<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998.
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission file number 1-7928
BIO-RAD LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
A Delaware Corporation 94-1381833
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1000 Alfred Nobel Drive, Hercules, California 94547
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 724-7000
Indicate by check 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 month (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 ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date--
<TABLE>
<CAPTION>
Shares Outstanding
Title of each Class at October 30, 1998
<S> <C>
Class A Common Stock,
Par Value $1.00 per share 9,970,579
Class B Common Stock,
Par Value $1.00 per share 2,455,999
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . $ 98,982 $ 99,491 $323,054 $311,097
Cost of goods sold . . . . . . . . . . . . . 45,405 44,656 146,544 135,400
GROSS PROFIT . . . . . . . . . . . . . . . . 53,577 54,835 176,510 175,697
Selling, general and administrative expense . 41,042 39,935 123,610 121,202
Product research and development expense . . 10,243 10,991 30,784 33,004
INCOME FROM OPERATIONS . . . . . . . . . . . 2,292 3,909 22,116 21,491
Interest expense . . . . . . . . . . . . . . (941) (219) (2,817) (779)
Investment income, net. . . . . . . . . . . . 1,955 420 7,585 1,318
Other, net . . . . . . . . . . . . . . . . . (577) (480) (1,722) (1,187)
INCOME BEFORE TAXES . . . . . . . . . . . . . 2,729 3,630 25,162 20,843
Provision for income taxes . . . . . . . . . 791 1,016 7,297 5,836
NET INCOME . . . . . . . . . . . . . . . . . $ 1,938 $ 2,614 $ 17,865 $ 15,007
======== ======== ======== ========
Basic earnings per share:
Net income . . . . . . . . . . . . . . . . $0.16 $0.21 $1.46 $1.22
======== ======== ======== ========
Weighted average common shares . . . . . . 12,302 12,264 12,259 12,278
======== ======== ======== ========
Diluted earnings per share:
Net income . . . . . . . . . . . . . . . . $0.16 $0.21 $1.44 $1.21
======== ======== ======== ========
Weighted average common shares . . . . . . 12,394 12,397 12,381 12,419
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE>
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 8,335 $ 10,843
Accounts receivable . . . . . . . . . . . . . . . . . . . 96,397 96,965
Inventories . . . . . . . . . . . . . . . . . . . . . . . 96,927 91,428
Prepaid expenses, taxes and other current assets. . . . . 28,489 28,182
Total current assets . . . . . . . . . . . . . . . . . 230,148 227,418
Net property, plant and equipment . . . . . . . . . . . . 80,111 78,678
Marketable securities . . . . . . . . . . . . . . . . . . 7,835 18,092
Other assets . . . . . . . . . . . . . . . . . . . . . . 43,523 27,688
Total assets . . . . . . . . . . . . . . . . . . . . $361,617 $351,876
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable and current maturities of long-term debt. . $ 10,001 $10,802
Accounts payable . . . . . . . . . . . . . . . . . . . . 22,295 32,385
Accrued payroll and employee benefits . . . . . . . . . . 27,131 24,825
Sales, income and other taxes payable . . . . . . . . . . 6,476 5,055
Other current liabilities . . . . . . . . . . . . . . . . 28,513 27,715
Total current liabilities . . . . . . . . . . . . . . 94,416 100,782
Long-term debt, net of current maturities . . . . . . . . 38,731 38,952
Deferred tax liabilities . . . . . . . . . . . . . . . . 16,504 15,465
Total liabilities . . . . . . . . . . . . . . . . . . 149,651 155,199
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 - 9,970,579 at September 30, 1998
and 9,824,509 at December 31, 1997 . . . . . . . . . . 9,971 9,825
Class B common stock, $1.00 par value, 6,000,000 shares
authorized; outstanding - 2,455,999 at September 30, 1998
and 2,596,069 at December 31, 1997 . . . . . . . . . . 2,456 2,596
Additional paid-in capital . . . . . . . . . . . . . . . 18,478 18,426
Class A treasury stock, 123,648 shares at September 30, 1998
and 193,539 shares at December 31, 1997 at cost . . . . (3,309) (5,206)
Class B treasury stock, 30,000 shares at December 31, 1997
at cost . . . . . . . . . . . . . . . . . . . . . . . . -- (800)
Retained earnings . . . . . . . . . . . . . . . . . . . . 183,506 167,182
Accumulated other comprehensive income:
Currency translation . . . . . . . . . . . . . . . . . (298) (1,149)
Net unrealized holding gain on marketable securities . 1,162 5,803
Total stockholders' equity . . . . . . . . . . . . . . 211,966 196,677
Total liabilities and stockholders' equity . . . . $361,617 $351,876
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers . . . . . . . . . . . . $323,661 $310,386
Cash paid to suppliers and employees . . . . . . . . (298,711) (283,612)
Interest paid. . . . . . . . . . . . . . . . . . . . (2,680) (804)
Income tax payments. . . . . . . . . . . . . . . . . (6,580) (9,539)
Miscellaneous receipts . . . . . . . . . . . . . . . 170 80
Net cash provided by operating activities. . . . . . 15,860 16,511
Cash flows from investing activities:
Capital expenditures, net. . . . . . . . . . . . . . (14,415) (16,092)
Payments for acquisitions. . . . . . . . . . . . . . -- (787)
Purchases of marketable securities and investments . (17,922) (6,198)
Sales of marketable securities and investments . . . 13,791 2,401
Foreign currency hedges, net . . . . . . . . . . . . 20 2,734
Net cash used in investing activities. . . . . . . . (18,526) (17,942)
Cash flows from financing activities:
Net borrowings under line-of-credit arrangements . . (400) (599)
Long-term borrowings . . . . . . . . . . . . . . . . 108,910 31,375
Payments on long-term debt . . . . . . . . . . . . . (109,345) (33,563)
Proceeds from issuance of common stock . . . . . . . 58 1,258
Treasury stock activity, net . . . . . . . . . . . . 1,156 (3,764)
Net cash provided by (used in) financing activities. 379 (5,293)
Effect of exchange rate changes on cash . . . . . . . . . (221) 2,006
Net decrease in cash and cash equivalents . . . . . . . . (2,508) (4,718)
Cash and cash equivalents at beginning of period. . . . . 10,843 9,390
Cash and cash equivalents at end of period. . . . . . . . $ 8,335 $ 4,672
======== ========
Reconciliation of net income to net cash provided
by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 17,865 $ 15,007
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . 15,276 13,147
Foreign currency hedge transactions, net . . . . . (20) (2,918)
Gains on disposition of marketable securities. . . (7,518) (927)
Decrease in accounts receivable. . . . . . . . . . 1,622 2,993
Increase in inventories. . . . . . . . . . . . . . (5,451) (14,302)
Increase in other current assets . . . . . . . . . (203) (4,381)
Increase (decrease) in accounts payable and other
current liabilities. . . . . . . . . . . . . . . (6,978) 8,941
Increase in income taxes payable . . . . . . . . . 1,054 598
Other. . . . . . . . . . . . . . . . . . . . . . . 213 (1,647)
Net cash provided by operating activities . . . . . . . . $ 15,860 $ 16,511
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
BIO-RAD LABORATORIES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of Bio-Rad Laboratories, Inc. ("Bio-Rad" or the
"Company"), reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of the
interim periods presented. All such adjustments are of a normal
recurring nature. The condensed consolidated financial
statements should be read in conjunction with the notes to
consolidated financial statements contained in the Company's
Annual Report for the year ended December 31, 1997 (the Company's
1997 Annual Report). Certain amounts in the financial statements
of the prior year have been reclassified to be consistent with
the 1998 presentation.
