Our business is not inherently seasonal.  However, the European custom of concentrating vacation during the summer months usually tempers third quarter sales volume and operating income.

We also use a range of sales and marketing intermediaries (SMIs) in our international markets. The types of SMIs we utilize are distributors, agents, brokers and resellers. We have programs and policies in place with our SMIs that requireto ensure their compliance with all applicable laws, including adhering to our anti-corruption standards to ensure a transparent sale to our customers.

Our customer base is broad and diversified. Our worldwide customer base includes (1) prominent university and research institutions; (2) hospital, public health and commercial laboratories; (3) other leading diagnostic manufacturers; and (4) leading companies in the biotechnology, pharmaceutical, chemical and food industries. There has been no single customer that accounted for more than three percent of our total net sales.  

Our sales are affected by a number of 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.  

Most of our international sales are generated by our wholly-owned international subsidiaries and their branch offices.  Certain of these subsidiaries also have manufacturing facilities.operations.  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 markets served by our product groups are highly competitive.  Our competitors range in size from start-ups to large multinational corporations with significant resources and reach.  We seek to compete primarily in market segments where the technology and efficacy of our products and technology offer customers specific advantages over the competition.

We are also subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physician sunshine laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment.

Sales of our products will depend, in part, on the extent to which our products or diagnostic tests using our products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for certain medical products and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including price controls and restrictions on reimbursement. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our products or diagnostic tests using our products, or a decision by a third-party payor to not cover our products could reduce or eliminate utilization of our products and have a material adverse effect on our sales, results of operations and financial condition. In addition, healthcare reform measures have been and will be adopted in the future, any of which could limit the amounts that governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.

As a multinational manufacturer and distributor of sophisticated instrumentation, we must meet a wide array of electromagnetic compatibility and safety compliance requirements to satisfy regulations in the United States, the European Union and other jurisdictions.  

Our operations are subject to federal, state, local and foreign environmental laws and regulations that govern activities such activities as transportation of goods, 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 could 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.

These regulatory requirements vary widely among countries.

There have been, and will continue to be, significant changes in the healthcare industry in an effort to reduce costs. These changes include:

We are subject to healthcare regulation and enforcement by both the U.S. federal government and the U.S. states and foreign governments in which we conduct our business. These healthcare laws and regulations include, for example:

We operate in multiple jurisdictions and our profits are taxed pursuant to make estimates related to ourthe tax laws of these jurisdictions. Our effective income tax provisionrate may be affected by the changes in or interpretations of tax laws and tax agreements in any given jurisdiction, utilization of net operating loss and tax credit carryforwards, changes in geographical mix of income and expense, and changes in our assessment of matters such as the ability to realize deferred tax assets. As a result of these considerations, we must estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax exposures, as well as making judgments regardingexposure together with assessing temporary differences resulting from the recoverabilitydifferent treatment of deferreditems for tax assetsand accounting purposes. These differences result in each jurisdiction. Deferreddeferred tax assets and liabilities, reflectwhich are included in the tax effects of net operating losses, tax credits, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management assessesconsolidated balance sheet.

We assess the likelihood that theour deferred tax assets will be recovered from future taxable income, considering all available evidence such as historical levels of income, expectations and to the extent management believesrisks associated with estimates of future taxable income and ongoing prudent and feasible tax strategies. When we determine that recoveryit is not more likely a valuation allowance must be established.  To the extent management establishes a valuation allowancethan not that we will realize all or increases this allowance in a period, an increase to expense within the Provision for income taxes in the Consolidated Statementspart of Income may result.

We make certain estimates and judgments about the application of tax laws, the expected resolution of uncertain tax positions and other matters surrounding the recognition and measurement of uncertain tax benefits. In the event that uncertain tax positions are resolved for amounts different than our estimates, or the related statutes of limitations expire without the assessment of additional income taxes, we will be required to adjust the amounts of the related assets and liabilities in the period in which such events occur. Such adjustments may have a material impact on our income tax provision and our results of operations.

