I n s pIr a tIo n s In lIf e s cIe n c e r e s e a r c h a n d c lInIc a l dIa g n o s tIc s
Bio-Rad Laboratories
Annual Report 2007
Not everyone
Not everyone them…
They are buried, after all, among the often ordinary
and humdrum moments of everyday life and work:
little flashes of brilliance—
nuggets of creative inspiration,
just waiting to be found.
Bio-Rad 2007 Annual Report 1
L e t t eR t o S hA Re h oLd eR S
Dear Shareholders,
We are pleased to report that 2007 exceeded our expectations.
We began the year cautiously, with the knowledge that U.S.
research funding was constrained and that we would likely
encounter “headwinds” when comparing the year to some of
the non-recurring events of 2006.
We worked diligently to make 2007
Toward the end of the year, we
In 2007 we also welcomed a
another year of progress and in many
began selling our MRSASelect™ test
new member to our board, Louis
respects we succeeded. Sales grew
in the U.S. to help hospitals combat
Drapeau. Mr. Drapeau brings with
by 14.7% to $1.46 billion for the year.
the risks associated with nosocomial
him a wealth of experience both
Of this increase, 9.8% was organic
infections.
on the financial side and in the
and the balance resulted from the
addition of DiaMed, acquired in the
fourth quarter of the year.
Sales of our existing products were
biomedical area.
also strong in 2007. One of these
2008 is shaping up to be another
products, the ProteOn™ system,
exciting year. Products we intro-
We achieved a number of impor-
provides a new way to study
duced last year combined with our
tant goals during the year. First, we
protein interactions. Also notable
new DiaMed product line and our
introduced over 75 new products
is our revolutionary BioPlex® 2200
planned 2008 introductions should
across our businesses, including an
system, which is beginning to gain
bring us closer to our goal of
entirely new line of next-generation
market acceptance in the diagnostic
$2 billion in sales.
thermal cyclers for use in studying
laboratory.
To achieve this result, we will
One of the more exciting events of
continue to invest in the infrastruc-
the year for us was the addition of
ture necessary to support a larger
DiaMed, the Swiss-based immuno-
operation—an investment in both
hematology company. Their prod-
people and capital resources that
ucts for blood typing, combined
should hold us in good stead for
with Bio-Rad’s products in this
many years to come.
area, make us a market leader in
this important area of diagnostics.
DNA. We also introduced a new
point-of-care diabetes platform to
aid in diabetes monitoring, as well
as a new electrophoresis system,
the next generation of a product we
first introduced over 20 years ago.
2 Bio-Rad 2007 Annual Report
In recognition of the ingenuity that
story, you’ll find a common thread
has enabled us to attain leader-
and one that continues to this day.
ship positions in the world of
Not only did we pursue each of
life science research and clinical
these ideas, we kept improving
diagnostics, we invite you to read
from where we first began, making
through several important moments
our products better and more use-
of inspiration featured in this report,
ful for our customers, and ultimately
which have opened up new doors
resulting in better health for all.
david Schwartz
ChAiRmAn of the BoARd
We thank you for your continued
interest and support.
norman Schwartz
PReSident
for Bio-Rad and led to our success
over the years.
With the first story you will discover
how Bio-Rad originally found a
direction for itself during the early
years, which not only focused us in
the area of separation, purification,
and analysis, but would eventually
lead us to the field of clinical diag-
nostics. Sometimes opportunities
appear in the most unlikely places. It
is encouraging to see how seeming-
ly simple ideas grow into something
one may have never imagined.
It has been an inspiring experience
to look back at these moments, yet
difficult to pick just a few. In each
Bio-Rad 2007 Annual Report 3
These are the “ ” moments.
4 Bio-Rad 2007 Annual Report
These are the “ ” moments.
As a company with more than a half-century of
history, Bio-Rad has been home to more than its
share of inspirational, industry changing moments;
pivotal developments that Bio-Rad researchers
subsequently turned into products and businesses
that would become part of one of the most vital
and innovative life science research and clinical
diagnostics companies in the industry.
In this report, we profile five special moments in the
history of Bio-Rad; stories of people, ideas, and
inspirations, and of how the company—and the state
of healthcare—has been changed because of them.
Bio-Rad 2007 Annual Report 5
6 Bio-Rad 2007 Annual Report
io n e xChAn g e ReSi nS
By the 1940s, the process of
His inclination proved correct when
The early success of Bio-rad’s
separating molecules based on their
he discovered commercial demand
charges—for water analysis, protein
for a product that could separate
purification, and quality control—
a mixture based on differences in
had already been around for almost
the electrochemical charges of its
a hundred years. But the post-war
components.
years brought new and exciting re-
search, from which new resins were
developed that would become the
basis for the ion exchange chroma-
tography technology that is used to
this day, in applications as diverse as
purifying our water to monitoring our
blood sugar levels over time.
The problem back then, how-
ever, was that these resins were of
industrial grade quality and too full
of impurities that interfered with the
results of scientists who wished to
separate isotopes, biochemicals,
and other materials. This meant
that each time scientists wished to
conduct a separation, they had to
first purify the resins themselves—a
tedious, labor-intensive, and incon-
sistent process.
The result was Bio-Rad’s introduction
of the first analytical grade (AG) ion
exchange resins that were suitable for
laboratory research applications. This
development became the launching
point for what is today known as
Bio-Rad’s Life Science Group.
In the years that followed, Bio-Rad
continued to expand its offering of
products and in 1964 introduced
new applications including a series of
polyacrylamide gel chromatography
materials. The Bio-Gel® P product
separated compounds based on dif-
ferences in molecular weight or size.
Its gentle process was an effective
separation medium for sensitive ma-
terials such as hormones, proteins,
and other biological compounds that
would be altered or destroyed by
In the early days of Bio-Rad, while
classical methods.
working on the separation of rare
earth elements, co-founder David
Schwartz experienced the problem
firsthand when he lost a batch of
the expensive rare earths he was
attempting to separate. When he
and his team successfully cleaned
the resins and were able to continue
their work, Dave realized the value
of having highly refined and purified
ion exchange resins right from the
start—pre-made, and ready to go.
Since then, Bio-Rad has established
itself as a leader in the life science
research market, and today offers
thousands of products that incor-
porate a wide range of technologies
used to “separate, purify, analyze,
and identify” biological and chemical
materials.
ion exchange resin producTs led
To inquiries from an unexpecTed
source: physicians and hospiTal
paThologisTs, who were seeking
a more reliaBle meThod for
deTermining Thyroid funcTion,
an imporTanT measure of human
meTaBolism. working on The
proBlem in conjuncTion wiTh The
medical communiTy, Bio-rad in
1967 inTroduced The T-4 (Thyrox-
ine) TesT, The firsT commercially
availaBle TesT To accuraTely
deTermine Thyroid funcTion. By
The early 1970s, wiTh TesTs for
a varieTy of oTher diseases in-
cluding cardiovascular disease,
lead poisoning, and anemia, The
company’s clinical diagnosTics
group was formed.
Simple and pure, Bio-Rad’s method
of refining ion exchange resins established
the company in the life science field.
A series of fortunate events.
Bio-Rad 2007 Annual Report 7
8 Bio-Rad 2007 Annual Report
m U Lt iP Le x A nA L ySiS
The idea of running multiple labo-
In 1996, Bio-Rad researchers theo-
Today, The offspring of These
ratory tests with a single patient
rized that beads with an iron layer
sample is a powerful notion, as the
under their surface, could, in the
resulting economies of time, cost,
presence of a magnetic field, adhere
and labor are of obvious benefit. If
to the walls of the container and
a person has trouble breathing, a
allow the liquid (and debris) to be
single test to measure both acidity
removed by aspiration, leaving the
(pH) and the levels of oxygen and
purified proteins—precisely what the
carbon dioxide in the blood can
researchers wanted to measure—
pinpoint the problem—avoiding the
behind on the beads. After adjusting
need to perform separate tests to
the composition of the magnetic
isolate the cause. Perhaps even
beads, the Bio-Rad team success-
more importantly, this process could
fully developed a highly effective
benefit patients further, for example,
method for flow cytometric-based
when testing for multiple biomarkers.
immunoassay.
When additional ones for a specific
disease can be tested, the resulting
information provides even greater
confidence in the results.
But the story of innovation didn’t
stop there. Recognizing the potential
benefits of multiplexing, Bio-Rad
researchers directed their attention
Welcome to the field of multiplex
to the technology itself, and how it
analysis.
In the mid-1990s, when scientists
wanted to identify and count T cells
in a blood sample, they used a
device called a flow cytometer, a
was used in the laboratory. Using
magnetic beads, would it be pos-
sible to multiplex in a way that was
automated and dependable—with
the push of a button?
machine that counts, examines, and
By 1998, Bio-Rad began to develop
sorts cells suspended in a stream of
a system dedicated to the perfor-
fluid. These systems could also be
mance of multiplex immunoassays
used to run multiple immunoassays
using magnetic beads and incorpo-
of proteins using latex beads—small
rating a number of important features
and uniform. One of the problems
that translated into higher reliability,
researchers faced with this method,
faster throughput, better ease-of-use,
however, was that when the beads
and lower costs. The resulting com-
were isolated in preparation for their
bination represented a powerful new
run through the instrument, some
way to commercially test for analytes
debris remained behind, which, if
useful in the diagnosis and treatment
large enough, could interfere with
of a wide variety of diseases.
the measurements, leading to spuri-
ous results.
discoveries is The Bioplex® 2200
sysTem, which represenTs a
BreakThrough in clinical diag-
nosTic Technology. iT is The firsT
and only fully auTomaTed ran-
dom access mulTiplex TesTing
plaTform ThaT provides clinical
laBoraTories wiTh The Tech-
nology To rapidly process, or
“mulTiplex”, mulTiple individual
TesTs ThaT are TradiTionally
processed separaTely—all from
a single paTienT sample.
Using magnetic beads is the key to
multiplexing in the BioPlex 2200 system.
A case of stick-to-itiveness.
Bio-Rad 2007 Annual Report 9
10 Bio-Rad 2007 Annual Report
PReC A St g eL S
Proteins and nucleic acids are the
intensify, the need to standardize this
Bio-rad has conTinued To
two essential organic molecules in
crucial step of analysis became even
expand iTs producTs in The
all living things. Separating them and
more pressing. What was needed
analyzing them is the key to many
was a reliable, fast, and cost-efficient
important applications in biotechnol-
method of creating the gels, one that
ogy today, from studying the genetic
would allow researchers to devote
makeup, or DNA, of living organisms
their time to the experiment—not to
and determining the paternity of a
its preparation.
parent to evaluating, diagnosing, and
monitoring a wide variety of diseases
and conditions.
In 1991, Bio-Rad introduced the first
of its line of “ready to run” precast
gels. Researchers simply had to
Since the 1960s, one of the methods
place the gel into the instrument,
of choice for this process has been a
load their samples, and in less than
technology called gel electrophoresis,
an hour results in the form of sharp,
an extremely common laboratory
clear bands would appear. Scientists
procedure in which the molecules of
were able to analyze their results—in
proteins and nucleic acids are sepa-
the time it used to take them to pre-
rated and identified based on their
pare a gel. And because precast gels
migration through a gel under the
were manufactured under uniform
influence of an electrical current. By
conditions, this eliminated the vari-
the position of these molecules in the
ability often found in hand-cast gels,
gel, researchers are able to determine
providing quality that was consistent
their size and electric charge.
and reliability that was guaranteed.
