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, 2003 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 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
UNITED STATES | |
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 year ended December 31, 2004 | ||||||||||||
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 number1-7928 | ||||||||||||
BIO-RAD LABORATORIES, INC. | ||||||||||||
(Exact name of registrant as specified in its charter) | ||||||||||||
Delaware | 94-1381833 | |||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||
1000 Alfred Nobel Drive, Hercules, California | 94547 | |||||||||||
(Address of principal executive offices) | (Zip Code) | |||||||||||
(510)724-7000 | ||||||||||||
Registrant's telephone number, including area code | ||||||||||||
Securities registered pursuant to Section 12 (b) of the Act: | ||||||||||||
Title of Each Class | Name of Each Exchange on Which Registered | Shares Outstanding February 15, 2005 | Market Value on February 15, 2005 of Stocks Held by Non-Affiliates | |||||||||
Class A Common Stock Par Value $0.0001 per share | American Stock Exchange | 21,043,099 | $ 1,001,218,565 | |||||||||
Class B Common Stock Par Value $0.0001 per share | American Stock Exchange | 4,848,378 | $ 30,028,939 | |||||||||
| ||||||||||||
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, 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 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 the Form 10-K or any amendment to this Form 10-K.{ } | ||||||||||||
Indicated by check mark whether the registrant is an accelerated filer ( as defined in Rule 126-2 of the Act) | ||||||||||||
Yes X No _____ | ||||||||||||
Documents Incorporated by Reference
Document Form 10-K Parts
_________________________________________ ____________________
(1) Annual Report to Stockholders for the
fiscal year ended December 31, 2003
(specified portions) I, II, IV
(2) Definitive Proxy Statement to be mailed
to stockholders in connection with the
registrant's 2004 Annual Meeting of
Stockholders (specified portions) III
Document | Form 10-K Parts | |
(1) | Annual Report to Stockholders for the fiscal year | |
ended December 31, 2004 (specified portions) | I, II, IV | |
(2) | Definitive Proxy Statement to be mailed to stockholders | |
in connection with the registrant's 2005 Annual Meeting | ||
of Stockholders (specified portions) | III |
1
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 productionproduction of specialty chemicals used in biochemical, pharmaceutical and other life science research applications. In 1967, the CompanyCompany entered the field of clinical diagnostics with the developmentdevelopment of its first test kit based on separation techniques and materials developed for life science research. Recognizing that the fields of clinical diagnostics and life science 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 also expanded its geographical market. The Company has distribution channelschannels in over thirty countries outside the United States through subsidiaries whose primary focus is customer service and product distribution.
On October 1, 1999 Bio-Rad acquired the stock of Pasteur Sanofi Diagnostics (PSD) and the rights to certain ancillary assets for $210 million. PSD was founded by the Institut Pasteur to commercialize its diagnostic research, and holdsheld certain exclusive licenses from the Institut Pasteur in the HIV and infectious disease diagnostic product market. PSD also expanded the geographic reach and market penetration for the Company's products particularly in Latin America, Africa and France.
During 2000 and 2001, the Company sold substantially all of its
analytical instruments product lines. These divestitures have
allowed the Company to focus on its core segments of Life Science
and Clinical Diagnostics.
Bio-Rad manufactures and supplies the life science research, healthcare, analytical chemistry 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.
Description of Business
Business Segments
The Company operates in two industry segments designated as Life Science and Clinical Diagnostics. Each operates in both the United States and international markets. For a description of business and financial information on industry and geographic segments, see Note 15 on pages 2729 through 2932 of Exhibit 13.1, which is incorporated herein by reference.
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2
Life Science Segment.
Life science is the study of the characteristics, behavior, and structure of living organisms and their component systems. Life science researchers use a variety of products and systems-- including reagents, instruments, software and apparatus-- to advance the study of life processes, drug discovery, biotechnology and food pathogen testing, primarily within a laboratory setting.
We focus on selected segments of the life science market--
proteomics,market all dealing with functional genomics and cell biology -- forproteomics and which we estimate 20032004 worldwide sales totaled approximately $3.8$4 billion. The primary technological applications that we supply to these segments consist of electrophoresis, image analysis, molecular detection, chromatography, gene transfer, sample preparation and amplification. The primary end-users in our sectors of the market are universities and medical schools, industrial research organizations, government agencies, pharmaceutical manufacturers, biotechnology researchers and food testing laboratories.
Clinical Diagnostics Segment.