2. INVENTORIES
<TABLE>
The principal components of inventories are as follows:
<CAPTION>
September 30, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Raw materials $ 30,638 $ 27,257
Work in process 22,256 21,242
Finished goods 44,033 42,929
$ 96,927 $ 91,428
======== ========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
The principal components of property, plant and equipment are as
follows:
<CAPTION>
September 30, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Land and improvements $ 8,057 $ 8,057
Buildings and leasehold
improvements 55,980 55,477
Equipment 127,827 115,097
191,864 178,631
Accumulated depreciation (111,753) (99,953)
Net property, plant and equipment $ 80,111 $ 78,678
======== ========
</TABLE>
4
<PAGE>
4. INVESTMENT IN AFFILIATES
Beginning in December 1997, Bio-Rad began investing in
Instrumentation Laboratory, S.p.A. ("IL"), an Italian based
clinical diagnostics company with fiscal 1997 revenues in excess
of $200 million. At September 30, 1998, Bio-Rad held
approximately 25% of the outstanding stock of IL. Grupo CH-
Werfen, S.A., a privately held company based in Spain, controls
over 50% of the outstanding stock of IL. Approximately 29% of
the outstanding stock of IL is available in the U.S. evidenced by
American Depository Shares (Nasdq:ILABY). The most recently
published financial statements for IL are as of February 28,
1998.
Prior to September 1998, Bio-Rad classified the investment as
Marketable Securities. Given the limited availability of
financial information and the low volume of shares traded in
recent months, Bio-Rad management does not believe there is a
sufficient liquid market for IL stock. Accordingly, the
investment has been reclassified to Other Assets. Additionally,
since Bio-Rad does not have the ability to significantly
influence the operating and financial policies of IL, the
investment has been recorded as its cost of $17,739,000.
5. LONG-TERM DEBT
The Company entered into a $100 million revolving credit
agreement on May 15, 1998, replacing the $60 million credit
agreement previously in place. The new agreement provides for
borrowings on an unsecured basis through May 15, 2003. Interest
is based upon Eurodollar or prime rates.
6. EARNINGS PER SHARE
Weighted average shares used for diluted earnings per share
include the dilutive effect of outstanding stock options of
92,000 and 133,000 shares for the quarters ended September 30,
1998 and 1997, respectively. For the corresponding year-to-date
periods, weighted average shares used for diluted earnings per
share include the dilutive effect of outstanding stock options of
122,000 and 141,000 shares, respectively.
Options to purchase 140,000 and 130,000 shares of common stock
were outstanding during 1998 and 1997, respectively, but were
excluded from the computation of diluted earnings per share
because the exercise price of the options was greater than the
average market price of the common shares. The options were
still outstanding at September 30, 1998.
5
<PAGE>
7. COMPREHENSIVE INCOME
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." Comprehensive income is defined as the
change in equity of a business during a period from transactions
and other events and circumstances from non-owner sources. Under
SFAS No. 130, the term "comprehensive income" is used to describe
the total of net earnings plus other comprehensive income which,
for the Company, includes foreign currency translation
adjustments and unrealized gains and losses on marketable
securities classified as available-for-sale.
The adoption of SFAS No. 130 did not impact the calculation of
net income or earnings per share nor did it impact reported
assets, liabilities or total stockholders' equity. It did impact
the presentation of the components of stockholders' equity within
the balance sheet and will result in the presentation of the
components of comprehensive income within an annual financial
statement, which must be displayed with the same prominence as
other financial statements.
<TABLE>
The components of the Company's total comprehensive income were:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 1,938 $ 2,614 $17,865 $15,007
Currency translation adjustments 1,828 (1,297) 851 (4,228)
Net unrealized holding gains (losses) (739) 1,596 696 3,975
Reclassification adjustments for
gains included in net income (1,337) (342) (5,337) (927)
Total comprehensive income $ 1,690 $ 2,571 $14,075 $13,827
</TABLE>
Included in comprehensive income for the three months and nine
months ended September 30, 1998 is $712,000 and ($652,000),
respectively, of gains (losses) related to the reclassification
of IL from Marketable Securities to Other Assets (see Note 4).
8. NEW FINANCIAL ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," effective for fiscal years beginning after June 15,
1999, with early adoption permitted. This statement establishes
accounting and reporting standards requiring companies to record
all derivatives on the balance sheet as either assets or
6
<PAGE>
liabilities and measure those instruments at fair value. The
manner in which companies are to record gains or losses resulting
from changes in the values of those derivatives depends on the
use of the derivative and whether it qualifies for hedge
accounting. The Company has not yet quantified the impacts of
adopting SFAS No. 133 on its financial statements and has not
determined the timing of adoption of SFAS No. 133.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
This discussion should be read in conjunction with the information
contained both in this report and in the Company's Consolidated
Financial Statements for the year ended December 31, 1997.
