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, 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 July 31, 1996 <S> <C> Class A Common Stock, Par Value $1.00 per share 9,676,689 Class B Common Stock, Par Value $1.00 per share 2,618,163 </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 Six Months Ended June 30, June 30, 1996 1995 1996 1995 <S> <C> <C> <C> <C> NET SALES . . . . . . . . . . . . . . . . . . $ 99,981 $ 97,921 $208,253 $195,779 Cost of goods sold . . . . . . . . . . . . . 41,704 41,403 88,544 83,220 GROSS PROFIT . . . . . . . . . . . . . . . . 58,277 56,518 119,709 112,559 Selling, general and administrative expense . 38,655 38,918 76,493 73,874 Product research and development expense . . 9,620 8,513 19,212 16,889 INCOME FROM OPERATIONS . . . . . . . . . . . 10,002 9,087 24,004 21,796 Interest expense . . . . . . . . . . . . . . (743) (1,150) (1,583) (2,432) Investment income, net . . . . . . . . . . . 1,000 278 1,300 486 Other, net . . . . . . . . . . . . . . . . . (245) 468 (1,092) (429) INCOME BEFORE TAXES . . . . . . . . . . . . . 10,014 8,683 22,629 19,421 Provision for income taxes . . . . . . . . . 2,503 2,170 5,657 4,855 NET INCOME . . . . . . . . . . . . . . . . . $ 7,511 $ 6,513 $ 16,972 $ 14,566 ======== ======== ======== ======== Earnings per share . . . . . . . . . . . . . $0.61 $0.54 $1.38 $1.20 ======== ======== ======== ======== Weighted average common shares . . . . . . . 12,282 12,197 12,269 12,183 ======== ======== ======== ======== </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> June 30, December 31, 1996 1995 <S> <C> <C> ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . $ 26,429 $ 14,774 Accounts receivable . . . . . . . . . . . . . . . . . 89,085 92,061 Inventories . . . . . . . . . . . . . . . . . . . . . 72,596 75,357 Prepaid expenses, taxes and other current assets. . . 19,268 19,400 Total current assets . . . . . . . . . . . . . . . 207,378 201,592 Net property, plant and equipment . . . . . . . . . . 71,820 72,966 Marketable securities . . . . . . . . . . . . . . . . 6,441 5,902 Other assets . . . . . . . . . . . . . . . . . . . . 5,306 4,638 Total assets . . . . . . . . . . . . . . . . . . $ 290,945 $ 285,098 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Notes payable and current maturities of long-term debt $ 10,339 $ 14,269 Accounts payable . . . . . . . . . . . . . . . . . . 19,487 19,946 Accrued payroll and employee benefits . . . . . . . . 23,665 23,908 Sales, income and other taxes payable . . . . . . . . 5,490 7,082 Other current liabilities . . . . . . . . . . . . . . 23,076 24,612 Total current liabilities . . . . . . . . . . . . 82,057 89,817 Long-term debt, net of current maturities . . . . . . 16,955 20,922 Deferred tax liabilities . . . . . . . . . . . . . . 17,810 17,300 Total liabilities . . . . . . . . . . . . . . . . 116,822 128,039 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 - 9,658,915 at June 30, 1996 and 9,593,283 at December 31, 1995 . . . . . . . 9,659 9,593 Class B common stock, $1.00 par value, 6,000,000 shares authorized; outstanding - 2,628,434 at June 30, 1996 and 2,646,063 at December 31, 1995. . . . . . . . 2,628 2,646 Additional paid-in capital . . . . . . . . . . . . . . 16,559 15,887 Retained earnings . . . . . . . . . . . . . . . . . . 141,829 124,857 Currency translation . . . . . . . . . . . . . . . . 2,700 3,527 Net unrealized holding gain on marketable securities. 748 549 Total stockholders' equity . . . . . . . . . . . . 174,123 157,059 Total liabilities and stockholders' equity . . $ 290,945 $ 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> Six Months Ended June 30, 1996 1995 <S> <C> <C> Cash flows from operating activities: Cash received from customers . . . . . . . . . . . . . . . $208,862 $195,311 Cash paid to suppliers and employees . . . . . . . . . . . (175,453) (173,336) Interest paid. . . . . . . . . . . . . . . . . . . . . . . (1,677) (2,398) Income tax payments . . . . . . . . . . . . . . . . . . . (8,502) (1,683) Miscellaneous receipts . . . . . . . . . . . . . . . . . . 83 191 Net cash provided by operating activities. . . . . . . . . 23,313 18,085 Cash flows from investing activities: Capital expenditures, net. . . . . . . . . . . . . . . . . (6,289) (5,962) Marketable securities investment activity, net . . . . . . 308 (158) Foreign currency hedges, net . . . . . . . . . . . . . . . 1,114 (2,502) Net cash used in investing activities. . . . . . . . . . . (4,867) (8,622) Cash flows from financing activities: Net borrowings under line-of-credit arrangements. . . . . (7,649) (2,893) Additions to long-term debt . . . . . . . . . . . . . . . -- 38,904 Payments on long-term debt. . . . . . . . . . . . . . . . (433) (42,229) Proceeds from issuance of common stock. . . . . . . . . . 