountants and the Consolidated
Financial Statements and Notes thereto appearing on pages 2
through 26 of Exhibit 13.1 are incorporated herein by reference.
6
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections labeled "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" of the definitive
Proxy Statement mailed to stockholders in connection with the
1997 Annual Meeting of Stockholders (the 1997 Proxy Statement)
are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The sections labeled "Executive Compensation and Other
Information", "Compensation of Directors", "Compensation
Committee Interlocks and Insider Participation", "Report of the
Compensation Committee of the Board of Directors" and "Stock
Performance Graph" of the 1997 Proxy Statement are incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The section labeled "Principal and Management Stockholders" of
the 1997 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section labeled "Compensation of Directors" of the 1997 Proxy
Statement is incorporated herein by reference.
7
<PAGE>
P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Index to Financial Statements
The following Consolidated Financial Statements are
included in the 1996 Annual Report and are incorporated
herein by reference pursuant to Item 8:
Page in
Exhibit 13.1
Consolidated Balance Sheets
at December 31, 1996 and 1995 2-3
Consolidated Statements of Income
for each of the three years in the
period ended December 31, 1996 4
Consolidated Statements of Cash Flows
for each of the three years in the period
ended December 31, 1996 5
Consolidated Statements of Changes in
Stockholders' Equity for each of the three
years in the period ended December 31, 1996 6
Notes to Consolidated Financial Statements 7-25
Report of Independent Public Accountants 26
2. Index to Financial Statement Schedule
Page in
Form 10-K
Schedule II Valuation and Qualifying Accounts 9
Report of Independent Public Accountants
on Schedule II 10
All other financial statement schedules are omitted because
they are not required or because the required information is
included in the Consolidated Financial Statements or the Notes
thereto.
3. Index to Exhibits
The exhibits listed in the accompanying Index to Exhibits on
pages 12 and 13 of this report are filed or incorporated by
reference as part of this report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during
the last quarter of the period covered by this report.
8
<PAGE>
BIO-RAD LABORATORIES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
(In thousands)
<TABLE>
Reserve for doubtful accounts receivable
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Year Expenses Deductions of Year
<S> <C> <C> <C> <C>
1996 $3,094 $ 952 $ (358) $3,688
===== ===== ===== =====
1995 $2,894 $ 462 $ (262) $3,094
===== ===== ===== =====
1994 $2,033 $1,283 $ (422) $2,894
===== ===== ===== =====
</TABLE>
<TABLE>
Valuation allowance for deferred tax assets
<CAPTION>
Deductions
Balance at Charged to Balance
Beginning Costs and at End
of Year Additions Expenses of Year
<S> <C> <C> <C> <C>
1996 $ 6,478 $ - $ (906) $ 5,572
====== ====== ====== ======
1995 $ 7,209 $ - $ (731) $ 6,478
====== ====== ====== ======
1994 $12,353 $ - $(5,144) $ 7,209
====== ====== ====== ======
</TABLE>
9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
To the Stockholders and Board of Directors of
Bio-Rad Laboratories, Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Bio-Rad Laboratories, Inc.'s annual report to stockholders
incorportated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 1997. Our audit was made for
the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the index, Item 14(a)2, is the
responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California,
February 4, 1997
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BIO-RAD LABORATORIES, INC.
By: /s/ Sanford S. Wadler
Sanford S. Wadler
Secretary
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Principal Executive Officer:
/s/ David Schwartz President and Director March 26, 1997
(David Schwartz)
Principal Financial Officer:
/s/ T. C. Chesterman Chief Financial Officer March 26, 1997
(Thomas C. Chesterman)
Principal Accounting Officer:
/s/ James R. Stark Corporate Controller March 26, 1997
(James R. Stark)
Other Directors:
/s/ James J. Bennett Director March 26, 1997
(James J. Bennett)
/s/ Albert J. Hillman Director March 26, 1997
(Albert J. Hillman)
/s/ Philip L. Padou Director March 26, 1997
(Philip L. Padou)
/s/ Alice N. Schwartz Director March 26, 1997
(Alice N. Schwartz)
/s/ Norman Schwartz Director March 26, 1997
(Norman Schwartz)
/s/ Burton A. Zabin Director March 26, 1997
(Burton A. Zabin)
11
<PAGE>
BIO-RAD LABORATORIES, INC.
INDEX TO EXHIBITS
ITEM 14(a)3
The following documents are filed as part of this report:
Exhibit No.
3.1 Restated Certificate of Incorporation, as of
September 15, 1988. (1)
3.2 Bylaws of the Registrant, as amended February 19,
1980. (2)
10.4 1994 Stock Option Plan. (3)
10.5 Amended 1988 Employee Stock Purchase Plan. (4)
10.6 Employees' Deferred Profit Sharing Retirement Plan. (5)
10.9 Credit Agreement dated as of February 18, 1994, by and
among the Registrant, the Lenders and The First
National Bank of Chicago, as agent. (6)
10.9.1 Amendment dated as of September 30, 1994 to the Credit
Agreement dated as of February 18, 1994, by and among
the Registrant, the Lenders and The First National Bank
of Chicago, as agent. (7)
10.9.2 Amendment dated as of May 30, 1995 to the Credit
Agreement dated as of February 18, 1994, by and among
the Registrant, the Lenders and The First National Bank
of Chicago, as agent. (7)
10.9.3 Amendment dated as of July 10, 1996 to the Credit
Agreement dated as of February 18, 1994, by and among
the Registrant, the Lenders and The First National Bank
of Chicago, as agent. (8)
10.10 Non-competition and employment continuation agreement
with James J. Bennett.
11.1 Computation of Earnings Per Share.
13.1 Excerpt from Annual Report to Stockholders' for the
fiscal year ended December 31, 1996 (to be deemed filed
only to the extent required by the instructions to
exhibits for reports on Form 10-K).
21.1 Listing of Subsidiaries.
23.1 Consent of Independent Public Accountants.
27.1 Financial Data Schedule.
________________________________________________________________
(1) Incorporated by reference from the Exhibits to the
Company's Form 10-K filing for the fiscal year ended
December 31, 1992, dated March 26, 1993.
12
<PAGE>
(2) Incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-7
Registration No. 2-66797, which became effective
April 22, 1980.
(3) Incorporated by reference from the Exhibits to the
Company's Form S-8 filing, dated April 28, 1994.
(4) Incorporated by reference from the Exhibits to the
Company's Form S-8 filing, dated April 28, 1994.
(5) Incorporated by reference from the Exhibits to the
Company's Form 10-K filing for the fiscal year ended
December 31, 1994, dated March 23, 1995.
(6) Incorporated by reference from the Exhibits to the
Company's Form 10-K filing for the fiscal year ended
December 31, 1993, dated March 24, 1994.
(7) Incorporated by reference from the Exhibits to the
Company's September 30, 1995 Form 10-Q filing dated
November 3, 1995.
(8) Incorporated by reference from the Exhibits to the
Company's September 30, 1996 Form 10-Q filing dated
November 8, 1996.
13
<PAGE>
DATE: January 15, 1997
TO: Jim Bennett
FROM: David Schwartz
SUBJECT:
CONFIDENTIAL
This letter will confirm our discussions concerning the most
appropriate utilization of your expertise and experience after you
decide to leave your present position as Executive Vice
President/Chief Operating Officer of Bio-Rad ("Present Position"), in
return for your signing this "non-compete" agreement.
1. You will give Bio-Rad at least six months' notice if you decide to
leave your Present Position. Additionally, you will provide such
notice so that, including the hours worked under Paragraph 3 below,
your total hours worked in any year in which the end of the six-month
notice period occurs will not exceed 999 hours.
2. You will be nominated by the management of Bio-Rad to continue as a
member of the Board of Directors; and if this nomination is ratified
by the shareholders, you will remain a director for a minimum of three
years.
3. After you leave your present Position, you will continue as an
employee taking on a variety of assignments as mutually agreed to with
the CEO for a total of six weeks of cumulative work during each twelve-
month period, for up to five consecutive 12-month periods following
your leaving your Present Position.