The clinical diagnostics industry encompasses a broad array of technologies incorporated into a variety of tests used to detect, identify and quantify substances in blood or other bodily fluids and tissues. The test results are used as aids for medical diagnosis, detection, evaluation, monitoring and treatment of diseases and other medical conditions. The bulk of tests are performedin vitro (outside(outside the body), while the remainder consist ofin vivo ("in the body") tests. The most common type ofin vitro tests are routine chemistry tests that measure important health parameters, such as glucose, cholesterol or sodium, as part of routine blood checks. Other diagnostic tests are more specialized and require more sophisticated equipment and materials than do routine tests. These specialized tests are alsotypically lower-volume and higher-priced than routine tests. We estimate that in 20032004 the global clinical diagnostics market totaled approximately $23.5$24.0 billion.
The primary end-users in the areas of the clinical diagnostics industry we target are hospital laboratories, reference laboratories, physician office laboratories, government agencies and other diagnostics manufacturers.
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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.
2
Patents and Trademarks
We own numerous U.S. and international patents and patent licenses. We believe, however, that our ability to develop and manufacture our products depends primarily on our knowledge, technology and special skills. Under several patent license agreements, we pay royalties on the sales of certain products. We view these patents and license agreements as valuable assets.
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 ontempers 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. 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 segments maintains a sales force 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, telemarketing, the Company
websitee-commerce 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.
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Our customer base is broad and diversified. In 2003,2004, no single customer accounted for more than 3%2% of our total net sales. Our sales are affected by certain external factors. For example, a number of our customers, particularly in the Life Science segment, are substantially dependent on government grants and research contracts for their funding. A significant reduction of government funding would have a detrimental effect on the results of this segment.
The Company is the leading provider of BSE (Bovine Spongiform Encephalopathy or mad cow) tests throughout the world. Revenues from the sales of testing products for BSE within our Life Science segment represented approximately 11% and 12% of consolidated net revenue in 20032004 and 2002, respectively.2003. A large portion of the revenue for this product is from government agencies currently mandating the use of the test. Competition, pricing, changes in test standards, technology or a decrease in government demand could negatively impact the Company's future revenue from this product.
Most of the Company's international sales are generated by wholly-owned subsidiaries and their branch offices in Australia,
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Austria, Belgium, Brazil, Canada, the Czech Republic, Denmark,
England, Finland, France, Germany, Greece, Hong Kong, Hungary,
India, Israel, Italy, Japan, Korea, Mexico, the Netherlands, New
Zealand, Norway, People's Republic of China, Poland, Portugal,
Russia, Singapore, South Africa, Spain, Sweden, Switzerland,
Taiwan and Thailand.offices. 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 are present in the United States.
Competition
Most markets served by our product groups are competitive. Our competitors range in size from start-ups to large multinational corporations. Reliable independent information on sales and market share of products produced by our competitors is not generally available. We believe, however, based on our own marketing information, that while some competitors are dominant with respect to certain individual products, no one company, including us, is dominant with respect to a material portion of any segment of our business.
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Because of the breadth of its product lines, Life Science does not face the same competitor for all of its products. Competitors in this market include AmershamGE Biosciences, Invitrogen, Qiagen, Zeiss, Olympus, Leica, Nikon and Applied Biosystems.BioSystems (Applera). We compete primarily based on meeting performance specifications.
Competitors in the Clinical Diagnostics segment range in size from small private companies to large multinational corporations. We compete mainly in specific market niches and do not attempt to pursue the most competitive general diagnostics markets. We compete based on our technological ability to provide customers with very specific tests and believe we are usually a significant competitor within our market niche. Competitors include Abbott Laboratories, bioMerieux, Inc., Roche Diagnostics, BioChem Pharma, Inova, diaSorin and Medical Analysis Systems.
Product Research and Development
The Company conducts extensive product research and development activities in all areas of our business, employing approximately 550700 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. Our research teams are continuously developing new products and new applications for existing products. In our development and testing of new products and applications, we consult with scientific and medical professionals at universities, hospitals and medical schools, and in industry. WeExcluding in-process research and development, we spent approximately $94.3$108.3 million, $82.9$91.3 million and $76.5$79.8 million on research and development activities during the years ended December 31, 2004, 2003 and 2002 and 2001 respectively.
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Regulatory Matters
The manufacturing, marketing and labeling of certain of our 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 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.
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As a multinational manufacturer and distributor of sophisticated instrumentation equipment, we 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 FDA must approve an
export permit application before companies can market products
outside the U.S. prior to the products' receipt of FDA approval.