720 550 Net cash used in financing activities . . . . . . . . . . (7,362) (5,668) Effect of exchange rate changes on cash . . . . . . . . . . . . 571 (2,546) Net increase in cash and cash equivalents . . . . . . . . . . . 11,655 1,249 Cash and cash equivalents at beginning of period. . . . . . . . 14,774 3,751 Cash and cash equivalents at end of period. . . . . . . . . . . $ 26,429 $ 5,000 ======== ======== Reconciliation of net income to net cash provided by operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,972 $ 14,566 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . 7,935 8,261 Gains on disposition of marketable securities. . . . . . (656) (391) Foreign currency hedges, net . . . . . . . . . . . . . . (1,138) 2,601 (Increase) decrease in accounts receivable . . . . . . . 1,972 (3,106) (Increase) decrease in inventories . . . . . . . . . . . 1,938 (9,285) (Increase) decrease in other current assets. . . . . . . 643 (538) Increase (decrease) in accounts payable and other current liabilities. . . . . . . . . . . . . . . . . . (606) 4,039 Increase (decrease) in income taxes payable. . . . . . . (2,518) 3,138 Other. . . . . . . . . . . . . . . . . . . . . . . . . . (1,229) (1,200) Net cash provided by operating activities . . . . . . . . . . . $ 23,313 $ 18,085 ======== ======== </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> June 30, December 31, 1996 1995 (in thousands) <S> <C> <C> Raw materials $ 27,776 $ 26,467 Work in process 17,521 17,189 Finished goods, net 27,299 31,701 $ 72,596 $ 75,357 ======== ======== </TABLE> 3. PROPERTY, PLANT AND EQUIPMENT <TABLE> The principal components of property, plant and equipment are as follows: <CAPTION> June 30, December 31, 1996 1995 (in thousands) <S> <C> <C> Land and improvements $ 8,057 $ 8,057 Buildings and leasehold improvements 51,949 51,786 Equipment 103,412 99,486 163,418 159,329 Less accumulated depreciation 91,598 86,363 Net property, plant and equipment $ 71,820 $ 72,966 ======== ======== </TABLE> 4
4. STOCK SPLIT Retroactive adjustments for all periods presented have been made, as appropriate, to common stock and per share amounts to reflect the 3-for-2 stock split effected in the form of a 50% stock dividend paid May 31, 1996. 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 Six Months Ended Year Ended June 30, June 30, December 31, 1996 1995 1996 1995 1995 <S> <C> <C> <C> <C> <C> Net sales 100.0 100.0 100.0 100.0 100.0 Cost of goods sold 41.7 42.3 42.5 42.5 43.4 Gross profit 58.3 57.7 57.5 57.5 56.6 Selling, general and administrative 38.7 39.7 36.8 37.8 37.9 Product research and development 9.6 8.7 9.2 8.6 8.7 Restructuring costs - - - - 0.4 Income from operations 10.0 9.3 11.5 11.1 9.6 ===== ===== ===== ===== ===== </TABLE> Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995 Corporate Results - Sales, Margins and Expenses Bio-Rad's net sales (sales) in the second quarter of 1996 increased 2% to $100.0 million from $97.9 million reported in the second quarter of 1995. The effects of a strengthened U.S. dollar, principally versus the Japanese yen, reduced the increase in consolidated sales compared to sales based on 1995 exchange rates by approximately $3.4 million or 4%. Compared to the second quarter of 1995, sales increased 9% in Clinical Diagnostics and decreased 2% in Analytical Instruments and 1% in Life Science. Excluding the effects of the strengthened U.S. dollar, sales increased 9% in Clinical Diagnostics, 6% in Analytical Instruments and 3% in Life Science. During the second quarter of 1996, the increased Clinical Diagnostics sales were principally in the U.S., in part a result of increased investment in sales personnel and support during 1995. In the Analytical Instruments segment sales of spectroscopy equipment continued to increase at double digit rates, a trend started in the fourth quarter of 1995. 6
Consolidated gross margin increased to 58.3% for the second quarter of 1996 from 57.7% for the second quarter of 1995. The increase is attributed to increased margins in the Analytical Instruments segment resulting from product mix and better overhead absorption in the spectroscopy equipment manufacturing plant and to a greater proportion of total sales from the Clinical Diagnostics segment where margins are generally higher than the other segments of the Company's business. The strengthened U.S. dollar caused international selling, general and administrative expense (SG&A) to decline by approximately $1.5 million for the second quarter of 1996 when compared to international SG&A based on 1995 exchange rates. This, coupled with the Company's continued monitoring of SG&A expenses, reduced SG&A to $38.7 million in the second quarter of 1996 from $38.9 million in the second quarter of 1995. Cost reductions in Clinical Diagnostics and Life Science allowed Bio- Rad to succeed in growing