For years, to conduct this procedure,
Further Bio-Rad improvements
scientists had to “hand cast” their
included gels with a longer shelf life,
own gels, literally mixing and pouring
protections against leakage, and the
reagents, components, chemicals,
introduction in 2004 of the Experion™
and then buffers. Researchers were
automated electrophoresis system,
spending valuable time and labor on
which automates the entire process
this process that, while for the most
and allows researchers to get results
part was effective, could be incon-
quickly and even more cost-efficiently.
sistent from one researcher to the
next—or even from one batch to the
next made by the same scientist.
Because experiments had to be
replicated, this lack of consistency
posed problems for the reliability and
reproducibility of the results. As inter-
est in DNA and proteins continued to
What you see is what
you get. Every time.
area of elecTrophoresis,
and Today iT is The worldwide
markeT leader. advancemenTs
of Bio-rad’s elecTrophoresis
Technologies have led To The
prominenT role The company
has played in helping To
unlock The secreTs of
life conTained in dna and
deTermining how geneTic
informaTion TranslaTes inTo
The wonders of all living
organisms, including us.
Bio-Rad’s Criterion™ precast gels provide
sharp, crisp bands, helping researchers
quickly get results they can rely on.
Bio-Rad 2007 Annual Report 11
12 Bio-Rad 2007 Annual Report
he m o gLoBi n A 1C t eSt i n g
Given the advancements in diabetes
team developed the first commercial
an auTomaTed Bio-rad hplc
treatment today, it’s easy to forget
test for monitoring hemoglobin A1 in
TesTing meThod was uTilized in
how far we’ve come from the days
diabetics using a small, disposable,
when scientists first began to gain a
and inexpensive open chromatogra-
better understanding of diabetes and
phy column.
how patients could minimize long-
term complications from this disease.
Further efficiencies were still to come.
The separated hemoglobin A1 still
Since the 1950s, diabetics have
contained impurities that affected
managed their disease by moni-
the measurement, causing some un-
toring the sugar (glucose) level of
certainty about the results. By 1982,
their blood to determine the level of
in the process of eliminating these
insulin their body required at a given
interferences caused by impurities
time. However, for the many diabet-
associated with the existing test,
ics who manage their disease with
Bio-Rad became the first company
a combination of diet, exercise, and
to measure “A1C,” a subset of
medication, monitoring their glucose
hemoglobin A1 and a more precise
levels on a regular basis is not the
indicator of average blood glucose
only way of letting them know how
levels over time. As the new test be-
effective their therapy is over a longer
came established as a useful clinical
period of time.
In the 1970s, it was discovered that
“glycosylated” hemoglobin (GHb),
which contained a protein called
hemoglobin A1 showed elevated
levels in diabetics. GHb offered insight
tool, test volumes increased rapidly,
and Bio-Rad introduced a series of
automated high-performance liquid
chromatography (HPLC) platforms
to further improve performance and
laboratory efficiency.
into average blood glucose levels in
Today, Bio-Rad advancements
diabetics over a several-month period,
continue to lead the way in monitor-
and therefore provided a more repre-
ing treatment regimens for the more
sentative baseline for monitoring and
than 14 million Americans who have
controlling their disease. This exciting
been diagnosed with diabetes and
development was tempered by the
who are part of the approximately
fact that testing hemoglobin A1 was a
200 million worldwide who suffer
cumbersome and expensive process.
from the disease.
Upon the discovery of hemoglobin
A1, Bio-Rad researchers began
to think of ways to provide more
efficient separation that would be
suitable for routine use in the clinical
laboratory. By 1978, the Bio-Rad
The u.s. governmenT’s massive
10-year diaBeTes sTudy, The
diaBeTes conTrol and complica-
Tions Trial (dccT), which Began
in 1983. This sTudy demonsTraTed
ThaT mainTaining Blood glucose
levels as close To normal as
possiBle slowed The onseT
of complicaTions caused By
diaBeTes and esTaBlished The
usefulness of a1c TesTing, help-
ing physicians provide The mosT
effecTive Therapy for Their
paTienTs wiTh diaBeTes.
Bio-rad offers a series of
markeT-leading producTs for
a1c TesTing. These range from
our d-10™ and varianT™ line of
hemogloBin TesTing sysTems
To The company’s newesT
producT, The small, porTaBle,
and fully auTomaTed in2iT™
poinT-of-care analyzer, which
can deliver a1c resulTs from
a paTienT’s sample wiThin min-
uTes in a physician’s office.
the latest in A1C testing, the small and
portable in2it point-of-care analyzer can
provide a patient’s A1C results within minutes.
The A1Cs of
diabetes monitoring.
Bio-Rad 2007 Annual Report 13
14 Bio-Rad 2007 Annual Report
edU C A t i o nA L oUtReA Ch
In the span of just a few short years
Thus was born a program that would
Today, The BioTechnology
in the mid-1990s, the world gained
turn into one of private industry’s
a newfound appreciation for the
most successful partnerships with
importance of DNA, thanks to a per-
academia. Ron—himself a former
fect storm of biotechnology events
high school teacher—and a group
then sweeping through the popular
of Bio-Rad scientists worked closely
culture: the televised proceedings of
with educators to determine ap-
a spectacular, forensics-based crimi-
propriate curricula for the program,
nal trial; a best-selling book, which
and bundled lesson materials with
speculated that dinosaurs could be
corresponding Bio-Rad equipment
cloned from DNA extracted from a
into comprehensive and hands-on
mosquito preserved in amber for
classroom kits, that would, as Ron
millions of years; and the ongoing
put it, “emulate real-world science in
sequencing of the human genome—
a way that was fun and engaging.”
a breakthrough that promised untold
possibilities for the improved health
of our species.
The idea resulted in curriculum sub-
jects that spanned the spectrum of
explorer™ program is parT
of The science curriculum aT
over 6,500 high schools and
universiTies in The u.s. and
around The world. over The
course of The program’s 11
years of exisTence, Bio-rad
has provided more Than Two
million sTudenTs The opporTu-
niTy To explore—in Their own
classrooms—The fundamenTal
Techniques of geneTic engi-
neering, dna fingerprinTing
and amplificaTion, proTein
expression and analysis, and
The creaTion of geneTically
popular science. These included the
modified organisms.
Even as terms like cloning, double
kit in which students use a jellyfish
helixes, and human genome became
gene to genetically engineer green
part of the vernacular, another revo-
fluorescent bacteria, one in which
lution, under the radar, was quietly
they capture their own DNA and turn
brewing. Science teachers around
it into a necklace called “Genes in
the world were clamoring to find
a Bottle™”, and yet another in which
ways to keep their curriculum up to
they discover the importance of the
date by integrating this exciting new
diversity of species in a rain forest.
It didn’t take long before the program
took off, and with it the imagination
of students everywhere. Who knows
what they will discover next?
revolution in biotechnology into their
classrooms. What better way, after
all, to engage students’ curiosity
and observational abilities than with
subject matter that could be made
relevant to the events going on
around them?
Around this time, the answer to that
question came to Bio-Rad’s Ron
Mardigian: why not a biotechnology
outreach program for high schools?
Instead of dissecting frogs in biology
class, students could learn how
real-world methods and applications
work on instruments that were actu-
ally used in laboratories.
Since the Biotechnology explorer program
was introduced, for many students around the
world, biology class has never been the same.
What goes best with
green fluorescent bugs? Kids.
ron mardigian and educaTors
Bio-Rad 2007 Annual Report 15
th e B U Si n eS S o f B i o - RAd
Bio-Rad Laboratories has played a leading role in the advance ment of scientific
discovery for over 50 years by providing a broad range of innovative tools and
services to the life science research and clinical diagnostics markets.
founded in 1952 and incorporated in 1957, Bio-Rad has a global team of more
than 6,300 employees and serves more than 85,000 research and industry
customers worldwide through its global network of operations. throughout its
existence, Bio-Rad has built strong customer relationships that advance scientific
research and development efforts and support the introduction of new technology
used in the growing fields of genomics, proteomics, drug discovery, food safety,
medical diagnostics, and more.
L i f e SCi e nCeS
Bio-Rad’s Life Science Group develops, manu factures, and markets a wide range of labora tory instruments,
apparatus, and consumables used for research in functional genomics, pro teomics, and food safety. The
group ranks among the top 5 life science companies world wide, and maintains a solid reputation for quality,
innovation, and commitment to its customers. Bio-Rad’s life science products are based on technologies used
to separate, purify, analyze, identify, and amplify biological materials such as proteins and nucleic acids. Some
of these technologies include electrophoresis, imaging, multiplex immunoassay, chromatography, microbiology,
bioinformatics, protein function analysis, transfection, amplification, and real-time PCR. Bio-Rad products
support researchers in laboratories throughout the world.
CLi n iC A L diAg n oSt iC S
Clinical Diagnostics develops, manufactures, sells, and supports a large portfolio of products for medical
screening and diagnostics. Bio-Rad is the leading specialty diagnostic company in the world and its products
are recognized as the gold standard for diabetes monitoring and broad-spectrum screening. The company is
also well known for its quality control (QC) systems, blood virus testing and detection, blood typing, toxicology,
genetic disorders testing, specialty chemistry, molecular pathology, and internet-based soft ware products.
Bio-Rad’s clinical diagnostics products incorporate a broad range of technolo gies used to detect, identify, and
quantify sub stances in bodily fluids and tissues. The results are used as aids for medical diagnosis, detection,
evaluation, and the monitoring and treatment of diseases and other medical conditions.
16 Bio-Rad 2007 Annual Report
2 0 0 7 fi nAnCiA L hi g hLi g h tS
fi v e -yeAR ReCoRd
( $ i n m iL Li o nS, e xCePt PeR ShA Re dA
tA)
2003
2004
2005
2006
2007
Net Sales
Gross Profit
$ 979.6
$ 1090.0
$ 1,181.0
$ 1,273.9
$ 1,461.1
$ 556.2
$ 610.1
$ 646.5
$ 712.5
$ 791.4
Research Expenditures(1)
$ 91.3
$ 108.3
$ 115.1
$ 123.4
$ 140.5
Net Income
Return On Sales
$ 76.2
$
68.2
$
81.6
$ 103.3
$
93.0
7.8%
6.3%
6.9%
8.1%
6.4%
Book Value Per Share
$ 19.41
$ 23.10
$ 25.09
$ 30.92
$ 36.14
Basic Earnings Per Share
$ 3.00
$
2.65
$
3.13
$
3.92
$
3.49
Cash Flow from Operations
$ 127.6
$ 123.1
$ 108.3
$ 118.2
$ 191.6
(1) exCLUdeS $14.6, $4.1 And $7.7 of PURChASed R&d in 2004, 2006 And 2007, ReSPeCtiveL
y
2007 SALeS By Region
net SALeS
( i n m iL Li o nS)
CASh fLow
fRom oPeRA tionS
( i n m iL Li o nS)
BASiC e ARningS
PeR ShARe
1
.
1
6
4
1
$
9
.
3
7
2
1
$
0
.
1
8
1
1
$
0
.
0
9
0
1
$
6
.
9
7
9
$
6
.
1
9
1
$
6
.
7
2
1
$
1
.
3
2
1
$
2
.
8
1
1
$
3
.
8
0
1
$
2
9
.