TheThese requirements relating to testing and trials, product licensing, pricing and reimbursement vary widely among countries.
Our operations are subject to federal, state, local and foreign environmental laws and regulations that govern such activities as emissions to air and discharges to water, as well as handling and disposal practices for solid, hazardous and medical wastes. In addition to environmental laws that regulate our operations, we are also subject to environmental laws and regulations that create liabilities and clean-up responsibility for spills, disposals or other releases of hazardous substances into the environment as a result of our operations or otherwise impacting real property that we own or operate. The environmental laws and regulations also subject us to claims by third parties for damages resulting from any spills, disposals or releases resulting from our operations or at any of our properties.
Employees
At DecemberJanuary 31, 2003 Bio-Rad2005Bio-Rad had approximately 4,8005,200 full-time employees. Fewer than 10%9% of Bio-Rad's 2,200approximately 2,700 U. S. employees are covered by a collective bargaining agreement which will expire on November 7, 2006. Many of Bio-Rad's non-U.S. full-time employees, especially in France, are covered by collective bargaining agreements. Bio-Rad considers its employee relations in general to be good.
Available Information
The Company files annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934. The public may read and copy any materials that the Company files with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by 5
7
The Company's website address is www.bio-rad.com. The Company makes available, free of charge through its Internet website, its Form 10-K's, 10-Q's and 8-K's, and any amendments to these forms, as soon as reasonably practicable after filing with the SEC.
ITEM 2. PROPERTIES
We own our Corporate headquarters located in Hercules, California. The principal manufacturing and research locations for each segment are as follows:
Approximate
Segment Location Square Ftg. Owned/Leased
Life Science Richmond, California 201,000 Owned/Leased
Hercules, California 346,800 Owned/Leased
Hemel Hempstead, England 102,000 Leased
Milan, Italy 50,000 Leased
Riom, France 24,000 Owned/Leased
Clinical
Diagnostics Hercules, California 135,000 Owned/Leased
Irvine, California 185,900 Leased
Greater Seattle,
Washington 127,600 Owned/Leased
Lille, France 182,000 Owned
Paris, France 162,000 Leased
Munich, Germany 55,000 Leased
Nazareth-Eke, Belgium 30,000 Leased
Segment | Location | Owned/Leased |
Life Science | Richmond, California | Owned/Leased |
Hercules, California | Owned/Leased | |
Waltham, Massachusetts | Leased | |
Milan, Italy | Leased | |
Riom, France | Owned/Leased | |
Clinical | ||
Diagnostics | Hercules, California | Owned/Leased |
Irvine, California | Leased | |
Greater Seattle, Washington | Owned/Leased | |
Plano, Texas | Leased | |
Lille, France | Owned | |
Paris, France | Leased | |
Munich, Germany | Leased | |
Nazareth-Eke, Belgium | Leased |
Most manufacturing and research facilities also house administration, sales and distribution activities. In addition, we lease office and warehouse facilities in a variety of locations around the world. The facilities are used principally for sales, service, distribution and administration for both segments.
The Marnes la Coquette facility near Paris, France which served
as the corporate headquarters for PSD, as wellserves as a significant manufacturing, administrative and research facility has been renewed untilfacility. The lease expires at December 31, 2005. The Company believes it will successfully conclude negotiations to extend the lease for several years.
The Company recently completed building additional facilities at its Northern California headquarters. Historically, adequate space to expand sales and distribution channels has been available and we have leased space as needed.
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ITEM 3. LEGAL PROCEEDINGS
Note 14, "Legal Proceedings," appearing on page 27 of the 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 AND ISSUER PURCHASES OF
EQUITY SECURITIES
Information Concerning Common Stock
The Company's Class A and Class B Common Stock are listed on the American Stock Exchange with the symbols BIO and BIO.B, respectively. The following sets forth, for the periods indicated, the high and low prices for the Company's Class A and Class B Common Stock.
