SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________ FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _________ to _________________ Commission file number 1-7928 BIO-RAD LABORATORIES, INC. (Exact name of registrant as specified in its charter) Delaware 94-1381833 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Alfred Nobel Drive, Hercules, CA 94547 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (510) 724-7000 <TABLE> Securities registered pursuant to Section 12(b) of the Act: <CAPTION> Market Value on Name of each exchange Shares outstanding March 20, 1997 of stocks Title of each class on which registered March 20, 1997 held by non-affiliates ------------------- --------------------- ------------------ ------------------------ <S> <S> <C> <C> Class A Common Stock Par Value $1.00 per share American Stock Exchange 9,786,229 $215,611,963 Class B Common Stock Par Value $1.00 per share American Stock Exchange 2,615,803 $ 13,683,695 </TABLE> Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Documents Incorporated by Reference Document Form 10-K Parts _________________________________________ ____________________ (1) Annual Report to Stockholders for the fiscal year ended December 31, 1996 (specified portions) I, II, IV (2) Definitive Proxy Statement to be mailed to stockholders in connection with the registrant's 1997 Annual Meeting of Stockholders (specified portions) III
P A R T I ITEM 1. BUSINESS General Founded in 1957, Bio-Rad Laboratories, Inc. ("Bio-Rad" or the "Company") was initially engaged in the development and produc- tion of specialty chemicals used in biochemical, pharmaceutical and other life science research applications. In 1967, the Com- pany entered the field of clinical diagnostics with the develop- ment of its first test kit based on separation techniques and materials developed for life sciences research. Recognizing that the fields of clinical diagnostics and life sciences research were evolving toward more automated techniques, Bio-Rad expanded into the field of analytical and measuring instrument systems through internal research and development efforts and acquisitions in the late 1970's and 1980's. As Bio-Rad broadened its product lines, it has also widened its geographical market. The Company controls its distribution chan- nels in twenty-two countries outside the U.S.A. through subsidiaries whose primary focus is customer service and product distribution. Bio-Rad manufactures and supplies the life sciences research, healthcare, analytical chemistry, semiconductor and other markets with a broad range of products and systems used to separate complex chemical and biological materials and to identify, analyze and purify their components. Business Segments The Company operates in three industry segments designated Life Science, Clinical Diagnostics and Analytical Instruments. Each operates in both the U.S. and international markets. For finan- cial information on geographic and industry segments, see Note 13 on pages 22 and 23 of Exhibit 13.1, which is incorporated herein by reference. Exhibit 13.1 is the Company's Consolidated Financial Statements, which is an excerpt from the Company's 1996 Annual Report to Stockholders. Description of Business Life Science The Life Science segment develops, manufactures, sells and services electrophoresis, gene transfer, chromatography, immunoassay, imaging and image analysis products including specialty chemical and biological materials, separation and purification systems, laser scanning confocal microscopes and accessories. These products are used to separate, purify and analyze complex chemical mixtures and are sold to universities, private industry, government agencies and clinical and hospital laboratories. They are used in biochemistry, molecular biology, cancer research, immunology, and other areas of life science and genetic research. In addition, these products are sold to 1
industrial and commercial customers, including pharmaceutical, biotechnology and food processing companies, for research and development, manufacturing and quality control applications. Clinical Diagnostics The Clinical Diagnostics segment develops and manufactures automated test systems, test kits and specialized quality controls for the healthcare market. Hospitals and clinical laboratories use these products to assist physicians in diagnosing and monitoring their patients. Many of these products are based on innovative applications of technologies originally developed for life science research. Bio-Rad also develops, manufactures and distributes controls for immunoassay testing, therapeutic drug monitoring and other applications. Analytical Instruments Bio-Rad's Analytical Instruments segment develops, manufactures, sells and services FT-IR spectrometer systems, semiconductor measurement test and manufacturing instruments and spectral reference publications. Purchasers of these products include government agencies, universities, research institutions and industrial companies. These products are used in industrial and scientific research, in manufacturing and in quality control applications. Raw Materials and Components The Company utilizes a wide variety of chemicals, biological materials, electronic components, machined metal parts, optical parts, minicomputers and peripheral devices. Most of these materials and components are available from numerous sources and the Company has not experienced difficulty in securing adequate supplies. Patents and Trademarks The Company owns numerous U.S. and international patents and patent licenses. Bio-Rad believes, however, that its ability to develop and manufacture its products depends primarily on its know-how, technology and special skills. Under several patent license agreements, Bio-Rad pays royalties on the sales of certain products. Bio-Rad views these patents and license agreements as valuable assets, however, no individual agreement is of material importance to any segment or to the Company's business as a whole. 2
