SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002.
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, California 94547
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(510) 724-7000
No Change
Former name, former address and former fiscal year, if changed since last
report.
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 commonstock ,as of the latest practicable date--
Shares Outstanding
Title of each Class at April 30, 2002
Class A Common Stock,
Par Value $0.0001 per share 20,240,414
Class B Common Stock,
Par Value $0.0001 per share 4,854,992
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2002 2001
NET SALES . . . . . . . . . . . . . . . . . . $210,182 $202,668
Cost of goods sold . . . . . . . . . . . . . 88,842 92,720
-------- --------
GROSS PROFIT . . . . . . . . . . . . . . . . 121,340 109,948
Selling, general and administrative expense . 65,657 61,197
Product research and development expense . . 20,241 18,428
-------- --------
INCOME FROM OPERATIONS . . . . . . . . . . . 35,442 30,323
Interest expense . . . . . . . . . . . . . . (5,554) (6,589)
Other, net . . . . . . . . . . . . . . . . . (2,280) (10,132)
-------- --------
INCOME BEFORE TAXES . . . . . . . . . . . . . 27,608 13,602
Provision for income taxes . . . . . . . . . 8,835 5,033
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . $ 18,773 $ 8,569
======== ========
Basic earnings per share:
Net income . . . . . . . . . . . . . . . $0.75 $0.35
======== ========
Weighted average common shares . . . . . 24,930 24,508
======== ========
Diluted earnings per share:
Net income . . . . . . . . . . . . . . . $0.73 $0.34
======== ========
Weighted average common shares 25,789 25,094
======== ========
The accompanying notes are an integral part of these statements.
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BIO-RAD LABORATORIES, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
<table>
<caption>
March 31, December 31,
2002 2001
<s> (Unaudited)
ASSETS: <c> <c>
Cash and cash equivalents . . . . . . . . . . . . . . $ 44,946 $ 47,129
Accounts receivable, net . . . . . . . . . . . . . . . 196,004 194,400
Inventories . . . . . . . . . . . . . . . . . . . . . 141,667 139,179
Prepaid expenses, taxes and other current assets . . . 53,264 50,120
-------- --------
Total current assets . . . . . . . . . . . . . . . 435,881 430,828
Net property, plant and equipment . . . . . . . . . . 132,779 132,974
Goodwill, net . . . . . . . . . . . . . . . . . . . . 75,873 75,873
Other assets . . . . . . . . . . . . . . . . . . . . . 42,225 44,353
-------- --------
Total assets . . . . . . . . . . . . . . . . . . $686,758 $684,028
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable . . . . . . . . . . . . . . . . . . . $ 67,848 $ 64,903
Accrued payroll and employee benefits . . . . . . . . 50,720 58,434
Notes payable and current maturities of long-term debt 10,095 9,931
Sales, income and other taxes payable . . . . . . . . 23,947 18,633
Other current liabilities . . . . . . . . . . . . . . 41,844 47,205
-------- --------
Total current liabilities . . . . . . . . . . . . . 194,454 199,106
Long-term debt, net of current maturities . . . . . . 174,343 188,423
Deferred tax liabilities . . . . . . . . . . . . . . . 13,026 12,622
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . 381,823 400,151
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value, 7,500,000 shares
authorized; none outstanding . . . . . . . . . . . . -- --
Class A common stock, $0.0001 par value, 50,000,000 shares
authorized; outstanding - 20,198,344 at March 31, 2002
and 20,166,636 at December 31, 2001 . . . . . . . . . 2 2
Class B common stock, $0.0001 par value, 20,000,000 shares
authorized; outstanding - 4,861,492 at March 31, 2002
and 4,826,562 at December 31, 2001 . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . 32,831 32,171
Class A treasury stock, 45,879 shares at March 31, 2002
and 161,336 shares at December 31, 2001 at cost . . (530) (1,863)
Retained earnings . . . . . . . . . . . . . . . . . . 295,535 276,554
Accumulated other comprehensive income:
Currency translation and other . . . . . . . . . . . (22,903) (22,987)
-------- --------
Total stockholders' equity . . . . . . . . . . . . 304,935 283,877
-------- --------
Total liabilities and stockholders' equity . . . $686,758 $684,028
======== ========
</table>
The accompanying notes are an integral part of these statements.