Class A Class B
High Low High Low
2003
Fourth Quarter 65.00 48.81 65.10 47.95
Third Quarter 62.50 48.52 63.00 50.00
Second Quarter 62.85 35.35 61.00 35.00
First Quarter 39.11 33.20 44.35 32.00
2002
Fourth Quarter 45.90 36.25 44.35 37.00
Third Quarter 45.99 34.90 45.00 36.00
Second Quarter 51.00 36.30 50.25 38.50
First Quarter 38.00 27.45 37.50 27.50
Class A | Class B | |||
High | Low | High | Low | |
2004 | ||||
Fourth Quarter | 59.50 | 50.06 | 58.25 | 50.90 |
Third Quarter | 58.50 | 50.01 | 57.25 | 50.25 |
Second Quarter | 61.90 | 55.15 | 61.00 | 55.50 |
First Quarter | 58.79 | 51.81 | 59.00 | 52.00 |
2003 | ||||
Fourth Quarter | 65.00 | 48.81 | 65.10 | 47.95 |
Third Quarter | 62.50 | 48.52 | 63.00 | 50.00 |
Second Quarter | 62.85 | 35.35 | 61.00 | 35.00 |
First Quarter | 39.11 | 33.20 | 44.35 | 32.00 |
On March 1, 2004February 15, 2005 the Company had 1,308446 holders of record of Class A Common Stock and 208198 holders of record of Class B Common Stock. Bio-Rad has never paid a cash dividend and has no present plans to pay cash dividends.
See Item 12 for the security ownership of certain beneficial owners and management.
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ITEM 6. SELECTED FINANCIAL DATA
The table headed "Summary of Operations and Selected Financial Data" 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 3435 through 4446 of Exhibit 13.1 is incorporated herein by reference.
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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The section headed "Financial Risk Management" appearing on page
44pages 45 and 46 of Exhibit 13.1 is incorporated herein by reference.
ITEM 8.8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes thereto and the ReportsReport of Independent Registered Public AccountantsAccounting Firm appearing on pages 2 through 3034 of Exhibit 13.1 are incorporated herein by reference.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9a.
CONTROLS AND PROCEDURES
The Company maintains disclosure controls
Evaluation of Disclosure Controls and procedures that are
designed to ensure that information required to be disclosed in
the Company's Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms. These disclosure controls are also
designed that such information is accumulated and communicated to
the Company's management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable, not absolute,
assuranceProcedures
As of achieving the desired control objectives.
Management is also required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and
procedures.
As the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company'sCompany’s management, including the Company'sCompany’s Chief Executive Officer and the Company'sCompany’s Chief Financial Officer, of the effectiveness of the design and operation of the Company'sCompany’s disclosure controls and procedures. Based onupon that evaluation, the foregoing, the Company'sCompany’s Chief Executive Officer and Chief Financial Officer concluded that the Company'sCompany’s disclosure controls and procedures were effective to provide reasonable assurance that material information relating to the Company is made known to management, including the Chief Executive Officer and Chief Financial Officer, particularly during the period when
our periodic reports are being prepared.
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10
Changes in Internal Control Over Financial Reporting
There has been no change in the Company'sCompany’s internal controls over financial reporting during the Company'sCompany’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company'sCompany’s internal controls over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
The management of Bio-Rad Laboratories is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of the Company’s financial statements presented in accordance with generally accepted accounting principles.
An internal control system over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
We excluded MJ Geneworks, Inc. from our assessment of internal control over financial reporting as of December 31, 2004 because it was acquired by Bio-Rad in the third quarter of 2004. MJ Geneworks constituted less than 5% of total assets as of December 31, 2004 and less than 5% of total revenues and net earnings for the year then ended. Refer to Note 2to the consolidated financial statements for further discussion of this acquisition and its impact on Bio-Rad’s consolidated financial statements. Notwithstanding the exclusion of MJ Geneworks from our assessment, there was no material change to our internal control over financial reporting due to the acquisition pursuant to Rule 15d-15 of the Exchange Act. Our assessment of internal control over financial reporting for fiscal year 2005 will include MJ Geneworks.
Management has used the framework set forth in the report entitled “Internal Control – Integrated Framework” published by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission to evaluate the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. Management has concluded the Company’s internal control over financial reporting was effective as of December 31, 2004. The Company’s independent auditor, Deloitte and Touche LLP, has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROLS OVER FINANCIAL REPORTING
To the Board of Directors and Stockholders of
Bio-Rad Laboratories, Inc.
Hercules, California
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Bio-Rad Laboratories, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from their assessment the internal control over financial reporting at MJ Geneworks, Inc. and its subsidiaries (“MJ Geneworks”), which was acquired on August 17, 2004 and whose financial statements reflect less than 5% of total consolidated assets as of December 31, 2004 and less than 5% of consolidated revenues and net earnings for the year then ended. &nbs p;Accordingly, our audit did not include the internal control over financial reporting at MJ Geneworks. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
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A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2004 of the Company and our reports dated March 2, 2005 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.