<TABLE>
The following table shows operating income and expense items as a
percentage of net sales:
<CAPTION>
Three Months Ended Nine Months Ended Year Ended
September 30, September 30, December 31,
1998 1997 1998 1997 1997
<S> <C> <C> <C> <C> <C>
Net sales 100.0 100.0 100.0 100.0 100.0
Cost of goods sold 45.9 44.9 45.4 43.5 44.3
Gross profit 54.1 55.1 54.6 56.5 55.7
Selling, general and
administrative 41.5 40.2 38.3 39.0 38.7
Product research and
development 10.3 11.0 9.5 10.6 10.8
Income from operations 2.3 3.9 6.8 6.9 6.2
===== ===== ===== ===== =====
</TABLE>
Three Months Ended September 30, 1998 Compared to
Three Months Ended September 30, 1997
Corporate Results - Sales, Margins and Expenses
Net sales (sales) in the third quarter of 1998 were $99.0 million
compared to $99.5 million in the third quarter of 1997. For the
third quarter of 1998, the effect of a strengthened U.S. dollar
reduced international sales by approximately $3.1 million when
compared to sales based upon 1997 exchange rates. Sales
increased in Clinical Diagnostics and Life Science, and decreased
in Analytical Instruments. Eliminating the effects of a
strengthened U.S. dollar, sales increased 12% in Clinical
Diagnostics, 5% in Life Science and were down 24% in Analytical
Instruments. In the third quarter of 1998 all segments have been
negatively impacted by the economic conditions in Asia. In
addition to Asia, the Analytical Instruments segment has been
impacted by a general slowdown in the markets it serves.
Approximately half of the increase in Clinical Diagnostics sales
growth can be directly attributed to the acquisition of the
Chiron Diagnostics controls business in the fourth quarter of 1997.
8
<PAGE>
Consolidated gross margins were 54.1% for the third quarter of
1998 compared to 55.1% for the third quarter of 1997 and 55.7%
for all of 1997. Gross margins were impacted by the
strengthening U.S. dollar and declined in the Clinical
Diagnostics and Analytical Instruments segments. Diagnostic
margins declined, in part, from the Chiron acquisition, where
several supply agreements existed to wholesale diagnostic
controls. Analytical Instruments margins are negatively impacted
by the absorption of period costs over a smaller sales amount.
Selling, general and administrative expense (SG&A) rose to 41.5%
of sales in the third quarter of 1998 from 40.2% of sales in the
comparable period of 1997. Management still believes that
moderating SG&A growth is a significant long-term objective.
While the current quarter in not reflective of this goal, the
year 1998 should be. The current investments in systems and
processes are more efficiently accomplished when sustained rather
than managed for short-term profitability. For the third quarter
of 1998, the Company met its objective to have SG&A grow slower
than sales in both the Life Science and Clinical Diagnostics
segments.
Product research and development expense (R&D) decreased from the
third quarter of 1997, both in absolute dollars and as a percent
of sales. Compared to the third quarter of 1997, only the
Clinical Diagnostics segment increased R&D spending, and at a
rate less than sales growth. As part of the Company's continuing
commitment to long-term growth, 1997 was a year of expanding R&D.
In 1998, management has monitored R&D spending to maintain an
appropriate growth rate.
Corporate Results - Non-Operating Items
Interest expense was $722,000 more in the third quarter of 1998
than the comparable period of 1997 principally as a result of
higher average borrowings. Borrowings increased in connection
with the acquisition in the fourth quarter of 1997 and the
investments in Instrumentation Laboratory in the second quarter
of 1998. During the third quarter, cash receipts for sales of
marketable securities funded the investments and at the end of
the quarter, borrowings had returned to approximately the same
level as year-end 1997.
Investment income in both years includes gains on sales of
marketable securities and interest income from short-term
investments. During the third quarter of 1998, Bio-Rad realized
significant investment income, $2.0 million, as it continued to
realign its investment in marketable securities in order to
increase its position in Instrumentation Laboratory (see Note 4).
Net other income and expense in the third quarter of 1998 is
primarily goodwill amortization. No significant items were
9
<PAGE>
included in net other income and expense for the third quarter of
1997.
The Company's effective tax rate for the third quarter of 1998
was 29% compared to 28% for all of 1997. The tax rate for both
years reflects the utilization of loss carryforwards, foreign
sales corporation benefits and foreign tax credits. However, as
loss carryforwards are exhausted the benefits realized will
decline in comparison to prior periods and the effective tax rate
will rise.
Nine Months Ended September 30, 1998 Compared to
Nine Months Ended September 30, 1997
Corporate Results - Sales, Margins and Expenses
Sales for the nine month period ended September 30, 1998 were
$323.1 million compared to $311.1 million in the comparable
period of 1997, an increase of 4%. For the first nine months of
1998, the effect of a strengthened U.S. dollar reduced
international sales by approximately $10.6 million compared to
sales based upon 1997 exchange rates. Sales increased 13% in
Clinical Diagnostics, were flat in Life Science and decreased 7%
in Analytical Instruments. Approximately half of the increase in
Clinical Diagnostics sale growth can be directly attributed to
the acquisition of the Chiron Diagnostics controls business in
the fourth quarter of 1997. Sales decreases in Analytical
Instruments are attributed to a general slowdown in the markets
it serves. The declining market has reversed the small growth
experienced earlier in 1998 in the products sold into the
semiconductor test and manufacturing equipment market. System
orders have been delayed as the number of new fabrication
facilities and lines has been reduced, the principle market for
the Company's semiconductor products.
Consolidated gross margins were 54.6% for the first nine months
of 1998 compared to 56.5% for the first nine months of 1997 and
55.7% for all of 1997. Gross margins declined in all three of
the Company's segments. Life Science margins declined as a
result of the strengthening dollar in Asia and Europe and price
discounting in Europe. Diagnostic margins declined, in part,
from the Chiron acquisition, where several supply agreements
existed to wholesale diagnostic controls. Also, higher service
costs and some price erosion lowered diagnostic margins in the
diabetes product line. Analytical Instruments margins were
negatively impacted by an increasingly weak semiconductor market
and the strengthening dollar.
