<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, 2000.
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)
Delaware 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 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 ___
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 31, 2000
<S> <C>
Class A Common Stock,
Par Value $1.00 per share 10,027,600
Class B Common Stock,
Par Value $1.00 per share 2,450,528
</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>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . $174,086 $113,527 $542,859 $355,059
Cost of goods sold . . . . . . . . . . . . . 84,090 51,899 258,003 158,008
GROSS PROFIT . . . . . . . . . . . . . . . . 89,996 61,628 284,856 197,051
Selling, general and administrative expense . 58,388 43,618 181,371 128,440
Product research and development expense . . 16,372 10,999 51,623 32,449
INCOME FROM OPERATIONS . . . . . . . . . . . 15,236 7,011 51,862 36,162
Interest expense . . . . . . . . . . . . . . (7,345) (755) (23,913) (2,458)
Investment income, net. . . . . . . . . . . . 340 516 823 939
Other, net . . . . . . . . . . . . . . . . . 13,215 (815) 4,482 (2,520)
INCOME BEFORE TAXES . . . . . . . . . . . . . 21,446 5,957 33,254 32,123
Provision for income taxes . . . . . . . . . 7,527 1,704 11,306 9,187
NET INCOME . . . . . . . . . . . . . . . . . $ 13,919 $ 4,253 $ 21,948 $ 22,936
======== ======== ======== ========
Basic earnings per share:
Net income . . . . . . . . . . . . . . . . $ 1.14 $0.35 $1.80 $1.89
======== ======== ======== ========
Weighted average common shares . . . . . . 12,217 12,111 12,204 12,105
======== ======== ======== ========
Diluted earnings per share:
Net income . . . . . . . . . . . . . . . . $1.14 $0.35 $1.79 $1.89
======== ======== ======== ========
Weighted average common shares . . . . . . 12,238 12,195 12,248 12,164
======== ======== ======== ========
</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)
(Unaudited)
<TABLE>
September 30, December 31,
2000 1999
<S> <C> <C>
ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $ 8,586 $ 17,087
Accounts receivable . . . . . . . . . . . . . . . . . 182,616 193,898
Inventories . . . . . . . . . . . . . . . . . . . . . 124,814 126,277
Prepaid expenses, taxes and other current assets . . . 38,905 41,455
Total current assets . . . . . . . . . . . . . . . 354,921 378,717
Net property, plant and equipment . . . . . . . . . . 119,439 125,942
Marketable securities . . . . . . . . . . . . . . . . 1,225 1,169
Other assets . . . . . . . . . . . . . . . . . . . . . 158,583 163,034
Total assets . . . . . . . . . . . . . . . . . . $634,168 $668,862
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable and current maturities of long-term debt $ 13,786 $ 21,960
Accounts payable . . . . . . . . . . . . . . . . . . . 56,082 64,737
Accrued payroll and employee benefits . . . . . . . . 51,459 59,919
Sales, income and other taxes payable . . . . . . . . 19,948 14,086
Other current liabilities . . . . . . . . . . . . . . 42,550 41,819
Total current liabilities . . . . . . . . . . . . . 183,825 202,521
Long-term debt, net of current maturities . . . . . . 211,630 239,211
Deferred tax liabilities . . . . . . . . . . . . . . . 10,009 7,016
Total liabilities . . . . . . . . . . . . . . . . . 405,464 448,748
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 - 10,015,100 at September 30, 2000
and 9,977,862 at December 31, 1999 . . . . . . . . . 10,015 9,978
Class B common stock, $1.00 par value, 6,000,000 shares
authorized; outstanding - 2,463,028 at September 30, 2000