3
$
9
4
.
3
$
0
0
.
3
$
3
1
.
3
5 $
6
.
2
$
46%
Europe
14%
Pacific
Rim
40%
Americas
03 04 05 06 07
03 04 05 06 07
03 04 05 06 07
StoCK PeRfoRmAnCe gR APh
The following graph compares the cumulative stockholder returns over the past five years for the Company’s Class A Common Stock,
the American Stock Exchange Market Value Index and a selected peer group, assuming $100 invested on December 31, 2002, and
reinvestment of dividends if paid:
S
R
A
L
L
O
D
400
350
300
250
200
150
100
50
0
Criterion™ precast gels provide the sharp,
crisp bands, helping researchers quickly get
results they can rely on.
Bio-Rad
Peer Group (1)
American Stock
Exchange Market
Value Index
2002
2003
2004
2005
2006
2007
(1) The Peer Group consists of the following public companies: Applera Corp. (the Applied Biosystems group), Beckman Coulter, Becton Dickinson, Thermo Fisher Scientific,
Invitrogen, Meridian Bioscience, Millipore, and PerkinElmer Inc. Companies in our peer group reflect our participation in two different markets: life science research
products and clinical diagnostics. No single public or private company has a comparable mix of products which serve the same markets. In many cases, only one division
of a peer group company competes in the same markets as we do. Collectively, however, our peer group reflects products and markets similar to those of Bio-Rad.
This stock performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference into any filing
under the Securities Act or the Exchange Act, and shall not otherwise be deemed filed under these Acts.
Bio-Rad 2007 Annual Report 17
SA LeS hiSt oR
y
$1.4 billion
$1.3 billion
$1.2 billion
$1.1 billion
$1 billion
$900 million
$800 million
$700 million
$600 million
$500 million
(cid:25)(cid:41)(cid:37)(cid:37)(cid:21)(cid:98)(cid:94)(cid:97)(cid:97)(cid:94)(cid:100)(cid:99)
$300 million
$200 million
$100 million
1959
1965
1970
1975
1980
1985
1990
1995
2000
2007
18 Bio-Rad 2007 Annual Report
Summary of oper ationS and Selecte d financial data
(in thousands, except per share data)
2007(2)
2006
2005
2004
2003
Year Ended December 31,
Net sales
$ 1,461,052 $ 1,273,930 $ 1,180,985 $ 1,090,012 $ 979,631
Cost of goods sold
669,690
561,394
534,499
479,939
423,401
Gross profit
791,362
712,536
646,486
610,073
556,230
Selling, general and administrative expense
507,978
438,949
416,084
378,264
317,524
Product research and development expense
140,535
123,376
115,104
108,344
91,273
Purchased in-process research and
development expense
Impairment losses on long-lived assets
Interest expense
Foreign exchange (gains) losses
7,656
—
31,606
2,576
4,100
—
32,022
1,053
—
14,620
19,770
32,643
(1,528)
—
20,219
2,394
Other income, net(1)
(19,832)
(28,991)
(28,958)
(11,095)
Income from continuing operations before
—
—
31,006
4,080
(3,012)
taxes and minority interests
120,843
142,027
Provision for income taxes
(26,548)
(38,764)
93,371
(15,792)
97,327
115,359
(31,035)
(38,055)
Minority interests in earnings of
consolidated subsidiaries
(1,301)
—
—
—
—
Income from continuing operations
92,994
103,263
77,579
66,292
77,304
Discontinued operations
Loss from discontinued operations (net of tax)
Gain on divestiture (net of tax)
Total income (loss) from discontinued operations
—
—
—
—
—
—
—
3,974
3,974
(1,487)
3,437
1,950
(1,133)
—
(1,133)
Net income
$
92,994 $ 103,263 $
81,553 $
68,242 $
76,171
Basic earnings per share:
Continuing operations
Discontinued operations
Basic earnings per share
Diluted earnings per share:
Continuing operations
Discontinued operations
$
$
$
3.49 $
3.92 $
2.98 $
2.58 $
—
—
0.15
0.07
3.49 $
3.92 $
3.13 $
2.65 $
3.41 $
3.83 $
2.91 $
2.51 $
—
—
0.15
0.07
Diluted earnings per share
$
3.41 $
3.83 $
3.06 $
2.58 $
Cash dividends paid per common share
—
—
—
—
3.04
(0.04)
3.00
2.94
(0.04)
2.90
—
Total assets
$ 1,971,594 $ 1,596,168 $ 1,426,582 $ 1,371,618 $ 992,596
Long-term debt, net of current maturities
$ 441,805 $ 425,625 $ 425,687 $ 425,979 $ 225,835
(1) See Note 11 to the consolidated financial statements for components of Other (income) expense, net. Included in 2005 is interest and investment income
of $16.7 million, gains on sales of investments of $11.2 million and litigation expense of $1.2 million. Included in 2006 is interest and investment income of
$22.3 million and gains on sales of investments of $4.7 million. Included in 2007 is interest and investment income of $22.0 million offset by a $3.6 million
write-down of investments.
(2) Included in 2007 are the fourth quarter operating results of an acquisition. See Note 2 to the consolidated financial statements.
Bio-Rad 2007 Annual Report 19
conSolidated Balan ce Sh eetS
(in thousands)
A S SE TS
Current assets:
Cash and cash equivalents
Short-term investments
December 31,
2007
2006
$ 161,764
$ 223,607
61,977
264,473
Accounts receivable less allowance of $21,410 in 2007 and $15,265 in 2006
358,076
292,970
Inventories, net:
Raw materials
Work in process
Finished goods
Total inventories
Deferred tax assets
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment:
Land and improvements
Buildings and leasehold improvements
Equipment
Total property, plant and equipment
Accumulated depreciation
Property, plant and equipment, net
Goodwill
Purchased intangibles, net
Long-term deferred tax assets
Other assets
61,555
88,375
59,356
57,682
171,085
136,007
321,015
253,045
36,450
35,862
89,692
59,820
1,028,974
1,129,777
11,929
9,577
181,772
121,977
420,628
357,600
614,329
489,154
(342,768)
(299,527)
271,561
189,627
328,439
119,492
210,304
20,429
44,605
9,100
111,887
103,567
TOTAL ASSET S
$ 1,971,594
$ 1,596,168
The accompanying notes are an integral part of these consolidated financial statements.
20 Bio-Rad 2007 Annual Repor t
(in thousands, except share data)
LIABILITIES AND STOCKHOLDERS’ EQ UITY
Current liabilities:
Accounts payable
Accrued payroll and employee benefits
Notes payable
Current maturities of long-term debt
Sales, income and other taxes payable
Litigation accrual
Accrued royalties
Current deferred taxes
Other current liabilities
Total current liabilities
Long-term debt, net of current maturities
Deferred tax liabilities
Other long-term liabilities
Total liabilities
Commitments and contingent liabilities
Minority interests
Stockholders’ equity:
Preferred stock, $0.0001 par value, 7,500,000 shares authorized;
none outstanding
Class A common stock, $0.0001 par value, 80,000,000 shares authorized;
outstanding—21,877,695 at 2007 and 21,594,311 at 2006
Class B common stock, $0.0001 par value, 20,000,000 shares authorized;
outstanding—5,006,440 at 2007 and 4,909,908 at 2006
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income:
Currency translation and other
Total stockholders’ equity
T OTAL LIABILITIES, MINORITY INTERESTS A ND
STOCKHOLDERS’ E QUITY
The accompanying notes are an integral part of these consolidated financial statements.
December 31,
2007
2006
$
96,470
$
83,411
121,255
92,101
4,630
10,997
27,905
5,473
44,069
2,134
101,235
2,539
503
19,949
8,810
31,826
2,445
77,949
414,168
319,533
441,805
425,625
51,215
58,282
7,512
23,960
965,470
776,630
—
34,434
—
2
1
—
—
—
2
1
98,629
78,230
762,067
674,070
110,991
67,235
971,690
819,538
$ 1,971,594
$ 1,596,168
Bio-Rad 2007 Annual Report 21
conSolidated StatementS o f in c ome
(in thousands, except per share data)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expense
Product research and development expense
Purchased in-process research and development expense
Impairment losses on long-lived assets
Interest expense
Foreign exchange (gains) losses
Other income, net
Income from continuing operations before taxes
and minority interests
Provision for income taxes
Minority interests in earnings of consolidated subsidiaries
Income from continuing operations
Discontinued operations
Year Ended December 31,
2007
2006
2005
$ 1,461,052 $ 1,273,930 $ 1,180,985
669,690
561,394
534,499
791,362
712,536
646,486
507,978
438,949
416,084
140,535
123,376
115,104
7,656
—
31,606
2,576
(19,832)
4,100
—
32,022
1,053
(28,991)
120,843
142,027
(26,548)
(1,301)
(38,764)
—
—
19,770
32,643
(1,528)
(28,958)
93,371
(15,792)
—
92,994
103,263
77,579
Gain on divestiture net of tax expense of $0 in 2005
Total income from discontinued operations
Net income
—
—
—
—
3,974
3,974
$
92,994 $ 103,263
$
81,553
Basic earnings per share:
Continuing operations
Discontinued operations
Net income
Weighted average common shares
Diluted earnings per share:
Continuing operations
Discontinued operations
Net income
Weighted average common shares
$
$
$
$
3.49 $
3.92
$
—
—
3.49 $
3.92 $
2.98
0.15
3.13
26,684
26,376
26,063
3.41 $
3.83
$
—
—
3.41 $
3.83
$
2.91
0.15
3.06
27,260
26,949
26,662
The accompanying notes are an integral part of these consolidated financial statements.
22 Bio-Rad 2007 Annual Repor t
conSolidated StatementS of caSh flow S
(in thousands)
Cash flows from operating activities:
Cash received from customers
Cash paid to suppliers and employees
Litigation settlement
Interest paid
Income tax payments
Miscellaneous receipts
Excess tax benefits from share-based compensation
Year Ended December 31,
2007
2006
2005
$ 1,467,626 $ 1,247,779
$ 1,166,711
(1,225,968)
(1,058,977)
(1,003,264)
(4,228)
(30,588)
(38,253)
(46,981)
(31,049)
(16,072)
25,983
24,914
(2,992)
(1,385)
—
(31,334)
(39,597)
15,768
—
Net cash provided by operating activities
191,580
118,229
108,284
Cash flows from investing activities:
Capital expenditures, net
Payments for acquisitions, net of cash received,
and long-term investments
Proceeds from divestitures
Payments for purchase of intangible assets
(60,595)
(52,987)
(36,055)
(387,673)
—
(2,075)
(46,071)
12,772
—
(4,344)
—
(5,000)
Purchases of marketable securities and investments
(270,174)
(334,047)
(873,822)
Sales of marketable securities and investments
470,200
178,643
942,790
Foreign currency economic hedges, net
Receipt (payment) of restricted cash
Net cash used in investing activities
Cash flows from financing activities:
Net payments on notes payable
Long-term borrowings
Payments on long-term debt
Debt issuance costs on 6.125% bonds
Proceeds from issuance of common stock
Excess tax benefits from share-based compensation
Net cash provided by (used in) financing activities
(4,112)
—
(2,196)
36,138
(254,429)
(207,748)
6,397
(36,138)
(6,172)
(4,326)
24
(17,720)
—
11,580
2,992
(7,450)
(659)
—
(487)
—
9,923
1,385
10,162
(6,847)
—
(447)
(331)
8,915
—
1,290
Effect of exchange rate changes on cash
8,456
6,248
(2,420)
Net (decrease) increase in cash and cash equivalents
(61,843)
(73,109)
100,982
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
223,607
296,716
195,734
$ 161,764 $ 223,607
$ 296,716
Non-cash investing activities:
Tender of Accent stock
Receipt of Nanometrics stock
$
$
— $
(3,200)
— $
5,354
$
$
—
—
The accompanying notes are an integral part of these consolidated financial statements.