You will be paid for the six weeks of cumulative work per twelve-month
period at the weekly rate of $2,500/week, plus the same weekly pay
rate as is in effect for your Present Position when your notice period
ends. If you cease being a Director, the cumulative weekly payments
shall be reduced by $2,500. This salary will be paid in 24 equal
installments during each 12-month period. Mutually agreed assignments
extending beyond the six weeks of cumulative work will be compensated
at the same weekly pay rate as is in effect when your notice period
ends.
Medical, dental, vacation, sick leave, profit sharing, bonus, further
grants of stock options, and any other benefits or payments not
excepted in this letter will cease when you leave your Present
Position.
<PAGE>
4. You will be permitted to exercise all vested stock options granted to
you prior to leaving your Present Position. If you become unable to
carry out your assigned duties under this letter, or if you retire,
the Stock Option Committee has granted you the right to exercise your
stock options for up to two years after you cease employment.
5. If you compete in any way with Bio-Rad during the term of your
employment, or two years thereafter, you will forfeit your right to
exercise your stock options and to receive the payments provided for
in this letter.
If this letter correctly confirms our agreement, please sign in the
space provided for below and return one original to me. The other
original is for your files.
Cordially,
/s/ David Schwartz
David Schwartz
I hereby confirm and agree to the conditions
of the agreement as stated above.
/s/ James J. Bennett
James J. Bennett
<PAGE>
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE
Bio-Rad Laboratories, Inc.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Computation for Consolidated Statements of Income:
Income before extraordinary charge $27,355 $25,156 $15,598
Extraordinary charge, net of tax efect (1,176) - -
_______ _______ _______
Net income $26,179 $25,156 $15,598
======= ======= =======
Weighted average common shares 12,273 12,206 12,113
======= ======= =======
Earnings per share:
Earnings per share before extraordinary charge $2.23 $2.06 $1.29
Extraordinary charge per share (.10) - -
_______ _______ _______
Earnings per share $2.13 $2.06 $1.29
======= ======= =======
Additional Primary Computation (1):
Weighted average common shares per above 12,273 12,206 12,113
Add-Dilutive effect of outstanding options
(as determined by the application of
the treasury stock method) 199 224 156
_______ _______ _______
Weighted average common shares, as adjusted 12,472 12,430 12,269
======= ======= =======
Primary earnings per share:
Earnings per share before extraordinary charge $2.19 $2.02 $1.27
Extraordinary charge per share (.09) - -
_______ _______ _______
Earnings per share $2.10 $2.02 $1.27
======= ======= =======
Fully Diluted Computation (1):
Weighted average common shares per above 12,273 12,206 12,113
Add-Dilutive effect of outstanding options
(as determined by the application of
the treasury stock method) 252 239 164
_______ _______ _______
Weighted average common shares, as adjusted 12,525 12,445 12,277
======= ======= =======
Fully diluted earnings per share:
Earnings per share before extraordinary charge $2.18 $2.02 $1.27
Extraordinary charge per share (.09) - -
_______ _______ _______
Earnings per share $2.09 $2.02 $1.27
======= ======= =======
<FN>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
</TABLE>
<PAGE>
EXHIBIT 13.1
Bio-Rad Laboratories, Inc.
SUMMARY OF OPERATIONS (In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992 1991
_____________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net sales $418,789 $396,618 $355,299 $328,553 $330,301 $310,669
Cost of goods sold (1) 182,046 171,942 155,805 151,063 138,173 133,787
Gross profit 236,743 224,676 199,494 177,490 192,128 176,882
Selling, general and administrative expense 155,516 150,272 132,591 129,187 133,934 125,224
Product research and development expense 39,580 34,714 30,172 34,204 34,655 28,240
Restructuring costs 2,700 1,500 - 3,816 9,023 1,290
Income from operations 38,947 38,190 36,731 10,283 14,516 22,128
Other income (expense):
Interest expense, net (3,027) (4,465) (6,138) (8,406) (9,368) (7,858)
Other, net 553 (183) (6,596) 2,801 22,357 (763)
Income before taxes and extraordinary charge 36,473 33,542 23,997 4,678 27,505 13,507
Provision for income taxes 9,118 8,386 8,399 1,877 11,951 5,353
Income before extraordinary charge 27,355 25,156 15,598 2,801 15,554 8,154
Extraordinary charge (2) (1,176) - - - - -
Net income $ 26,179 $ 25,156 $ 15,598 $ 2,801 $ 15,554 $ 8,154
====== ====== ====== ===== ====== =====
Earnings per share before extraordinary charge $2.23 $2.06 $1.29 $0.23 $1.31 $0.69
Extraordinary charge (2) (.10) - - - - -
Earnings per share $2.13 $2.06 $1.29 $0.23 $1.31 $0.69
====== ====== ====== ===== ====== =====
Weighted average common shares 12,273 12,206 12,113 11,990 11,886 11,807
Cash dividends paid per common share - - - - - -
Total assets $284,925 $285,098 $263,650 $259,890 $272,730 $253,142
Long-term debt, net of current maturities $ 6,721 $ 20,922 $ 26,287 $ 47,834 $ 57,909 $ 64,906
_____________________________________________________________________________________________________________________
<FN>
(1) In 1996, cost of goods sold includes a charge of $2.1 million for write-down of inventory associated with the
restructuring costs.
(2) Extraordinary charge for redemption of subordinated debt: 1996 - $1,176, net of tax effect of $817.
</TABLE>
1
<PAGE>
Bio-Rad Laboratories, Inc.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
________________________________________________________________________________________
December 31,
Assets 1996 1995
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 9,390 $ 14,774
Accounts receivable, less allowance of $3,688 in
1996 and $3,094 in 1995 97,795 92,061
Inventories 69,738 75,357
Deferred tax assets 14,947 12,274
Prepaid expenses and other current assets 6,665 7,126
Total current assets 198,535 201,592
Property, Plant and Equipment:
Land and improvements 8,057 8,057
Buildings and leasehold improvements 52,050 51,786
Equipment 107,847 99,486
Total property, plant and equipment 167,954 159,329
Less accumulated depreciation 96,092 86,363
Net property, plant and equipment 71,862 72,966
Marketable Securities 7,432 5,902
Other Assets 7,096 4,638
Total Assets $284,925 $285,098
======== ========
________________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
Bio-Rad Laboratories, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
__________________________________________________________________________________________
December 31,
Liabilities and Stockholders' Equity 1996 1995
<S> <C> <C>
Current Liabilities:
Notes payable $ 4,484 $ 13,614
Current maturities of long-term debt 1,058 655
Accounts payable 21,262 19,946
Accrued payroll and employee benefits 23,717 23,908
Sales, income and other taxes payable 3,988 7,082
Other current liabilities 24,630 24,612
Total current liabilities 79,139 89,817
Long-Term Debt, net of current maturities 6,721 20,922
Deferred Tax Liabilities 15,557 17,300
Total liabilities 101,417 128,039
Commitments and Contingent Liabilities
Stockholders' Equity:
Preferred stock, $1.00 par value, 2,300,000 shares authorized;
none outstanding - -
Class A common stock, $1.00 par value, 15,000,000 shares
authorized; outstanding 1996 - 9,740,922;
1995 - 9,593,283 9,741 9,593
Class B common stock, $1.00 par value, 6,000,000 shares
authorized; outstanding 1996 - 2,579,803;
1995 - 2,646,063 2,580 2,646
Additional paid-in capital 17,067 15,887
Class A treasury stock, 31,216 shares in 1996 at cost (839) -
Class B treasury stock, 30,000 shares in 1996 at cost (800) -
Retained earnings 151,003 124,857
Currency translation 3,570 3,527
Net unrealized holding gain on marketable securities 1,186 549
Total stockholders' equity 183,508 157,059
Total Liabilities and Stockholders' Equity $284,925 $285,098
======== ========
__________________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Bio-Rad Laboratories, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
___________________________________________________________________________________________________
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $418,789 $396,618 $355,299
Cost of goods sold 182,046 171,942 155,805
Gross profit 236,743 224,676 199,494
Selling, general and administrative expense 155,516 150,272 132,591
Product research and development expense 39,580 34,714 30,172
Restructuring costs 2,700 1,500 -
Income from operations 38,947 38,190 36,731
Other income (expense):
Interest expense (3,027) (4,465) (6,138)
Investment income, net 2,385 1,230 314
Other, net (1,832) (1,413) (6,910)
Income before taxes and extraordinary charge 36,473 33,542 23,997
Provision for income taxes 9,118 8,386 8,399
Income before extraordinary charge 27,355 25,156 15,598
Extraordinary charge, net of tax effect of $817 (1,176) - -
Net income $ 26,179 $ 25,156 $ 15,598
======== ======== ========
Earnings per share before extraordinary charge $2.23 $2.06 $1.29
Extraordinary charge per share (.10) - -
Earnings per share $2.13 $2.06 $1.29