and 2,484,716 at December 31, 1999 . . . . . . . . . 2,463 2,485
Additional paid-in capital . . . . . . . . . . . . . . 19,104 18,830
Class A treasury stock, 259,565 shares at September 30, 2000
and 335,450 shares at December 31, 1999 at cost . . (5,749) (7,392)
Retained earnings . . . . . . . . . . . . . . . . . . 222,708 200,993
Accumulated other comprehensive income:
Currency translation . . . . . . . . . . . . . . . . (20,031) (4,741)
Net unrealized holding gain (loss) on marketable securities 194 (39)
Total stockholders' equity . . . . . . . . . . . . 228,704 220,114
Total liabilities and stockholders' equity . . . $634,168 $668,862
======== ========
</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>
Nine Months Ended
September 30,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers . . . . . . . . . . . . $531,125 $350,345
Cash paid to suppliers and employees . . . . . . . . (478,181) (311,890)
Interest paid. . . . . . . . . . . . . . . . . . . . (21,656) (2,508)
Income tax payments. . . . . . . . . . . . . . . . . (7,768) (12,987)
Miscellaneous receipts (payments). . . . . . . . . . (5,155) (47)
-------- --------
Net cash provided by operating activities. . . . . . 18,365 22,913
Cash flows from investing activities:
Capital expenditures, net. . . . . . . . . . . . . . (23,941) (17,809)
Receipts for divestitures . . . . . . . . . . . . . 27,000 -
Purchases of marketable securities and investments . (370) (2,148)
Sales of marketable securities and investments . . . 714 6,230
Foreign currency hedges, net . . . . . . . . . . . . 5,705 1,585
-------- --------
Net cash provided by (used in) investing activities. 9,108 (12,142)
Cash flows from financing activities:
Net borrowings under line-of-credit arrangements . . (4,911) (143)
Long-term borrowings . . . . . . . . . . . . . . . . 407,509 94,225
Payments on long-term debt . . . . . . . . . . . . . (437,598) (103,032)
Arrangement and other fees for long-term financing . (4,500) -
Proceeds from issuance of common stock . . . . . . . 289 292
Treasury stock activity, net . . . . . . . . . . . . 1,410 (1,196)
-------- ---------
Net cash used in financing activities. . . . . . . . (37,801) (9,854)
Effect of exchange rate changes on cash . . . . . . . . . 1,827 828
Net increase (decrease) in cash and cash equivalents. . . (8,501) 1,745
Cash and cash equivalents at beginning of period. . . . . 17,087 10,081
Cash and cash equivalents at end of period. . . . . . . . $ 8,586 $11,826
======= =======
Reconciliation of net income to net cash provided
by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 21,948 $ 22,936
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . 32,430 16,589
Foreign currency hedge transactions, net . . . . . (5,705) (1,585)
Gains on disposition of marketable securities. . . (407) (870)
Increase in accounts receivable . . . . . . . . . (4,240) (2,268)
Increase in inventories . . . . . . . . . . . . . (14,180) (4,800)
Increase (decrease) in other current assets. . . . 808 (733)
Increase (decrease) in accounts payable and other
current liabilities. . . . . . . . . . . . . . . (5,899) 1,126
Increase (decrease) in income taxes payable. . . . 4,592 (5,232)
Other. . . . . . . . . . . . . . . . . . . . . . . (10,982) (2,250)
Net cash provided by operating activities . . . . . . . . $ 18,365 $ 22,913
======= =======
</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, 1999 (the Company's
1999 Annual Report). Certain amounts in the financial statements
of the prior year have been reclassified to be consistent with
the 2000 presentation.