Bio-Rad 2007 Annual Report 23
conSolidated StatementS o f ch an geS in StockholderS’ equity
(in thousands)
Common stock, $0.0001 par value:
Balance at beginning of year
Issuance of common stock
Balance at end of year
Additional paid-in capital:
Balance at beginning of year
Issuance of common stock
Stock compensation expense
Tax benefit from exercise of stock options
Balance at end of year
Retained earnings:
Balance at beginning of year
Net income
FIN 48 adjustment
Balance at end of year
Accumulated other comprehensive income:
Balance at beginning of year
Other comprehensive income (loss)
Balance at end of year
Year Ended December 31,
2007
2006
2005
$
3
$
3
$
—
3
—
3
78,230
11,580
5,506
3,313
60,112
9,923
5,363
2,832
98,629
78,230
3
—
3
49,628
8,916
—
1,568
60,112
674,070
570,807
489,254
92,994
103,263
81,553
(4,997)
—
—
762,067
674,070
570,807
67,235
43,756
110,991
27,052
40,183
67,235
58,003
(30,951)
27,052
Total stockholders’ equity
$ 971,690
$ 819,538
$ 657,974
Comprehensive income, net of tax:
Net income
Currency translation adjustments
$
92,994
$ 103,263
$
81,553
45,856
30,059
(30,535)
Net unrealized holding gains (losses) net of tax of ($1,396) in 2007,
$5,767 in 2006 and $2,735 in 2005
(2,433)
10,175
2,960
Reclassification adjustments for gains included in net income
net of tax of ($193) in 2007, $30 in 2006 and $2,007 in 2005
333
(51)
(3,376)
Total comprehensive income
$ 136,750
$ 143,446
$
50,602
The accompanying notes are an integral part of these consolidated financial statements.
24 Bio-Rad 2007 Annual Repor t
noteS to conSoli dated fina ncial Stat em entS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Bio-Rad Laboratories, Inc. and all subsidiaries
(referred to in this report as “Bio-Rad,” “we,” “us” and “our”) after elimination of intercompany balances and
transactions. The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three
months or less which are readily convertible into cash. Cash equivalents are stated at cost, which approximates
fair market value.
Short-Term Investments
Short-term investments consist of corporate, state and municipal securities with original maturities in excess
of three months. Investments with maturities beyond one year may be classified as short-term based on their
liquid nature and because such marketable securities represent the investment of cash that is available for
current operations. Our investments are classified as “Available-for-sale” and accordingly are reported at fair
value based on quoted market prices and other observable market data, with unrealized gains and losses
reported as a component of stockholders’ equity, net of any related tax effect. Unrealized losses are charged
against income when a decline in the fair market value of an individual security is determined to be other than
temporary. Realized gains and losses on investments are included in interest income.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash and cash
equivalents, short-term investments and trade accounts receivable. Cash and cash equivalents and short-term
investments are placed with highly rated major financial institutions. We perform credit evaluation procedures
related to our trade receivables and with the exception of certain developing countries, generally do not require
collateral. As a result of increased risk in these developing countries, some Bio-Rad sales are subject to collateral
letters of credit. Credit risk is generally limited due to the large number of customers and their dispersion across
many geographic areas. However, a significant amount of trade receivables are with national healthcare systems
in countries within the European Economic Community. We do not currently anticipate a credit risk associated
with these receivables.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers
to make required payments. The amount of the allowance is determined by analyzing known uncollectible
accounts, aged receivables, economic conditions in the customers’ country or industry, historical losses and
our customers’ credit-worthiness. Amounts later determined and specifically identified to be uncollectible are
charged or written off against this reserve. This valuation allowance is reviewed quarterly to determine whether
a change is warranted.
Bio-Rad 2007 Annual Report 25
noteS to conSoli dated fina n c i al Stat em entS (continued)
Inventory Valuation
Inventories are valued at the lower of actual cost or market and include material, labor and overhead costs.
Management reviews the need for an inventory obsolescence reserve on a quarterly basis or, if warranted by
circumstances, more frequently. In evaluating this reserve, technology changes, competition, customer demand
and manufacturing quality are considered.
Property, Plant and Equipment
Property, plant and equipment are carried at historical cost. Included in property, plant and equipment is reagent
rental equipment. We provide these instruments to our customers for use with our reagents. Property, plant and
equipment are assessed for impairment annually or whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Buildings and
leasehold improvements are amortized over 15-30 years or the lives of the leases or improvements, whichever is
shorter. With the exception of reagent rental equipment, which is amortized over a 1-5 year period, equipment is
depreciated over 3-12 years.
Net capital expenditures include proceeds from the sale of property, plant and equipment of $0.2 million, $0.3
million and $3.2 million for the years ended December 31, 2007, 2006 and 2005, respectively.
Goodwill and Other Purchased Intangible Assets
Goodwill represents the excess of the cost over the fair value of net tangible and identifiable intangible assets of
acquired businesses. Goodwill is assessed for impairment by applying a fair-value based test annually or whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable (see Note 6).
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements. Under this method, deferred tax assets and liabilities are determined based on the differences
between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in income in the period that includes the enactment date.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized.
In making such determination, we consider all available positive and negative evidence, including scheduled
reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial
operations. To the extent we determine that we are able to realize our deferred income tax assets in the future
in excess of their net recorded amount, we make an adjustment to the valuation allowance which would reduce
the provision for income taxes.
Revenue Recognition
Revenue is recognized when pervasive evidence of an arrangement exists, the price to the buyer is fixed or
determinable, collectibility is reasonably assured and title has passed to the customer or product has been
delivered absent specific contractual specifications. Equipment that requires factory installation is not recorded
26 Bio-Rad 2007 Annual Repor t
until installation is complete and customer acceptance, if required contractually, has occurred. At the time the
related revenue is recognized, a provision is recognized for estimated product returns. Reagent agreements are
a diagnostic industry sales method that provides use of an instrument if the customer exclusively purchases the
company’s reagents to use on that instrument. We have evaluated the reagent agreements and account for the
contracts under the terms of the guidance set forth in EITF 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables. All revenues that we earn under our reagent agreements are recognized when the reagent
has been delivered to the customer. Service revenues on extended warranty contracts are recognized ratably
over the life of the service agreement or as services are performed, if not under contract.
Shipping and Handling
We classify all freight billed to customers as net sales. Related freight costs are included in cost of goods sold.
Warranty
We warrant certain equipment against defects in design, materials and workmanship, generally for a period
of one year. Upon shipment of that equipment, we establish, as part of cost of goods sold, a provision for the
expected costs of such warranty based on historical experience, specific warranty terms and customer feed-
back. A review is performed on a quarterly basis to assess the adequacy of our warranty reserve.
Components of the warranty accrual, included in Other current liabilities and Other long-term liabilities,
were as follows (in millions):
January 1
Provision for warranty
Actual warranty costs
Acquisition
December 31
Research and Development
2007
2006
$ 12.9
$
14.9
(13.3)
0.8
12.0
14.9
(14.0)
—
$ 15.3
$
12.9
Internal research and development costs are expensed as incurred. Third-party research and development costs
are expensed when the contracted work has been performed. Purchased in-process research and development
costs are expensed at the time of purchase.
Foreign Currency
Balance sheet accounts of international subsidiaries are translated at the current exchange rate as of the end
of the accounting period. Income statement items are translated at average exchange rates for the period. The
resulting translation adjustment is recorded as a separate component of stockholders’ equity.
Foreign currency transaction gains and losses are included in Foreign exchange (gains) losses in the Consolidated
Statements of Income. Transaction gains and losses result primarily from fluctuations in exchange rates when
intercompany receivables and payables are denominated in currencies other than the functional currency of our
subsidiary that recorded the transaction.
Bio-Rad 2007 Annual Report 27
noteS to conSoli dated fina n c i al Stat em entS (continued)
Forward Exchange Contracts
As part of distributing our products, we regularly enter into intercompany transactions. We enter into forward
foreign currency exchange contracts to manage foreign exchange risk of future movements in foreign exchange
rates that affect foreign currency denominated intercompany receivables and payables. We do not use derivative
financial instruments for speculative or trading purposes. In accordance with Statement of Financial Accounting
Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities, we do not seek hedge
accounting treatment for these contracts. As a result, these contracts, generally with maturity dates of 90 days
or less and related primarily to currencies of industrial countries, are recorded at their fair value at each balance
sheet date. The resulting gains or losses offset exchange gains or losses on the related receivables and payables,
both of which are recorded as Foreign exchange (gains) losses in the Consolidated Statements of Income. The
cash flows related to these contracts are classified as cash flows from investing activities in the Consolidated
Statements of Cash Flows.
We do not own 100% of the voting stock of some our consolidated subsidiaries. The remaining shares held by
third parties represent a minority (or noncontrolling) interest in these subsidiaries. Our consolidated statements
present the full amount of assets, liabilities, income and expenses of all of our consolidated subsidiaries, with
offsetting amounts shown in Minority Interests for the portion of these items that do not belong to us.
Employee Share-Based Compensation Plans
We maintain stock option and stock award plans for officers and certain other key employees. We also have an
employee stock purchase plan that provides that eligible employees may contribute toward the purchase of our
Class A common stock. These plans are described more fully in Note 10.
Prior to January 1, 2006, we applied Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees (APB No. 25), and related interpretations, in accounting for our share-based compensation plans.
All employee stock options were granted at or above the grant date fair market value. Accordingly, no compensation
cost was recognized in the financial statements but was included as a pro forma disclosure in the consolidated
financial statements. We also recorded no compensation expense in connection with our Employee Stock Purchase
Plan as the purchase price of the stock was not less than 85% of the lower of the fair market value of our common
stock at the beginning of each offering period or at the end of each purchase period.
As of January 1, 2006, we adopted the fair value recognition provisions of SFAS 123(R), Share-Based Payments
using the modified prospective method. Under this transition method we record compensation expense for all
awards granted after the date of adoption and for the unvested portion of previously granted awards that remain
outstanding at the date of adoption. In accordance with the modified prospective transition method, our results
for periods prior to 2006 have not been restated.
28 Bio-Rad 2007 Annual Repor t
The following table illustrates the effect on net income and earnings per share if we had applied the fair value
recognition provisions of SFAS 123 in accounting for the compensation cost for our stock option and stock
purchase plans during the year ended December 31, 2005 (in millions, except per share data).
Net income, as reported
Deduct: Total stock based employee compensation expense determined under
fair value methods for all awards net of related tax effects
Pro forma net income
Earnings per share:
Basic—as reported
Basic—pro forma
Diluted—as reported
Diluted—pro forma
2005
$
81.6
3.4
$
78.2
$
$
$
$
3.13
3.00
3.06
2.93
Further information regarding share-based compensation can be found in Note 10.