DELOITTE & TOUCHE LLP
San Francisco, California
March 2, 2005
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ITEM 9b.
OTHER INFORMATION
None.
PART 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 20042005 Annual Meeting of Stockholders ("the 2004(the” 2005 Proxy Statement") are incorporated herein by reference.
The Company'sCompany’s Board of Directors has determined that Philip L. Padou is an "audit“audit committee financial expert,"” as defined in Item 401(h) of Regulation S-K. Mr. Padou is also an "independent"“independent” director, as determined in accordance with the independence standards set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section 121A of the American Stock Exchange Company Guide.
The Company has adopted a code of business ethics and conduct that applies to its principal executive officer, principal financial officer, principal accounting officer or controller and all other employees. The Company will provide a copy of the code of ethics to any person, without charge, upon request, by writing to the Company at "Bio-Rad“Bio-Rad Laboratories, Inc., Investor Relations, 1000 Alfred Nobel Drive, Hercules, CA 94547"94547”.
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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 20042005 Proxy Statement are incorporated herein by reference.
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ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The section labeled "Principal and Management Stockholders" of the 20042005 Proxy Statement is incorporated herein by reference.
(a) (b) (c)
Number of Number of
securities securities
to be issued Weighted- remaining available
upon exercise average for future issuance
of exercise under equity
outstanding price compensation plans
Plan category options, of (excluding
warrants and outstanding securities
rights options, reflected in column
warrants (a))
and rights
Equity
compensation
plans approved by
security
holders (1) 1,582,915 $ 20.04 2,862,784 (2)
Equity
compensation plans
not approved
by stockholders -- -- --
---------- ------- ----------
Total 1,582,915 $ 20.04 2,862,784
========== ======= ==========
Plan category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted-average exercise price of outstanding options, warrants and rights | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |
Equity compensation plans approved by security holders (1) | 1,611,089 | $27.20 | 1,550,795 | (2) |
Equity compensation plans not approved by stockholders | -- | -- | -- | |
Total | 1,611,089 | $27.20 | 1,550,795 |
(1) Consists of the Bio-Rad Laboratories, Inc. 1994 Stock Option Plan, the 2003 Stock Option Plan and the Bio-Rad Laboratories, Inc. Amended and Restated 1988 Employee Stock Purchase Plan.
(2) Consists of 918,545 shares available for issuance under the
Bio-Rad Laboratories, Inc. 1994 Stock Option Plan, 1,675,0001,372,550 shares available under the 2003 Stock Option Plan and 269,239178,245 shares available for issuance under the Bio-Rad Laboratories, Inc. Amended and Restated 1988 Employee Stock Purchase Plan.
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ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sectionsections labeled "Certain Relationships and Related Party Transactions" and "Compensation of Directors" of the 20042005 Proxy Statement isare incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to the section entitled "Report“Report of the Audit Committee of the Board of Directors"Directors” of the 20042005 Proxy Statement.
10
P A R T IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Index to Financial Statements
The following Consolidated Financial Statements are
included in Exhibit 13.1 and are incorporated
herein by reference pursuant to Item 8:
Page in
Exhibit 13.1
Consolidated Balance Sheets
at December 31, 2003 and 2002 2-3
Consolidated Statements of Income
for each of the three years in the
period ended December 31, 2003 4
Consolidated Statements of Cash Flows
for each of the three years in the period
ended December 31, 2003 5
Consolidated Statements of Changes in
Stockholders' Equity for each of the three
years in the period ended December 31, 2003 6
Notes to Consolidated Financial Statements 7-30
Independent Auditors' Report 31-32
Report of Independent Public Accountants 33
2. Index to Financial Statement Schedule
Page in
Form 10-K
Schedule II Valuation and Qualifying Accounts 12
Independent Auditors' Report on
Supplemental Schedule 13
Report of Independent Public Accountants
on Schedule II 14
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
16 through 18 of this report are filed or incorporated
by reference as part of this report.
(b) Reports on Form 8-K
None.