2. INVENTORIES
The principal components of inventories are as follows:
September 30, December 31,
2000 1999
(in thousands)
Raw materials $ 31,027 $ 32,398
Work in process 33,893 31,936
Finished goods 59,894 61,943
-------- --------
$124,814 $126,277
======== ========
3. PROPERTY, PLANT AND EQUIPMENT
The principal components of property, plant and equipment are as
follows:
September 30, December 31,
2000 1999
(in thousands)
Land and improvements $ 8,853 $ 8,937
Buildings and leasehold
improvements 67,352 73,230
Equipment 162,341 168,401
-------- --------
238,546 250,568
Accumulated depreciation (119,107) (124,626)
-------- --------
Net property, plant and equipment $119,439 $125,942
======== ========
4
<PAGE>
4. ACQUISITIONS AND DISPOSITIONS
In October 1999, the Company acquired Pasteur Sanofi Diagnostics
S.A.. At that time, liabilities were recorded of approximately
$14.0 million for severance and other employee costs and $4.0
million for the consolidation and closure of certain leased
facilities. As of September 30, 2000, expenses charged against
these reserves were approximately $9.7 million for severance and
other employee costs and $1.6 million for facilities and asset-
related write-offs.
On July 31, 2000, Accent Semiconductor Technology Inc. (ASTI)
acquired the assets and certain liabilities of the Company's
semiconductor and optoelectronic metrology business. The
proceeds of approximately $36.0 million represent $27.0 million
in cash, a note receivable due in five years and an 18% equity
interest in ASTI. The Company used $17.0 million of the cash
proceeds to reduce borrowings on the term loan portion of the
Senior Credit facility. The equity interest in ASTI will be held
as a long-term investment on the cost method.
5. EARNINGS PER SHARE
Weighted average shares used for diluted earnings per share
include the dilutive effect of outstanding stock options of
21,000 and 84,000 shares, for the three month period ended
September 30, 2000 and 1999, respectively.
Weighted average shares used for diluted earnings per share
include the dilutive effect of outstanding stock options of
44,000 and 59,000 shares, for the year-to-date periods ended
September 30, 2000 and 1999, respectively.
Options to purchase 439,000 and 137,000 shares of common stock
were outstanding for the three month period ended September 30,
2000 and 1999, 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.
Options to purchase 241,000 and 262,000 shares of common stock
were outstanding for the year-to-date periods ended September 30,
2000 and 1999, 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, 2000.
5
<PAGE>
6. OTHER INCOME AND EXPENSE
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Goodwill amortization $(2,033) $ (517) $(6,044) $(1,551)
Gain on sale of SMD 16,690 -- 16,690 --
Settlement payment to
investment Bank -- -- (3,000) --
Legal fees (982) (16) (2,663) (651)
Other, net (460) (282) (501) (318)
------- -------- -------- --------
Total other, net $13,215 $ (815) $ 4,482 $(2,520)
======= ======= ======= =======
</TABLE>
7. COMPREHENSIVE INCOME
The components of the Company's total comprehensive income were:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Net Income $13,919 $ 4,253 $21,948 $22,936
Currency translation adjustments (7,500) 1,670 (15,290) (1,632)
Net unrealized holding
gains (losses) on securities 11 (404) 509 82
Reclassification adjustments for
gains included in net income (9) (367) (276) (620)
------- ------- ------- -------
Total comprehensive income $ 6,421 $ 5,152 $ 6,891 $20,766
======= ======= ======= =======
</TABLE>
8. SEGMENT INFORMATION
Information regarding industry segments for the three months ended
September 30, 2000 and 1999 is as follows (in thousands):
Life Clinical Analytical
Science Diagnostics Instruments
Segment net sales 2000 $ 63,877 $101,507 $ 9,358
1999 53,416 45,478 15,002
Segment profit (loss) 2000 $ 1,915 $ 8,249 $ (2,094)
1999 1,976 5,091 180
6
<PAGE>
Information regarding industry segments for the nine months ended
September 30, 2000 and 1999 is as follows (in thousands):
Life Clinical Analytical
Science Diagnostics Instruments
Segment net sales 2000 $192,700 $307,233 $ 45,573
1999 169,477 138,111 49,116
Segment profit (loss) 2000 $ 10,478 $ 20,985 $ (2,014)
1999 13,708 20,772 942
Inter-segment sales are primarily between Life Science and Clinical
Diagnostics and are priced to give Life Science a representative gross
margin. Interest expense is charged to segments based on the carrying
amount of inventory and receivables employed by that segment. The
following reconciles total segment profit to consolidated income
before taxes:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Total segment profit $ 8,070 $ 7,247 $29,449 $35,422
Gross profit on inter-segment sales (334) (176) (1,335) (813)
Net corporate operating, interest
and other expense (income) not
allocated to segments 15,403 (1,113) 10,361 (1,874)
Goodwill amortization (2,033) (517) (6,044) (1,551)
Investment income, net 340 516 823 939
------- ------- ------- -------
Consolidated income before taxes $21,446 $ 5,957 $33,254 $32,123
======= ======= ======= =======
</TABLE>
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,
1999. Pro-forma information regarding the acquisition of Pasteur
Sanofi Diagnostics S.A.("PSD") is included in the Company's Form
8-K dated October 1, 1999.