===== ===== =====
Weighted average common shares 12,273 12,206 12,113
====== ====== ======
___________________________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Bio-Rad Laboratories, Inc.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
________________________________________________________________________________________________________
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $409,144 $387,729 $354,463
Cash paid to suppliers and employees (354,641) (339,702) (290,163)
Interest paid (3,710) (4,008) (6,725)
Income tax payments (16,923) (5,679) (2,586)
Miscellaneous payments (717) (108) (6,715)
Net cash provided by operating activities 33,153 38,232 48,274
Cash flows from investing activities:
Capital expenditures, net (15,235) (12,307) (9,798)
Payments for acquisitions (1,290) (829) -
Purchases of marketable securities and investments (2,710) (3,098) (1,417)
Sales of marketable securities and investments 2,968 2,959 1,261
Foreign currency hedges, net 1,423 (638) (3,102)
Net cash used in investing activities (14,844) (13,913) (13,056)
Cash flows from financing activities:
Net borrowings under line-of-credit arrangements (8,940) (8,063) (8,839)
Long-term borrowings 5,024 59,400 65,500
Payments on long-term debt (20,841) (65,535) (90,381)
Proceeds from issuance of common stock 1,262 1,093 823
Purchase of treasury stock (1,887) - -
Reissuance of treasury stock 215 - -
Net cash used in financing activities (25,167) (13,105) (32,897)
Effect of exchange rate changes on cash 1,474 (191) (1,682)
Net increase (decrease) in cash and cash equivalents (5,384) 11,023 639
Cash and cash equivalents at beginning of year 14,774 3,751 3,112
Cash and cash equivalents at end of year $ 9,390 $ 14,774 $ 3,751
======== ======== ========
________________________________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Bio-Rad Laboratories, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
__________________________________________________________________________
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Common Shares:
Balance at beginning of year 12,239,346 12,159,190 12,046,215
Issuance of common stock 81,631 80,156 112,975
Cash paid in lieu of fractional
shares on 3-for-2 stock split (252) - -
Balance at end of year 12,320,725 12,239,346 12,159,190
__________________________________________________________________________
Common Stock:
Balance at beginning of year $ 12,239 $ 12,159 $ 12,046
Issuance of common stock 82 80 113
Balance at end of year 12,321 12,239 12,159
Additional Paid-In Capital:
Balance at beginning of year 15,887 14,874 14,164
Issuance of common stock 1,188 1,013 710
Cash paid in lieu of fractional
shares on 3-for-2 stock split (8) - -
Balance at end of year 17,067 15,887 14,874
Treasury Stock:
Balance at beginning of year - - -
Purchase of treasury stock (1,887) - -
Reissuance of treasury stock 248 - -
Balance at end of year (1,639) - -
Retained Earnings:
Balance at beginning of year 124,857 99,701 84,103
Net income 26,179 25,156 15,598
Loss on reissuance of treasury stock (33) - -
Balance at end of year 151,003 124,857 99,701
Currency Translation:
Balance at beginning of year 3,527 2,566 (3)
Change in currency translation 43 961 2,569
Balance at end of year 3,570 3,527 2,566
Net Unrealized Holding Gain
On Marketable Securities:
Balance at beginning of year 549 518 -
Adoption of SFAS 115 effective
January 1, 1994 - - 1,572
Change in net unrealized holding
gain (loss) 637 31 (1,054)
Balance at end of year 1,186 549 518
________ ________ ________
Total Stockholders' Equity $183,508 $157,059 $129,818
======== ======== ========
__________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
Bio-Rad Laboratories, Inc.
Notes to Consolidated Financial Statements
_________________________________________________________________
1. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Bio-Rad
Laboratories, Inc. and all subsidiaries ("Bio-Rad" or the "Company")
after elimination of intercompany balances and transactions. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Changes in such estimates may
affect amounts reported in the future. Certain amounts in the
financial statements of prior years have been reclassified to be
consistent with the 1996 presentation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid in-
vestments with original maturities of three months or less which are
readily convertible into cash. Cash equivalents are stated at cost,
which approximates market value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of trade accounts
receivable. The Company performs credit evaluation procedures and
generally does not require collateral. Credit risk is limited due to
the large number of customers and their dispersion across many
geographic areas. However, a significant amount of trade receivables
are with national healthcare systems in countries within the European
Economic Community. The Company does not currently foresee a credit
risk associated with these receivables.
Inventory Valuation
Inventories are valued at the lower of average cost or market and
include material, labor and overhead costs.
Property, Plant and Equipment
Property, plant and equipment are carried at historical cost.
Depreciation is computed on a straight-line basis over the estimated
useful lives of the assets ranging from two to thirty years.
Leasehold improvements are amortized over the lives of the respective
leases or the lives of the improvements, whichever is shorter.
7
<PAGE>
Revenue Recognition and Warranty
Bio-Rad recognizes revenues when products are shipped or services
rendered and all significant obligations of the Company have been met.
Sales to end-users made through distributors or, on a non-recourse
basis through factors, are recorded net of applicable discounts and
factoring expenses. Factoring expenses were $1,096,000, $1,398,000
and $1,544,000 in 1996, 1995 and 1994, respectively. Where
appropriate, the Company also establishes a concurrent reserve for
returns and allowances.
The Company warrants certain equipment against defects in design,
materials and workmanship generally for one year. Upon shipment of
equipment sold at a price which includes a warranty, the Company
establishes, as part of cost of goods sold, a reserve for the expected
costs of such warranty.
Foreign Currency Translation
Balance sheet accounts of international subsidiaries are translated at
the current exchange rate as of the end of the accounting period.
Income statement items are translated at average exchange rates. The
resulting translation adjustment is recorded as a separate component
of stockholders' equity.
Forward Exchange Contracts
As part of distributing its products, the Company regularly enters
into intercompany transactions. The Company enters into forward
foreign exchange contracts as a hedge against foreign currency
denominated intercompany receivables and payables. These
nonspeculative contracts have maturity dates of 60 days or less,
relate primarily to currencies of industrial countries and are marked
to market at each balance sheet date. The resulting gains or losses
are included in other income and expense offsetting exchange losses or
gains on the related receivables and payables. Unrealized gains and
losses are not deferred. Exchange gains and losses on these
contracts are net of premiums and discounts resulting from interest
rate differentials between the U.S. and the countries of the
currencies being traded. The cash flows related to these contracts
are classified as cash flows from investing activities in the
statement of cash flows.
Stock Compensation Plans
Bio-Rad accounts for its stock-based compensation plans using the
intrinsic value method as promulgated by APB Opinion 25 and related
Interpretations. Accordingly, no compensation cost has been
recognized with respect to any stock-based compensation plan.
Earnings Per Share
Earnings per share are calculated on the basis of the weighted average
number of common shares outstanding for each period.
8
<PAGE>
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including cash and
cash equivalents, accounts receivable, notes payable, accounts payable
and forward exchange contracts, the carrying amounts approximate fair
value. The fair values of other instruments are disclosed in relevant
notes to the financial statements.
_________________________________________________________________
2. Inventories
<TABLE>
The principal components of inventories are as follows (in thousands):
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Raw materials $ 26,920 $ 26,467
Work in process 19,866 17,189
Finished goods 22,952 31,701
-------- --------
Inventories $ 69,738 $ 75,357
======== ========
</TABLE>
________________________________________________________________
3. Marketable Securities
The Company's marketable securities are classified as available-for-
sale and are recorded at current market value with an offsetting
adjustment to stockholders' equity. The Company's portfolio is
comprised principally of equity securities with an aggregate market
value of $7,432,000 and $5,902,000 and cost of $6,246,000 and
$5,353,000 at December 31, 1996 and 1995, respectively.