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<page>
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
<table> (Unaudited)
<caption>
Three Months Ended
March 31,
2002 2001
<s> -------- --------
Cash flows from operating activities: <c> <c>
Cash received from customers . . . . . . . . . . . . . $206,711 $183,233
Cash paid to suppliers and employees . . . . . . . . . (174,479) (168,730)
Interest paid. . . . . . . . . . . . . . . . . . . . . (9,785) (10,291)
Income tax payments . . . . . . . . . . . . . . . . . (4,797) (1,265)
Miscellaneous receipts (payments) . . . . . . . . . . 486 (732)
-------- --------
Net cash provided by operating activities . . . . . . 18,136 2,215
Cash flows from investing activities:
Capital expenditures, net. . . . . . . . . . . . . . . (8,443) (9,278)
Net sales (purchases) of marketable securities
and investments . . . . . . . . . . . . . . . . . . (238) 62
Foreign currency hedges, net . . . . . . . . . . . . . 97 1,056
-------- --------
Net cash used in investing activities. . . . . . . . . (8,584) (8,160)
Cash flows from financing activities:
Net borrowings (repayments) under line-of-credit
arrangements. . . . . . . . . . . . . . . . . . . 4,071 (2,825)
Long-term borrowings. . . . . . . . . . . . . . . . . 22,500 45,500
Payments on long-term debt. . . . . . . . . . . . . . (40,774) (43,113)
Proceeds from issuance of common stock. . . . . . . . 660 841
Treasury stock activity, net. . . . . . . . . . . . . 1,541 12
-------- --------
Net cash provided by (used in) financing activities . (12,002) 415
Effect of exchange rate changes on cash . . . . . . . . . . 267 1,570
-------- --------
Net decrease in cash and cash equivalents . . . . . . . . . (2,183) (3,960)
Cash and cash equivalents at beginning of period. . . . . . 47,129 13,954
-------- --------
Cash and cash equivalents at end of period. . . . . . . . . $ 44,946 $ 9,994
======== ========
Reconciliation of net income to net cash provided by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 18,773 $ 8,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . 8,817 10,302
Increase in accounts receivable . . . . . . . . . . (2,099) (16,645)
Increase in inventories . . . . . . . . . . . . . . (2,609) (7,180)
Increase in other current assets . . . . . . . . . . (2,792) (1,596)
Increase (decrease) in accounts payable and
other current liabilities . . . . . . . . . . . . (9,454) 2,885
Increase in income taxes payable . . . . . . . . . . 5,211 4,210
Other. . . . . . . . . . . . . . . . . . . . . . . . 2,289 1,670
-------- --------
Net cash provided by operating activities . . . . . . . . . $ 18,136 $ 2,215
======== ========
The accompanying notes are an integral part of these statements.
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</table>
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BIO-RAD LABORATORIES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 the
consolidated financial statements contained in the Company's
Annual Report for the year ended December 31, 2001. Certain
amounts in the financial statements of the prior year have been
reclassified to be consistent with the 2002 presentation.
2. INVENTORIES
The principal components of inventories are as follows:
March 31, December 31,
2002 2001
-------------------------
(in thousands)
Raw materials $ 34,428 $ 33,488
Work in process 26,429 28,715
Finished goods 80,810 76,976
-------- --------
$141,667 $139,179
======== ========
3. PROPERTY, PLANT AND EQUIPMENT
The principal components of property, plant and equipment are as
follows:
March 31, December 31,
2002 2001
--------------------------
(in thousands)
Land and improvements $ 9,522 $ 9,658
Buildings and leasehold
improvements 75,779 75,231
Equipment 197,838 191,284
-------- --------
283,139 276,173
Accumulated depreciation (150,360) (143,199)
-------- --------
Net property, plant and equipment $132,779 $132,974
======== ========
4. GOODWILL
The Company adopted Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" as of January 1,
2002, which provides that goodwill is no longer subject to
amortization over its useful life. Goodwill will be subject to
an annual assessment for impairment applying a fair-value based
test.
4
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5. EARNINGS PER SHARE
Weighted average shares used for diluted earnings per share
include the dilutive effect of outstanding stock options of
859,000 and 586,000 shares, for the three month periods ended
March 31, 2002 and 2001, respectively. There were no anti-
dilutive shares for the three month periods ended March 31, 2002
and 200l.
6. OTHER INCOME AND EXPENSE
The components of Other, net are:
Three Months Ended
March 31,
2002 2001
---------------------
(in thousands)
Goodwill amortization $ - $(2,021)
Non-operating litigation costs, net (79) (700)
Exchange losses (750) (816)
Write-down of investment in affiliates (2,000) (2,000)
Write-down of spectroscopy
instrument assets - (4,500)
Other 549 (95)
-------- --------
Total Other, net $ (2,280) $(10,132)
======= =======
In the first quarter of 2002, the Company recorded a $2,000 non-
cash pre-tax charge reflecting the write-down of the Company's
investment in Digilab, LLC. This reduced the investment value to
zero.
In the first quarter of 2001, the Company recorded a $4,500 non-
cash pre-tax charge reflecting the expected impact of the pending
sale of the spectroscopy instrument business to a new owner.
Additionally, the Company recorded a $2,000 non-cash pre-tax
charge to adjust the value of an investment based on on-going
discussions with the investment's management concerning its
future capital structure.