The following table shows operating income and expense items as a
percentage of net sales:
<TABLE>
Three Months Ended Nine Months Ended Year Ended
September 30, September 30, December 31,
2000 1999 2000 1999 1999
<S> <C> <C> <C> <C> <C>
Net sales 100.0 100.0 100.0 100.0 100.0
Cost of goods sold 48.3 45.7 47.5 44.5 46.5
Gross profit 51.7 54.3 52.5 55.5 53.5
Selling, general and
administrative 33.5 38.4 33.4 36.2 35.4
Product research and
development 9.4 9.7 9.5 9.1 9.3
Purchased in-process
research and
development - - - - 2.8
----- ----- ----- ----- -----
Income from operations 8.8 6.2 9.6 10.2 6.0
===== ===== ===== ===== =====
Net Income 8.0 3.7 4.0 6.5 2.1
===== ===== ===== ===== =====
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 the successful integration of
PSD, our substantial debt and debt service obligations, increased
competition, technological development, access to necessary
intellectual property, the ability to achieve management
objectives, government regulation, the continued performance of
business partners, and the monetary policies of various
countries.
8
<PAGE>
Three Months Ended September 30, 2000 Compared to
Three Months Ended September 30, 1999
Corporate Results - Sales, Margins and Expenses
Net sales (sales) in the third quarter of 2000 were $174.1
million compared to $113.5 million in the third quarter of 1999,
an increase of 53.4%. Sales increased 19.6% in Life Science,
123.2% in Clinical Diagnostics, and decreased 37.6% in Analytical
Instruments when compared to the third quarter of 1999. In the
third quarter of 2000 the Clinical Diagnostics segment benefited
from $48.4 million of sales arising from the recently acquired
PSD product lines. Excluding these sales, Bio-Rad sales and
Clinical Diagnostics sales grew by 10.7% and 16.8%, respectively.
The growth in Life Science is attributed to product offerings
used in the fields of proteomics, molecular biology, and drug
discovery. Clinical Diagnostics experienced growth in the area
of clinical quality control. Sales in the Analytical Instruments
segment declined as the Company sold its semiconductor and
manufacturing instrument product line (SMD) to Accent
Semiconductor Technology Inc. (ASTI) effective August 1, 2000.
The remaining product lines in this segment are the Company's
spectroscopy analytical equipment and spectral reference
database. Both businesses had lower sales in the quarter than in
the prior period.
Bio-Rad sales continue to be impacted by the strengthening dollar
especially in comparison to the Euro. Excluding the acquisition,
comparable period sales declined $4.1 million or 3.3% applying
constant exchange rates.
Consolidated gross margins were 51.7% for the third quarter of
2000 compared to 54.3% for the third quarter of 1999 and 53.5%
for all of 1999. Excluding the impact of the acquisition, gross
margins would have been 54.4%, unchanged from the prior year.
Margins on the PSD products are lower than the Company's
historical rates. Gross margins increased in Life Science 0.6%.