Unrealized holding gains and losses pertaining to marketable
securities are included as a separate component of stockholders'
equity until realized. At December 31, 1996, gross unrealized holding
gains and losses were $1,465,000 and $279,000, respectively. At
December 31, 1995, gross unrealized holding gains and losses were
$909,000 and $360,000, respectively.
For the purpose of determining realized gains and losses, the cost of
securities sold is based upon specific identification. Information
regarding the proceeds and gross realized gains and losses from sales
of securities is as follows:
9
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Proceeds $ 2,968 $ 2,959 $ 1,261
======== ======= =======
Gross realized gains $ 1,130 $ 1,118 $ 432
Gross realized losses - (123) (141)
-------- ------- -----
Net realized gain $ 1,130 $ 995 $ 291
======== ======= =======
</TABLE>
_________________________________________________________________
4. Notes Payable and Long-Term Debt
Notes payable include local credit lines maintained by the Company's
subsidiaries aggregating approximately $38,843,000, of which
$34,726,000 was unused at December 31, 1996. The weighted average
interest rate on these lines was 7.68% and 8.71% at December 31, 1996
and 1995, respectively. The parent company guarantees most of these
credit lines. The carrying amounts of notes payable, which includes
borrowings under these lines and cash overdrafts, approximate their
fair value.
<TABLE>
The principal components of long-term debt are as follows (in
thousands):
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Revolving credit agreement $ 5,000 $ -
10.9% Subordinated Notes - 20,000
Capitalized leases 1,530 1,526
Other 1,249 51
_______ _______
7,779 21,577
Less current maturities 1,058 655
_______ _______
Long-Term Debt $ 6,721 $20,922
======= =======
</TABLE>
The Company has a $60 million revolving credit agreement which
provides for borrowings on an unsecured basis through April 1999. The
outstanding balance is $5,000,000 and $0 at December 31, 1996 and
1995, respectively. Interest is at spreads over money market rates or
at the prime rate. The applicable interest rate at December 31, 1996
and 1995 was 5.98% and 8.50%, respectively. A fee ranging from 0.15%
to 0.30% annually is charged on the daily unborrowed portion of the
commitment.
10
<PAGE>
The 10.9% Subordinated Notes were redeemed in December 1996. This
redemption resulted in an extraordinary charge of $1,176,000, net
of income tax benefits of $817,000. The debt was extinguished
with current operating funds and $5,000,000 borrowed from the
Company's revolving credit agreement.
The revolving credit agreement (including amendments) requires the
Company, among other things, to comply with certain financial
ratio covenants. The Company was in compliance with all financial
ratio covenants as of December 31, 1996. This agreement also
contains certain other restrictions, including the limitation of
cash dividends. Approximately $8,113,000 of retained earnings
were available for payment of cash dividends at December 31, 1996.
Maturities of long-term debt at December 31, 1996 are as follows:
1997 - $1,058,000; 1998 - $907,000; 1999 - $5,645,000; 2000 -
$118,000; 2001 - $51,000; subsequent to 2001 - $0.
The fair value of the Company's long-term debt is estimated based
on the current rates available to the Company for similar issues
of comparable maturities. At December 31, 1996 the estimated
fair value is $7,779,000.
11
<PAGE>
_________________________________________________________________
5. Income Taxes
<TABLE>
The U.S. and international components of income before taxes and
extraordinary charge are as follows (in thousands):
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
U.S. $ 23,766 $ 24,592 $ 13,652
International 12,707 8,950 10,345
-------- -------- --------
Income before taxes and
extraordinary charge $ 36,473 $ 33,542 $ 23,997
======== ======== ========
</TABLE>
<TABLE>
The provision for income taxes consists of (in thousands):
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Current:
U.S. Federal $ 7,613 $ 6,764 $ 368
International 6,070 2,115 3,476
U.S. State 1,122 1,008 663
-------- -------- --------
14,805 9,887 4,507
Deferred (5,687) (1,501) 3,892
-------- -------- --------
Provision for income taxes $ 9,118 $ 8,386 $ 8,399
======== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
The major components of the deferred income tax provision are as
follows (in thousands):
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Change in eliminated
intercompany profit $ 476 $ (29) $ 113
Change in reserves for
obsolete inventory and
warranty expense (817) (2,007) (1,020)
Change in other reserves (4,718) 147 4,242
Difference between tax
and book depreciation (537) (138) (116)
Miscellaneous other items (91) 526 673
------- ------- -------
Deferred income tax provision $(5,687) $(1,501) $ 3,892
======= ======= =======
</TABLE>
<TABLE>
The reconciliation of the effective tax rate is as follows (dollars in
thousands):
<CAPTION>
Year Ended December 31,
1996 1995 1994
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory tax rate $12,766 35% $11,740 35% $ 8,399 35%
State taxes, net of
federal income tax benefit 395 1 426 1 515 2
Effect of international
losses and differences
between international
and U.S. tax rates 1,806 5 781 2 1,291 5
Foreign Sales Corporation
tax benefit (1,343) (4) (1,539) (4) (1,278) (5)
Research and development
tax credit (413) (1) (265) (1) (461) (2)
Benefit of excess foreign
tax credits on
repatriation of foreign
earnings (253) (1) (908) (3) (1,012) (4)
Loss carryforwards utilized (1,518) (4) (1,678) (5) (2,704) (11)
Other (2,322) (6) (171) - 3,649 15
------- --- ------- --- ------- ---
Provision for income taxes $ 9,118 25% $ 8,386 25% $ 8,399 35%
======= === ======= === ======= ===
</TABLE>
13
<PAGE>
<TABLE>
Temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities at December
31, 1996 are as follows (in thousands):
<CAPTION>
Deferred Deferred
Tax Tax
Assets Liabilities
<S> <C> <C>
Tax benefit of foreign loss
carryforwards $ 3,157 $ -
Deferred gain on condemnation - 6,717
Eliminated intercompany profit 3,610 -
Reserves for obsolete inventory,
warranty and bad debts 10,167 -
Restructuring reserve 1,923 -
Tax benefit of IPRI loss
carryforward 295 -
Development cost of Hercules
facility - 1,445
Write-off of investment in
subsidiaries 484 -
Depreciation - 602
Miscellaneous other items 883 6,793
------- -------
20,519 15,557
Valuation allowance (5,572) -
------- -------
Total $14,947 $15,557
======= =======
</TABLE>
The net change in the valuation allowance for deferred tax assets in
1996 was a decrease of $906,000 primarily resulting from unanticipated
utilization of foreign loss carryforwards.
At December 31, 1996, Bio-Rad's international subsidiaries had
combined net operating loss carryforwards of $8,960,000. A portion of
these loss carryforwards will expire in the following years: 1998 -
$1,063,000; 1999 - $275,000; 2000 - $282,000; 2001 - $79,000; 2002 -
$87,000 and 2004 - $567,000. The remainder of these loss carry-
forwards have no expiration date. At December 31, 1996, Bio-Rad's
domestic subsidiary, International Plant Research Institute (IPRI),
had a net operating loss carryforward of $842,000 which will expire
between 1998 and 2003. The utilization of these carryforwards is
limited to the separate taxable income of each individual subsidiary.
Bio-Rad does not provide for taxes which would be payable if the
cumulative undistributed earnings of its international subsidiaries,
approximately $20,822,000 at December 31, 1996, were remitted to the
U.S. parent company. Unless it becomes advantageous for tax or
foreign exchange reasons to remit a subsidiary's earnings, such
earnings are indefinitely reinvested in subsidiary operations. The
withholding tax and U.S. federal income taxes on these earnings, if
remitted, would in large part be offset by tax credits.
_________________________________________________________________
14
<PAGE>
6. Stockholders' Equity
Stock Classification
The Company's outstanding stock consists of Class A Common Stock
(Class A) and Class B Common Stock (Class B). Each share of Class A
and Class B participates equally in the earnings of Bio-Rad, and is
identical in most other respects except that (i) Class A has limited
voting rights, each share of Class A being entitled to one-tenth of a
vote on most matters and each share of Class B being entitled to one
vote; (ii) Class A stockholders are entitled to elect 25% of the Board
of Directors (rounded up to the nearest whole number) and Class B
stockholders are entitled to elect the balance of the directors; (iii)
cash dividends may be paid on Class A shares without paying a cash
dividend on Class B shares, but no cash dividend may be paid on Class
B shares unless an at least equal cash dividend is paid on Class A
shares; and (iv) Class B shares are convertible at any time into Class
A shares on a one for one basis at the option of the stockholder.
