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 March 31, 1997. 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 April 30, 1997 <S> <C> Class A Common Stock, Par Value $1.00 per share 9,790,734 Class B Common Stock, Par Value $1.00 per share 2,614,803 </TABLE>
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 March 31, 1997 1996 <S> <C> <C> NET SALES . . . . . . . . . . . . . . . . . . $105,854 $108,272 Cost of goods sold . . . . . . . . . . . . . 43,713 46,840 GROSS PROFIT . . . . . . . . . . . . . . . . 62,141 61,432 Selling, general and administrative expense . 40,718 37,838 Product research and development expense . . 10,808 9,592 INCOME FROM OPERATIONS . . . . . . . . . . . 10,615 14,002 Interest expense . . . . . . . . . . . . . . (285) (840) Investment income, net . . . . . . . . . . . 448 300 Other, net . . . . . . . . . . . . . . . . . (370) (847) INCOME BEFORE TAXES . . . . . . . . . . . . . 10,408 12,615 Provision for income taxes . . . . . . . . . 2,914 3,154 NET INCOME . . . . . . . . . . . . . . . . . $ 7,494 $ 9,461 ======== ======== Earnings per share . . . . . . . . . . . . . $0.61 $0.77 ======== ======== Weighted average common shares . . . . . . . 12,276 12,255 ======== ======== </TABLE> The accompanying notes are an integral part of these statements. 1
BIO-RAD LABORATORIES, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) <TABLE> <CAPTION> March 31, December 31, 1997 1996 (Unaudited) <S> <C> <C> ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . $ 10,667 $ 9,390 Accounts receivable . . . . . . . . . . . . . . . . . 97,116 97,795 Inventories . . . . . . . . . . . . . . . . . . . . . 73,140 69,738 Prepaid expenses, taxes and other current assets . . . 23,324 21,612 Total current assets . . . . . . . . . . . . . . . 204,247 198,535 Net property, plant and equipment . . . . . . . . . . 72,024 71,862 Marketable securities . . . . . . . . . . . . . . . . 8,817 7,432 Other assets . . . . . . . . . . . . . . . . . . . . . 6,745 7,096 Total assets . . . . . . . . . . . . . . . . . . $291,833 $284,925 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Notes payable and current maturities of long-term debt $ 11,918 $ 5,542 Accounts payable . . . . . . . . . . . . . . . . . . . 19,893 21,262 Accrued payroll and employee benefits . . . . . . . . 23,120 23,717 Sales, income and other taxes payable . . . . . . . . 4,766 3,988 Other current liabilities . . . . . . . . . . . . . . 23,987 24,630 Total current liabilities . . . . . . . . . . . . . 83,684 79,139 Long-term debt, net of current maturities . . . . . . 4,572 6,721 Deferred tax liabilities . . . . . . . . . . . . . . . 15,919 15,557 Total liabilities . . . . . . . . . . . . . . . . . 104,175 101,417 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 - 9,788,961 at March 31, 1997 and 9,740,922 at December 31, 1996 . . . . . . . . . 9,789 9,741 Class B common stock, $1.00 par value, 6,000,000 shares authorized; outstanding - 2,614,803 at March 31, 1997 and 2,579,803 at December 31, 1996 . . . . . . . . . 2,615 2,580 Additional paid-in capital . . . . . . . . . . . . . . 18,107 17,067 Class A treasury stock, 79,116 shares at March 31, 1997 and 31,216 shares at December 31, 1996 at cost . . . (2,178) (839) Class B treasury stock, 30,000 shares at March 31, 1997 and December 31, 1996 at cost . . . . . . . . . . . (800) (800) Retained earnings . . . . . . . . . . . . . . . . . . 158,497 151,003 Currency translation . . . . . . . . . . . . . . . . . 502 3,570 Net unrealized holding gain on marketable securities . 1,126 1,186 Total stockholders' equity . . . . . . . . . . . . 187,658 183,508 Total liabilities and stockholders' equity . . . $291,833 $284,925 ======== ======== </TABLE> The accompanying notes are an integral part of these statements. 2
BIO-RAD LABORATORIES, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 1997 1996 <S> <C> <C> Cash flows from operating activities: Cash received from customers . . . . . . . . . . . . . $ 99,499 $100,279 Cash paid to suppliers and employees . . . . . . . . . (99,019) (87,614) Interest paid. . . . . . . . . . . . . . . . . . . . . (282) (1,434) Income tax payments . . . . . . . . . . . . . . . . . (982) (2,932) Miscellaneous receipts . . . . . . . . . . . . . . . . 82 105 Net cash provided by (used in) operating activities. . (702) 8,404 Cash flows from investing activities: Capital expenditures, net. . . . . . . . . . . . . . . (4,842) (2,555) Marketable securities investment activity, net . . . . (1,132) 339 Foreign currency hedges, net . . . . . . . . . . . . . 1,894 382 Net cash used in investing activities. . . . . . . . . (4,080) (1,834) Cash flows from financing activities: Net borrowings under line-of-credit arrangements. . . 6,695 (4,098) Long-term borrowings. . . . . . . . . . . . . . . . . 6,425 - Payments on long-term debt. . . . . . . . . . . . . . (8,589) (187) Proceeds from issuance of common stock. . . . . . . . 1,123 421 Purchase of treasury stock. . . . . . . . . . . . . . (1,339) - Net cash provided by (used in) financing activities . 4,315 (3,864) Effect of exchange rate changes on cash . . . . . . . . . . 1,744 472 Net increase in cash and cash equivalents . . . . . . . . . 1,277 3,178 Cash and cash equivalents at beginning of period. . . . . . 