Earnings per Share
Basic earnings per share is computed by dividing net income by the weighted average number of common
shares outstanding for that period less the weighted average number of unvested restricted shares outstanding
for that period. Diluted earnings per share takes into account the effect of dilutive instruments, such as stock
options, restricted stock and restricted stock units, and uses the average share price for the period in determining
the number of common stock equivalents that are to be added to the weighted average number of shares
outstanding. Common stock equivalents are excluded from the diluted earnings per share calculation if the
effect would be anti-dilutive. The following table summarizes the basic and diluted weighted average common
shares (in thousands).
Weighted average shares outstanding
Weighted average unvested restricted shares
Basic shares
Effect of potentially dilutive securities:
Stock-based compensation awards
Diluted weighted average common shares
Anti-dilutive shares
Year Ended December 31,
2007
2006
2005
26,716
26,376
26,063
(32)
—
—
26,684
26,376
26,063
576
27,260
279
573
26,949
253
599
26,662
281
Bio-Rad 2007 Annual Report 29
noteS to conSoli dated fina n c i al Stat em entS (continued)
Fair Value of Financial Instruments
For certain financial instruments, including cash and cash equivalents, short-term investments, accounts receivable,
marketable securities, notes payable, and accounts payable, the carrying amounts approximate fair value.
The estimated fair value of financial instruments in the table below has been determined using available market
information or other appropriate valuation methodologies. Estimates are not necessarily indicative of the
amounts that could be realized in a current market exchange as considerable judgment is required in interpreting
market data used to develop estimates of fair value. The use of different market assumptions or estimation
techniques could have a material effect on the estimated fair value. With the exception of an equity investment,
financial instruments that have fair values based on market quotations are included in Other assets. Long-term
debt has an estimated fair value based on quoted market prices for the same or similar issues.
The estimated fair value of our financial instruments is as follows (in millions):
Year Ended December 31,
2007
2006
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Other assets
Total long-term debt
$ 111.9
$ 173.2
$ 452.8
$ 446.0
$ 103.6
$ 426.1
$ 190.5
$ 436.4
New Financial Accounting Standards
In June 2006, the Financial Accounting Standard Board (FASB) issued Financial Interpretation (“FIN”) 48,
Accounting for Uncertainty in Income Taxes, which clarifies the accounting for uncertainty in income taxes
recognized in the financial statements in accordance with SFAS 109, Accounting for Incomes Taxes. FIN 48
provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not
that the position will be sustained upon examination, including resolutions of any related appeals or litigation
processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition
threshold at the effective date to be recognized upon the adoption of FIN 48. This interpretation also provides
guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition.
Bio-Rad adopted the provisions of FIN 48, on January 1, 2007. As a result of the implementation of FIN 48,
we recognized approximately a $5.0 million increase in the liability for unrecognized tax benefits, which was
accounted for as a reduction to the January 1, 2007 balance of retained earnings.
Consistent with our accounting principle on classification of interest and penalties prior to adoption of FIN 48,
Bio-Rad recognizes interest and penalties related to unrecognized tax benefits within the income tax expense
line in the accompanying consolidated statement of operations. Accrued interest and penalties are included
within the related tax liability line in the consolidated balance sheet.
30 Bio-Rad 2007 Annual Repor t
In December 2007, the FASB issued SFAS 141R, Business Combinations. SFAS 141R established principles
and requirements for how the acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The state-
ment also provides guidance for recognizing and measuring the goodwill acquired in the business combination
and determines what information to disclose to enable users of the financial statement to evaluate the nature
and financial effects of the business combination. SFAS 141R is effective for financial statements issued for
fiscal years beginning after December 15, 2008. Accordingly, any business combinations we engage in will be
recorded and disclosed following existing pronouncements until January 1, 2009. We expect SFAS No. 141R
will have an impact on our consolidated financial statements when effective, but the nature and magnitude of
the specific effects will depend upon the nature, terms and size of acquisitions we may consummate after the
effective date. We have accrued a liability of $1.5 million for unrecognized tax benefits as of December 31, 2007
related to tax positions of DiaMed taken prior to the acquisitions by Bio-Rad. If such liabilities are settled for
lesser amounts prior to the adoption of SFAS 141R, the reversal of any remaining liability will affect goodwill.
If such liabilities reverse subsequent to the adoption of SFAS 141R, such reversals will affect the income tax provision
in the period of reversal. We are still assessing the full impact of this standard on our future consolidated financial
statements. It is not permissible to adopt this statement early.
In September 2006, the FASB issued SFAS 158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans. This new standard requires an employer to: (a) recognize in its statement of financial
position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a
plan’s assets and obligations that determine its funded status as of the end of the employer’s fiscal year; and
(c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the
changes occur. These changes are to be reported in comprehensive income of a business entity. The employer
is required to recognize the funded status of a benefit plan and meet the disclosure requirements effective as
of the end of fiscal years ending after December 15, 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal
years ending after December 15, 2008. The adoption of SFAS 158 did not have a material effect on our consolidated
financial statements.
In September 2006, FASB issued SFAS 157, Fair Value Measurements, which addresses how companies should
measure fair value when they are required to use a fair value measurement for recognition or disclosure purposes
under generally accepted accounting principles. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. We will include the disclosure provisions of this statement when applicable.
In February 2007, FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities–
including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure
many financial instruments and certain other items at fair value. Most of the provisions in SFAS 159 are elective;
however the amendment to SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, applies
to all entities with available-for-sale securities. The fair value option established by SFAS 159 permits all entities
to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized
gains and losses on items for which the fair value option has been elected in earnings at each subsequent
reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such
as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date
occurs); and (c) is applied only to entire instruments and not to portions of instruments. We have adopted this
statement as of January 1, 2008. The adoption created no impact to our financial statements.
Bio-Rad 2007 Annual Report 31
noteS to conSoli dated fina n c i al Stat em entS (continued)
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statement—an
amendment of ARB No. 51. This Statement amends ARB No. 51 to establish accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncon-
trolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Additionally, this Statement requires that consolidated net income include
the amounts attributable to both the parent and the noncontrolling interest. SFAS 160 is effective for interim
periods beginning on or after December 15, 2008. We are in the process of evaluating the impact of the adoption
of SFAS 160 on our consolidated financial statements. It is not permissible to adopt this statement early.
2. ACQUISITIONS
In May 2007, we entered into a definitive agreement to acquire approximately 77.7% of the registered shares,
or 85.96% of the outstanding shares, of DiaMed Holding AG (“DiaMed”), a private Swiss company that develops,
manufactures and markets a complete line of reagents and instruments used in blood typing and screening.
DiaMed holds approximately 9.6% of its shares as treasury shares. There were no acquired assets, employees or
operations based in the United States. The acquisition closed on October 1, 2007. The acquisition was accounted
for as a purchase under SFAS 141 and accordingly the purchase price was allocated to the assets acquired
and liabilities assumed based on estimated fair values, except for the minority interest share in such assets and
liabilities which was recorded at historical cost. Under the terms of the agreement, we paid 476.9 million Swiss
francs ($409.6 million) in cash to acquire these shares. At closing, we received approximately $11.3 million from
certain selling shareholders for businesses that we did not acquire resulting in net cash paid of $398.3 million
plus estimated transaction costs of $1.0 million. DiaMed’s operating results including any charges related to
the transaction are included in our consolidated financial statements beginning in the fourth quarter of 2007.
DiaMed is included in our Clinical Diagnostics segment. At closing, approximately 14.04% of the DiaMed
outstanding shares are held by minority shareholders. Their interest is recorded as Minority Interests on the
consolidated balance sheet. We are obligated to submit a cash tender offer before October 1, 2008 to acquire
the remaining 14.04% of DiaMed’s outstanding shares from certain minority shareholders for 92.25% of the
price paid to the majority shareholders. At December 31, 2007 we estimated the offer would cost approximately
$70 million. The minority shareholders are under no obligation to accept our tender offer. The acquisition of the
minority shares will be accounted for as a step acquisition if, and when, such shares are acquired.
DiaMed develops, manufactures and markets worldwide a complete line of reagents used in blood typing and
screening as well as instruments and instrument systems that use the DiaMed priority reagents. Its products
are used by hospitals, clinical laboratories and blood banks to identify certain properties of the cell and serum
components of human blood prior to a blood transfusion. DiaMed’s principal product is its proprietary blood
typing test. DiaMed is headquartered in Cressier, Switzerland and employs approximately 800 people worldwide.
The acquisition of DiaMed will help us enhance our diagnostics business while presenting a number of opportunities
for cross selling.
The estimated excess of the purchase price over the fair value of the net tangible assets acquired is approximately
$379.1 million. This amount is subject to change pending the final analysis of the fair values of the assets acquired
and the liabilities assumed, including the valuation of certain tax assets acquired. The goodwill will not be
deductible for tax purposes.
32 Bio-Rad 2007 Annual Repor t
The $379.1 million excess was allocated as follows (in millions):
Know how
Customer relationships/lists
Developed product technology
Tradenames
Licenses
Purchased in-process R&D
Goodwill
Life
(in years)
9
16
7
5
1
expensed
indefinite
Amount
$
69.0
67.8
15.9
14.6
3.0
7.4
201.4
$ 379.1
We are in the process of finalizing the allocation of the purchase price to the individual assets acquired and
liabilities assumed. The preliminary allocation of the purchase price included in the current period balance sheet
is based on the best estimates of management. The completion of the purchase price allocation is pending the
finalization of certain analyses of inventory, taxes and valuations for certain fixed assets and property. The final
allocation may result in adjustments to the carrying value of DiaMed’s recorded assets and liabilities, revisions
of the useful lives of intangible assets and the determination of any residual amount that will be allocated to
goodwill. The related depreciation and amortization from the acquired assets is also subject to revision based
on the final allocation.
The following table presents the preliminary allocation of the purchase price related to DiaMed (in millions):
Cash and cash equivalents
Accounts receivable, net
Inventory
Property, plant and equipment
Purchased intangibles (including purchased in-process research and development)
Goodwill
All other assets
Current liabilities
Long-term debt
Deferred tax liabilities
Other long-term liabilities
Minority interests
$
16.1
53.1
58.8
64.1
177.7
201.4
26.7
(89.1)
(28.8)
(40.5)
(7.2)
(33.0)
$ 399.3
Bio-Rad 2007 Annual Report 33
noteS to conSoli dated fina n c i al Stat em entS (continued)
In connection with the acquisition of DiaMed we recorded acquisition liabilities related to the termination of a
small number of DiaMed employees of $4.9 million. There were no payments made as of December 31, 2007.
The following unaudited pro forma financial information presents the combined results of operations of Bio-Rad
and DiaMed as if the acquisition of DiaMed had occurred as of the beginning of 2007 and 2006, respectively.
The pro forma financial information gives effect to certain adjustments, including the amortization of purchased
intangibles, the elimination of interest income related to the cash paid, the elimination of activity between Bio-Rad
and DiaMed and tax provision adjustments to reflect the effect of the pro forma adjustments. However, pro forma
results do not include any anticipated cost savings or other effects of the planned integration of DiaMed.
Accordingly, the pro forma financial information does not necessarily reflect the results of operations that would
have occurred had the two companies constituted a single entity during such periods.