Clinical Diagnostics margins, after eliminating the acquired
product lines, exceeded the prior year-to-date due in part, to a
payment on a warranty claim from a supplier of approximately $1.7
million. The positive impact of this event was offset by the
strengthening U.S. dollar's impact on foreign currency
denominated sales.
Selling, general and administrative expense (SG&A) decreased to
33.5% of sales in the third quarter of 2000 from 38.4% of sales
in the third quarter of 1999. The program to integrate the PSD
business into Clinical Diagnostics is substantially complete,
including planned workforce reductions of approximately 200
employees since the acquisition date.
9
<PAGE>
SG&A expense as a percent of sales for the Life Science segment
declined 2.4%. Sales grew at 19.6% while SG&A grew only 12.1%,
due in part to a large single bulk chemical sale estimated to be a
one year supply for that customer.
Product research and development expense (R&D) was 9.4% of sales
including the operations of PSD, declining slightly from the 9.7%
of the prior period. The Life Science segment increased their
rate of spending in support of new products to increase their
offering in proteomics. Clinical Diagnostics spending contracted
slightly.
Corporate Results - Non-Operating Items
The third quarter includes a gain on the disposition of assets and
selected liabilities of the Company's semiconductor test and
manufacturing equipment to ASTI of $16.7 million. The Company
received $27.0 million in cash, an $8.0 million note due in five
years and an 18% interest in ASTI. $17.0 million of the cash
proceeds were used to pay down the "term loan" portion of the
Senior Credit Agreement. The cash remaining after tax deposits
and expenses of the sale was used to reduce the "line of credit".
Interest expense increased significantly from the prior year
reflecting the debt incurred to finance the acquisition of PSD.
Other income and expense in both years includes goodwill
amortization $2.0 million and $0.5 million respectively, and non-
operating legal costs.
The Company's effective tax rate rose in the third quarter as the
2000 annual rate was revised from 32% to 34% from the sale of the
SMD assets, the limitation on the deductibility of interest
expense in the United States, the utilization of loss
carryforwards and a change in the geographical source of taxable
income. The Company's effective tax rate in the prior year was
29% and did not consider the decreased profitability due to
greater interest expense and goodwill amortization attributed to
the PSD acquisition.
Nine Months Ended September 30, 2000
Compared to Nine Months Ended September 30, 1999
Corporate Results - Sales Margins and Expenses
Sales in the nine month period of 2000 were $542.9 million
compared to $355.1 million in the comparable period of 1999, an
increase of 52.9%. For the first nine months of 2000, the effect
from a strengthened U.S. dollar reduced sales $11.8 million when
compared to equivalent sales based upon the 1999 exchange rates.
Including the currency impact, sales increased 13.7% for Life
Science, 122.5% for Clinical Diagnostics and decreased in
Analytical Instruments. The semiconductor product lines
historically represented greater than 50% of Analytical
Instruments. Life Science sales increased for proteomics and
10
<PAGE>
molecular biology products. Clinical Diagnostics sales growth is
attributable to the $150.5 million of sales from the PSD
acquisition and $18.6 million from the pre-acquisition product
lines.
Consolidated gross margins were 52.5% for the first nine months of
2000 compared to 55.5% for the first nine months of 1999 and 53.5%
for all of 1999. Life Science margins improved to 54.3% on
higher than planned sales volume, improved manufacturing
efficiency, off-set in part by the effect of a strengthening U.S.
dollar on foreign currency denominated sales. Clinical
Diagnostics margins declined excluding the acquired PSD product
lines, as service costs, re-engineering costs and manufacturing
variances were incurred on outsourced diagnostic equipment, along
with the impact of a strengthened US dollar lowering the margin on
U.S. manufactured goods. Analytical Instruments margins,
excluding the semiconductor products divested, declined on lower
sales volumes not covering fixed manufacturing costs.