Stock Split
Retroactive adjustments have been made, as appropriate, to common
stock and per share amounts to reflect the 3-for-2 stock split
effected in the form of a 50% stock dividend in May 1996.
Stock Option Plans
Bio-Rad maintains incentive and non-qualified fixed stock option plans
for officers and certain other key employees. Under the 1994 Stock
Option Plan, the Company may grant options to its employees for up to
675,000 shares of common stock provided that no option shall be
granted after March 1, 2004. The Amended and Restated 1984 Stock
Option Plan provided that no option could be granted after March 1,
1994. Under both plans, Class A and Class B options are granted at
prices not less than fair market value on the date of grant, are
exercisable on a cumulative basis at a rate not greater than 25% per
annum commencing one year after the date of grant and expire five
years after the date of grant.
The Company has made no charge to income with respect to any stock
options. At the time options are exercised, the par value of the
shares is credited to common stock and the excess is credited to
additional paid-in capital. The Company may receive income tax
benefits from the exercise of non-qualified stock options and from
certain dispositions of stock received by employees under qualified or
incentive stock options. The fair value of each option granted since
January 1, 1995 was estimated on the date of the grant using the
Black-Scholes option-pricing model with the following assumptions for
grants in 1996 and 1995, respectively: no dividend yield for both
periods; expected lives of 1.8 and 2.8 years for both periods;
expected volatility of 33 percent and 38 percent; and risk-free
interest rates ranging from 4.85% to 5.27% and 6.78% to 7.43%.
15
<PAGE>
<TABLE>
Activity under the plans is summarized below (amounts reported in the Price columns
represent the weighted average exercise price):
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1996 1995 1994
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 427,457 $12.39 356,640 $ 9.66 376,140 $11.08
Granted 147,000 26.55 145,800 18.27 144,000 7.58
Exercised (59,576) 11.12 (39,552) 9.91 (10,482) 10.93
Forfeited (31,981) 20.21 (35,431) 11.96 (19,256) 8.94
Expired - - - - (133,762) 11.42
------- ------- -------
Outstanding at end of year 482,900 16.34 427,457 12.39 356,640 9.66
======= ======= =======
Options exercisable at year-end 149,605 103,437 68,718
======= ======= =======
Weighted average fair value of
options granted during the year $8.57 $6.76 -
</TABLE>
<TABLE>
The following table summarizes information about fixed stock options oustanding at December 31, 1996:
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -------------------------------
Number Weighted Average Number
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Prices at 12/31/96 Contractual Life Exercise Price at 12/31/96 Exercise Price
<S> <C> <C> <C> <C> <C>
$ 7.37 - $ 9.46 156,317 1.9 years $ 8.38 70,553 $ 8.66
$10.36 - $18.21 187,143 2.1 15.72 78,114 14.07
$19.80 - $29.33 139,440 4.0 26.09 938 20.03
------- -------
$ 7.37 - $29.33 482,900 2.6 16.34 149,605 11.55
======= =======
</TABLE>
16
<PAGE>
Employee Stock Purchase Plan
Under the Amended 1988 Employee Stock Purchase Plan (the Plan), the
Company has authorized the sale of 645,000 of Class A to eligible
employees. The purchase price of the shares under the Plan is the
lesser of 85% of the fair market value on the first day of each
calendar quarter or 85% of the fair market value on the last day of
each calendar quarter. Employees may designate up to 10% of their
compensation for the purchase of stock. Under the Plan, the Company
sold 30,888 shares for $742,000, 40,603 shares for $670,000 and
102,494 shares for $708,000 to employees in 1996, 1995 and 1994,
respectively. At December 31, 1996, 159,357 shares remained autho-
rized under the Plan.
The fair value of the employees' purchase rights since January 1, 1995
was estimated using the Black-Scholes model with the following
assumptions for 1996 and 1995, respectively: no dividend yield for
both periods; an expected life of 3 months for both periods; expected
volatility ranging from 26 to 38 percent and from 20 to 32 percent;
and risk-free interest rates ranging from 4.90% to 4.99% and from
5.12% to 5.66%. The weighted average fair value of those purchase
rights granted in 1996 and 1995 was $6.81 and $4.45, respectively.
Pro Forma Disclosures
Had compensation cost for the Company's stock-based compensation plans
been determined based upon the fair value at grant dates for awards
under those plans consistent with the method of SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net income
and earnings per share would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Net income As reported $26,179 $25,156
Pro forma $25,348 $24,651
Earnings per share As reported $2.13 $2.06
Pro forma $2.07 $2.02
</TABLE>
Under the requirements of SFAS No. 123, the above disclosures relate
only to options granted after December 15, 1994 and do not include the
impact of outstanding options that were made prior to the period for
which SFAS No. 123 is effective. During the initial phase-in period
of SFAS No. 123, since the employee stock options vest over several
years and additional grants are likely to be made in future years, the
disclosures are not likely to be representative of the effects on
reported pro forma net income or earnings per share in future years.
17
<PAGE>
7. Restructuring Costs
In the fourth quarter of 1996, the Clinical Diagnostics segment
provided a $2,100,000 charge to cost of goods sold and a $2,700,000
restructuring charge related to product line restructuring in the
immunoassay market and closure of the related production and research
facility in northern California. The charge to cost of goods sold
reflects the adjustment to inventory necessary to reduce the carrying
value of inventory to its net realizable value. The restructuring
charge consists primarily of lease related costs and write-offs of
production and research equipment dedicated to the Company's closed
system immunoassay product line. Cash outlays will be primarily for
lease related costs and will commence in the first quarter of 1997.
Future lease payments have been reserved through 2000. This reserve
may be offset in the future should the Company be successful in
efforts to sublease the property.
In the third quarter of 1995, the Life Science segment announced it
would close its sales office and warehouse located in New York. The
functions performed at this location were considered redundant and
have been absorbed by the California operations. In conjunction with
this decision, the Company recorded $1,500,000 of restructuring costs.
These charges consisted primarily of lease related costs and employee
separation costs. Cash outlays related to this restructuring were
made with current operating funds, and were completed in 1996 with the
exception of lease related costs. Future lease payments have been
reserved through 2001.
Restructuring costs recorded in 1992 included reserves for future
lease payments through 2001 on facilities no longer being utilized by
the Company. At December 31, 1996 a liability of $1,191,000 remains
for these leases.
___________________________________________________________________
8. Other Income and Expense
<TABLE>
Other, net includes the following income and (expense) components (in
thousands):
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Exchange gains (losses) $ (641) $ 118 $ (883)
Other non-operating litigation
costs, net (971) (1,350) (4,860)
Redemption of subordinated
notes - - (616)
Miscellaneous other items (220) (181) (551)
------- ------- -------
Other, net $(1,832) $(1,413) $(6,910)
======= ======= =======
</TABLE>
Exchange gains (losses) include premiums and discounts on forward
foreign exchange contracts.
________________________________________________________________
18
<PAGE>
9. Supplemental Cash Flow Information
<TABLE>
The reconciliation of net income to net cash provided by operating activities is as
follows (in thousands):
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Net income $26,179 $25,156 $15,598
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 17,870 16,681 16,847
Foreign currency hedge transactions, net (1,275) 649 3,054
Gains on dispositions of marketable securities (1,130) (995) (291)
Increase in accounts receivable, net (6,670) (9,261) (2,136)
(Increase) decrease in inventories 5,339 (984) 1,588
(Increase) decrease in other current assets 435 1,560 (964)
Increase in accounts payable and
other current liabilities 1,411 5,531 8,414
Increase (decrease) in income taxes payable (2,926) 1,153 1,541
Increase (decrease) in deferred taxes (4,879) (1,321) 3,938
Other (1,201) 63 685
_______ _______ _______
Net cash provided by operating activities $33,153 $38,232 $48,274
======= ======= =======
</TABLE>
_________________________________________________________________
19
<PAGE>
10. Commitments and Contingent Liabilities
Rents and Leases
Net rental expense under operating leases was $11,505,000 in 1996,
$11,105,000 in 1995 and $10,754,000 in 1994. Leases are principally
for facilities and automobiles.