11
P A R T IV | ||
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES | ||
(a) 1. | Index to Financial Statements | |
The following Consolidated Financial Statements are included in Exhibit 13.1 and | ||
are incorporated herein by reference pursuant to Item 8: | ||
Page in | ||
Exhibit 13.1 | ||
Consolidated Balance Sheets at December 31, 2004 and 2003 | 2-3 | |
Consolidated Statements of Income for each of the three years | ||
in the period ended December 31, 2004 | 4 | |
Consolidated Statements of Cash Flows for each of the | ||
three years in the period ended December 31, 2004 | 5 | |
Consolidated Statements of Changes in Stockholders' Equity | ||
for each of the three years in the period ended December 31, 2004 | 6 | |
Notes to Consolidated Financial Statements | 7-33 | |
Report of Independent Registered Public Accounting Firm | 34 | |
2. | Index to Financial Statement Schedule | |
Page in | ||
Form 10-K | ||
Schedule II Valuation and Qualifying Accounts | 18 | |
Report of Independent Registered Public Accounting Firm | 19 | |
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 22 through 25 of this report | ||
are filed or incorporated by reference as part of this report. | ||
17
BIO-RAD LABORATORIES, INC,.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2004, 2003 2002 and 2001
(In2002
(In thousands)
Reserve for doubtful accounts receivable
Additions
Balance at Charged
Balance at Beginning of Year | Additions Charged to Costs and Expenses | Deductions | Other (A) | Balance at End of Year | |
2004 | $12,978 | $2,029 | $ (621) | $(980) | $13,406 |
2003 | $12,122 | $4,687 | $(3,831) | -- | $12,978 |
2002 | $11,509 | $2,857 | $(2,244) | -- | $12,122 |
(A) Due to Balance
Beginning Costs and at Endthe sale of Year Expenses Deductions Other of Year
2003 . . . $12,122 $4,687 $(3,831) -- $12,978
======= ====== ======= ===== =======
2002 . . . $11,509 $2,857 $(2,244) -- $12,122
======= ====== ======= ===== =======
2001 . . . $10,255 $5,200 $(3,946) -- $11,509
======= ====== ======= ===== =======
the Company’s confocal microscopy product line.
Valuation allowance for current and long-term deferred tax asset
Deductions
Balance at Charged to Balance
Beginning Costs and at End
of Year Additions Expenses Other(A) of Year
2003 . . . . $12,867 $1,965 $ (432) -- $14,400
======= ====== ======= ======= =======
2002 . . . . $17,302 $1,241 $(2,342) $(3,334) $12,867
======= ====== ======= ======= =======
2001 . . . . $20,620 $4,959 $(2,793) $(5,484) $17,302
======= ====== ======= ======= =======
(A)assets
Balance at Beginning of Year | Additions | Deductions Charged to Costs and Expenses | Other (B) | Balance at End of Year | |
2004 | $21,446 | $1,058 | $(4,481) | -- | $18,023 |
2003 | $17,215 | $4,240 | $ (9) | -- | $21,446 |
2002 | $20,337 | $2,783 | $(2,571) | $(3,334) | $17,215 |
(B)
Valuation arising from the acquisition of PSD.
12
18
REPORT OF INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and ShareholdersStockholders of
Bio-Rad Laboratories, Inc.
Hercules, California
We have audited the consolidated financial statements of Bio-Rad Laboratories, Inc. and subsidiaries (the "Company"“Company”) as of December 31, 2004 and 2003, and 2002,for each of the three years in the period ended December 31, 2004, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, and for the years then ended,effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, and have issued our reportreports thereon dated March 10, 2004 (which report expresses an
unqualified opinion and includes explanatory paragraphs concerning the
Company's change in it's method of accounting for goodwill and
intangible assets and the application of procedures relating to
certain disclosures and reclassifications of consolidated financial
statement amounts related to the 2001 consolidated financial
statements that were audited by other auditors who have ceased
operations);2, 2005; such consolidated financial statements and our report on such consolidated financial statements are included in the Company's 2003your 2004 Annual Report to the ShareholdersStockholders and are incorporated herein by reference. Our auditreport relating to management’s report on the effectiveness of internal controls over financial reporting is included herein. Our audits also included the
2003 and 2002 consolidated financial statement schedule of the Company listed in Item 15(a)2. This consolidated financial statement schedule is the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion based on our audits. In our opinion, the consolidated 2003 and 2002 financial statement schedules,schedule, when considered in relation to the 2003 and 2002 basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forthfor therein. The financial statement
schedules for the year ended December 31, 2001 were audited by other
auditors who have ceased operations. Those auditors expressed an
opinion, in their report dated February 4, 2002, (February 6, 2002, as
to a subsequent event), that such 2001 financial statement schedules
considered in relation to the 2001 basic financial statements taken as
a whole (prior to the disclosures and reclassifications referred to
above), presented fairly, in all material respects, the information
set forth therein.