SG&A decreased to 38.3% of sales in the first nine months of 1998
from 39.0% of sales in the comparable period of 1997. The
strengthened U.S. dollar reduced international SG&A by
approximately $3.6 million or 1.1% of sales. To improve overall
10
<PAGE>
profitability, one of the long-term objectives of management is
to control SG&A growth as a fraction of sales growth. On a
currency neutral basis, SG&A for Life Science increased by 2%,
and SG&A for Analytical Instruments decreased by 2% when compared
to 1997. Clinical Diagnostics increased SG&A spending but at a
lower rate than the sales growth rate. The 1997 fourth quarter
acquisition did not add significantly to the fixed SG&A burden of
Clinical Diagnostics.
Consolidated R&D decreased from the first nine months of 1997,
both in absolute dollars and as a percent of sales. Compared to
the first nine months of 1997, Clinical Diagnostics and
Analytical Instruments increased R&D spending by approximately
$500,000 and $200,000, respectively. 1997 was a year of
expanding R&D, especially in the Life Science segment where two
products, the Molecular Imager FX Imager and MicroRadiance, were
completed and launched in 1998. In 1998, Life Science has
curtailed several projects which did not currently offer the
appropriate commercial opportunities.
Corporate Results - Non-operating Items
Interest expense was $2.0 million more in the first nine months
of 1998 than the comparable period of 1997 principally as a
result of higher average borrowings. Average borrowings
increased in connection with the acquisition in the fourth
quarter of 1997 and the investments in Instrumentation Laboratory
in the second quarter of 1998.
Investment income in both years includes gains on sales of
marketable securities and interest income from short-term
investments. During the second and third quarters of 1998, Bio-
Rad realized significant investment income, $6.8 million, as it
sold some of its investment in marketable securities in order to
increase its position in Instrumentation Laboratory (see Note 4).
Net other income and expense in the first nine months of 1998
includes goodwill amortization and non-operating legal costs.
Net other income and expense in the first nine months of 1997 was
primarily net exchange losses, goodwill amortization and non-
operating legal costs.
As expected, the Company's effective tax rate increased from 28%
to 29% for the first nine months of 1998. The tax rate for both
years reflects the utilization of loss carryforwards, foreign
sales corporation benefits and foreign tax credits. However, as
loss carryforwards are exhausted the benefits realized will
decline in comparison to prior periods and the effective tax rate
will rise.
11
<PAGE>
Financial Condition
At September 30, 1998, the Company had available $8.3 million in
cash and cash equivalents, $62.0 million under its principal
revolving credit agreement and marketable securities with a
market value of $7.8 million, a majority of which could be
readily converted to cash. On May 15, 1998, the Company entered
into a new $100 million revolving credit agreement replacing the
$60 million revolving credit agreement (see Note 5).
Cash provided by operating activities provided the Company with
the majority of the cash flow necessary to support investing
activities. During the second and third quarters the Company
realized investment income by selling a portion of its investment
portfolio. Gains on any sales in the fourth quarter are not
expected to match the second or third quarters. The cash
generated by these sales was used to increase Bio-Rad's holdings
in Instrumentation Laboratory, S.p.A., an Italian based clinical
diagnostics company with annual revenues of over $200 million.
Bio-Rad currently holds as an investment approximately 25% of
Instrumentation Laboratory (see Note 4).
At September 30, 1998, consolidated accounts receivable decreased
by $0.6 million from December 31, 1997. The decrease is less
than would be expected as a result of the Company deciding to
factor less in Southern Europe and a slowdown in payments in
Asia.
At September 30, 1998, consolidated net inventories were $5.5
million higher than at December 31, 1997. The increase in
inventory occurred in all three of the Company's segments. The
largest increase was in the Life Science segment. This segment
has been negatively effected by the economic conditions in Asia,
and has increased inventory of some product lines for new
products and to meet expected fourth quarter demand. Management
continues to monitor inventory levels and regularly reviews the
impact of obsolescence in current inventory caused by the
introduction of new products.
In February 1998, the Board of Directors authorized the Company
to repurchase up to an additional $10 million of common stock
over an indefinite period of time. This is the third such
authorization since July 1996 bringing the total authorized to
$18 million. Through October 1998, the Company has repurchased
261,800 shares of Class A common stock and 30,000 shares of Class B
common stock for a total of $7.8 million. The repurchase is
designed to improve shareholder value and to satisfy the Company's
obligations under the employee stock purchase and stock option
plans.
12
<PAGE>
The Company continues to regularly review acquisition opportunities;
currently no material acquisitions have reached a stage beyond
exploratory discussions.
Euro - A New European Currency
Beginning January 1, 1999, certain member countries of the European
Union have planned to fix the conversion rates between their
national currencies and a common currency, the "Euro," that will
become a legal currency on that date. Over the period January 1,
1999 through January 1, 2002 participating countries will gradually
transition from their national currencies, which will still exist at
January 1, 1999, to the Euro.
This transition will have business implications including the need
to adjust internal systems to accommodate the Euro and cross border
price transparency. A group of Corporate and European managers have
been assigned the task of preparing and accommodating the changes
required to continue to do business in the European Union. The
Company does not presently expect that the efforts involved will
have a material impact on operations, financial position or
liquidity. There will be increased competitive pressures and
marketing strategies will need to be continuously evaluated until
the transition is complete. As a result of competitive forces and
emerging government regulations, the Company cannot guarantee that
all problems will be foreseen and remediated, and that no material
disruption will occur.
Year 2000
The Year 2000 issue is the result of computer programs being written
using two rather than four digits to define the date. Failure to
recognize "00" as the year 2000 could result in a temporary
inability to conduct normal business activities.
Bio-Rad currently operates in a decentralized processing
environment. The Company, with the assistance of outside
consultants and contractors, has begun phased identification,
remediation, replacement, validation and notification processes to
minimize the potential disruption to business from information
technology and non-information technology systems. The project
start-up, inventory and assessment phases are generally complete.
For each location remediations or scheduled replacements will be
completed prior to the Year 2000 deadline. As a contingency plan,
certain locations have been identified to act as central processing
centers to ensure each major region of the world will have access to
processing capabilities to meet customer requirements.
Bio-Rad's manufactured products have also been undergoing assessment
for Year 2000 readiness. Customers and investors can review the
Year 2000 readiness status of the Company's products on its web
site, http://www.bio-rad.com.