9,390 14,774 Cash and cash equivalents at end of period. . . . . . . . . $ 10,667 $ 17,952 ======== ======== Reconciliation of net income to net cash provided by operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . $ 7,494 $ 9,461 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . 4,217 3,974 Foreign currency hedge transactions, net . . . . . . (2,261) (648) Gains on dispositions of marketable securities . . . (313) (125) Increase in accounts receivable. . . . . . . . . . . (3,808) (7,132) (Increase) decrease in inventories . . . . . . . . . (5,125) 2,232 Increase in other current assets . . . . . . . . . . (1,941) (218) Increase (decrease) in accounts payable and other current liabilities . . . . . . . . . . . . (915) 820 Increase in income taxes payable . . . . . . . . . . 1,917 476 Other. . . . . . . . . . . . . . . . . . . . . . . . 33 (436) Net cash provided by (used in) operating activities . . . . $ (702) $ 8,404 ======== ======== </TABLE> The accompanying notes are an integral part of these statements. 3
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, 1996 (the Company's 1996 Annual Report). Certain amounts in the financial statements of the prior year have been reclassified to be consistent with the 1997 presentation. 2. INVENTORIES <TABLE> The principal components of inventories are as follows: <CAPTION> March 31, December 31, 1997 1996 (in thousands) <S> <C> <C> Raw materials $ 28,299 $ 26,920 Work in process 21,412 19,866 Finished goods 23,429 22,952 $ 73,140 $ 69,738 ======== ======== </TABLE> 3. PROPERTY, PLANT AND EQUIPMENT <TABLE> The principal components of property, plant and equipment are as follows: <CAPTION> March 31, December 31, 1997 1996 (in thousands) <S> <C> <C> Land and improvements $ 8,057 $ 8,057 Buildings and leasehold improvements 52,098 52,050 Equipment 109,031 107,847 169,186 167,954 Less accumulated depreciation 97,162 96,092 Net property, plant and equipment $ 72,024 $ 71,862 ======== ======== </TABLE> 4
4. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share", effective for financial statements issued for periods ending after December 15, 1997. Under SFAS 128, Bio-Rad will be required to disclose basic earning per share and diluted earnings per share. Earnings per share as currently reported by Bio-Rad are equal to basic earnings per share as defined in SFAS 128. Historically, Bio-Rad has not been subject to the provisions of the Accounting Principles Board Opinion No. 15 because common stock equivalents as defined within that statement resulted in dilution of less than 3%. 5
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, 1996. <TABLE> The following table shows operating income and expense items as a percentage of net sales: <CAPTION> Three Months Ended Year Ended March 31, December 31, 1997 1996 1996 <S> <C> <C> <C> Net sales 100.0 100.0 100.0 Cost of goods sold 41.3 43.3 43.5 Gross profit 58.7 56.7 56.5 Selling, general and administrative 38.5 34.9 37.1 Product research and development 10.2 8.9 9.5 Restructuring costs - - 0.6 Income from operations 10.0 12.9 9.3 ===== ===== ===== </TABLE> Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996 Corporate Results - Sales, Margins and Expenses Net sales (sales) in the first quarter of 1997 were $105.9 million compared to $108.3 million in the first quarter of 1996. For the first quarter of 1997, the effect of a strengthened U.S. dollar reduced international sales by approximately $4.0 million when compared to sales based upon 1996 exchange rates. Sales increased 7% in Life Science, but were down 3% in Clinical Diagnostics and 22% in Analytical Instruments. Sales growth in the Life Science segment is attributed to new product introductions in the latter part of 1996 and early 1997; the impact of foreign exchange reduced this growth by approximately 4%. Excluding the impact of the strengthened U.S. dollar, sales were flat in Clinical Diagnostics. Approximately 10% of the decline in Analytical Instruments sales is attributable to Japan. During the first quarter of 1996, Analytical Instruments 6
benefited from the government injecting money into the Japanese economy for capital expenditures; this was not repeated in 1997. Customer delivery schedules and a slowdown in deliveries to the semiconductor market accounts for another 6% of the decline in Analytical Instruments sales; and currency fluctuations account for approximately 3% of the decline. Consolidated gross margins were 58.7% for the first quarter of 1997 compared to 56.7% for the first quarter of 1996. Gross margins improved in all three of the Company's segments. The improvement in gross margin is primarily due to the change in product mix. Sales in the first quarter of 1996 included more instrument sales which generally have lower margins than sales of consumable products and there were fewer returns in the Life Science segment after implementing a program to increase product quality. Selling, general and administrative expense (SG&A) increased to 38.5% of sales in the first quarter of 1997 from 34.9% of sales in the comparable period of 1996. SG&A spending increased in all segments reflecting planned spending increases in anticipation of sales growth. The majority of the increased spending was for personnel and