We acquired intangible assets in connection with certain of our business acquisitions. These assets were recorded at their estimated fair values at the acquisition date and are amortized over their respective estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used. Estimated useful lives are determined based on our historical use of similar assets and the expectation of future realization of cash flows attributable to the intangible assets. Changes in circumstances, such as technological advances or changes to our business model, could result in the actual useful lives differing from our current estimates. In those cases where we determine that the useful life of an intangible asset should be shortened, we amortize the net book value in excess of the estimated salvage value over its revised remaining useful life. We did not revise our previously assigned useful life estimates attributed to any of our intangible assets during the years ended December 31, 2021, 2020 and 2019.

Service revenues on extended warranty contracts are recognized ratably over the life of the service agreement as a stand-ready performance obligation. For arrangements that include a combination of products and services, the transaction prices areprice is allocated to each performance obligationsobligation based on stand-alone selling prices. The method used to determine the stand-alone selling prices for product and service revenues is based on the observable prices when the product or services have been sold separately.

Reagent rental agreements are primarily a diagnostic industry sales method that provides use of an instrument and consumables (reagents) to a customer on a per test basis. These agreements may also include maintenance of the underlying instruments retainedplaced at customer locations as well as initial training. We initially determine if a reagent rental arrangement contains a lease at leasecontract commencement. Where we have determined that such an arrangement contains a lease, we next must ascertain its lease classification for purposes of applying appropriate accounting treatment as an operating, sales-type or direct financing lease. In addition, forFor purposes of determining the lease term used in performing the lease classification test, we include the noncancellable period of the lease together with those periods covered by the option to extend the lease if the customer is reasonably certain to exercise that option, the periods covered by an option to terminate the lease if the customer is reasonably certain not to exercise that option, and the periods covered by the option to extend (or not to terminate) the lease in which exercise of the option is controlled by the company.Company. The assessment of the lease term for reagent rental agreements, including the impact from any associated contractual termination penalties, are subject to an estimation process. While most of our reagent rental arrangements contain either the option for a lessee to extend and/or cancel, the period in which the contract is enforceable is a very short period and therefore the lease term has been limited to the noncancellable period. Furthermore, it has historically been very rare forGenerally, these arrangements todo not contain an option for the lessee to purchase the underlying asset.

We value inventory at the lower of the actual cost to purchase and/or manufacture the inventory, or the current estimated net realizable value of the inventory.  We review inventory quantities on hand and reduce the cost basis of excess and obsolete inventory based primarily on an estimated forecast of product demand, production requirements and the quality efficacy and potencyefficacy of raw materials.  This review is done on a quarterly basis or, if warranted byat the circumstances, more frequently.end of each fiscal quarter.  In addition, our industry is characterized by technological change, frequent new product development and product obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand.  Our estimates of future product demand may prove to be inaccurate, and if too high, we may have overstated the carrying value of our inventory. In the future, if inventory is determined to be overvalued, we would be required to write down the value of inventory to market and recognize such costs in our cost of goods sold at the time of such determination. Therefore, although we make efforts to ensure the accuracy of our forecasts of future product demand and perform procedures to safeguard overall inventory quality, any significant unanticipated changes in demand, technological developments, regulations, storage conditions, or other economic or environmental factors affecting biological materials, could have a significant impact on the value of our inventory and reported results of operations.

The following shows cost of goods sold, gross profit, expense items and net income as a percentage of net sales:

Change in fair market value of equity and debt securities were gains of $2,031.0 million$4.93 billion for 2019the year ended December 31, 2021 compared to $606.2 million$4.50 billion for 2018,the year ended December 31, 2020, primarily resulting from the recognition of holding gains on our investmentposition in Sartorius AG.AG of $4.92 billion in 2021 and $4.48 billion in 2020, partially offset by a decrease in fair value of a loan to Sartorius-Herbst Beteiligungen II GmbH of $10.8 million.

As of December 31, 2019,2021, based on the expected outcome of certain examinations or as a result of the expiration of statutes of limitation for certain jurisdictions, we believe that within the next twelve months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $2.8$20.8 million. Substantially all such amounts will impact our effective income tax rate.

Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations located in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2020, filed on AprilFebruary 16, 2019,2021, for the discussion of the comparison of the fiscal year ended December 31, 20182020 to the fiscal year ended December 31, 2017,2019, the earliest of the three fiscal years presented in the Consolidated Statements of Operations.