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The Company has identified significant suppliers and is requesting
information from them regarding the Year 2000 readiness of their
products or services. The Company has not yet received enough
responses to ascertain that a material adverse impact can be
avoided. It is not possible at this time to value the amount of
business that might be lost as a result of Bio-Rad's business
partners' failure to deliver products and services after December
31, 1999. Additionally, global infrastructure comprised of banking,
transportation, communication, power generation and ordinary and
necessary governmental activities are critical to the Company's
operations. Should any of these suppliers not be fully functional
after 1999 the negative impact to the Company would be significant
and material.
The expenditures required in 1998 and 1999 to replace and remediate
Year 2000 non-compliant Bio-Rad information technology systems,
including equipment, is estimated at $8 million and primarily deals
with distribution system capabilities worldwide. Approximately half
of these costs have been incurred to date. Hardware and software
purchased and installed in connection with these projects will
provide both Year 2000 readiness and significant additional
functionality. Manufacturing systems have been remediated at a cost
that is not material to Bio-Rad overall and have been included in
operating results in 1997 and 1998. While some systems enhancements
or modifications have been delayed to allow for the more significant
Year 2000 remediation to be completed, weighing both cost and
benefit, Bio-Rad management believes this is a prudent response.
The Company as of this date has not identified the "most likely
worst case Year 2000 scenario." That scenario will be largely
dependent on the response from the Company's significant worldwide
suppliers and its assessment of preparedness of the global
infrastructure, including multiple national governments. During the
first half of 1999 the Company will review a contingency plan based
on the aforementioned significant supplier responses and global
infrastructure preparedness.
Forward Looking Statements
Other than statements of historical fact, statements made in this
report include forward looking statements, such as statements with
respect to the Company's future financial performance, operating
results, plans and objectives. Actual results may differ materially
from those currently anticipated depending on a variety of risk
factors including increased competition, the ability to achieve
management objectives (especially related to SG&A and inventory),
government regulation, the continued performance of business
partners (particularly in relation to the Year 2000 issue), and the
monetary policies of various countries.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following documents are filed as part of this report:
Exhibit No.
10.5 Amended and Restated 1988 Employee Stock Purchase Plan.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended September
30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
BIO-RAD LABORATORIES, INC.
(Registrant)
Date: November 10, 1998 /s/ Thomas C. Chesterman
Thomas C. Chesterman, Vice President,
Chief Financial Officer
Date: November 10, 1998 /s/ James R. Stark
James R. Stark,
Corporate Controller
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Exhibit 10.5
BIO-RAD LABORATORIES, INC.
AMENDED AND RESTATED 1988
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose
This Bio-Rad Laboratories, Inc. Amended and Restated 1988 Stock
Purchase Plan (the "Plan") is designed to encourage and assist employees
of Bio-Rad Laboratories, Inc. (the "Company") to acquire an equity
interest in the Company through the purchase of shares of the Company's
Class A Common Stock (the "Common Stock").
2. Administration
The Plan shall be administered by the Company's Board of Directors
(or a committee of "disinterested" directors no fewer in number than
required by Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which in either case is referred to as the
"Board") in accordance with the requirements and limitations of Rule 16b-
3 and Section 423, or any successor provision, of the Internal Revenue Code
of 1986, as amended (the "Code"), and the Treasury Regulations
promulgated thereunder. The Board may from time to time select a committee
or persons (the "Administrator"), to be responsible for any matters for
which a "disinterested administrator" is not required by Rule 16b-3.
Subject to the express provisions of the Plan, the overall supervision of
the Board and to the limitations of Rule 16b-3 and Section 423, the
Administrator may administer and interpret the Plan in any manner it
believes to be desirable, and any such interpretation shall be conclusive
and binding on the Company and all participants.
3. Number of Shares
(a) Shares Available. The Company has reserved for sale under the
Plan 450,000 shares of Common Stock. 645,000 shares may be sold under the
Plan of which 450,000 shares may be newly issued shares and 195,000 shares
may be reacquired in private transactions or open market purchases, but all
shares sold under the Plan, regardless of source, shall be counted against
the 645,000 share limitation.
(b) Adjustments. If at any time after the day preceding the
Enrollment Date for each Purchase Period, and prior to the issue and sale
by the Company of all the shares of Common Stock covered by participants'
enrollment forms with respect to each Purchase Period for which the
Enrollment Date has occurred, the Company shall effect a subdivision of
shares of Common Stock or other increase (by stock dividend or otherwise)
of the number of shares of Common Stock outstanding, without the receipt of
consideration by the Company or another corporation in which it is
financially interested and otherwise than in discharge of the Company's
obligation to make further payment for assets theretofore acquired by it or
such other corporation or upon conversion of stock or other securities
issued for consideration, or shall reduce the number of shares of Common
1
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Stock outstanding by a consolidation of shares, then (a) in the event of
such an increase in the number of such shares outstanding, the number of
shares of Common Stock then subject to participants' enrollment forms with
respect to such Purchase Period shall be proportionately increased and the
Purchase Price (as defined in Section 8(a)) per share for such Purchase
Period shall be proportionately reduced, and (b) in the event of such a
reduction in the number of such shares outstanding, the number of shares of
Common Stock then subject to enrollment forms with respect to such Purchase
Period shall be proportionately reduced and the Purchase Price per share
for such Purchase Period shall be proportionately increased. Except as
provided in this Section 3(b), no adjustment shall be made under this Plan
or any enrollment form by reason of any dividend or other distribution
declared or paid by the Company.
4. Eligibility Requirements
(a) Eligible Employees. Each employee, except those described in
the next paragraph, shall become eligible to participate in the Plan in
accordance with Section 5 on the first Enrollment Date following six months
of employment by the Company, or such other period of employment as may be
designated by the Administrator from time to time. Participation in the
Plan is entirely voluntary.
(b) Exclusions from Eligibility. The following employees are not
eligible to participate in the Plan, subject to such limitations as may be
applicable under Section 423 of the Code and Treas. Reg. 1.423.-2(e):
(i) employees who, immediately upon enrollment in the Plan,
would be deemed under Section 423(b)(3) of the Code to own stock
possessing 5 percent or more of the total combined voting power or
value of all classes of stock of the Company or any other corporation
that constitutes a parent or subsidiary corporation of the Company
within the meaning of that section;
(ii) employees who are customarily employed by the Company
less than 20 hours per week or less than five months in any calendar
year; and
(iii) employees who are prohibited by the laws of the nation of
their residence or employment from participating in the Plan.