(in millions)
Revenue
Net income
Basic net income per share
Diluted net income per share
Year Ended December 31,
2007
2006
$ 1,600
$ 1,500
$
$
$
95
3.57
3.50
$
$
$
85
3.17
3.10
In November 2006, we acquired Ciphergen Biosystems, Inc.’s (Ciphergen) ProteinChip Systems business and
worldwide rights to its Surface Enhanced Laser Desorption/Ionization (SELDI) technology for approximately $20
million in cash. The acquisition includes certain product lines, manufacturing capability, and intellectual property
as well as access to Ciphergen’s life science customer base. Under the terms of the agreement, Ciphergen will
retain rights to the diagnostics market. Through a separate supply agreement, Bio-Rad will supply instruments
and reagents to Ciphergen to support their diagnostics business. The total purchase of $20.0 million included
$5.4 million of net tangible assets, $3.0 million of goodwill and $11.6 million of intangible assets. The goodwill
will be deductible for tax purposes. An initial amount of $18.0 million was paid in 2006. An additional $2.0 million
was paid in 2007 after the SELDI patent was granted. This $2.0 million is shown as additional goodwill in 2007.
Purchased in-process research and development of $3.8 million was charged to expense in the fourth quarter
of 2006. The allocation of the total purchase price to net tangible assets, goodwill and other intangible assets
has been recorded at their fair market value based upon management estimates and third party valuations. The
results of this acquisition are included in our consolidated financial statements from the acquisition date, in our
Life Science segment. We also made a $3.0 million equity investment in Ciphergen as part of the transaction.
In October 2006, we completed the acquisition of Blackhawk BioSystems, Inc. (Blackhawk) for approximately
$16.7 million in cash. With the acquisition of the Blackhawk infectious disease controls, we will be able to offer
a broader line of quality control products for the clinical laboratory. Bio-Rad acquired $2.2 million of net tangible
liabilities, $5.3 million of goodwill and $13.6 million of intangible assets. The goodwill will not be deductible for
tax purposes. Purchased in-process research and development of $0.3 million was charged to expense in the
fourth quarter of 2006. The allocation of the total purchase price to net tangible liabilities, goodwill and other
intangible assets has been recorded at their fair market value based upon management estimates and third party
valuations. The results of Blackhawk are included in our consolidated financial statements from the acquisition
date, in our Clinical Diagnostics segment.
34 Bio-Rad 2007 Annual Repor t
3. SHORT-TERM INVESTMENTS
Short-term investments consist of the following (in millions):
Available-for-sale securities:
Corporate obligations
Asset backed securities (including mortgage-backed)
U.S Agencies
Marketable equity securities
Variable rate notes
Certificates of deposit
Total short-term investments
December 31,
2007
2006
$
10.3
$ 143.7
34.5
—
17.2
—
—
58.9
32.5
14.4
10.0
5.0
$
62.0
$ 264.5
In 2007 we converted a major portion of our short-term investments to cash in anticipation of the acquisition
of DiaMed (see Note 2).
Management classifies investments in marketable securities at the time of purchase and reevaluates such
classification at each balance sheet date. Marketable debt and equity securities classified as short-term
investments have been designated as available-for-sale and are stated at fair value. These investments are
marked to market, with unrealized gains and losses reported as a component of comprehensive income. We
review our short-term investments for other-than-temporary losses on a quarterly basis. No securities were
considered other-than-temporarily impaired in 2007, 2006 or 2005.
4. INVESTMENTS
We own shares of ordinary voting stock of Sartorius AG, of Goettingen, Germany, a process technology supplier
to the biotechnology, pharmaceutical, chemical and food and beverage industries. We purchased shares in 2007
and 2006 for approximately $1 and $6 million, respectively, bringing our total investment to approximately 28%
of the outstanding voting shares of Sartorius at December 31, 2007. The Sartorius family trust and Sartorius
family members hold a controlling interest of the outstanding voting shares. We do not have any representative
or designee on Sartorius’ board of directors, nor do we have any other influence over the operating and financial
policies of Sartorius. Therefore, we account for this investment using the cost method. This investment is
reported in Other assets.
During July 2006, Accent Semiconductor Technology Inc. (Accent), a private company, was acquired by Nanometrics
Inc. (Nanometrics), a publicly held company. In preparation for the merger, Accent repaid the $11.8 million note
receivable and accrued interest owed to Bio-Rad as part of Accent’s 2000 purchase of the assets and certain
liabilities of our former semiconductor and optoelectronic metrology business. As part of the merger agreement,
we tendered our ownership interest in Accent in exchange for approximately 600,000 shares of Nanometrics stock
valued at $5.4 million on conversion. We also received a $2.5 million facilitation fee for aiding in the merger. These
transactions resulted in a gain of $4.7 million included in Other income, net (see Note 11) in 2006. Our current
ownership interest in Nanometrics is less than 5%, is marked to market and is included in Other assets.
Bio-Rad 2007 Annual Report 35
noteS to conSoli dated fina n c i al Stat em entS (continued)
On July 26, 2005, BioSource International, Inc. (BioSource) announced in a press release that it had entered into a
definitive merger agreement under which Invitrogen Corporation would acquire BioSource for $12.50 per share in
cash. In October 2005, we tendered our shares of BioSource to Invitrogen Corporation for $12.50 per share in cash
and received cash of $8.3 million. We recorded in Other income, net, a pre-tax gain of $3.3 million (see Note 11).
In December 1997, we began investing in Instrumentation Laboratory, S.p.A. (IL), an Italian based clinical
diagnostics company. A privately held company based in Spain controls the majority of the outstanding stock
of IL. In October 2005, Bio-Rad entered into an agreement to sell all its shares back to IL. We received cash of
$12.0 million and recorded in Other income, net, a pre-tax gain of $7.9 million (see Note 11).
5. DISCONTINUED OPERATIONS
On May 31, 2004, we sold a group of assets and transferred certain liabilities that comprise a substantial portion
of our confocal microscopy product line to Carl Zeiss Jena GmbH. Proceeds of $19.8 million were offset by net
assets of $5.7 million, lease settlements of $6.7 million and severance, legal and other costs of $1.7 million
resulting in a pre-tax gain of $5.7 million. As required by SFAS 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, with the disposition of this asset group, the sales and expenses related to this product line
for current and prior periods have been reclassified as a separate line on the income statement titled “Discontinued
Operations.” During 2005, Bio-Rad reached an agreement to settle the $6.7 million lease commitment and revised
our lease settlement estimate to $2.7 million to exit the facility in 2005. Consequently, we recognized a $4.0
million gain on the revised disposition. There were no sales or pre-tax operating losses attributable to the
discontinued operations for the years ended December 31, 2007, 2006 and 2005.
6. GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS
Goodwill balances have been included in Corporate for segment reporting purposes in Note 15. Changes to
Goodwill were as follows (in millions):
2007
2006
$ 119.5
$ 113.3
201.4
2.0
—
5.5
—
1.0
5.3
(0.1)
$ 328.4
$ 119.5
January 1
DiaMed acquisition
Ciphergen acquisition
Blackhawk acquisition
Currency fluctuations/other
December 31
36 Bio-Rad 2007 Annual Repor t
As part of the acquisition of DiaMed in October 2007 (see Note 2), we added $201.4 million of goodwill and
$170.3 million of intangible assets: $67.8 million of customer relationships, $69.0 million of know how, $14.6
million of tradenames, and $15.9 million of developed product technology and $3.0 of licenses. The intangibles
are part of our Clinical Diagnostics segment.
As part of the acquisition of Ciphergen in December 2006 (see Note 2), we added $3.0 million of goodwill and
$7.8 million of intangible assets: $7.2 million of developed technology and $0.6 million in customer lists. The
intangibles are recorded in our Life Science segment.
As part of the acquisition of Blackhawk in October 2006 (see Note 2), we added $5.3 million of goodwill and
$13.3 million of intangible assets: $11.5 million of developed technology, $0.4 million of covenants not to
compete, $0.2 million of customer lists, and $1.2 million of tradenames. These intangibles are part of our Clinical
Diagnostics segment.
In March 2005, we purchased the rights to certain patents for $1.0 million. In June 2004, we purchased $14.0
million of intangible assets related to licensing agreements. We paid $6.0 million upon acquisition and $4.0
million in the third quarter of 2004. The remaining $4.0 million was paid in 2005. These intangibles are part of
our Clinical Diagnostics segment.
During the fourth quarter of 2005, $19.8 million of impairment losses related to intangible and long-lived assets
were recorded in the Life Science segment. Of these losses, $15.8 million related to intangible and tangible
assets acquired from MJ GeneWorks (MJ). The circumstance leading to the impairment was the November 10,
2005 recommended ruling of the Connecticut Federal District Court that it would not enforce the August 30,
2005 settlement between Bio-Rad, Applera and Roche (see Note 14). As a result of this decision Bio-Rad continued
to be barred from selling, servicing or marketing MJ thermal cyclers and real time polymerase chain reaction
(PCR) equipment in the United States. The asset group impaired included fixed assets at the Massachusetts
manufacturing location making the MJ cyclers along with intangible assets related to developed technology,
U.S. customer mailing lists, trade names and non-compete agreements. The determination of fair value was
calculated converting estimated future cash flows to their present value, using the rate of return expected by an
investor for an investment with similar perceived risk. Additionally, $4.0 million of intangible and tangible assets
related to our microarray product line manufactured in Waterloo, Canada were impaired. In the fourth quarter of
2005, we decided to close the plant and no longer manufacture the products that related to the specific patents
purchased from Virtek in 2002. We have developed new microarray products that do not use the technology
covered in the patents.
Bio-Rad 2007 Annual Report 37
noteS to conSoli dated fina n c i al Stat em entS (continued)
Other than goodwill, we have no intangible assets with indefinite lives. Information regarding our identifiable
purchase intangible assets is as follows (in millions):
Customer relationships/lists
Know how
Developed product technology
Licenses
Tradenames
Covenants not to compete
Patents
Other
Customer relationships/lists
Know how
Developed product technology
Licenses
Tradenames
Covenants not to compete
Patents
Other
December 31, 2007
Average
Historical
Life (years)
Carrying
Amount
Accumulated
Amortization
2-16
6-10
5-15
1-14
5-15
5
4
7
$
71.0
$
81.4
44.3
20.4
16.2
2.4
1.0
0.1
2.0
9.7
7.6
4.3
0.8
1.6
0.4
0.1
Net
$
69.0
71.7
36.7
16.1
15.4
0.8
0.6
—
$ 236.8
$
26.5
$ 210.3
December 31, 2006
Average
Historical
Life (years)
Carrying
Amount
Accumulated
Amortization
2-15
6-7
5-15
14
15
5
4
7
$
1.4
9.8
27.9
14.0
1.2
2.4
1.0
0.1
$
0.4
5.7
3.6
2.2
—
1.1
0.1
0.1
$
Net
1.0
4.1
24.3
11.8
1.2
1.3
0.9
—
$
57.8
$
13.2
$
44.6
Recorded purchased intangible asset amortization expense for the years ended December 31, 2007, 2006,
and 2005 was $12.8 million, $5.3 million, and $11.0 million, respectively. Estimated purchased intangible asset
amortization expense (based on existing intangible assets) for the years ended December 31, 2008, 2009, 2010,
2011 and 2012 is $27.3 million, $23.4 million, $22.2 million, $21.5 million and $19.7 million, respectively.
7. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable include local credit lines maintained by our subsidiaries aggregating approximately $52.0 million,
of which $42.1 million was unused at December 31, 2007. At December 31, 2006, these lines aggregated
approximately $33.5 million, of which $30.1 million was unused. The weighted average interest rate on these
lines was 3.9% and 4.5% at December 31, 2007 and 2006 respectively. Bio-Rad Laboratories, Inc. guarantees
most of these credit lines.
38 Bio-Rad 2007 Annual Repor t
The principal components of Long-term debt are as follows (in millions):
7.5% Senior Subordinated Notes
6.125% Senior Subordinated Notes
Other debt
Capitalized leases
Less current maturities
Long-term debt
December 31,
2007
2006
$ 225.0
$ 225.0
200.0
200.0
0.4
27.4
452.8
(11.0)
—
1.1
426.1
(0.5)
$ 441.8
$ 425.6
In September 2007, Bio-Rad entered into Amendment No. 2 to the Amended and Restated Credit Agreement
(the “Credit Agreement”). Amendment No. 2 amends certain provisions of the Credit Agreement including
increasing the amount of borrowings permissible under the Credit Agreement to $200 million from $150 million,
which may be increased up to an additional $50 million under certain conditions, and amending certain covenants
to permit the acquisition by Bio-Rad of DiaMed including, but not limited to, the incurrence of certain indebtedness
and liens in connection with such acquisition.
Borrowings under the Credit Agreement are on a revolving basis and can be used to make acquisitions, for
working capital and other general corporate purposes. Borrowings under the Credit Agreement are payable on
June 21, 2010. We had no outstanding balance as of December 31, 2007.
In December 2004, Bio-Rad sold $200.0 million principal amount of Senior Subordinated Notes due 2014
(6.125% Notes). The notes pay a fixed rate of interest of 6.125% per year. We have the option to redeem any
or all of the 6.125% Notes at various declining redemption prices or at 100% of the principal amount plus the
“applicable premium” (as defined by the indenture) along with accrued and unpaid interest and certain other
charges depending on the date redeemed. Bio-Rad’s obligations under the 6.125% Notes are not secured, rank
equal to other senior subordinated notes and rank junior to all of Bio-Rad’s existing and future senior debt.
In August 2003, Bio-Rad sold $225.0 million principal amount of Senior Subordinated Notes due 2013 (7.5%
Notes). The notes pay a fixed rate of interest of 7.5% per year. We have the option to redeem any or all of the
7.5% Notes at various declining redemption prices or at 100% of the principal amount plus the “applicable
premium” (as defined by the indenture) along with accrued and unpaid interest and certain other charges
depending on the date redeemed. Bio-Rad’s obligations under the 7.5% Notes are not secured, rank equal
to other senior subordinated notes and rank junior to all Bio-Rad’s existing and future senior debt.
The Credit Agreement is secured by substantially all of our personal property assets, the assets of our domestic
subsidiaries and 65% of the capital stock of certain foreign subsidiaries. It is guaranteed by all of our existing
and future material domestic subsidiaries. The Credit Agreement, the 6.125% Notes, and the 7.5% Notes require
Bio-Rad to comply with certain financial ratios and covenants, among other things. The covenants include a
leverage ratio test, an interest coverage test and a consolidated net worth test. There are also restrictions on our
ability to declare or pay dividends, incur debt, guarantee debt, enter into transactions with affiliates, merge or
consolidate, sell assets, make investments, create liens and prepay subordinated debt. We were in compliance
with all financial ratios as of December 31, 2007 and 2006.
Maturities of long-term debt at December 31, 2007 are as follows: 2008 – $11.0 million; 2009 – $6.4 million;
2010 – $3.8 million; 2011 – $6.5 million; 2012 – $0.1 million; thereafter – $425.0 million.
Bio-Rad 2007 Annual Report 39
noteS to conSoli dated fina n c i al Stat em entS (continued)
8. INCOME TAXES
The U.S. and international components of income before taxes are as follows (in millions):
U.S.
International
Income from continuing operations before taxes
Year Ended December 31,
2007
2006
2005
$ 75.5
$
66.8
$
35.0
45.3
75.2
58.4
$ 120.8
$ 142.0
$
93.4
The provision (benefit) for income taxes consists of the following (in millions):
Current tax expense
U.S. and State
International
Current tax expense
Deferred tax expense
Non-current tax expense
Provision for income taxes
Year Ended December 31,
2007
2006
2005
$ 15.0
$
13.2
$
11.6
12.6
27.6
(5.9)
4.8
24. 6
37.8
1.0
—
22.6
34.2
(18.4)
—
$ 26.5
$
38.8
$
15.8
The reconciliation between Bio-Rad’s effective tax rate on income from continuing operations and the statutory
tax rate is as follows:
Year Ended December 31,
U. S. statutory tax rate
Foreign income at other than U.S. tax rates
Foreign losses not benefited
Non-taxable dividend income
Export sales benefit
Research and development tax credits
Capital loss benefit
Increase/(decrease) in tax reserves
Change in valuation allowance on temporary differences
Examination settlements
Foreign tax credit claims
In-process research and development
Other
Provision for income taxes
2007
35%
(2)
3
(5)
—
(8)
—
3
(3)
(2)
(3)
2
2
22%
2006
35%
2005
35%
(1)
1
(3)
(2)
(2)
—
1
1
(1)
—
—
(2)
27%
(7)
3
(6)
(3)
(2)
(5)
3
—
—
—
—
(1)
17%
40 Bio-Rad 2007 Annual Repor t
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of deferred tax assets and liabilities are as follows (in millions):
Deferred tax assets
Receivable allowances
Inventory reserve
Warranty reserve
Vacation pay reserve
Net operating loss
Retirement reserve
Depreciation
Goodwill and intangibles
State tax credit carryforward
Other
Valuation allowance
Deferred tax liabilities
Unrealized holding gains
Deferred gain
Foreign exchange gain/loss
Depreciation
Goodwill and intangibles
Other
Year Ended December 31,
2007
2006
$
5.4
$
4.2
14.6
7.3
7.4
20.9
5.8
5.9
16.9
7.5
20.2
(31.1)
80.8
9.4
5.2
2.4
4.1
49.1
7.1
77.3
13.2
6.1
6.3
16.2
3.8
6.2
16.5
7.2
15.3
(26.5)
68.5
10.6
5.2
2.3
1.9
9.4
4.1
33.5
Net deferred taxes
$
3.5
$
35.0
At December 31, 2007, Bio-Rad’s international subsidiaries had combined net operating loss carryforwards
of $68.1 million. The amount of carryforwards subject to expiration includes $5.6 million and $8.4 million in
2013 and 2014, respectively. The remaining loss carryforwards have no expiration date. The utilization of these
carryforwards is limited to the separate taxable income of each individual subsidiary. We believe that it is more
likely than not that the benefit from certain of these net operating loss carryforwards will not be realized. We
have provided a valuation allowance of $17.6 million on the deferred tax assets relating to these net operating
loss carryforwards. If or when recognized, the tax benefits relating to any reversal of the valuation allowance on
deferred tax assets at December 31, 2007 will be recognized as a reduction of income tax expense.
At December 31, 2007, Bio-Rad had an unutilized domestic net operating loss carryforward of $9.9 million.
The loss carryforward will expire in the year 2018. The utilization of the loss carryforward is limited to Bio-Rad’s
domestic taxable income.
Bio-Rad 2007 Annual Report 41
noteS to conSoli dated fina n c i al Stat em entS (continued)
At December 31, 2007, Bio-Rad had a California tax credit carryforward of $7.5 million. The credit carryforward
has no expiration date. The utilization of the tax credit carryforward is limited to Bio-Rad’s California taxable
income. We believe that it is more likely than not that the benefit from these tax credit carryforwards will not be
realized. Therefore, we have provided a valuation allowance of $7.5 million on the deferred tax assets relating to
these state tax credit carryforwards. If or when recognized, the tax benefits relating to any reversal of the valuation
allowance on deferred tax assets at December 31, 2007 will be recognized as a reduction of income tax expense.
A valuation allowance is needed to reduce the deferred tax assets to an amount that is more likely than not to
be realized. The net change in the valuation allowance in 2007 was an increase of $4.6 million, primarily relating
to net operating losses acquired or incurred in jurisdictions with no future projected earnings.
Our income tax returns for the 2001 to 2006 tax years are currently under examination by the Internal Revenue
Service. We believe appropriate provisions for all outstanding issues have been made for all jurisdictions and
all open years. We do not expect that the results of this examination will have a material effect on our financial
condition or results of operations.
The following table summarizes the open tax years by major tax jurisdiction that are subject to examination by
tax authorities as of December 31, 2007:
U.S.
France
Germany
Italy
Japan
Switzerland
1997-2007
2005-2007
2004-2007
2001-2007
2003-2007
2006-2007
The following is a reconciliation of the total amounts of unrecognized tax benefits for the year (in millions):
Balance at January 1, 2007
Additions to tax positions related to prior years
Reductions to tax positions related to prior years
Additions to tax positions related to the current year
Settlements
Lapse of statute of limitations
Acquisitions
Currency translation
Balance at December 31, 2007
$
13.3
1.1
(2.4)
11.0
(2.5)
(1.4)
2.9
0.3
$
22.3
Included in the balance of unrecognized tax benefits at December 31, 2007 are $19.1 million of tax benefits that,
if recognized, would affect the effective tax rate. Also included in the balance of unrecognized tax benefits at
December 31, 2007 are $0.3 million of tax benefits that, if recognized, would result in adjustments to other tax
accounts, primarily deferred taxes.
42 Bio-Rad 2007 Annual Repor t
Bio-Rad recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense.
Related to the uncertain tax benefits noted above, we accrued interest of $0.3 million during 2007 and in total,
as of December 31, 2007, have recognized a liability for interest of $2.8 million.
We believe that it is reasonably possible that approximately $6.4 million of our currently remaining unrecognized
tax benefits, each of which are individually insignificant, may be recognized by the end of 2008 as a result of
a lapse of the statute of limitations. These benefits are related to uncertainty regarding sustainability of certain
deductions and credits for tax years that remain subject to examination by the relevant tax authorities.
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in their opera-
tions. As of December 31, 2007, Bio-Rad has not made a provision for U.S. or additional foreign withholding
taxes on approximately $416 million of the excess of the amount for financial reporting over the tax basis of
investments in foreign subsidiaries that are essentially permanent in duration. Generally, such amounts become
subject to U.S. taxation upon remittance of dividends and under certain other circumstance. If these earnings
were repatriated to the U.S., they would generate foreign tax credits that would reduce the U.S. federal tax
liability associated with the distribution. The potential deferred tax liability for these earnings would be
approximately $70 million.
9. STOCKHOLDERS’ EQUITY
Bio-Rad’s outstanding stock consists of Class A Common Stock (Class A) and Class B Common Stock (Class
B). Each share of Class A and Class B participates equally in the earnings of Bio-Rad, and is identical in most
respects except that Class A has limited voting rights. Each share of Class A is entitled to one-tenth of a vote
on most matters, and each share of Class B is entitled to one vote. Additionally, Class A stockholders are
entitled to elect 25% of the Board of Directors and Class B stockholders are entitled to elect the balance of the
directors. Cash dividends may be paid on Class A shares without paying a cash dividend on Class B shares
but no cash dividend may be paid on Class B shares unless at least an equal cash dividend is paid on Class
A shares. Class B shares are convertible at any time into Class A shares on a one-for-one basis at the option
of the stockholder. The Schwartz family collectively holds a majority of Bio-Rad’s voting stock. As a result, the
Schwartz family is able to exercise significant influence over Bio-Rad.