SG&A slower than sales for the second consecutive quarter. Product research and development expense (R&D) increased from the second quarter of 1996, both in absolute dollars and as a percent of sales. R&D spending increased in Life Science and Analytical Instruments but was down slightly in Clinical Diagnostics. Corporate Results - Non-Operating Items Interest expense was $407,000 less in the second quarter of 1996 than the comparable period of 1995 principally as a result of lower average borrowings. Average borrowings in the second quarter of 1996 were 37% less than average borrowings in the same period of 1995. Investment income in the second quarter of 1996 includes the sales of equity securities for a gain of $531,000 and interest income of $163,000. No significant items were included in other income and expense for the second quarter of 1996 or the second quarter of 1995. The Company's effective tax rate for the second 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. Six Months Ended June 30, 1996 Compare to Six Months ended June 30, 1995 Corporate Results - Sales, Margins and Expenses Bio-Rad's sales in the first half of 1996, at $208.3 million, were 6% greater than sales in the first half of 1995. On a year- to-date basis, the effects of a strengthened U.S. dollar 7
decreased consolidated sales compared to sales based on 1995 exchange rates by approximately $4.0 million. Sales increased in all segments of the Company's business. Excluding the effects of the strengthened U.S. dollar, sales increased 20% in Analytical Instruments, 8% in Clinical Diagnostics and 5% in Life Science. The growth in Analytical Instruments is attributed to growth in sales of spectroscopy equipment as well as semiconductor test and manufacturing equipment. Led by a $2.8 million increase in U.S. sales, Clinical Diagnostics is experiencing worldwide growth. 1996 year-to-date consolidated gross margins were unchanged from the comparable period of 1995. Improved gross margins in the Analytical Instruments segment offset minor decreases in the Life Science and Clinical Diagnostics segments. SG&A decreased to 36.8% of sales in the first half of 1996 from 37.8% in the first half of 1995. While spending increased in absolute dollars in all segments, all segments of the Company succeeded in growing sales faster than SG&A for the first half of 1996. Management continues to monitor SG&A spending in an effort to improve overall profitability. R&D increased from the first half 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. Spending increases were most significant in the Analytical Instruments and Life Science segments. Corporate Results - Non-Operating Items Interest expense was $849,000 less in the first half of 1996 than the comparable period of 1995 principally as a result of lower average borrowings. Average borrowings in the first half of 1996 were 35% less than average borrowings in the same period of 1995. Investment income in the first half of 1996 includes the sales of equity securities for a gain of $656,000 and interest income of $318,000. Net other income and expense in the first half of both 1996 and 1995 is primarily non-operating legal costs. The Company's effective tax rate for the first half 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 $23 million for the year-to- date June 30, 1996 compared to $18 million for the comparable period 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. 8
At June 30, 1996, the Company had available $26 million in cash and cash equivalents, $60 million under its principal revolving credit agreement and marketable securities with a market value of $6 million, most of which could be readily converted to cash. During the first half 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 objectives for operations, research and development and modest external growth. In early July 1996, the Board of Directors authorized the Company to repurchase up to $4 million of common stock over an indefinite period of time. Management believes shareholder value can be improved through the selective repurchase of the Company's stock. 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 or exploratory discussions. At June 30, 1996, consolidated accounts receivable were $3.0 million lower than at December 31, 1995. The decline in receivables results from lower sales in the second quarter of 1996 when compared to the fourth quarter of 1995. At June 30, 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 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. 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, 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: August 8, 1996 /s/ Thomas L Braje Thomas L. Braje, Vice President, Chief Financial Officer Date: August 8, 1996 /s/ James R. Stark James R. Stark, Corporate Controller 11