(c) Officers and Directors. Employees who are also directors or
"officers" of the Company (as defined in Rule 16a-1(f) under the Exchange
Act, as such rule may be amended in the future) may participate only in
accordance with Rule 16b-3. The Plan is intended to conform to the extent
necessary with all provisions of the Securities Act of 1933, as amended
(the "1933 Act"), and the Exchange Act and any and all regulations and
rules promulgated by the Securities and Exchange Commission thereunder,
including, without limitation, Rule 16b-3. Notwithstanding anything herein
to the contrary, the Plan shall be administered, and the purchase rights
shall be granted and may be exercised, only in such a manner as to conform
to such laws, rules and regulations. To the extent permitted by applicable
law, the Plan and the purchase rights granted hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
(d) Definitions. "Employee" shall mean any individual who is an
employee of the Company or a Participating Subsidiary within the meaning of
Section 3401(c) of the Code and the Treasury Regulations promulgated
thereunder. "Subsidiary" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if, as of the applicable
2
<PAGE>
Enrollment Date, each of the corporations other than the last corporation
in the chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain. "Participating Subsidiary" shall mean a subsidiary which has been
designated by the Administrator as covered by the Plan.
5. Enrollment
Any eligible employee may enroll or re-enroll in the Plan as of the
first trading day of any three month, six month, or other period (a
"Purchase Period") as shall be established by the Administrator from time
to time ("Enrollment Dates"), provided that, unless otherwise designated
each Purchase Period shall commence on the first trading day of each fiscal
quarter of the Company and end on the trading last day of such fiscal
quarter. In order to enroll or re-enroll, an eligible employee must
complete, sign and submit to the Company an enrollment form. Any enrollment
form received by the Company before the 15th day of the month preceding an
Enrollment Date, or such other date established by the Administrator from
time to time ("Cut-Off Date") will be effective on that Enrollment Date.
For purposes of the Plan, a "trading day" is any day on which regular
trading occurs on any established stock exchange or market system on which
the Common Stock is traded.
6. Grant of Purchase Rights on Enrollment
(a) Enrollment or Re-Enrollment. Enrollment by a participant in the
Plan on an Enrollment Date will constitute the grant by the Company to the
participant of a right to purchase shares of Common Stock under the Plan.
Re-enrollment by a participant in the Plan on an Enrollment Date will
constitute cancellation by the participant of one or more outstanding
purchase rights and the grant by the Company to the participant of a new
purchase right on the Enrollment Date on which such re-enrollment occurs.
An increase (but not a decrease) in the level of payroll withholding shall
also constitute the grant of a new purchase right for the incremental
change in the amount withheld but shall not cancel outstanding rights to
purchase shares of Common Stock under the Plan. Any participant whose
purchase right expires and who has not withdrawn from the Plan will
automatically be re-enrolled in the Plan and granted a new purchase right
on the Enrollment Date immediately following the date on which the prior
purchase right expires.
(b) General Terms of Purchase Rights. Each purchase right granted
under the Plan shall have the following terms:
(i) each purchase right granted under the Plan will have a
term of not more than 27 months (or such longer period of time as may
be provided by Section 423(b)(7) of the Code or Treasury Regulation
1.423-(h)) or such shorter period as may be established by the Board
from time to time; notwithstanding the foregoing, however, whether or
not all shares have been purchased thereunder, the purchase right
will expire on the earliest to occur of (A) the completion of the
purchase of shares on the last Purchase Date (as defined in Section 8)
occurring within 27 months (or such longer period of time as may
be provided by Section 423(b)(7) of the Code or Treasury Regulation
1.423-(h)) of the Enrollment Date for such purchase right, or such
shorter period as may be established by the Board before an
Enrollment Date for all purchase rights to be granted on such
Enrollment Date, or (B) the date on which the employee's
participation in the Plan terminates for any reason;
3
<PAGE>
(ii) payment for shares purchased under the purchase right
will be made only through payroll withholding in accordance with
Section 7;
(iii) purchase of shares upon exercise of the purchase right
will be accomplished only on the Purchase Dates in accordance with
Section 8;
(iv) the price per share under the purchase right will be
determined as provided in Section 8;
(v) on each Enrollment Date, each participant shall be
entitled to subscribe for the number of shares of Common Stock
offered during such Purchase Period designated by him or her in
accordance with the terms of the Plan; provided, however, that for
any Purchase Period, the Board of Directors may set a minimum, a
maximum, or both a minimum and a maximum number of shares that may be
subscribed for during such Purchase Period, provided that the maximum
number of shares may not in any event exceed 1,000 shares per
calendar year;
(vi) notwithstanding clause (v), (a) in no event may any
participant subscribe for shares (under any one or more Purchase
Periods which have Enrollment Dates within any calendar year) which
would have a total value (computed as the number of shares subscribed
for during each such Purchase Period multiplied by the maximum
Purchase Price for each such Purchase Period) in excess of $21,250
(or such greater or lesser amount as may be provided by Section
423(b)(8) of the Code or Treasury Regulation 1.423-(i)), and (b) the
maximum number of shares that may be subscribed for by a participant
shall be further limited and reduced to the extent that the number of
shares owned by such participant immediately after any Enrollment
Date for purposes of Section 423(b)(3) of the Code plus the maximum
number of shares set forth in clause (v) above would exceed 5 percent
of the total combined voting power or value of all classes of stock
of the Company or a parent or subsidiary corporation of the Company
within the meaning set forth in Section 423(b)(3) of the Code; and
(vii) the purchase right will in all respects be subject to the
terms and conditions of the Plan, as interpreted by the Administrator
from time to time.
7. Payroll Withholding
(a) Election of Withholding Amount. Each participant may elect to
make contributions at a monthly rate equal to any whole percentage up to a
maximum of 10%, or such other maximum percentage as the Administrator may
establish from time to time before an Enrollment Date for all purchase
rights to be granted on such Enrollment Date, of his or her monthly base
earnings. Monthly base earnings exclude commissions, bonuses, overtime
pay, shift premiums, long-term disability or workers compensation payments
and similar amounts, but includes elective qualified contributions by the
participant to employee benefit plans. The rate of contribution shall be
designated by the participant in the enrollment form. A participant may
elect to increase or decrease the rate of contribution effective as of any
Enrollment Date by delivery to the Company not later than the related
Cutoff Date of a new enrollment form indicating the revised rate of
contribution. If the rate is decreased and there is more than one purchase
right outstanding, the participant may specify the purchase right to which
such decrease should apply.