/s/
DELOITTE & TOUCHE LLP
San Francisco, California
March 10, 2004
13
This report is a copy of the previously issued
report covering 2001, 2000, and 1999. The
predecessor auditors have not reissued their report.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
To Bio-Rad Laboratories, Inc.:
We have audited in accordance with auditing standards generally
accepted in the United States, the consolidated financial statements
included in Bio-Rad Laboratories, Inc.'s annual report to stockholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 2002. Our audits were 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 the 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 audits 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.
ARTHUR ANDERSEN LLP
San Francisco, California
February 4, 2002
14
19
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 12, 2004
2, 2005
20
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/ Norman Schwartz President and Director March 12, 2004
(Norman Schwartz)
Principal Financial Officer
Vice President,
/s/ Christine A. Tsingos Chief Financial Officer March 12, 2004
(Christine A. Tsingos)
Principal Accounting Officer:
/s/ James R. Stark Corporate Controller March 12, 2004
(James R. Stark)
Other Directors:
/s/ James J. Bennett Director March 12, 2004
(James J. Bennett)
/s/ Albert J. Hillman Director March 12, 2004
(Albert J. Hillman)
/s/ Ruediger Naumann-Etienne Director March 12, 2004
(Ruediger Naumann-Etienne)
/s/ Philip L. Padou Director March 12, 2004
(Philip L. Padou)
/s/ Alice N. Schwartz Director March 12, 2004
(Alice N. Schwartz)
/s/ David Schwartz Director March 12, 2004
(David Schwartz)
15
Principal Executive Officer: | ||
/s/ Norman Schwartz | President and Director | March 2, 2005 |
(Norman Schwartz) | ||
Principal Financial Officer | ||
/s/ Christine A. Tsingos___ | Vice President, | |
(Christine A. Tsingos) | Chief Financial Officer | March 2, 2005 |
Principal Accounting Officer | Corporate Controller | March 2, 2005 |
/s/ James R. Stark________ | ||
(James R. Stark) | ||
Other Directors: | ||
/s/ James J. Bennett______ | Director | March 2, 2005 |
(James J. Bennett) | ||
/s/ Albert J. Hillman______ | Director | March 2, 2005 |
(Albert J. Hillman) | ||
/s/ Ruediger Naumann-Etienne | Director | March 2, 2005 |
(Ruediger Naumann-Etienne) | ||
/s/ Philip L. Padou________ | Director | March 2, 2005 |
(Philip L. Padou) | ||
/s/ Alice N. Schwartz______ | ||
(Alice N. Schwartz) | Director | March 2, 2005 |
/s/ David Schwartz________ | Director | March 2, 2005 |
(David Schwartz) |
21
BIO-RAD LABORATORIES, INC.
INDEX TO EXHIBITS
ITEM 14(a)3
Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be "filed“filed under the Securities Exchange Act of 1934."
”
Exhibit No.
----------
3.1
Restated Certificate of Incorporation, as of February 8, 2002. (1)
3.1.1
Certificate of Amendment to Restated Certificate of Incorporation of Bio-Rad Laboratories, Inc., as of May 6, 2004.