Bio-Rad operates and conducts business globally, primarily through subsidiary companies established in the markets in which we trade.  Goods are manufactured in a small number of locations, and are then shipped to local distribution facilities around the world.  Our product mix is diversified, and certain products compete largely on product efficacy, while others compete on price.  Gross margins are generally sufficient to exceed normal operating costs, and funding for research and development of new products, as well as routine outflows offor capital expenditures, interest and taxes.  In addition to the annual positive cash flow from operating activities, additional liquidity is readily available via the sale of short-term investments and access to our domestic $200.0 million unsecured Credit Agreementrevolving credit facility (Credit Agreement) that we entered into in April 2019 and amended in November 2021 (see Note 5, "Notes Payable and Long-Term Debt," to the consolidated financial statements), and to a lesser extent international lines of credit. Borrowings under the 2019 Credit Agreement are available on a revolving basis and can be used to make permitted acquisitions, for working capital and for other general corporate purposes. We had no outstanding borrowings under the 2019 Credit Agreement as of December 31, 2019;2021; however, $0.2 million was utilized for domestic standby letters of credit that reduced our borrowing availability.  The 2019 Credit Agreement matures in April 2024. In total under domestic and international lines of credit, standby letters of credit and guarantee arrangements, we had approximately $207.5 million available for borrowing and usage as of December 31, 2019, which was reduced by approximately $4.2 million that was utilized for standby letters of credit and guarantee arrangements issued by our banks to support our obligations.  Management believes that this availability, together with cash flow from operations, will be adequate to meet our current objectives for operations, research and development, capital additions for manufacturing and distribution, plant and equipment, information technology systems and an acquisitionacquisitions of reasonable proportion to our existing total available capital. However, we have outstanding $425.0 million principal amount of Senior Notes that are due in December 2020 (4.875% Notes). We are currently assessing the repayment of the 4.875% Notes and believe we have adequate resources to repay or finance this obligation.

At December 31, 2019,2021, we had available $1,114.6$869.9 million in cash, cash equivalents and short-term investments, of which approximately 21%23% was held in our foreign subsidiaries. We believe that our holdings of cash, cash equivalents and short-term investments in the U.S. and in our foreign subsidiaries are sufficient to meet both the current and long-term needs of our global operations. The amount of funds held in the United States can fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons, such as business-development activities.acquisitions. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and foreign cash flows (both inflows and outflows).

It is generally our intention to repatriate certain foreign earnings to the extent that such repatriations are not restricted by local laws or accounting rules, and there are no substantial incremental costs. 

Cash flows from operations during the first quarter have historically had larger payments for royalties, fourth quarter sales commissions to third parties and annual employee bonuses, and we expect this pattern to recur in the first quarter of 2020.2022.

Net cash used in investing activities was $208.9$784.4 million and $187.0$60.3 million for 2019the years ended December 31, 2021 and 2018,2020, respectively. The net increase between 2019 and 2018 of $21.9$724.2 million was primarily due to payments for acquisitions in 2019, andattributable to a lesser extent proceeds$453.4 million funding for a divestiturecollateralized loan to Sartorius-Herbst Beteiligungen II GmbH, an increase of a product line in 2018 as discussed below. These were partially offset primarily by lower capital expenditures in 2019 than in 2018 as discussed below,$204.3 million for net cash outflows from purchases, sales and for salesmaturities of marketable securities and investments, that increased by $27.6higher net cash outflows of $28.9 million for the acquisition of Dropworks, Inc. in 20192021 compared to 2018. Other items that affected cash flows from investing activities are further discussed below.

    

Net cash used in financing activities was $22.8$55.4 million compared to $48.7$523.0 million in 2019for the years ended December 31, 2021 and 2018,2020, respectively. Net cash used in financing activitiesThis decrease was lower in 2019 than 2018 primarily dueattributable to lower repurchases of our common stock in 2019 than in 2018 of $20.9 million.

The re-issuance of the treasury stock for the restricted stock programyears ended December 31, 2021 and 2020 did not require cash payments or receipts and therefore did not affect liquidity.  Upon fulfilling

The following summarizes certain of our contractual obligations as of December 31, 20192021 and the effect such obligations are expected to have on our cash flows in future periods (in millions):