Annual future minimum lease payments at December 31, 1996 under
operating leases are as follows: 1997 - $9,155,000; 1998 -
$6,340,000; 1999 - $4,107,000; 2000 - $2,685,000; 2001 - $2,357,000;
subsequent to 2001 - $8,091,000.
Deferred Profit Sharing Retirement Plan
The Company has a profit sharing plan covering substantially all U.S.
employees. Contributions are made at the discretion of the Board of
Directors. Bio-Rad has no liability other than for the current year's
contribution. Contributions charged to income were $3,165,000,
$2,870,000 and $3,279,000 in 1996, 1995 and 1994, respectively.
Foreign Exchange Contracts
The Company enters into forward foreign exchange contracts as a hedge
against foreign currency denominated intercompany receivables and
payables. The contracts are marked to market at each balance sheet
date, and the resulting net unrealized gains or losses offset exchange
losses or gains on those receivables and payables. At December 31,
1996, the Company had contracts maturing in January 1997 to sell
foreign currency with a market value of $26,157,000 and to purchase
foreign currency with a market value of $680,000. At December 31,
1995, the Company had contracts maturing in January and February 1996
to sell foreign currency with a market value of $83,228,000 and to
purchase foreign currency with a market value of $43,885,000.
_________________________________________________________________
11. Legal Proceedings
In the third quarter of 1996, Bio-Rad and Fuji Photo Film Co., Ltd.
reached a settlement in the action filed in Civil Department No. 29 of
the Tokyo District Court in July 1994 alleging infringement of a
Japanese patent which covers an autoradiographic process. The settle-
ment amounts were provided for in 1995 and 1994.
In the fourth quarter of 1994, the Company reached a settlement in an
action in the U.S. District Court in the District of New Jersey,
brought in March 1991, by Pharmacia LKB Biotechnology, Inc., et al.
(Pharmacia) alleging infringement of Pharmacia's U.S. patent. The
settlement provided for the payment by Bio-Rad to Pharmacia of
$5,500,000. Additionally, both parties agreed to cross license
various patents. The impact of the settlement and related legal fees
on 1994 results was a charge of $4,860,000 recorded in other income
and expense (see Note 8).
20
<PAGE>
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of business. One such
action relates to the U.S. Environmental Protection Agency which has
informed the Company that it may be a potentially responsible party
under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, at one site in Colorado. In the opinion of
management the outcome of this and other claims, legal actions and
complaints would have no material adverse effect on the future results
of operations or the financial position of the Company.
_________________________________________________________________
12. Related Party Transactions
The Company regularly contracts for legal services with the law firm
of Townsend and Townsend and Crew. Albert J. Hillman was of counsel
in this law firm during 1996 and a non-employee member of the
Company's Board of Directors. The rate charged the Company for these
services is comparable to the rates charged others for similar
services.
_________________________________________________________________
21
<PAGE>
13. Industry Segment Information
<TABLE>
Bio-Rad is a multinational manufacturer and worldwide distributor of life science research
products, clinical diagnostics and analytical instruments. Information regarding geographic
areas at December 31, 1996, 1995 and 1994 and for the years then ended is as follows (in
thousands):
<CAPTION>
Consoli-
North Pacific Elimin- dated
Worldwide Operations America Europe Rim ations Total
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated 1996 $184,325 $141,413 $ 93,051 $ - $418,789
customers 1995 169,350 138,288 88,980 - 396,618
1994 163,745 117,548 74,006 - 355,299
Net intercompany sales 1996 103,411 44,390 1,847 (149,648) -
1995 98,734 42,335 6,164 (147,233) -
1994 79,915 40,798 6,044 (126,757) -
Total net sales 1996 287,736 185,803 94,898 (149,648) 418,789
1995 268,084 180,623 95,144 (147,233) 396,618
1994 243,660 158,346 80,050 (126,757) 355,299
Income from operations 1996 24,633 10,514 3,800 - 38,947
1995 25,076 11,030 2,084 - 38,190
1994 24,066 10,768 1,897 - 36,731
Identifiable assets 1996 176,900 74,412 33,613 - 284,925
1995 178,738 69,502 36,858 - 285,098
1994 163,914 66,748 32,988 - 263,650
</TABLE>
Net intercompany sales and income from operations are recorded on the basis
of intercompany prices established by the Company.
22
<PAGE>
Net sales in North America include export sales from the Company's United
States operations of approximately $7,577,000, $6,163,000 and $6,654,000
in 1996, 1995 and 1994, respectively.
<TABLE>
Information regarding industry segments at December 31, 1996, 1995 and 1994 and for the years
then ended is as follows (in thousands):
<CAPTION>
Consoli-
Life Clinical Analytical dated
Market Segments Science Diagnostics Instruments Corporate Total
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated 1996 $196,249 $148,506 $ 74,034 $ - $418,789
customers 1995 193,145 137,426 66,047 - 396,618
1994 169,676 131,942 53,681 - 355,299
Income (loss) from operations 1996 14,642 18,583 5,136 586 38,947
1995 17,250 17,465 3,873 (398) 38,190
1994 17,706 18,573 1,186 (734) 36,731
Identifiable assets 1996 106,394 93,721 39,887 44,923 284,925
1995 115,256 94,321 32,804 42,717 285,098
1994 106,605 92,690 32,272 32,083 263,650
Capital expenditures 1996 7,103 7,514 2,133 791 17,541
1995 5,598 6,624 1,514 655 14,391
1994 4,031 5,558 1,538 388 11,515
Depreciation 1996 7,063 7,724 1,456 1,160 17,403
1995 6,986 6,510 1,555 1,181 16,232
1994 6,531 6,439 1,773 1,234 15,977
</TABLE>
Sales between segments are immaterial. Capital expenditures include
capitalized leases of $872,000, $778,000 and $784,000 in 1996, 1995 and
1994, respectively.
___________________________________________________________________________
23
<PAGE>
14. Quarterly Financial Data - (unaudited)
<TABLE>
Summarized quarterly financial data for 1996 and 1995 are as follows
(in thousands, except per share data):
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
1996
<S> <C> <C> <C> <C> <C>
Net sales $108,272 $ 99,981 $ 96,559 $113,977 $418,789
Gross profit 61,432 58,277 55,847 61,187 236,743
Income before
extraordinary charge 9,461 7,511 6,699 3,684 27,355
Extraordinary charge - - - (1,176) (1,176)
Net income 9,461 7,511 6,699 2,508 26,179
Earnings per share
before extraordinary
charge $0.77 $0.61 $0.55 $0.30 $2.23
Extraordinary charge
per share - - - (0.10) (0.10)
Earnings per share $0.77 $0.61 $0.55 $0.20 $2.13
1995
Net sales $ 97,858 $ 97,921 $ 92,905 $107,934 $396,618
Gross profit 56,041 56,518 52,937 59,180 224,676
Net income 8,053 6,513 4,440 6,150 25,156
Earnings per share $0.66 $0.54 $0.36 $0.50 $2.06
</TABLE>
_______________________________________________________________________
15. Information Concerning Common Stock - (unaudited)
The Company's Class A and Class B Common Stock are listed on the
American Stock Exchange with the symbols BIO.A and BIO.B, respec-
tively. The following sets forth, for the periods indicated, the high
and low sales prices for the Company's Class A and Class B Common
Stock.
<TABLE>
<CAPTION>
Class A Class B
High Low High Low
<S> <C> <C> <C> <C>
1996
First Quarter 28-1/2 24-11/12 27-5/6 25-11/12
Second Quarter 37 28 36-3/4 29-1/12
Third Quarter 36-5/8 26-5/8 36-3/8 26-1/2
Fourth Quarter 31 24 30-1/2 25-1/8
1995
First Quarter 19-1/4 16-7/12 18-2/3 16-1/2
Second Quarter 24-1/6 18-1/3 23-5/6 18-1/4
Third Quarter 27-1/6 23-1/2 26-11/12 23-1/2
Fourth Quarter 28-5/12 24-2/3 28-1/2 25-1/12
</TABLE>
24
<PAGE>
At February 14, 1997, the Company had 646 holders of record of Class
A Common Stock and 323 holders of record of Class B Common Stock.