Seasonal Operations and Backlog The Company's business is not inherently seasonal, however, the European custom of concentrating vacation during the summer months usually has had a negative impact on third quarter sales volume and operating income. For the most part, the Company operates in markets characterized by short lead times and the absence of significant backlogs. The Company produces several analytical instruments against an order backlog. Management has concluded that backlog information is not material to the Company's business as a whole. Sales and Marketing Each of Bio-Rad's divisions maintains a sales force or works in conjunction with other divisions to sell its products on a direct basis. Each sales force is technically trained in the disciplines associated with its products. Sales are also generated through direct mail advertising, exhibits at trade shows and technical meetings, and by extensive advertising in technical and trade publications. Sales and marketing efforts are augmented by technical service departments that assist customers in effective product utilization and in new product applications. Bio-Rad also produces and distributes technical literature and holds seminars for customers on the use of its products. Bio-Rad products are sold to a broad and diversified customer base. In 1996, no single customer accounted for as much as 2% of Bio-Rad's total sales. A number of the Company's customers, particularly in Life Science, are substantially dependent for their funding on government grants and research contracts. A portion of the Analytical Instruments segment is dependent upon large semiconductor manufacturers; the loss of these customers or a severe downturn in the semiconductor market would have a detrimental effect on the results of the segment. Most of the Company's international sales are generated by wholly-owned subsidiaries and their branch offices in Australia, Austria, Belgium, Canada, Denmark, England, Finland, France, Germany, Hong Kong, India, Israel, Italy, Japan, Korea, the Netherlands, New Zealand, People's Republic of China, Singapore, Spain, Sweden and Switzerland. Certain of these subsidiaries also have manufacturing facilities. While Bio-Rad's international operations are subject to certain risks common to foreign operations in general, such as changes in governmental regulations, import restrictions and foreign exchange fluctuations, the Company's international operations are principally in developed nations, which the Company regards as presenting no significantly greater risks to its operations than 3
are present in the United States. Competition Most markets served by Bio-Rad's product groups are competitive. Bio-Rad's competitors range in size from start-ups to large multi-nationals. Reliable independent information on sales and market share of products produced by Bio-Rad's competitors is not generally available. Bio-Rad believes, however, based on its own marketing information, that while some competitors are dominant with respect to certain individual products, no one company, including Bio-Rad, is dominant with respect to a material portion of any segment of Bio-Rad's business. Product Research and Development The Company conducts extensive product research and development activities in all areas of its business, employing approximately 345 people worldwide in these activities. Research and development have played a major role in Bio-Rad's growth and are expected to continue to do so in the future. New products and new applications for existing products are being developed continuously by Bio-Rad's researchers. In its development and testing of new products and applications, Bio-Rad consults with scientific and medical professionals at universities, at hospitals and medical schools, and in industry. Bio-Rad spent approximately $39.6 million, $34.7 million and $30.2 million on R&D activities during the years ended December 31, 1996, 1995 and 1994, respectively. Regulatory Matters Certain of the Company's products (primarily diagnostic products) are subject to regulation in the United States by the Center for Devices and Radiological Health of the United States Food and Drug Administration (FDA) and in other jurisdictions by state and foreign government authorities. FDA regulations require that some new products have pre-marketing approval by the FDA and require certain of Bio-Rad's products to be manufactured in accordance with "good manufacturing practices", to be extensively tested and to be properly labeled to disclose test results and performance claims and limitations. As a multinational manufacturer and distributor of sophisticated instrumentation equipment, Bio-Rad must meet a wide array of electromagnetic compatibility and safety compliance requirements to satisfy regulations in the United States, the European Community and other jurisdictions. The Company is also subject to government regulation of the use and handling of radioactive materials and controlled substances. The Company believes it is in compliance with these and other regulations. 4