4
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(b) Credit to Participant's Account. Contributions shall be
credited to a participant's account as soon as administratively feasible
after payroll withholding. The Company shall be entitled to use of the
contributions immediately after payroll withholding and shall have no
obligation to pay interest on withholdings to any participant, and shall
not be obligated to segregate withholdings.
(c) Payment of Taxes by Participant. Upon disposition of shares
acquired by exercise of a purchase right, the participant shall pay, or
make provision adequate to the Company for payment of, all federal, state,
and other tax (and similar) withholdings that the Company determines, in
its discretion, are required due to the disposition, including any such
withholding that the Company determines in its discretion is necessary to
allow the Company to claim tax deductions or other benefits in connection
with the disposition. A participant shall make such similar provisions for
payments that the Company determines, in its discretion, are required due
to the exercise of a purchase right, including such provisions as are
necessary to allow the Company to claim tax deductions or other benefits in
connection with the exercise of the purchase right.
8. Purchase of Shares
(a) Purchase Price. After the last trading day of each March, June,
September, and December Purchase Period (or such other Purchase Period
established by the administrator), the Company shall apply the funds then
credited to each participant's account to the purchase of any whole and
fractional shares of Common Stock. The cost to the participant (the
"Purchase Price") for the shares purchased under any purchase right shall
be 85% of the lower of:
(i) the fair market value at the beginning of the fiscal quarter; or
(ii) the fair market value at the end of the fiscal quarter.
(b) Fair Market Value. For the purposes of the Plan, the "fair
market value" of the Common Stock on a date shall be either (a) (i) the
closing price of Common Stock on such date on any established stock
exchange if the Common Stock is traded on such an exchange or (ii) in the
event that there is no trade resulting in a closing price on a date, the
mean between the high bid and low asked quotations for the Common Stock on
such date as quoted on the exchange, in each case as reported in the Wall
Street Journal or similar publication if such prices are so quoted or
reported (if such date is not a trading day, the average of such quotations
on the last preceding trading day shall be used in lieu of such
quotations), or (b) the fair market value on such date as determined by the
Administrator if shares of Common Stock are not so listed, quoted or
reported.
(c) Delivery of Certificates. At the election of the participant,
certificates evidencing shares purchased on any Purchase Date shall be
delivered as soon as administratively feasible; provided, however, the
Administrator may, from time to time, establish limitations as to the
frequency with which a participant may elect to have certificates
evidencing shares delivered hereunder. Participants shall be treated as the
owners of their shares effective as of the Purchase Date.
(d) Application of Excess Funds. Any funds in an amount less than
the cost of one share of Common Stock left in a participant's account
pertaining to such Purchase Period on a Purchase Date shall be carried
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<PAGE>
forward in such account for application on the next Purchase Date, unless
the participant has withdrawn from the Plan, in which case the additional
amount shall be distributed to the participant
(e) Adjustment of Purchase Rights. If at any Purchase Date, the
shares available under the Plan are less than the number all participants
would otherwise be entitled to purchase on such date, purchases shall be
reduced proportionately to eliminate the deficit. Any funds that cannot be
applied to the purchase of shares due to such a reduction shall be refunded
to participants as soon as administratively feasible.
9. Withdrawal From the Plan
A participant may withdraw from the Plan in full (but not in part) at
any time upon delivery to the Company of a notice of withdrawal at such
times as the Administrator may determine from time to time. Any such
withdrawal shall be effective as of the end of the then current Purchase
Period, and all funds credited to a participant's payroll deduction account
shall be used to purchase shares as of the next Purchase Date. Any eligible
employee who has withdrawn from the Plan may, however, re-enroll in the
Plan again on the subsequent Enrollment Date following withdrawal in
accordance with the provisions of Section 5.
10. Termination of Employment
Notwithstanding the provisions of Section 9 of this Plan,
participation in the Plan shall terminate immediately if a participant
ceases to be employed by the Company or a Participating Subsidiary (unless
the participant shall thereupon be employed by a Participating Subsidiary
or, if previously employed by a Participating Subsidiary, the Company), for
any reason (including death or disability), or otherwise becomes ineligible
to participate in the Plan. As soon as administratively feasible after
such termination, the Company shall pay to the participant, or his or her
beneficiary or legal representative, all amounts credited to the
participant's account.
11. Leave of Absence
Unless a participant has voluntarily withdrawn from the Plan, shares
will be purchased for that participant's account on the Purchase Date next
following commencement of a leave of absence by such participant.
Participation in the Plan will terminate immediately after the purchase of
shares on such Purchase Date, however, unless:
(i) the leave of absence is of less than 90 days duration and is due
to illness, injury or other reason approved by the Administrator; or
(ii) the participant's right to reemployment after such leave is
guaranteed by contract or statute.
12. Designation of Beneficiary
Each participant may designate one or more beneficiaries in the event
of death and may, in his or her sole discretion, change such designation at
any time. Any such designation shall be effective upon receipt by the
Company and shall control over any disposition by will or otherwise.
6
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As soon as administratively feasible after the death of a participant,
amounts credited to his or her account shall be paid in cash to the
designated beneficiaries or, in the absence of a designation, to the
executor, administrator or other legal representative of the participant's
estate. Such payment shall relieve the Company of further liability with
respect to the Plan on account of the deceased participant. If more than
one beneficiary is designated, each beneficiary shall receive an equal
portion of the account unless the participant has given express contrary
instructions.
13. Assignment
(a) Prohibition on Assignment. The rights of a participant under
the Plan shall not be assignable by such participant, by operation of law,
or otherwise. No participant may create a lien on any funds, securities,
rights or other property held by the Company for the account of the
participant under the Plan, except to the extent that there has been a
designation of beneficiaries in accordance with the Plan, and except to the
extent permitted by the laws of descent and distribution if beneficiaries
have not been designated.
(b) Lifetime Exercise Limitation. A participant's right to purchase
shares under the Plan shall be exercisable only during the participant's
lifetime and only by him or her, except that a participant may direct the
Company to issue share certificates to the participant and his or her
spouse in community property, to the participant jointly with one or more
other persons with right of survivorship, or to certain forms of trusts
approved by the Administrator.