Bio-Rad has never paid a cash dividend and has no present plans to
pay cash dividends.
25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Bio-Rad Laboratories, Inc.:
We have audited the accompanying consolidated balance sheets of
Bio-Rad Laboratories, Inc. (a Delaware Corporation) and
subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the period
ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Bio-Rad Laboratories, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California,
February 4, 1997
26
<PAGE>
Bio-Rad Laboratories, Inc.
Management's Discussion and Analysis
________________________________________________________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This discussion should be read in conjunction with the information
contained in the Company's Consolidated Financial Statements and the
accompanying notes which are an integral part of the statements.
References are to the Notes to Consolidated Financial Statements.
<TABLE>
The following table shows operating income and expense items as a
percentage of net sales:
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net sales 100.0 100.0 100.0
Cost of goods sold 43.5 43.4 43.9
Gross profit 56.5 56.6 56.1
Selling, general and administrative 37.1 37.9 37.3
Product research and development 9.5 8.7 8.5
Restructuring costs 0.6 0.4 -
_____ _____ _____
Income from operations 9.3 9.6 10.3
===== ===== =====
Income before extraordinary charge 6.5 6.3 4.4
===== ===== =====
</TABLE>
_________________________________________________________________
Corporate Results -- Sales, Margins and Expenses
Bio-Rad's net sales (sales) in 1996 were $418.8 million, an increase
of 5.6% over sales in 1995. The effect of the strengthened U.S.
dollar in 1996 exchange rates compared to 1995 exchange rates resulted
in an approximate 2% or $8.5 million decrease in consolidated sales.
Sales increased in all segments of the Company's business. Excluding
the effects of the strengthened U.S. dollar, sales increased 16% in
Analytical Instruments, 8% in Clinical Diagnostics and 4% in Life
Science. The growth in Analytical Instruments was led by growth in
sales of spectroscopy equipment but also included increased sales of
the Company's semiconductor test and manufacturing equipment,
especially in the fourth quarter. Clinical Diagnostics is
experiencing renewed worldwide growth led by increases in U.S. sales.
Bio-Rad's sales for 1995 were $396.6 million, representing growth of
11.6%. Compared to 1994, Life Science sales increased $23.5 million
or 13.8%, Clinical Diagnostics increased $5.5 million or 4.2%, and
Analytical Instruments increased $12.4 million or 23.0%. Overall for
1995, the weaker U.S. dollar had the effect of increasing foreign
currency denominated sales approximately 4.0% or $14.4 million. Sales
27
<PAGE>
were strong throughout 1995 for both Life Science and Analytical
Instruments, particularly for the Company's semiconductor test and
manufacturing equipment. Growth exceeded 15% for both of these
segments throughout the year with the single exception of Life Science
in the first quarter. Globally, competition was severe and markets
weak for the Clinical Diagnostics segment.
Consolidated gross margins were 56.5% for 1996 compared to 56.6% for
1995. Gross margins were negatively impacted by 0.5% from a $2.1
million charge in the fourth quarter of 1996 for the write-down of
Clinical Diagnostics inventory associated with the development and
production of a closed system immunoassay analyzer product line (see
Note 7). Improved gross margins in the Analytical Instruments segment
are the result of sales increases. Gross margins in Clinical
Diagnostics were relatively unchanged excluding the impact of the
fourth quarter inventory adjustment. In Life Science gross margins
are down less than 1% when compared to 1995; this is attributable to a
number of factors including exchange rates, sales mix and factory
inefficiencies.
Consolidated gross margins increased during 1995 to 56.6% from 56.1%
in 1994. This increase is attributable to both increased revenue from
foreign sales as a result of the weaker dollar and continuing
improvements to the manufacturing process which have allowed the
Company to operate at more efficient levels. During the fourth
quarter of the year, it has been customary that larger instrument
sales increase in relation to total sales resulting in a lower gross
margin as a result of sales mix.
Consolidated selling, general and administrative expense (SG&A)
decreased to 37.1% of sales in 1996 from 37.9% in 1995. While
spending increased in absolute dollars in all segments, the Clinical
Diagnostics and Analytical Instruments segments succeeded in growing
sales faster than SG&A in 1996. In the Life Science segment the
growth in SG&A was proportional to the growth in sales. Management
continues to seek efficiencies and reductions in SG&A spending in an
effort to improve overall profitability.
During 1995, SG&A increased to 37.9% from 37.3% in 1994. The
increased spending represented investment in additional personnel for
the direct sales force and their ancillary support. Support costs
included computer hardware, demonstration equipment, advertising and
sales support personnel. Spending exceeded sales growth in the Life
Science and Clinical Diagnostics segments. Analytical Instruments
succeeded in growing sales faster than SG&A primarily because of the
demand for the Company's products sold to the semiconductor industry.
Product research and development expense (R&D) increased in 1996 when
compared to 1995, both in absolute dollars and as a percent of sales.
As planned, R&D was expanded and spending increased in the Analytical
Instruments and Life Science segments as part of Bio-Rad's continuing
commitment to long-term growth. R&D spending was down approximately
$0.6 million in the Clinical Diagnostics segment as management reduced
spending during its evaluation of marketing strategies related to its
closed system immunoassay analyzer product line that resulted in an
28
<PAGE>
inventory write-down and restructuring charge. Management believes
that an open system solution that allows Clinical Diagnostics to
concentrate on reagents and less expensive capital equipment will have
greater market acceptance.
As part of the Company's continuing commitment to long-term growth,
Bio-Rad increased R&D to 8.7% of sales in 1995 from 8.5% in 1994. In
absolute dollars, spending increased $4.5 million with each segment
participating in the year over year increased investment in R&D.
In the fourth quarter of 1996, the Clinical Diagnostics segment made a
provision of $2.7 million for lease related costs and write-down of
certain dedicated fixed assets associated with its closed system
immunoassay analyzer product line (see Note 7). Management determined
that the Company's marketing strategy was not competitive and has
redirected resources to an open systems approach which will allow for
greater opportunity to provide reagents to its customers. Management
expects this change of focus to result in increased sales opportun-
ities and better utilization of R&D resources.
The Life Science segment made a $1.5 million provision for the cost of
closing its New York warehouse and distribution center in the third
quarter of 1995 (see Note 7). After a marketing and service review,
management concluded that the required service level for customers
throughout the United States could be met by utilizing its West Coast
facilities and personnel. The closing of this facility has eliminated
redundant costs and enabled the Company to more efficiently use its
remaining distribution space.
Corporate Results -- Non-Operating Items
Net interest expense represents 0.7% of sales in 1996 compared to 1.1%
in 1995 and 1.7% in 1994. The decline is attributable to an overall
reduction in the amount of interest bearing debt. Average borrowings
for the years 1996, 1995 and 1994 were $27.9 million, $42.4 million
and $62.7 million, respectively. Interest expense will be reduced
even further in the coming year as a result of the repayment of the
$20.0 million 10.9% Subordinated Notes in December 1996. This
repayment resulted in an extraordinary charge (see Note 4). During
1995 interest rate changes had little impact on interest expense as
the Company paid down short-term debt and the $20.0 million 10.9%
Subordinated Notes became a larger percentage of total borrowings.
Investment income in 1996, 1995 and 1994 includes gains on sales of
marketable securities. 1996 also includes interest income of $0.8
million from short-term investments. Interest income will decline in
the coming year as the cash balances generating this income were used
to repay the 10.9% Subordinated Notes.
Net other income and expense for 1996 was principally non-operating
litigation costs and exchange losses (see Note 8). Net other income
and expense for 1995 was principally non-operating litigation costs
(see Note 8). Net other income and expense for 1994 was principally
comprised of non-operating litigation costs (see Note 11), exchange
losses and the redemption premium on subordinated notes retired in
29
<PAGE>
November 1994 (see Note 8). Bio-Rad's hedging program is limited to
nonspeculative forward foreign exchange contracts (with major
financial institutions) which hedge the exposure of intercompany
receivables and payables. The net exchange gain or loss results from
the estimating inherent in projecting intercompany balances and
transaction charges.