advertising. Product research and development expense (R&D) increased from the first quarter of 1996, both in absolute dollars and as a percent of sales. As part of the Company's continuing commitment to long-term growth, Bio-Rad continues to expand R&D. Compared to the first quarter of 1996, spending increased in both the Life Science and Analytical Instruments segments. R&D spending was down approximately $0.5 million in Clinical Diagnostics. Corporate Results - Non-Operating Items Interest expense was $555,000 less in the first quarter of 1997 than the comparable period of 1996 principally as a result of lower average borrowings. The early extinguishment of $20 million of subordinated notes in December 1996 has reduced the Company's debt level to that of pre-1980. Investment income in both years includes gains on sales of marketable securities and interest income from short-term investments. Net other income and expense in the first quarter of 1997 includes net exchange losses and goodwill amortization. Bio-Rad regularly enters into forward foreign exchange contracts as a hedge against foreign currency denominated intercompany receivables and payables. Net other income and expense in the first quarter of 1996 was primarily non-operating legal costs. As expected, the Company's effective tax rate increased from 25% 7
to 28% for the first quarter of 1997. The tax rate for both years reflects the utilization of loss carryforwards, foreign sales corporation benefits and foreign tax credits. However, the benefits realized in 1997 will not be at the same level as 1996. Financial Condition At March 31, 1997, the Company had available $10.7 million in cash and cash equivalents, $57.0 million under its principal revolving credit agreement and marketable securities with a market value of $8.8 million, most of which could be readily converted to cash. Financing activities, principally borrowings under short-term lines of credit, provided the Company with the cash flow necessary to support investing activities and the modest shortfall in operating activities. During the first quarter of 1997, the Company continued to repurchase common stock, an action began in July 1996 when the Board of Directors authorized the spending of up to $4 million. To date, the Company has repurchased $3.2 million of common stock, which will be used to satisfy the Company's obligations under the employee stock purchase and stock option plans. Bio- Rad remains well positioned to make a substantial strategic acquisition should the opportunity arise. While the Company regularly reviews such opportunities, currently no acquisitions have reached a stage beyond preliminary exploratory discussions. At March 31, 1997, consolidated accounts receivable decreased by $0.7 million from December 31, 1996. Excluding the effects of the strengthened U.S. dollar, accounts receivable increased by $3.8 million. The increase is a result of local operations opportunistically using credit in the sales process, increased equipment sales which require extensive acceptance procedures and in some areas, a slow down in the payment process. Management has noted the overall increase and has taken selective steps where advantageous to accelerate customer payments. At March 31, 1997, consolidated net inventories were $3.4 million higher than at December 31, 1996. The increase in inventory occurred in all three segments of the Company's business in anticipation of planned sales that were not realized. Management continues to monitor inventory levels and regularly reviews the impact of obsolescence in current inventory caused by the introduction of new products. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. At the Company's annual meeting of stockholders on April 29, 1997, the following individuals were reelected to the Board of Directors: 8
<TABLE> <CAPTION> Class of Common Stock Votes Votes Elected From For Withheld <S> <C> <C> <C> James J. Bennett Class B 2,188,037 1,794 Albert J. Hillman Class A 8,734,042 140,417 Philip L. Padou Class A 8,734,042 140,417 Alice N. Schwartz Class B 2,188,037 1,794 David Schwartz Class B 2,188,037 1,794 Norman Schwartz Class B 2,188,037 1,794 Burton A. Zabin Class B 2,188,037 1,794 </TABLE> The following proposal was approved at the Company's annual meeting: <TABLE> <CAPTION> Votes Votes Broker For Against Abstentions Non-Votes <S> <C> <C> <C> <C> Ratification of Arthur Andersen LLP as the Company's independent auditors 3,074,410 1,703 1,164 -- </TABLE> The foregoing matters are described in detail in the Company's definitive Proxy Statement dated April 1, 1997, filed with the Securities and Exchange Commission and incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits The following documents are filed as part of this report: Exhibit No. 11.1 Computation of Earnings Per Share. 22.1 Proxy Statement dated April 1, 1997 (definitive form filed April 2, 1997 and incorporated by reference). 27.1 Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K for the quarter ended March 31, 1997. 9
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: May 13, 1997 /s/ Thomas C. Chesterman Thomas C. Chesterman, Vice President, Chief Financial Officer Date: May 13, 1997 /s/ James R. Stark James R. Stark, Corporate Controller 10