<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 June 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 Jule 31, 2000
<S> <C>
Class A Common Stock,
Par Value $1.00 per share 10,014,655
Class B Common Stock,
Par Value $1.00 per share 2,463,473
</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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . $185,087 $115,794 $368,773 $241,532
Cost of goods sold . . . . . . . . . . . . . 87,193 50,553 173,913 106,109
GROSS PROFIT . . . . . . . . . . . . . . . . 97,894 65,241 194,860 135,423
Selling, general and administrative expense . 62,265 41,805 122,983 84,822
Product research and development expense . . 17,380 10,916 35,251 21,450
INCOME FROM OPERATIONS . . . . . . . . . . . 18,249 12,520 36,626 29,151
Interest expense . . . . . . . . . . . . . . (7,802) (807) (16,568) (1,703)
Investment income, net . . . . . . . . . . . 195 349 483 423
Other, net . . . . . . . . . . . . . . . . . (3,180) (1,025) (8,733) (1,705)
INCOME BEFORE TAXES . . . . . . . . . . . . . 7,462 11,037 11,808 26,166
Provision for income taxes . . . . . . . . . 2,388 3,156 3,779 7,483
NET INCOME . . . . . . . . . . . . . . . . . $ 5,074 $ 7,881 $ 8,029 $ 18,683
======== ======== ======== ========
Basic earnings per share:
Net income . . . . . . . . . . . . . . . . $0.42 $0.65 $0.66 $1.54
======== ======== ======== ========
Weighted average common shares . . . . . . 12,218 12,095 12,198 12,102
======== ======== ======== ========
Diluted earnings per share:
Net income . . . . . . . . . . . . . . . . $0.41 $0.65 $0.65 $1.54
======== ======== ======== ========
Weighted average common shares . . . . . . 12,270 12,176 12,261 12,144
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
1
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BIO-RAD LABORATORIES, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $ 13,071 $ 17,087
Accounts receivable . . . . . . . . . . . . . . . . . 193,662 193,898
Inventories . . . . . . . . . . . . . . . . . . . . . 139,325 126,277
Prepaid expenses, taxes and other current assets . . . 37,970 41,455
Total current assets . . . . . . . . . . . . . . . 384,028 378,717
Net property, plant and equipment . . . . . . . . . . 125,990 125,942
Marketable securities . . . . . . . . . . . . . . . . 1,346 1,169
Other assets . . . . . . . . . . . . . . . . . . . . . 153,673 163,034
Total assets . . . . . . . . . . . . . . . . . . $665,037 $668,862
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable and current maturities of long-term debt $ 19,564 $ 21,960
Accounts payable . . . . . . . . . . . . . . . . . . . 59,121 64,737
Accrued payroll and employee benefits . . . . . . . . 50,839 59,919
Sales, income and other taxes payable . . . . . . . . 12,011 14,086
Other current liabilities . . . . . . . . . . . . . . 49,698 41,819
Total current liabilities . . . . . . . . . . . . . 191,233 202,521
Long-term debt, net of current maturities . . . . . . 242,935 239,211
Deferred tax liabilities . . . . . . . . . . . . . . . 8,527 7,016
Total liabilities . . . . . . . . . . . . . . . . . 442,695 448,748
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 - 10,014,655 at June 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 - 2,463,473 at June 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, 258,816 shares at June 30, 2000
and 335,450 shares at December 31, 1999 at cost . . (5,703) (7,392)
Retained earnings . . . . . . . . . . . . . . . . . . 208,802 200,993
Accumulated other comprehensive income:
Currency translation . . . . . . . . . . . . . . . . (12,531) (4,741)
Net unrealized holding gain (loss) on marketable securities 192 (39)
Total stockholders' equity . . . . . . . . . . . . 222,342 220,114
Total liabilities and stockholders' equity . . . $665,037 $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>
<CAPTION>
Six Months Ended
June 30,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers . . . . . . . . . . . . . . . $365,227 $234,532
Cash paid to suppliers and employees . . . . . . . . . . . (333,482) (210,815)
Interest paid. . . . . . . . . . . . . . . . . . . . . . . (11,890) (1,800)