Certain of the Company's production processes involve the use of materials whose use is subject to federal, state and local environmental regulations. The Company regularly evaluates its processes and procedures to ensure compliance with applicable environmental standards and regulations. Although, from time to time, modification of processes and procedures may be required which will require additional capital expenditures, the Company presently believes that any such expenditures will have no material adverse effect on the future results of operations or the financial position of the Company. Employees At December 31, 1996, Bio-Rad had approximately 2,535 full-time employees. Fewer than 8% of Bio-Rad's employees are covered by a collective bargaining agreement which will expire on October 31, 1998. Bio-Rad considers its employee relations in general to be good. ITEM 2. PROPERTIES Bio-Rad owns its Corporate headquarters located in Hercules, California. The principal manufacturing and research locations for each segment are as follows: Life Science Richmond, California Owned/Leased Hercules, California Owned Hemel Hempstead, England Leased Milan, Italy Leased Clinical Diagnostics Hercules, California Owned/Leased Anaheim, California Leased Munich, Germany Leased Analytical Instruments Cambridge, Massachusetts Owned/Leased York, England Owned Philadelphia, Pennsylvania Owned Most manufacturing and research facilities also house administration, sales and distribution activities for the segment. In addition, the Company leases office and warehouse facilities in California, Colorado, New Mexico, Australia, Austria, Belgium, Canada, Denmark, England, Finland, France, Germany, Hong Kong, India, Israel, Italy, Japan, Korea, the Netherlands, New Zealand, People's Republic of China, Singapore, Spain, Sweden and Switzerland. These facilities are used principally for administration, sales, service and distribution for all three segments. The company has leased space in California, Canada, England and 5
New York that is not currently being utilized. For the most part, reserves for future lease payments were recorded at the time the Company stopped using these facilities. The Company has subleased or is attempting to sublease these properties. The Company has recently leased a new facility in California that will replace the existing research, manufacturing and warehouse facilities in Anaheim California during 1997. All facilities are believed to be adequate to support the Company's current and anticipated production requirements. Historically, adequate space to expand sales and distribution channels has been available and is leased as needed. ITEM 3. LEGAL PROCEEDINGS Note 11, "Legal Proceedings", appearing on pages 20 and 21 of Exhibit 13.1 is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this report. P A R T II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Note 15, "Information Concerning Common Stock", appearing on pages 24 and 25 of Exhibit 13.1 is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The table headed "Summary of Operations" appearing on page 1 of Exhibit 13.1 is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The section headed "Management's Discussion and Analysis of Results of Operations and Financial Condition" appearing on pages 27 through 31 of Exhibit 13.1 is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of Independent Public Accountants and the Consolidated Financial Statements and Notes thereto appearing on pages 2 through 26 of Exhibit 13.1 are incorporated herein by reference. 6
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. P A R T III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The sections labeled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" of the definitive Proxy Statement mailed to stockholders in connection with the 1997 Annual Meeting of Stockholders (the 1997 Proxy Statement) are incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The sections labeled "Executive Compensation and Other Information", "Compensation of Directors", "Compensation Committee Interlocks and Insider Participation", "Report of the Compensation Committee of the Board of Directors" and "Stock Performance Graph" of the 1997 Proxy Statement are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section labeled "Principal and Management Stockholders" of the 1997 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The section labeled "Compensation of Directors" of the 1997 Proxy Statement is incorporated herein by reference. 7
P A R T IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Index to Financial Statements The following Consolidated Financial Statements are included in the 1996 Annual Report and are incorporated herein by reference pursuant to Item 8: Page in Exhibit 13.1 Consolidated Balance Sheets at December 31, 1996 and 1995 2-3 Consolidated Statements of Income for each of the three years in the period ended December 31, 1996 4 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1996 5 Consolidated Statements of Changes in Stockholders' Equity for each of the three years in the period ended December 31, 1996 6 Notes to Consolidated Financial Statements 7-25 Report of Independent Public Accountants 26 2. Index to Financial Statement Schedule Page in Form 10-K Schedule II Valuation and Qualifying Accounts 9 Report of Independent Public Accountants on Schedule II 10 All other financial statement schedules are omitted because they are not required or because the required information is included in the Consolidated Financial Statements or the Notes thereto. 3. Index to Exhibits The exhibits listed in the accompanying Index to Exhibits on pages 12 and 13 of this report are filed or incorporated by reference as part of this report. (b) Reports on Form 8-K There were no reports on Form 8-K filed by the Company during the last quarter of the period covered by this report. 8