7. COMPREHENSIVE INCOME
The components of the Company's total comprehensive income were:
Three Months Ended
March 31,
2002 2001
---------------------
(in thousands)
Net Income $18,773 $ 8,569
Currency translation adjustments (61) (6,721)
Net unrealized holding gains 161 3
Reclassification adjustments for
gains included in net income (16) (57)
------- -------
Total comprehensive income $18,857 $ 1,794
======= =======
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8. SEGMENT INFORMATION
Information regarding industry segments for the three months
ended March 31, 2002 and 2001 is as follows (in thousands):
Life Clinical Other
Science Diagnostics Operations
Segment net sales 2002 $100,507 $107,883 $ 1,792
2001 $92,175 $102,988 $ 7,505
Segment profit(loss) 2002 $19,235 $ 10,812 $ (353)
2001 $18,708 $ 8,092 $ (928)
The following reconciles total segment profit to consolidated
income before taxes:
Three Months Ended
March 31,
2002 2001
--------------------
(in thousands)
Total segment profit $29,694 $25,872
Net corporate operating, interest
and other expense not allocated
to segments 194 (2,138)
Other, net (2,280) (10,132)
------- -------
Consolidated income before taxes $27,608 $13,602
======= =======
9. SUBSEQUENT EVENT
On April 30, 2002, the Company retired the remaining $22,500 of
the term loan portion of the Senior Credit Agreement.
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<page>
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, 2001.
The following table shows operating income and expense items as a
percentage of net sales:
Three Months Ended Year Ended
March 31, December 31,
2002 2001 2001
Net sales 100.0 100.0 100.0
Cost of goods sold 42.3 45.7 44.3
----- ----- -----
Gross profit 57.7 54.3 55.7
Selling, general and
administrative 31.2 30.2 32.6
Product research and
development 9.6 9.1 9.4
----- ----- -----
Income from operations 16.9 15.0 13.7
===== ===== =====
Net income 8.9 4.2 5.4
===== ===== =====
Forward Looking Statements
Other than statements of historical fact, statements made in this
report include forward looking statements, such as statements
with respect to the Company's future financial performance,
operating results, plans and objectives. We have based these
forward looking statements on our current expectations and
projections about future events. However, actual results may
differ materially from those currently anticipated depending on a
variety of risk factors including among other things: our
substantial leverage and ability to service our debt; our ability
to successfully develop and market new products; our reliance on
and access to necessary intellectual property; competition in and
government regulation of the industries in which we operate; and
the monetary policies of various countries. We undertake no
obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future
events, or otherwise.
Three Months Ended March 31, 2002 Compared to
Three Months Ended March 31, 2001
Corporate Results - Sales, Margins and Expenses
Net sales (sales) in the first quarter of 2002 were $210.2
million compared to $202.7 million in the first quarter of 2001,
an increase of 3.7%. Excluding the impact of currency and
divestitures, real growth was 10%. Sales increased 9.0% in Life
Science and 4.8% in Clinical Diagnostics and includes the impact
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<page>
of a stronger dollar lowering reported growth. The growth in
Life Science is attributed to the demand for the Company's
products for proteomic and genomic research and for the
for the Company's BSE (Bovine Spongiform Encephalopathy) test
used to detect the presence of prions linked to the Mad Cow
Disease. The Company expects that the total number of BSE tests
performed in the market will remain level for the year 2002,
absent new countries making the decision to test. Clinical
Diagnostics growth was provided by products for diabetes
monitoring, quality controls, blood virus and autoimmune testing.
On a comparative basis,first quarter sales were adversely affected
by the strength of the U.S. dollar versus the prior period.
Reported growth would increase by 4% for Life Science and 3% for
Clinical Diagnostics if international sales were translated at a
constant exchange rate.
Consolidated gross margins were 57.7% for the first quarter of
2002 compared to 54.3% for the first quarter of 2001 and 55.7%
for all of 2001. Gross margins improved in Life Science as the
sales mix improved, as consumables and apparatus products
represented an overall higher percentage of sales. These
products have overall higher product margins than equipment.
Clinical Diagnostics margins improved on lower manufacturing
expenses and improved sales mix.
Selling, general and administrative expense (SG&A) increased to
31.2% of sales in the first quarter of 2002 from 30.2% of sales
in the first quarter of 2001. SG&A for Life Science increased
18.6% when compared to the first quarter of 2001. The first
quarter of 2001 did not contain the requisite expenses to retain
and expand the food testing business. Life Science has increased
sales and customer support services to support this business.
Clinical Diagnostics experienced an 8.8% increase in SG&A
expenditures chiefly to expand customer service support in the
U.S. and a movement to convert some remaining distributor sales
to direct sales in Asia. The long-term goal for management
remains a consistent gradual reduction in SG&A spending as a
percent of sales.
