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, 1996. 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, 1996 <S> <C> Class A Common Stock, Par Value $1.00 per share 6,436,820 Class B Common Stock, Par Value $1.00 per share 1,752,348 </TABLE>
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. BIO-RAD LABORATORIES, INC. Condensed Consolidated Statements of Income (In thousands, except per share data) <TABLE> <CAPTION> Three Months Ended March 31, 1996 1995 <S> <C> <C> NET SALES . . . . . . . . . . . . . . . . . . $108,272 $ 97,858 Cost of goods sold . . . . . . . . . . . . . 46,840 41,817 GROSS PROFIT . . . . . . . . . . . . . . . . 61,432 56,041 Selling, general and administrative expense . 37,838 34,956 Product research and development expense . . 9,592 8,376 INCOME FROM OPERATIONS . . . . . . . . . . . 14,002 12,709 Interest expense . . . . . . . . . . . . . . (840) (1,282) Investment income, net . . . . . . . . . . . 300 208 Other, net . . . . . . . . . . . . . . . . . (847) (897) INCOME BEFORE TAXES . . . . . . . . . . . . . 12,615 10,738 Provision for income taxes . . . . . . . . . 3,154 2,685 NET INCOME . . . . . . . . . . . . . . . . . $ 9,461 $ 8,053 ======== ======== Per share data prior to second quarter stock split: Earnings per share . . . . . . . . . . . . . $1.16 $0.99 ======== ======== Weighted average common shares . . . . . . . 8,170 8,113 ======== ======== </TABLE> The accompanying notes are an integral part of these unaudited statements. 1
BIO-RAD LABORATORIES, INC. Condensed Consolidated Balance Sheets (In thousands, except share data) <TABLE> <CAPTION> March 31, December 31, 1996 1995 <S> <C> <C> ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . $ 17,952 $ 14,774 Accounts receivable . . . . . . . . . . . . . . . . . 98,241 92,061 Inventories . . . . . . . . . . . . . . . . . . . . . 72,539 75,357 Prepaid expenses, taxes and other current assets. . . 20,627 19,400 Total current assets . . . . . . . . . . . . . . . 209,359 201,592 Net property, plant and equipment . . . . . . . . . . 71,832 72,966 Marketable securities . . . . . . . . . . . . . . . . 5,652 5,902 Other assets . . . . . . . . . . . . . . . . . . . . 4,688 4,638 Total assets . . . . . . . . . . . . . . . . . . $ 291,531 $ 285,098 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Notes payable and current maturities of long-term debt $ 10,056 $ 14,269 Accounts payable . . . . . . . . . . . . . . . . . . 19,448 19,946 Accrued payroll and employee benefits . . . . . . . . 23,283 23,908 Sales, income and other taxes payable . . . . . . . . 8,463 7,082 Other current liabilities . . . . . . . . . . . . . . 25,277 24,612 Total current liabilities . . . . . . . . . . . . 86,527 89,817 Long-term debt, net of current maturities . . . . . . 20,976 20,922 Deferred tax liabilities . . . . . . . . . . . . . . 17,760 17,300 Total liabilities . . . . . . . . . . . . . . . . 125,263 128,039 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 - 6,427,253 at March 31, 1996 and 6,395,522 at December 31, 1995 . . . . . . . 6,427 6,396 Class B common stock, $1.00 par value, 6,000,000 shares authorized; outstanding - 1,752,348 at March 31, 1996 and 1,764,042 at December 31, 1995. . . . . . . . 1,752 1,764 Additional paid-in capital . . . . . . . . . . . . . . 20,368 19,966 Retained earnings . . . . . . . . . . . . . . . . . . 134,318 124,857 Currency translation . . . . . . . . . . . . . . . . 2,885 3,527 Net unrealized holding gain on marketable securities. 518 549 Total stockholders' equity . . . . . . . . . . . . 166,268 157,059 Total liabilities and stockholders' equity . . $ 291,531 $ 285,098 ========= ========= </TABLE> The accompanying notes are an integral part of these unaudited statements. 2
BIO-RAD LABORATORIES, INC. Condensed Consolidated Statements of Cash Flows (In thousands) <TABLE> <CAPTION> Three Months Ended March 31, 1996 1995 <S> <C> <C> Cash flows from operating activities: Cash received from customers . . . . . . . . . . . . $100,279 $ 92,121 Cash paid to suppliers and employees . . . . . . . . (87,614) (81,696) Interest paid. . . . . . . . . . . . . . . . . . . . (1,434) (1,232) Income tax payments . . . . . . . . . . . . . . . . (2,932) (591) Miscellaneous receipts (payments) . . . . . . . . . 105 (59) Net cash provided by operating activities. . . . . . 8,404 8,543 Cash flows from investing activities: Capital expenditures, net. . . . . . . . . . . . . . (2,555) (2,676) Marketable securities investment activity, net . . . 339 (1) Foreign currency hedges, net . . . . . . . . . . . . 