14. General Limitation on Right to Purchase
Notwithstanding any provision of the Plan to the contrary, if at any
time a participant is entitled to purchase shares of Common Stock on a
Purchase Date, taking into account such Participant's rights, if any, to
purchase Common Stock under the Plan and all other stock purchase plans of
the Company and of other corporations that constitute parent or subsidiary
corporations of the Company within the meaning of Sections 425(e) and (f)
of the Code, the result would be that, during the then current calendar
year, such Participant would have first become entitled to purchase under
the Plan and all such other plans a number of shares of Common Stock of the
Company that would exceed the maximum number of shares permitted by the
provisions of Section 423(b)(8) of the Code, then the number of shares that
such Participant shall be entitled to purchase pursuant to the Plan on such
Purchase Date shall be reduced by the number that is one more than the
number of shares that represents the excess, and any excess amount in his
account resulting from such reduction shall be promptly refunded to him in
cash.
15. Administrative Assistance
If the Administrator in its discretion so elects, it may retain a
brokerage firm, bank or other financial institution to assist in the
purchase of shares, delivery of reports or other administrative aspects of
the Plan. If the Administrator so elects, each participant shall (unless
prohibited by the laws of the nation of his or her employment or residence)
be deemed upon enrollment in the Plan to have authorized the establishment
of an account on his or her behalf at such institution. Shares purchased by
a participant under the Plan shall be held in the account in the name in
which the share certificate would otherwise be issued pursuant to Section
13(b).
7
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16. Costs
All costs and expenses incurred in administering the Plan shall be
paid by the Company, except that any stamp duties, transfer taxes or
transfer agent fees applicable to participation in the Plan (such as
withdrawal fees) may be charged to the account of such participant by the
Company. Any brokerage fees for the purchase of shares by a participant
shall be paid by the Company.
17. Reports
The Company shall provide or cause to be provided to each participant
a report of his or her contributions and the shares purchased by that
participant as of each Purchase Date.
18. Equal Rights and Privileges
All eligible employees shall have equal rights and privileges with
respect to the Plan so that the Plan qualifies as an "employee stock
purchase plan" within the meaning of Section 423 or any successor
provision of the Internal Revenue Code and the related regulations.
Notwithstanding the express terms of the Plan, any provision of the Plan
which is inconsistent with Section 423 or any successor provision of the
Internal Revenue Code shall without further act or amendment by the Company
or the Board be reformed to comply with the requirements of Section 423.
This Section 18 shall take precedence over all other provisions in the
Plan.
19. Applicable Law
The Plan shall be governed by the substantive laws (excluding the
conflict of laws rules) of the State of California.
20. Modification and Termination
(a) The Board may amend, alter or terminate the Plan at any time. No
amendment shall be effective unless within 12 months after it is adopted by
the Board, it is approved by the holders of a majority of the votes cast at
a duly held shareholders' meeting at which a quorum of the voting power of
the Company is represented in person or by proxy, if such amendment would:
(i) increase the number of shares reserved for purchase under
the Plan; or
(ii) require shareholder approval in order to comply with SEC
Rule 16b-3.
(b) In the event the Plan is terminated, the Board may elect to
terminate all outstanding purchase rights either prior to expiration or
upon completion of the purchase of shares on the next Purchase Date, or may
elect to permit purchase rights to expire in accordance with their terms
(and participation to continue through such expiration dates). If the
purchase rights are terminated prior to expiration, all funds contributed
to the Plan that have not been used to purchase shares shall be returned to
the participants without interest as soon as administratively feasible.
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21. No Right of Employment
Neither the grant nor the exercise of any rights to purchase shares
under this Plan nor anything in this Plan shall impose upon the Company any
obligation to employ or continue to employ any participant. The right of
the Company to terminate any employee with or without cause, at any time,
and with or without notice shall not be diminished or affected because any
rights to purchase shares have been granted to such employee.
22. Requirements of Law
The Company shall not be required to sell, issue, or deliver any
shares of Common Stock under this Plan if such sale, issuance, or delivery
might constitute a violation by the Company or the participant of any
provision of law. Unless a registration statement under the 1933 Act is in
effect with respect to the shares of Common Stock proposed to be delivered
under the Plan, the Company shall not be required to issue such shares if,
in the opinion of the Company or its counsel, such issuance would violate
the 1933 Act. Regardless of whether such shares of Common Stock have been
registered under the 1933 Act or registered or qualified under the
securities laws of any state, the Company may impose restrictions upon the
hypothecation or further sale or transfer of such shares (including the
placement of appropriate legends on stock certificates) if, in the judgment
of the Company or its counsel, such restrictions are necessary or desirable
to achieve compliance with the provisions of the 1933 Act, the securities
laws of any state, or any other law or are otherwise in the best interests
of the Company. As a condition precedent to the issuance of any shares of
Common Stock under the Plan, the Company may require evidence satisfactory
to it or its counsel to the effect that the purchaser of such shares is
acquiring the shares for investment and not with a view to their
distribution. Any determination by the Company or its counsel in connection
with any of the foregoing shall be final and binding on all parties.
If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing shares of Common Stock issued under the
Plan is no longer required in order to comply with applicable securities or
other laws, the holder of such certificate shall be entitled to exchange
such certificate for a certificate representing a like number of shares
lacking such legend.
The Company may, but shall not be obligated to, register or qualify
any securities covered by the Plan. The Company shall not be obligated to
take any other affirmative action in order to cause the grant or exercise
of any right or the issuance, sale, or delivery of shares pursuant to the
exercise of any right to comply with any law.
23. Board and Shareholder Approval
This plan was originally approved by the Board of Directors on March
2, 1988 and by the holders of a majority of the voting power of all
outstanding shares of the Company on April 26, 1988. The Plan became
effective on January 1, 1989. The Plan was first amended by the Board of
Directors on January 15, 1992 and by holders of a majority of the voting
power of all outstanding shares of the Company on April 28, 1992. The Plan
was further amended by the Board of Directors on February 2, 1994 and by
the holders of a majority of the voting power of all outstanding shares of
the Company on April 26, 1994. The Plan was further amended by the Board of
Directors on August 28, 1997, effective as of October 1, 1997.
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from Bio-Rad Laboratories, Inc. Form 10-Q for the quarter ended
September 30, 1998 and is qualified in its entirety by reference
to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