Bio-Rad's consolidated tax provision in both 1996 and 1995 was 25%
decreasing from 35% in 1994. The lower effective tax rate for 1996
and 1995 is the result of changes in the source of taxable income and
fewer non-deductible expenses and reserves. The tax rate reflects the
utilization of loss carryforwards, foreign sales corporation benefits
and foreign tax credits. These benefits are not expected to continue
at the same level in 1997.
Financial Condition
Historically, the Company's ongoing and principal capital requirement
was for working capital to fund its growth in operations. Since 1994,
the Company's efforts to improve profitability and emphasize working
capital control have mitigated much of this requirement.
At December 31, 1996, the Company had available $9.4 million in cash
and cash equivalents, $34.7 million under its international lines of
credit, $55.0 million under its principal revolving credit agreement
(see Note 4) and marketable securities with a market value of $7.4
million, most of which could be readily converted into cash (see
Note 3).
Net cash provided by operations was $33.2 million. This met all 1996
requirements for investing and reduced borrowings by $24.8 million
including the early extinguishment of the Company's 10.9% Subordinated
Notes which resulted in an extraordinary charge. In 1995 and 1994 the
Company provided $38.2 million and $48.2 million, respectively, in
cash from operations. The past three years have all benefited from
the Company's program began in 1993 to improve profitability by
lowering headcount, reducing inventory levels and reducing capital
expenditures when compared to the three years ended December 31, 1993.
The total amount of interest bearing debt has been reduced during the
past three years by $66.3 million resulting in the Company's lowest
ratio of interest bearing debt to equity.
Consolidated net accounts receivable increased 6.2% in 1996 when
compared to 1995. The fourth quarter rise in sales year over year was
5.6% and is the major source of the year-end increase. Bio-Rad's
management regularly reviews the allowance for uncollectible
receivables and believes net receivables are fully realizable.
For the year ended December 1996, consolidated net inventories
decreased approximately 7.5% to $69.7 million. The decrease occurred
primarily in the Life Science segment as a result of focused attention
on aggressive inventory management. Management regularly reviews the
impact of obsolescence in current inventory caused by the introduction
of new products. Management continues to focus on inventory control
to moderate capital requirements.
30
<PAGE>
A valuation reserve is necessary for deferred tax assets (see Note 5)
primarily because realization of tax attribute carryforwards is
uncertain.
Net capital expenditures in 1996 totaled $15.2 million compared to
$12.3 million and $9.8 million in 1995 and 1994, respectively.
Constraint in the addition of machinery and equipment and leasehold
improvements has been another component of management's cost reduction
program contributing to lowering capital requirements. Expenditures
in all years include clinical diagnostic equipment placed with
customers to be used with the Company's diagnostic reagents.
Management regularly approves capital spending in the normal course of
business. Capital expenditures are expected to increase in 1997 when
compared to the past three years. The Clinical Diagnostics segment's
southern California manufacturing operations will have a new leased
facility during 1997. The expected capital expenditures for leasehold
improvements and equipment associated with this move are approximately
$6 million.
Bio-Rad's liquidity continued to improve during 1996. Available funds
and cash flow from operations are adequate to meet the Company's
objectives for operations, research and development, and modest
external growth. In early July 1996, the Board of Directors
authorized the Company to repurchase up to $4 million of common stock
over an indefinite period of time. During the last half of 1996, the
Company repurchased 40,000 shares of Class A common stock and 30,000
shares of Class B common stock for $1.9 million. These shares will be
used to satisfy the Company's obligations under the employee stock
option and stock purchase plans.
In the fourth quarter of 1996, Bio-Rad acquired a small software
company to compliment its spectral reference libraries product line
and a small research company to provide additional technology to the
semiconductor product lines. Funding for these acquisitions was
provided by cash flow from operations. These acquisitions are not
material to the financial position of the Company and have been
accounted for as purchases. Bio-Rad is well positioned to make a
substantial strategic acquisition should the opportunity arise. While
the Company regularly reviews such opportunities, currently no
material acquisitions are under review.
New Financial Accounting Standards
In June 1996, the Financial Accounting Standards Board issued SFAS No.
125, "Accounting for Transfer and Servicing of Financial Assets and
Extinguishments of Liabilities", effective for transactions occurring
after December 31, 1996. The effective date for certain provisions of
the statement was extended to transactions occurring after December
31, 1997 by SFAS No. 127 issued in December 1996. This statement will
not have a material effect on the Company's financial statements.
31
<PAGE>
EXHIBIT 21.1 - LISTING OF SUBSIDIARIES
SUBSIDIARY JURISDICTION OF ORGANIZATION
Bio-Rad Laboratories Pty. Limited Australia
Bio-Rad Laboratories Ges.m.b.H. Austria
Bio-Rad International, Inc. (FSC) Barbados
Bio-Rad Laboratories S.A.-N.V. Belgium
RSL N.V. Belgium
Bio-Rad Leasing, Inc. California, USA
Bio-Rad Laboratories (Israel) Inc. California, USA
Bio-Rad Pacific Limited California, USA
International Plant Research Institute California, USA
Bio-Metrics Properties Limited California, USA
Bio-Rad Laboratories (Canada) Ltd. Canada
Bio-Rad Micromeasurements (Canada) Inc. Canada
828584 Ontario Limited Canada
Beijing Bio-Rad Analytical
Biochemistry Instrument Co., Ltd. China
SoftShell International Ltd. Colorado, USA
Bio-Rad Export, Inc. (DISC) Delaware, USA
Bio-Metrics Limited Delaware, USA
Bio-Rad Scan Beam S/A Denmark
Bio-Rad Limited England
Bio-Rad Laboratories Limited England
Bio-Rad Lasersharp Limited England
Bio-Rad Microscience Limited England
Emscope Engineering Limited England
Sadtler Research Laboratories Ltd. England
Bio-Metrics (U.K.) Limited England
Micromeasurements Limited England
Bio-Rad Micromeasurements Limited England
Bio-Rad S.A. France
SoftShell S.A.R.L. France
Bio-Rad Laboratories GmbH Germany
Bio-Rad China Limited Hong Kong
Bio-Rad Laboratories (India) Private Limited India
Bio-Rad Laboratories Ltd. Israel
Bio-Rad Laboratories S.r.l. Italy
Nippon Bio-Rad Laboratories K.K. Japan
Bio-Rad Korea Ltd. Korea
Bio-Rad Micromeasurements Inc. Massachusetts, USA
Bio-Rad Laboratories B.V. The Netherlands
Sandia Systems, Inc. New Mexico, USA
Polaron Instruments, Inc. Pennsylvania, USA
Bio-Rad Laboratories (Singapore) Limited Singapore
Bio-Rad Laboratories S.A. Spain
Bio-Rad Laboratories AB Sweden
Bio-Rad Laboratories AG Switzerland
- ----------------------------------------------------------------------------
<PAGE>
EXHIBIT 23.1 - CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File Nos. 33-53335 and
33-53337).
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California,
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from Bio-Rad Laboratories, Inc. Form 10-K for the year ended
December 31, 1996 and is qualified in its entirety by reference
to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,390
<SECURITIES> 0
<RECEIVABLES> 101,483
<ALLOWANCES> 3,688
<INVENTORY> 69,738
<CURRENT-ASSETS> 198,535
<PP&E> 167,954
<DEPRECIATION> 96,092
<TOTAL-ASSETS> 284,925
<CURRENT-LIABILITIES> 79,139
<BONDS> 6,721
<COMMON> 12,321
0
0
<OTHER-SE> 171,187
<TOTAL-LIABILITY-AND-EQUITY> 284,925
<SALES> 418,789
<TOTAL-REVENUES> 418,789
<CGS> 182,046
<TOTAL-COSTS> 182,046
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,027
<INCOME-PRETAX> 36,473
<INCOME-TAX> 9,118
<INCOME-CONTINUING> 27,355
<DISCONTINUED> 0
<EXTRAORDINARY> 1,176
<CHANGES> 0
<NET-INCOME> 26,179
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 0
</TABLE>