SG&A decreased to 33.4% of sales in the first nine months of 2000
from 36.2% of sales in the comparable period of 1999. The Life
Science segment increased SG&A expenditures by $7.6 million
investing in e-commerce capabilities, distribution and marketing
infrastructure. Clinical Diagnostics expenditures declined as a
percent of sales due to personnel attrition, lay-offs and the
postponement of discretionary spending during the integration
phase of the PSD acquisition. The Company expects the impact of
personnel reductions to benefit future periods.
Consolidated R&D increased by $19.2 million in the first nine
months of 2000 compared to the first nine months of 1999 including
the activity from the PSD acquisition. Life Science and Clinical
Diagnostics each increased their R&D expenditures in line with
development plans in the area of proteomics, drug discovery, new
diagnostic testing platforms and expanded quality control systems.
Corporate Results - Non-operating Items
Interest expense was $23.9 million, reflecting the debt incurred
to finance the acquisition of PSD. In January 2000, the Company
incurred an additional $1.0 million of non recurring bank fees to
replace the $100 million bridge loan with a similar debt
instrument from a different lender with preferable terms.
Other income and expense includes goodwill amortization of $6.0
million, non-operating legal costs of $2.7 million and a $3.0
million non-recurring payment to settle a dispute arising under
the terms of an engagement letter between the Company and an
investment bank. The year-to-date results include the gain on
disposition of the semiconductor product line to ASTI of $16.7
million.
11
<PAGE>
The Company's effective tax rate increased to 34% for the first
nine months of 2000 from 29% in the prior period. The increase
reflects limitations on the deductibility of interest expense in
the United Sales associated with the PSD acquisition, the
utilization of loss carryforwards, the geographical source of
taxable income, and the sale of the Company's semiconductor
product line's assets.
Financial Condition
The Company as of September 30, 2000 had available approximately
$92.0 million under its principal revolving credit agreement and
$19.2 million under various foreign lines of credit. Cash and
cash equivalents available were $ 8.6 million. The Company has
achieved an EBITDA of $89.6 million year-to-date which has allowed
it to lower its debt to equity ratio from 1.1 to 1.0 at the
acquisition date of PSD to .99 to 1.0 at September 30, 2000. Debt
has decreased by $32.6 since the acquisition. Lowering the total
amount of debt will continue to be a focus for the Company.
At September 30, 2000, consolidated accounts receivable were
$182.6 million. The change from December 31, 1999 represents the
net impact of a strengthened U.S. dollar lowering foreign
denominated receivables, the sale of semiconductor receivables, an
increase in the aging of receivables caused by a change in
collection administration after the integration and an increase in
sales activity to economies that require longer terms as a
condition of sales. The Company believes that after a transition
period administration will improve but increased working capital
will be required for sales to under or lesser developed
countries/economies.
At September 30, 2000, Bio-Rad consolidated net inventories
decreased by $1.5 million from December 31, 1999 including the
reduction caused by the disposition of the semiconductor product
line. Inventory increased in Life Science for new product
introductions to take place before year-end related to proteomics
and amplification applications as well as cyclical build-up in
microscopy to meet projected year-end demand. Clinical
Diagnostics inventory increased significantly from year-end as it
was artificially low due to an outside supplier's manufacturing
problems. Inventory for the Clinical Diagnostics quality controls
business is characterized by long lead times and large infrequent
batch production which is necessary to meet customers'
requirements. Inventories also increased during the current year
as Bio-Rad took delivery of the ancillary asset site in Brazil
from Sanofi Synthelabo.
Net capital expenditures totaled $23.9 million for the first nine
months of 2000 compared to $17.8 million for the same period of
1999. Expenditures rose as the Company placed with customers the
next generation of reagent rental equipment and invested in data
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communication and business systems to standardize and integrate its
new acquisition and production equipment. Reagent rental equipment
is automated diagnostics instruments that consume the Company's
reagents placed with Clinical Diagnostic customers who then commit
to periodic reagent purchases.
The Board of Directors has authorized the Company to repurchase up
to $18 million of common stock over an indefinite period of time.