3.2
Bylaws of the Registrant, as amended February 19,
1980.19,1980. (2)
4.1
Credit Agreement dated as of September 9, 2003 among Bio-Rad Laboratories, Inc., the lenders, Bank One, N.A., as Administrative Agent, Wells Fargo Bank, N.A. And Union Bank of California, N.A., as Syndication Agents and ABN AMRO Bank N.V. and BNP Paribas, as Documentation Agents. (3)
4.1.1
Amendment No. 1 to Credit Agreement dated as of December 8, 2004 among Bio-Rad Laboratories, Inc., the lenders referred to herein, JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA (Illinois), as lender and Administrative Agent, Wells Fargo Bank, N.A. and Union Bank of California, N.A., as Syndication Agents and ABN AMRO Bank N.V. and BNP Paribas, as Documentation agents. (4)
4.2
Pledge Amendment dated as of September 9, 2003 among Bio-Rad Laboratories, Inc., and Bank One, N.A., as contractual representative. (3)
4.3
Security Agreement dated as of September 9, 2003 among Bio-
RadBio-Rad Laboratories, Inc., as Grantor and Bank One N.A., as Administrative Agent. (3)
4.4
The Indenture dated as of August 11, 2003 for 7.50% Senior Subordinated Notes due 2013 among Bio-Rad Laboratories, Inc., as Issuer, and Wells Fargo Bank, N.A., as Trustee. (3)
22
4.5
The Exchange and Registration Rights Agreement dated as of August 11, 2003 for 7.50% Senior Subordinated Notes due 2013. (3)
4.6
Indenture, dated as of December 21, 2004, between Bio-Rad Laboratories, Inc. and Wells Fargo National Bank, as trustee. (5)
10.4
1994 Stock Option Plan. (7)
(6)
10.4.1
Amendment to the Bio-Rad Laboratories, Inc. 1994 Stock Option Plan dated April 28, 1998. (8)
(7)
10.4.2
Second Amendment to the Bio-Rad Laboratories, Inc. 1994 Stock Option Plan dated December 6, 1999. (8)
(7)
10.4.3
Third Amendment to the Bio-Rad Laboratories, Inc. 1994 Stock Option Plan dated September 19, 2000. (8)
(7)
10.4.4
Fourth Amendment to the Bio-Rad Laboratories, Inc. 1994 Stock Option Plan dated April 25, 2001. (8)
10.5
Amended and Restated 1988 Employee Stock Purchase Plan.(9)
10.5.1
Amendment to the Amended 1988 Employee Stock Purchase Plan. 16
10.6
Employees' Deferred Profit Sharing Retirement Plan (Amended and Restated effective January 1, 1997). (11)
(10)
10.7
2003 Stock Option Plan. (12)
(11)
10.10
Non-competition and employment continuation agreement with James J. Bennett. (11)
10.12 Split Dollar Life Insurance(10)
10.13
Stock Purchase Agreement dated September 17,
1999as of August 16, 2004 by and between the Schwartz Irrevocable Descendants TrustCompany, MJ GeneWorks, Incorporated, Michael J. Finney and Bio-Rad Laboratories, Inc. (4)
John D. Finney, excluding exhibits and schedules. Pursuant to Regulation S-K Item 601(b)(2), the exhibits and schedules to this agreement have not been filed. The Company agrees to furnish supplementally a copy of any omitted exhibits or schedules to the SEC upon request. The Company has requested confidential treatment of certain portions of this agreement. (12)
23
13.1
Excerpt from Annual Report to Stockholders' for the fiscal year ended December 31, 2003,2004, (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 Registered Public Accountants.
Accounting Firm.
31.1
Certification of Chief Executive Officer Required by Rule 13a(14(a) (17 CFR 240.13a-14(a)).
31.2
Certification of Chief Financial Officer Required by Rule 13a(14(a) (17 CFR 240.13a-14(a)).
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
OxleySarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
______________________________________________________________
(1)
Incorporated by reference from Exhibits to the Company's Form 10-K filing for the fiscal year ended December 31, 2001, dated March 28, 2002.
(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 Exhibits to the Company's Form S-4 dated September 19, 2003.
24
(4) Incorporated by reference from the Exhibits to the Company's
Form 10-K filing for the fiscal year ended December 31,
1999, dated March 28, 2000.
(5)
Incorporated by reference from Exhibits to the Company's
September 30, 2002,Company’s Form 10-Q8-K filing dated November 13,
2002.
17
(6) December 14, 2004.
(5)
Incorporated by reference from Exhibits to the Company's
June 30, 2000,Company’s Form 10-Q8-K filing dated August 14, 2000.
(7) December 22, 2004.
(6)
Incorporated by reference from the Exhibits to the Company's Form S-8 filing, dated April 28, 1994.
(8)
(7)
Incorporated by reference from the Exhibits to the Company's Form 10-K filing for the fiscal year ended December 31, 2000, dated March 28, 2001.
(8)
Incorporated by reference from the Exhibits to the Company's Form 10-K filing for the fiscal year ended December 31, 2003, dated March 15, 2004.
(9)
Incorporated by reference from the Exhibits to the Company's September 30, 1998, Form 10-Q filing dated November 10,12, 1998.
(10)
Incorporated by reference from the Exhibits to the Company's September 30, 1997, Form 10-Q filing dated November 13, 1997.
(11) Incorporated by reference from the Exhibits to the Company's
Form 10-K filing for the fiscal year ended December 31,
1996, dated March 26, 1997.
(12)
Incorporated by reference from Exhibits to the Company'sCompany’s March 31, 2003, Form 10-Q filing dated May 13, 2003.
18
(12)
Incorporated by reference from Exhibits to the Company’s September 30, 2004, Form 10-Q filing dated November 9, 2004.
25