Product research and development expense increased to 9.6% as a
percentage of sales from 9.1% for the first quarter of 2001.
Life Science and Clinical Diagnostics each increased their R&D
expenditures in line with development plans in the areas of
proteomics, drug discovery, new diagnostic testing platforms and
expanded quality control systems.
Corporate Results - Non-Operating Items
Interest expense decreased from the prior year reflecting the
reduction of debt. Net other income and expense in the first
quarter of 2002 includes a $2.0 million non-cash pre-tax expense
reflecting an impairment in the Company's valuation of an
investment. Net other income and expense in the first quarter of
2001 included $6.5 million of non-cash pre-tax expense relating
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to the impact of transferring ownership of the Company's
spectroscopy instrument business and an impairment in the
Company's valuation of an investee based on on-going discussions
with that investee's management concerning its future capital
structure.
Goodwill amortization of $2.0 million is included in the first
quarter of 2001. Goodwill is not being amortized in 2002
consistent with Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets."
The Company's effective tax rate declined to 32% for the first
quarter of 2002 compared to 37% in the first quarter of 2001.
The decreased rate reflects management's decision that a portion
of the valuation reserve on deferred tax assets is no longer
required as a result of greater expectation of future taxable
income.
Financial Condition
The Company, as of March 31, 2002, had available approximately
$97.5 million under its principal revolving credit agreement and
$22.6 million under various foreign lines of credit. Cash and
cash equivalents available were $44.9 million. On April 30,
2002, the Company retired the remaining $22.5 million outstanding
on the term loan portion of the Senior Credit Agreement.
At March 31, 2002, consolidated accounts receivable increased by
$1.6 million from December 31, 2001 when a decline would be
indicated when comparing sales activity from first quarter 2002
with fourth quarter 2001. The increase was chiefly in Europe and
principally due to a combination of sales made late in the
quarter, the minor extension of credit terms and system
conversion issues which are temporary in nature.
At March 31, 2002, consolidated net inventories increased by $2.5
million from December 31, 2001. Life Science increased inventory
levels to meet increased customer demands for its consumable and
apparatus products. Clinical Diagnostics increased inventory
levels to meet customer demands for diabetes monitoring and blood
virus product offerings. Inventory for the Clinical Diagnostics
quality controls business is characterized by long lead times and
large, infrequent batch production which is necessary to meet
customers requirements. Bio-Rad management regularly reviews
inventory valuation for excess, obsolete and slow-moving
products.
Net capital expenditures totaled $8.4 million for the first three
months of 2002 compared to $9.3 million for the same period of
2001. Capital expenditures for the quarter include reagent
rental equipment placed with Clinical Diagnostics customers who
then commit to purchasing the Company's diagnostic reagents for
use. The remaining expenditures represent additions to
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production equipment and the Company's investment in data
communication and business systems to standardize and integrate
its recent acquisitions.
The Company now believes that continued growth will require
additional space in Northern California for manufacturing,
laboratory and general office use. Management is currently
reviewing financing alternatives that could result in increased
capital expenditures or lease commitments in 2002 and beyond of
approximately $25-30 million.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
During the three months ended March 31, 2002, there have been no
material changes from the disclosures about market risk provided
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's annual meeting of stockholders on April 23,
2002, the following individuals were reelected to the Board of
Directors:
Class of
Common Stock Votes Votes
Elected From For Withheld
James J. Bennett Class B 4,660,977 1,514
Albert J. Hillman Class A 14,739,524 105,937
Ruediger Naumann-Etienne Class B 4,662,033 458
Philip L. Padou Class A 14,738,024 107,437
Alice N. Schwartz Class B 4,660,977 1,514
David Schwartz Class B 4,662,033 458
Norman Schwartz Class B 4,662,033 458
The following proposals were approved at the Company's annual meeting:
Votes Votes Broker
For Against Abstentions Non-Votes
Ratification of
Arthur Andersen LLP
as the Company's
independent auditors 6,083,877 46,721 16,439 --
Employee Stock Purchase
Plan Amendment 5,572,028 32,413 5,412 537,185
10
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The foregoing matters are described in detail on pages 5, 6, 15,
16 and 17 of the Company's definitive Proxy Statement dated
April 1, 2002, filed with the Securities and Exchange Commission
and incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following documents are filed as part of this report:
Exhibit No.
22.1 Proxy Statement dated April 1, 2002, pages 5, 6, 15, 16
and 17, (definitive form filed April 4, 2001, and
incorporated by reference).
(b) Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended
March 31, 2002.
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<page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
BIO-RAD LABORATORIES, INC.
(Registrant)
Date: May 15, 2002 /s/ Sanford S. Wadler
Sanford S. Wadler, Vice President,
General Counsel and Secretary
Date: May 15, 2002 /s/ James R. Stark
James R. Stark, Corporate Controller
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