382 (464) Net cash used in investing activities. . . . . . . . (1,834) (3,141) Cash flows from financing activities: Net borrowings under line-of-credit arrangements. . (4,098) (213) Additions to long-term debt . . . . . . . . . . . . - 17,967 Payments on long-term debt. . . . . . . . . . . . . (187) (19,084) Proceeds from issuance of common stock. . . . . . . 421 282 Net cash used in financing activities . . . . . . . (3,864) (1,048) Effect of exchange rate changes on cash . . . . . . . . . 472 (2,188) Net increase in cash and cash equivalents . . . . . . . . 3,178 2,166 Cash and cash equivalents at beginning of period. . . . . 14,774 3,751 Cash and cash equivalents at end of period. . . . . . . . $ 17,952 $ 5,917 ======== ======== Reconciliation of net income to net cash provided by operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . $ 9,461 $ 8,053 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . 3,974 4,181 Foreign currency hedge transactions, net . . . . . (648) 1,921 Gains on dispositions of marketable securities . . (125) (143) Increase in accounts receivable. . . . . . . . . . (7,132) (7,861) (Increase) decrease in inventories . . . . . . . . 2,232 (4,465) Increase in other current assets . . . . . . . . . (218) (373) Increase in accounts payable and other current liabilities. . . . . . . . . . . . . . . 820 5,385 Increase in income taxes payable . . . . . . . . . 476 2,088 Other. . . . . . . . . . . . . . . . . . . . . . . (436) (243) Net cash provided by operating activities . . . . . . . . $ 8,404 $ 8,543 ======== ======== </TABLE> The accompanying notes are an integral part of these unaudited statements. 3
BIO-RAD LABORATORIES, INC. Notes to Condensed Consolidated Financial Statements 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, 1995 (the Company's 1995 Annual Report). Certain amounts in the financial statements of the prior year have been reclassified to be consistent with the 1996 presentation. 2. INVENTORIES <TABLE> The principal components of inventories are as follows: <CAPTION> March 31, December 31, 1996 1995 (in thousands) <S> <C> <C> Raw materials $ 27,899 $ 26,467 Work in process 18,190 17,189 Finished goods, net 26,450 31,701 $ 72,539 $ 75,357 ======== ======== </TABLE> 3. PROPERTY, PLANT AND EQUIPMENT <TABLE> The principal components of property, plant and equipment are as follows: <CAPTION> March 31, December 31, 1996 1995 (in thousands) <S> <C> <C> Land and improvements $ 8,057 $ 8,057 Buildings and leasehold improvements 51,834 51,786 Equipment 101,014 99,486 160,905 159,329 Less accumulated depreciation 89,073 86,363 Net property, plant and equipment $ 71,832 $ 72,966 ======== ======== </TABLE> 4
4. SUBSEQUENT EVENT - 3-FOR-2 STOCK SPLIT On April 30, 1996 the Company announced that its Board of Directors had approved a 3-for-2 stock split on both its Class A and Class B common stock, to be effected in the form of a 50% stock dividend payable May 31, 1996 to stockholders of record on May 16, 1996. Weighted average common shares and earnings per share will be retroactively adjusted for this stock split. After adjustment, earnings per share for the first quarter of 1996 and 1995 will be $0.77 and $0.66, respectively. 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, 1995. <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, 1996 1995 1995 <S> <C> <C> <C> Net sales 100.0 100.0 100.0 Cost of goods sold 43.3 42.7 43.4 Gross profit 56.7 57.3 56.6 Selling, general and administrative 34.9 35.7 37.9 Product research and development 8.9 8.6 8.7 Restructuring costs - - 0.4 Income from operations 12.9 13.0 9.6 ===== ===== ===== </TABLE> Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995 Corporate Results - Sales, Margins and Expenses Bio-Rad's net sales (sales) in the first quarter of 1996 reached a record $108.3 million up 11% from the $97.9 million reported in the first quarter of 1995. For the first quarter of 1996, the effects of a stronger U.S. dollar reduced the increase in consolidated sales compared to sales based on 1995 exchange rates by approximately $0.5 million. Compared to the first quarter of 1995, sales increased 32% in Analytical Instruments, 8% in Clinical Diagnostics and 6% in Life Science. Owing to strength in the semiconductor market, Analytical Instruments semiconductor test and manufacturing equipment sales have increased at double digit rates when compared to the comparable quarter of the prior year since the third quarter of 1994. In the first quarter of 1996 this segment also experienced comparable growth in the sales of spectroscopy equipment. The improved trend in Clinical Diagnostic sales is primarily attributable to increases in Europe and the Pacific Rim. 6