Income tax payments . . . . . . . . . . . . . . . . . . . (5,317) (8,829)
Miscellaneous receipts (payments). . . . . . . . . . . . . (2,573) 21
Net cash provided by operating activities. . . . . . . . . 11,965 13,109
Cash flows from investing activities:
Capital expenditures, net. . . . . . . . . . . . . . . . . (17,057) (10,967)
Purchases of marketable securities and investments . . . . (370) (1,597)
Sales of marketable securities and investments . . . . . . 574 937
Foreign currency hedges, net . . . . . . . . . . . . . . . 3,461 2,530
Net cash used in investing activities. . . . . . . . . . . (13,392) (9,097)
Cash flows from financing activities:
Net payments under line-of-credit arrangements . . . . . . (2,143) (1,713)
Long-term borrowings . . . . . . . . . . . . . . . . . . . 347,498 37,250
Payments on long-term debt . . . . . . . . . . . . . . . . (343,543) (38,658)
Arrangement and other fees for long-term financing . . . . (4,500) -
Proceeds from issuance of common stock . . . . . . . . . . 289 292
Treasury stock activity, net . . . . . . . . . . . . . . . 1,469 (1,483)
Net cash used in financing activities. . . . . . . . . . . (930) (4,312)
Effect of exchange rate changes on cash . . . . . . . . . . . . (1,659) 1,814
Net increase in cash and cash equivalents . . . . . . . . . . . (4,016) 1,514
Cash and cash equivalents at beginning of period. . . . . . . . 17,087 10,081
Cash and cash equivalents at end of period. . . . . . . . . . . $ 13,071 $ 11,595
======== ========
Reconciliation of net income to net cash provided
by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,029 $ 18,683
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . 21,726 10,776
Foreign currency hedge transactions, net . . . . . . . . (3,461) (2,530)
Gains on disposition of marketable securities. . . . . . (392) (356)
(Increase) decrease in accounts receivable . . . . . . . 504 (3,952)
Increase in inventories . . . . . . . . . . . . . . . . (15,004) (1,219)
(Increase) decrease in other current assets. . . . . . . 3,186 (685)
Decrease in accounts payable and other
current liabilities. . . . . . . . . . . . . . . . . . (6,376) (3,943)
Decrease in income taxes payable . . . . . . . . . . . . (971) (3,159)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 4,724 (506)
Net cash provided by operating activities . . . . . . . . . . . $ 11,965 $ 13,109
======== ========
</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 the
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:
June 30, December 31,
2000 1999
(in thousands)
Raw materials $ 36,298 $ 32,398
Work in process 38,252 31,936
Finished goods 64,775 61,943
$139,325 $126,277
======== ========
3. PROPERTY, PLANT AND EQUIPMENT
The principal components of property, plant and equipment are as
follows:
June 30, December 31,
2000 1999
(in thousands)
Land and improvements $ 8,897 $ 8,937
Buildings and leasehold
improvements 68,843 73,230
Equipment 173,335 168,401
251,075 250,568
Accumulated depreciation (125,085) (124,626)
Net property, plant and equipment $125,990 $125,942
======== ========
4. ACQUISITIONS
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
4
<PAGE>
million for the consolidation and closure of certain leased
facilities. As of June 30, 2000, expenses charged against these
reserves were approximately $4.1 million for severance and other
employee costs and $1.0 million for facilities.
5. EARNINGS PER SHARE
Weighted average shares used for diluted earnings per share
include the dilutive effect of outstanding stock options of
52,000 and 81,000 shares, for the three month period ended June
30, 2000 and 1999, respectively.
Weighted average shares used for diluted earnings per share
include the dilutive effect of outstanding stock options of
63,000 and 42,000 shares, for the year-to-date periods ended June
30, 2000 and 1999, respectively.
Options to purchase 241,000 and 214,000 shares of common stock
were outstanding for the three month period ended June 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 209,000 and 294,000 shares of common stock
were outstanding for the year-to-date periods ended June 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 June 30, 2000.