BIO-RAD LABORATORIES, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1996, 1995 and 1994 (In thousands) <TABLE> Reserve for doubtful accounts receivable <CAPTION> Additions Balance at Charged to Balance Beginning Costs and at End of Year Expenses Deductions of Year <S> <C> <C> <C> <C> 1996 $3,094 $ 952 $ (358) $3,688 ===== ===== ===== ===== 1995 $2,894 $ 462 $ (262) $3,094 ===== ===== ===== ===== 1994 $2,033 $1,283 $ (422) $2,894 ===== ===== ===== ===== </TABLE> <TABLE> Valuation allowance for deferred tax assets <CAPTION> Deductions Balance at Charged to Balance Beginning Costs and at End of Year Additions Expenses of Year <S> <C> <C> <C> <C> 1996 $ 6,478 $ - $ (906) $ 5,572 ====== ====== ====== ====== 1995 $ 7,209 $ - $ (731) $ 6,478 ====== ====== ====== ====== 1994 $12,353 $ - $(5,144) $ 7,209 ====== ====== ====== ====== </TABLE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II To the Stockholders and Board of Directors of Bio-Rad Laboratories, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Bio-Rad Laboratories, Inc.'s annual report to stockholders incorportated by reference in this Form 10-K, and have issued our report thereon dated February 4, 1997. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index, Item 14(a)2, is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP San Francisco, California, February 4, 1997 10
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BIO-RAD LABORATORIES, INC. By: /s/ Sanford S. Wadler Sanford S. Wadler Secretary Date: March 26, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Principal Executive Officer: /s/ David Schwartz President and Director March 26, 1997 (David Schwartz) Principal Financial Officer: /s/ T. C. Chesterman Chief Financial Officer March 26, 1997 (Thomas C. Chesterman) Principal Accounting Officer: /s/ James R. Stark Corporate Controller March 26, 1997 (James R. Stark) Other Directors: /s/ James J. Bennett Director March 26, 1997 (James J. Bennett) /s/ Albert J. Hillman Director March 26, 1997 (Albert J. Hillman) /s/ Philip L. Padou Director March 26, 1997 (Philip L. Padou) /s/ Alice N. Schwartz Director March 26, 1997 (Alice N. Schwartz) /s/ Norman Schwartz Director March 26, 1997 (Norman Schwartz) /s/ Burton A. Zabin Director March 26, 1997 (Burton A. Zabin) 11
BIO-RAD LABORATORIES, INC. INDEX TO EXHIBITS ITEM 14(a)3 The following documents are filed as part of this report: Exhibit No. 3.1 Restated Certificate of Incorporation, as of September 15, 1988. (1) 3.2 Bylaws of the Registrant, as amended February 19, 1980. (2) 10.4 1994 Stock Option Plan. (3) 10.5 Amended 1988 Employee Stock Purchase Plan. (4) 10.6 Employees' Deferred Profit Sharing Retirement Plan. (5) 10.9 Credit Agreement dated as of February 18, 1994, by and among the Registrant, the Lenders and The First National Bank of Chicago, as agent. (6) 10.9.1 Amendment dated as of September 30, 1994 to the Credit Agreement dated as of February 18, 1994, by and among the Registrant, the Lenders and The First National Bank of Chicago, as agent. (7) 10.9.2 Amendment dated as of May 30, 1995 to the Credit Agreement dated as of February 18, 1994, by and among the Registrant, the Lenders and The First National Bank of Chicago, as agent. (7) 10.9.3 Amendment dated as of July 10, 1996 to the Credit Agreement dated as of February 18, 1994, by and among the Registrant, the Lenders and The First National Bank of Chicago, as agent. (8) 10.10 Non-competition and employment continuation agreement with James J. Bennett. 11.1 Computation of Earnings Per Share. 13.1 Excerpt from Annual Report to Stockholders' for the fiscal year ended December 31, 1996 (to be deemed filed only to the extent required by the instructions to exhibits for reports on Form 10-K). 21.1 Listing of Subsidiaries. 23.1 Consent of Independent Public Accountants. 27.1 Financial Data Schedule. ________________________________________________________________ (1) Incorporated by reference from the Exhibits to the Company's Form 10-K filing for the fiscal year ended December 31, 1992, dated March 26, 1993. 12
(2) Incorporated by reference from the Exhibits to the Company's Registration Statement on Form S-7 Registration No. 2-66797, which became effective April 22, 1980. (3) Incorporated by reference from the Exhibits to the Company's Form S-8 filing, dated April 28, 1994. (4) Incorporated by reference from the Exhibits to the Company's Form S-8 filing, dated April 28, 1994. (5) Incorporated by reference from the Exhibits to the Company's Form 10-K filing for the fiscal year ended December 31, 1994, dated March 23, 1995. (6) Incorporated by reference from the Exhibits to the Company's Form 10-K filing for the fiscal year ended December 31, 1993, dated March 24, 1994. (7) Incorporated by reference from the Exhibits to the Company's September 30, 1995 Form 10-Q filing dated November 3, 1995. (8) Incorporated by reference from the Exhibits to the Company's September 30, 1996 Form 10-Q filing dated November 8, 1996. 13