Consolidated gross margins were 56.7% for the first quarter of 1996 compared to 57.3% for the first quarter of 1995 and 56.6% reported for the entire year of 1995. Gross margin decreased in the Clinical Diagnostics segment, increased slightly in the Analytical Instrument segment and remained the same in the Life Science segment. The decline in margin in the Clinical Diagnostics segment is primarily due to unfavorable manufacturing variances. Selling, general and administrative expense (SG&A) decreased to 34.9% of sales in the first quarter of 1996 from 35.7% of sales in the first quarter of 1995. While spending increased in absolute dollars in all segments, Analytical Instruments and Clinical Diagnostics succeeded in growing sales faster than SG&A for the first quarter of 1996. Management continues to monitor SG&A spending in an effort to improve overall profitability. Product research and development expense (R&D) increased from the first quarter of 1995, both in absolute dollars and as a percent of sales. As planned, R&D was expanded and spending increased in all segments as part of Bio-Rad's continuing commitment to long-term growth. Corporate Results - Non-Operating Items Interest expense was $442,000 less in the first quarter of 1996 than the comparable period of 1995 principally as a result of lower average borrowings. Average borrowings in the first three months of 1996 were 33% less than average borrowings in the same period of 1995. Net other income and expense in the first quarter of both 1996 and 1995 is primarily non-operating legal costs. The Company's effective tax rate for the first quarter of 1996 and all of 1995 was 25%. The tax rate reflects the utilization of foreign loss carryforwards, foreign sales corporation benefits and foreign tax credits. Financial Condition Net cash provided by operations was $8.4 million for the quarter ended March 31, 1996 compared to $8.5 million for the comparable quarter of 1995. Cash provided by operations and limited capital expenditures allowed Bio-Rad to further reduce interest bearing debt and continue to improve its debt to equity ratio. At March 31, 1996, the Company had available $18.0 million in cash and cash equivalents, $60.0 million under its principal revolving credit agreement and marketable securities with a market value of $5.7 million, most of which could be readily converted to cash. During the first quarter of 1996, Bio-Rad did not utilize its principal revolving credit facility. The majority of excess cash has been invested in short-term instruments. Available funds and cash flow from operations are adequate to meet the Company's 7
objectives for operations, research and development and modest external growth. Management believes Bio-Rad is well positioned to make a substantial strategic acquisition should the opportunity arise. While the Company regularly reviews such opportunities, currently no material acquisitions have reached a stage beyond preliminary exploratory discussions. At March 31, 1996, consolidated accounts receivable were $6.2 million higher than at December 31, 1995. Approximately $3.2 million of the increase is attributed to increased sales in Japan in the first quarter of 1996 when compared to the fourth quarter of 1995. The remainder is attributable to increased sales of larger and more complex instruments, principally in the Pacific Rim where payment terms are, on average, longer than in North America and Europe. At March 31, 1996 consolidated net inventories decreased by $2.8 million from December 31, 1995. The decline in inventory is the result of management's continuous attention to lowering inventory levels as a means to control capital requirements and improve the return on assets employed. Management regularly plans for and 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 30, 1996, the following individuals were reelected to the Board of Directors: <TABLE> <CAPTION> Class of Common Stock Votes Votes Elected From For Witheld <S> <C> <C> <C> James J. Bennett Class B 1,649,121 224 Albert J. Hillman Class A 4,354,073 35,815 Philip L. Padou Class A 4,353,351 37,537 Alice N. Schwartz Class B 1,649,124 221 David Schwartz Class B 1,649,102 243 Norman Schwartz Class B 1,649,124 221 Burton A. Zabin Class B 1,649,124 221 </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 2,087,141 855 437 -- </TABLE> 8
The foregoing matters are described in detail in the Company's definitive Proxy Statement dated March 29, 1996, 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 March 29, 1996 (definitive form filed April 3, 1996 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, 1996. 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, 1996 /s/ Thomas L Braje Thomas L. Braje, Vice President, Chief Financial Officer Date: May 13, 1996 /s/ James R. Stark James R. Stark, Corporate Controller 11