6. OTHER INCOME AND EXPENSE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Goodwill amortization $(2,021) $ (517) $(4,011) $(1,034)
Settlement payment to
investment Bank -- -- (3,000) --
Legal fees (1,139) (603) (1,681) (635)
Other, net (20) 95 (41) (36)
Total other, net $(3,180) $(1,025) $(8,733) $(1,705)
======= ======= ======= =======
7. COMPREHENSIVE INCOME
The components of the Company's total comprehensive income were:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(in thousands)
Net Income $ 5,074 $ 7,881 $ 8,029 $18,683
Currency translation adjustments (1,978) (976) (7,790) (3,302)
Net unrealized holding
gains (losses) on securities 35 875 498 486
Reclassification adjustments for
gains included in net income (50) (216) (267) (253)
Total comprehensive income $ 3,081 $ 7,564 $ 470 $15,614
======= ======= ======= =======
</TABLE>
5
<PAGE>
8. SEGMENT INFORMATION
Information regarding industry segments for the three months ended
June 30, 2000 and 1999 is as follows (in thousands):
Life Clinical Analytical
Science Diagnostics Instruments
Segment net sales 2000 $61,994 $106,140 $ 17,836
1999 55,857 44,617 15,810
Segment profit (loss) 2000 $ 1,430 $ 9,744 $ (261)
1999 4,885 6,603 (142)
Information regarding industry segments for the six months ended
June 30, 2000 and 1999 is as follows (in thousands):
Life Clinical Analytical
Science Diagnostics Instruments
Segment net sales 2000 $128,823 $205,726 $ 36,215
1999 116,061 92,633 34,114
Segment profit 2000 $ 8,563 $ 12,736 $ 80
1999 11,732 15,681 762
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>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Total segment profit $10,913 $11,346 $21,379 $28,175
Gross profit on inter-segment sales (440) (231) (1,001) (637)
Net corporate operating, interest
and other expense not allocated
to segments (1,185) 90 (5,042) (761)
Goodwill amortization (2,021) (517) (4,011) (1,034)
Investment income, net 195 349 483 423
Consolidated income before taxes $ 7,462 $11,037 $11,808 $26,166
======= ======= ======= =======
</TABLE>
6
<PAGE>
9. SUBSEQUENT EVENT
On July 31, 2000, Accent Semiconductor Technologies (Accent) acquired
the assets and certain liabilities of the Company's semiconductor and
optoelectronic metrology business. The proceeds of approximately
$36.00 million represent $27.0 million in cash, a note receivable due
in five years and a less than 20% equity interest in Accent. 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 Accent will be held as a long-term investment on the cost
method.
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, and
Form 8-K filed with the Securities and Exchange Commission on
October 15, 1999 regarding the acquisition of Pasteur Sanofi
Diagnostics S.A. ("PSD").
The following table shows operating income and expense items as a
percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Year Ended
June 30, June 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 47.1 43.7 47.2 43.9 46.5
Gross profit 52.9 56.3 52.8 56.1 53.5
Selling, general and
administrative 33.6 36.1 33.3 35.1 35.4
Product research and
development 9.4 9.4 9.6 8.9 9.3
Purchased in-process research
and development - - - - 2.8
Income from operations 9.9 10.8 9.9 12.1 6.0
===== ===== ===== ===== =====
Net income 2.7 6.8 2.2 7.7 2.1
===== ===== ===== ===== =====
</TABLE>
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 June 30, 2000 Compared to
Three Months Ended June 30, 1999
Corporate Results - Sales, Margins and Expenses
Net sales (sales) in the second quarter of 2000 were $185.1
million compared to $115.8 million in the second quarter of 1999,
an increase of 60%. Sales increased 11.0% in Life Science,
137.9% in Clinical Diagnostics, and 12.8% in Analytical
Instruments when compared to the second quarter of 1999. In the
second quarter of 2000 both Bio-Rad and the Clinical Diagnostics
segment benefited from $53.0 million of sales arising from the
recently acquired PSD product lines. Excluding the sales
attributable to the acquisition, Bio-Rad sales and Clinical
Diagnostics sales grew by 14.3% and 19.6%, respectively. The
growth in Life Science is attributed to product offerings used in
the fields of proteomics and drug discovery. Clinical
Diagnostics experienced growth in the area of clinical quality
control. In the Analytical Instruments segment, sales of the
Company's semiconductor test and manufacturing instruments
rebounded significantly but were offset by sales declines in the
Company's Spectroscopy product line.