From July 1996 through September 2000, the Company has repurchased
583,636 shares of Class A common stock and 30,000 shares of Class B
common stock for a total of $14.5 million. The indenture restricts
the Company's ability to repurchase its own stock to an amount not
to exceed $4 million in the aggregate over the term of the
indenture. Share repurchases made during the indenture amount to
$0.4 million.
As of July 31, 2000, the Company sold all the assets and transferred
selected liabilities associated with its semiconductor product lines
to ASTI. The cash proceeds of $27 million reduced borrowings by
$17.0 million on the term loan portion of the Senior Credit facility
and after tax deposits and expenses of the sales, the remainder was
applied to the line of credit. The Analytical Instruments
segment,after the transfer to ASTI comprises less than 5% of the
Company's sales and net assets.
Euro - A New European Currency
On January 1, 1999, certain member countries of the European Union
began to fix the conversion rates between their national currencies
and a common currency, the "Euro." Over the period January 1, 1999
through January 1, 2002 participating countries will gradually
transition from their national currencies 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. The Company has not experienced to date nor
does it expect that these changes will have a material impact on
operations, financial position or liquidity. There will be
increased competitive pressures as a result of the change, and
marketing strategies will need to be continuously evaluated until
the transition is complete. As a result of competitive forces and
government regulations, the Company cannot guarantee that all
problems will be foreseen and remediated, and that no material
disruption will occur.
Year 2000 Issues
To date, we have not experienced any material Year 2000 related
issues. Although we cannot be certain, we expect minimal future
Year 2000 issues based on the performance to date of our internal
systems and the products we supply to our customers.
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New Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging
Activities" effective for fiscal years beginning after June 15,
1999. The FASB has now delayed implementation to all fiscal
quarters of fiscal years beginning after June 15, 2000. This
statement establishes accounting and reporting standards
requiring companies to record all derivatives on the balance
sheet as either assets or 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 impact of SFAS
No. 133 on the Company's financial statements will depend on a
variety of factors, including interpretive guidance from the
FASB, the future level of forecasted and actual foreign currency
transactions, the extent of the Company's hedging activities, the
types of hedging instruments used and the effectiveness of such
instruments. However, the Company does not expect the adoption
of SFAS No. 133 to have a material effect on its financial
statements.
In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin: No. 101 "Revenue Recognition in
Financial Statements" (SAB101). SAB101 summarizes related views
of the SEC Staff in applying generally accepted accounting
principles to revenue recognition in financial statements
including the time for recognizing revenue derived from sales
involving contractual customer acceptance provisions where
installation of the product occurs after shipment. The Company's
current policy is to recognize revenues at the time the customer
receives the goods, generally at the time of shipment. Applying
the requirements of SAB101 to the present revenue recognition
policy of the Company may result in a deferral of revenue on
sales of the Company's more sophisticated instruments. A
majority of the Company's product lines and revenue will not be
involved in the mandated deferral process. The effect of the
changes will be recognized as a cumulative effect of a change in
accounting principle, if determined material, in the Company's
fourth quarter ending December 31, 2000. When completed, the
review may determine that the amount of revenue to be deferred is
material.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
During the nine months ended September 30, 2000, excluding its
exposure to increased interest rates, there have been no material
changes from the disclosures about market risk provided in the
Company's Annual Report on Form 10-K for the year ended December
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31, 1999. The issuance of the 11-5/8% Senior Subordinated Notes
has reduced Bio-Rad's exposure to increases in interest rates.
The Company has gone from having approximately all of its year-
end debt based on floating interest rates to approximately 67% at
fixed rate pricing.
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.
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, 2000.
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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 14, 2000 /s/ T. C. Chesterman
T. C. Chesterman, Vice President,
Chief Financial Officer
Date: November 14, 2000 /s/ James R. Stark
James R. Stark, Corporate Controller
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</TABLE>