Consolidated gross margins were 52.9% for the second quarter of
2000 compared to 56.3% for the second quarter of 1999 and 53.5%
for all of 1999. Excluding the impact of the acquisition, gross
margins would have been 55.3%. Margins on the PSD products are
lower than the Company's historical rates. Gross margins
declined in Life Science 0.6%, due to the strengthening U.S.
dollar lowering margins on foreign currency denominated sales and
sales volume declines in the Microscopy product lines.
Analytical Instruments gross margin increased as a result of
increased sales volume for the semiconductor products along with
firmer pricing. Clinical Diagnostics margins were impacted by
the strengthening U.S. dollar's impact on foreign currency
denominated sales and increased service and re-engineering costs
on diagnostic equipment supplied by outside contractors.
Selling, general and administrative expense (SG&A) decreased to
33.6% of sales in the second quarter of 2000 from 36.1% of sales
in the second quarter of 1999. The program to integrate the PSD
business has been substantially completed as of June 30, 2000.
The planned work force reductions were completed as of June 30.
Clinical Diagnostic's headcount has fallen by 183 since October 1,
1999, the acquisition date. SG&A expense as a percent of sales
grew for Life Science as the segment continued its investments in
e-commerce and other distribution and marketing infrastructure.
Product research and development expense (R&D) remained unchanged
at 9.4% of sales including the operations of PSD.
9
<PAGE>
Corporate Results - Non-Operating Items
Interest expense increased significantly from the prior year
reflecting the debt incurred to finance the acquisition of PSD.
Investment income in both years includes gains on sales of
marketable securities. Net other income and expense in both years
includes net goodwill amortization and non-operating legal costs.
The Company's effective tax rate rose to 32% for the second
quarter of 2000 compared to 29% in the second quarter of 1999.
The increased rate reflects the limitation on the deductibility of
goodwill amortization associated with the acquisition of PSD, the
utilization of loss carryforwards and a change in the geographical
source of taxable income.
Six Months Ended June 30, 2000
Compared to Six Months Ended June 30, 1999
Corporate Results - Sales Margins and Expenses
Sales in the first half of 2000 were $368.8 million compared to
$241.5 million in the first half of 1999, an increase of 52.7%.
For the first half of 2000, the effect from a strengthened U.S.
dollar reduced sales $7.7 million when compared to sales based
upon the 1999 exchange rates. Including the currency impact,
sales increased 11.0% for Life Science, 122.1% for Clinical
Diagnostics and 6.2% for Analytical Instruments. Life Science
sales increased in its core products and its imaging products.
Clinical Diagnostics sales growth is attributable to $102.1
million of sales from the PSD acquisition and $11.0 million from
the pre-acquisition product lines. The market has improved for
the Company's semiconductor test and manufacturing equipment, the
most significant product line in the Analytical Instruments
segment. The Spectroscopy business remains in decline and the
Company is reviewing its strategic options now that it has
announced the sale of its semiconductor business to Accent
Semiconductor Technologies (Accent).
Consolidated gross margins were 52.8% for the first six months of
2000 compared to 56.1% for the first six months of 1999 and 53.5%
for all of 1999. Life Science margins declined by 0.6% to 54.4%
due to the effect of a strengthening U.S. dollar on foreign
currency denominated sales and product sales mix partially offset
by improved manufacturing efficiency from increased volume.
Clinical Diagnostics margins declined excluding the PSD product
lines, as service costs, re-engineering costs and manufacturing
variances were incurred on outsourced diagnostic equipment.
Analytical Instruments margins improved on stronger semiconductor
sales growth compared to the prior period when the semiconductor
industry had not begun to emerge from the l998-l999 downturn.
SG&A decreased to 33.3% of sales in the first half of 2000 from
35.1% of sales in the comparable period of 1999. The Life Science
segment grew SG&A expenditures by $5.2 million investing in
e-commerce capabilities and distribution and marketing
10
<PAGE>
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 impact of personnel reductions
should benefit future periods as approximately half of the planned
redundancies were completed the last week of June, 2000.
Consolidated R&D increased by $13.9 million in the first half of
2000 compared to the first half of 1999, $6.8 million excluding
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 $16.6 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.
The Company's effective tax rate increased to 32% for the first
half of 2000 from 29% in the prior period. The increase reflects
limitations on the deductibility of goodwill associated with the
PSD acquisition, the utilization of loss carryforwards and the
geographical source of taxable income. In addition, the rate may
increase as a result of the sale of the Company's semiconductor
product line's assets. The allocation of asset valuations and
proceeds amongst the several buyers and sellers are subject to
mutual review and consultation.
Financial Condition
The Company as of June 30, 2000 had available approximately $75.0
million under its principal revolving credit agreement and $16.1
million under various foreign lines of credit. Cash and cash
equivalents available were $13.1 million.
At June 30, 2000, consolidated accounts receivable remained
unchanged from December 31, 1999. This represents the net impact
of a strengthened U.S. dollar lowering foreign denominated
receivables, and an increase in the aging of receivables caused by
the decentralization of collection functions of the PSD
organization from France and the United States to locally based
Latin America and Asia sales organizations. The Company believes
that after a transition period this will allow for overall
improved customer relations and improved collection
administration.
At June 30, 2000, consolidated net inventories increased by $13.1
million from December 31, 1999. Inventory increased in Life
11
<PAGE>
Science for new product introductions to take place before the
year-end related to proteomics and amplification applications, as
well as to build safety stock for key components used across
multiple products. Clinical Diagnostics inventory at year end
was artificially low due to outside suppliers manufacturing
problems. Inventory for the quality controls include some large
periodic bulk sales to be shipped later in the year. 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 $17.1 million for the first half of
2000 compared to $11.0 million for the same period of 1999.
Expenditures rose as the Company invested in data communication and
business systems to standardize and integrate its new acquisition
and production equipment. Capital expenditures include additions of
reagent rental equipment placed with Clinical Diagnostic customers
who then commit to purchasing the Company's diagnostic reagents.
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 June 30, 2000, the Company has repurchased
567,786 shares of Class A common stock and 30,000 shares of Class B
common stock for a total of $14.1 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. There have been no share repurchases made during the
first six months of the year 2000.
The Company had previously announced it's intention to sell or
dispose of certain portions of the Analytical Instruments segment.
As of July 31, 2000, the Company has sold all the assets and
transferred selected liabilities associated with its semiconductor
product lines to Accent for proceeds of approximately $36 million.
Proceeds represent $27 million in cash, a note receivable due in
five years and a less than 20% equity interest in Accent which the
Company will hold as a long term investment on the cost method. The
Company has used $17.0 million of the cash proceeds to reduce
borrowings on the term loan portion of the Senior Credit facility as
called for by the Senior Credit Agreement. The Company is now in
the process of reviewing its strategic options in regards to the
remainder of the Analytical Instruments segment. This segment after
the transfer to Accent will comprise 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
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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. 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 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.
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
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of the SEC Staff in applying generally accepted accounting
principles to revenue recognition in financial statements. The
Company has until the fourth quarter of 2000 to adhere to the
guidance in SAB101. The impact of SAB101 on our consolidated
financial statements has not been determined.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
During the six months ended June 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 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 57% 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.
4.1.2 Amendment dated June 21, 2000 to the Credit Agreement
dated as of September 30, 1999 among Bio-Rad
Laboratories, Inc., the lenders named therein, Banc
One, N.A. as Administrative Agent, ABN AMRO Bank N.V.
as Syndication Agent, and Union Bank of California,
N.A. as Documentation Agent.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended June 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: August 14, 2000 /s/ Thomas C. Chesterman
Thomas C. Chesterman, Vice President,
Chief Financial Officer
Date: August 14, 2000 /s/ James R. Stark
James R. Stark, Corporate Controller
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