10. SHARE-BASED COMPENSATION/STOCK OPTION AND PURCHASE PLANS
Description of Share-Based Compensation Plans
Stock Option and Award Plans
We have two stock option plans for officers and certain other employees: the Amended 1994 Stock Option
Plan (the “1994 Plan”) and the 2003 Stock Option Plan (the “2003 Plan”). Both plans authorize the grant to
employees of incentive stock options and non-qualified stock options. We no longer make stock option grants
under the 1994 Plan or 2003 Plan.
Under both of these plans, Class A and Class B options have been granted at prices not less than fair market
value on the date of grant. Generally, options granted have a term of 10 years and vest in increments of
20% per year over a five-year period on the yearly anniversary date of the grant. For options granted before
January 1, 2001, options vest in increments of 25% over a four-year period on the yearly anniversary date of the grant.
Bio-Rad 2007 Annual Report 43
noteS to conSoli dated fina n c i al Stat em entS (continued)
In April 2007, our stockholders approved the Bio-Rad Laboratories, Inc. 2007 Incentive Award Plan (the “2007
Plan”). The 2007 Plan authorizes the grant to employees of stock options, restricted stock awards, stock
appreciation rights and other types of equity awards. A total of 1,650,360 shares have been reserved for issuance
of equity awards and may be of either Class A or Class B common stock. Generally, stock awards issued under
the 2007 Plan vest in increments of 20% per year over a five-year period on the yearly anniversary date of the
grant. Stock options granted under the 2007 Plan have a ten year term. At December 31, 2007 there were
1,488,890 shares available to be granted.
Employee Stock Purchase Plan (ESPP)
We have an employee stock purchase plan which provides that eligible employees may contribute up to 10%
of their compensation up to $25,000 annually toward the quarterly purchase of our Class A common stock. The
employees’ purchase price is 85% of the lesser of the fair market value of the stock on the first business day
or the last business day of each calendar quarter. We have authorized the sale of 2,390,000 shares of common
stock under the ESPP.
Share-Based Compensation Expense
We have provided pro forma disclosures in Note 1 of the effect on net income and earnings per share for the
year ended December 31, 2005 as if the fair value method of accounting for share-based compensation had
been used for its employee stock option grants and ESPP purchases. These pro forma effects have been estimated
at the date of grant using the Black-Scholes option-pricing model.
Included in our share-based compensation expense in 2007 and 2006 is the cost related to stock option grants
and ESPP stock purchases. In 2007, share-based compensation also includes the cost related to restricted
stock and restricted stock unit awards issued in 2007.
For the years ended December 31, 2007 and 2006, we recognized pre-tax share-based compensation expense
of $5.5 million and $5.4 million, respectively. The tax benefit related to share-based compensation recognized
in the income statement for the years ended December 31, 2007 and 2006 was $1.0 million and $0.7 million,
respectively. We did not capitalize any share-based compensation expense. In accordance with SFAS 123(R),
we recognize share-based compensation net of estimated forfeitures.
For options granted before January 1, 2006, we amortized the fair value on an accelerated basis. For options and
awards granted after January 1, 2006, we amortized the fair value on a straight-line basis. All stock compensation
awards are amortized over the requisite service periods of the awards, which are generally the vesting periods.
44 Bio-Rad 2007 Annual Repor t
Stock Options
The following table summarizes stock option activity.
Outstanding, January 1, 2005
Granted
Exercised
Forfeited/Expired
Outstanding, December 31, 2005
Granted
Exercised
Forfeited/Expired
Outstanding, December 31, 2006
Granted
Exercised
Forfeited/Expired
Shares
1,630,717
307,822
(299,485)
(49,848)
1,589,206
313,233
(177,867)
(56,803)
1,667,769
59,000
(222,808)
(15,686)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(in millions)
$ 27.14
$ 57.25
$ 16.26
$ 46.05
$ 34.43
$ 62.68
$ 25.81
$ 51.79
$ 40.06
$ 75.09
$ 28.16
$ 56.70
Outstanding, December 31, 2007
1,488,275
$ 43.06
5.50
$
90.1
Vested and expected to vest,
December 31, 2007
Exercisable, December 31, 2007
1,419,558
880,350
$ 42.18
$ 32.21
5.39
4.29
$
$
87.2
62.9
The following summarizes information about stock options outstanding at December 31, 2007:
Options Outstanding
Options Exercisable
Number
Outstanding
at 12/31/07
Weighted-Average
Remaining
Contractual Life
(in years)
Weighted-
Average
Exercise Price
Number
Exercisable
at 12/31/07
Weighted-
Average
Exercise Price
312,610
340,680
319,901
367,584
147,500
1.98
4.62
6.15
7.45
8.67
$ 11.50
$ 32.49
$ 53.96
$ 60.19
$ 67.97
312,610
296,240
165,416
88,384
17,700
$ 11.50
$ 32.02
$ 53.89
$ 59.37
$ 63.00
Range of Exercise Prices
$10.75–$11.97
$28.61–$36.00
$36.50–$56.40
$57.49–$62.47
$63.00–$75.32
Bio-Rad 2007 Annual Report 45
noteS to conSoli dated fina n c i al Stat em entS
(continued)
Intrinsic value for stock options is defined as the difference between the current market value and the grant price.
The total intrinsic value on the date of exercise of stock options exercised during the years ended December 31,
2007 and 2006 was approximately $13 million and $8 million, respectively.
Cash received from stock options exercised during the years December 31, 2007 and 2006 was $6.3 million and
$4.6 million, respectively. The actual tax benefit realized for the tax deductions from stock options exercised
totaled $3.6 million and $1.8 million for the years ended December 31, 2007 and 2006, respectively.
As of December 31, 2007, there was $8.2 million of total unrecognized compensation cost from stock options.
That cost is expected to be recognized over a weighted average period of approximately 2 years.
The weighted-average fair value for stock options granted was estimated using a Black-Scholes option-pricing
model with the following weighted-average assumptions:
Expected volatility
Risk-free interest rate
Expected life (in years)
Expected dividend
Year Ended December 31,
2007
2006
2005
34%
4.72%
8.5
—
36%
4.62%
7.4
—
37%
3.45%
4.7
—
Weighted-average fair value of options granted
$37.05
$29.85
$20.76
Volatility was based on the historical volatilities of our common stock for a period equal to the stock option’s
expected life. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant.
In 2007 and 2005 the expected life represents the number of years that we estimate, based primarily on historical
experience, that the options will be outstanding prior to exercise. In 2006, we estimated the expected life using
the simplified method described in the SEC’s Staff Accounting Bulletin No. 107. We do not anticipate paying any
cash dividends in the future and therefore use an expected dividend yield of zero.
Restricted Stock
Restricted stock was granted during the year ended December 31, 2007 under the 2007 Plan. The fair value of each
share of restricted stock is the market value as determined by the closing price of the stock on the day of grant.
The following table summarizes our restricted stock activity during the year ended December 31, 2007:
Restricted
Stock
Weighted-
Average
Grant-Date
Fair Value
—
—
75,970
$ 75.33
—
(250)
75,720
—
$ 75.32
$ 75.33
Nonvested shares, January 1, 2007
Granted
Vested
Cancelled/Forfeited
Nonvested shares, December 31, 2007
46 Bio-Rad 2007 Annual Repor t
As of December 31, 2007, there was approximately $4.4 million of total unrecognized compensation cost related
to restricted stock granted under the 2007 Plan. The cost is expected to be recognized over a weighted-average
period of approximately 5 years.
Restricted Stock Units
Restricted stock units, which are rights to receive shares of company stock, were granted during the year ended
December 31, 2007 under the 2007 Plan. The fair value of each restricted stock unit is the market value as determined
by the closing price of the stock on the day of grant.
The following table summarizes our restricted stock unit activity during the year ended December 31, 2007:
Outstanding, January 1, 2007
Granted
Vested
Cancelled/Forfeited
Outstanding, end of period
Expected to vest, December 31, 2007
Units
—
28,010
—
(1,260)
26,750
23,158
Weighted-Average
Grant-Date
Fair Value
—
$ 75.32
—
$ 75.32
$ 75.32
$ 75.32
Weighted-Average
Remaining
Aggregate
Intrinsic Value
Contractual Term as of December 31,
2007 (in millions)
(in years)
2.68
2.60
$
$
2.8
2.4
As of December 31, 2007, there was approximately $1.5 million of total unrecognized compensation cost related
to restricted stock units granted under the 2007 Plan. That cost is expected to be recognized over a weighted-
average period of approximately 5 years.
Employee Stock Purchase Plan
The fair value of the employees’ purchase rights was estimated using a Black-Scholes model with the following
weighted average assumptions:
Expected volatility
Risk-free interest rate
Expected life (in years)
Expected dividend
Year Ended December 31,
2007
29%
4.79%
.25
—
2006
28%
4.66%
.25
—
2005
29%
2.95%
.25
—
Weighted-average fair value of purchase rights
$17.05
$13.68
$11.38
The major assumptions are primarily based on historical data. Volatility was based on the historical volatilities
of our common stock for a period equal to the expected life of the purchase rights. The risk-free interest rate is
based on the U.S. Treasury yield curve in effect at the time of the grant. We do not anticipate paying any cash
dividends in the future and therefore use an expected dividend yield of zero.
Bio-Rad 2007 Annual Report 47
noteS to conSoli dated fina n c i al Stat em entS (continued)
We sold 81,388 shares for $5.3 million, 99,888 shares for $5.3 million and 92,869 shares for $4.0 million under
the ESPP to employees in 2007, 2006 and 2005, respectively. At December 31, 2007, 426,162 shares remain
authorized under the ESPP.
We currently issue new shares to satisfy stock option exercises, restricted stock issuances and ESPP stock purchases.
11. OTHER INCOME AND EXPENSE
Other income, net includes the following income (expense) components (in millions):
Interest and investment income
Write down of investments
Litigation settlement (Note 14)
Gains on sales of investments (Note 4)
Miscellaneous other items
Other income, net
Year Ended December 31,
2007
2006
2005
$ 22.0
$
22.3
$
16.7
(3.6)
—
—
1.4
—
—
4.7
2.0
—
(1.2)
11.2
2.3
$ 19.8
$
29.0
$
29.0
12. SUPPLEMENTAL CASH FLOW INFORMATION
The reconciliation of net income to net cash provided by operating activities is as follows (in millions):
Net Income
Adjustments to reconcile net income to net cash
provided by operating activities (net of effects of acquisitions):
Depreciation
Amortization
Minority interests
Excess tax benefits from share-based compensation
Share-based compensation
Foreign currency economic hedge transactions, net
Gains on dispositions of securities
Decrease (increase) in accounts receivable, net
Decrease (increase) in inventories, net
Decrease (increase) in other current assets
Increase in accounts payable and other current liabilities
Increase (decrease) in income taxes payable
Increase (decrease) in deferred taxes
Impairment losses on long-lived assets
Litigation settlement related to MJ acquisition
Other
Year Ended December 31,
2007
2006
2005
$ 93.0
$ 103.3
$
81.6
53.5
13.8
1.3
(3.0)
5.5
4.1
(0.5)
9.0
4.4
(2.8)
10.6
(10.1)
(5.9)
—
—
18.7
48.7
6.7
—
(1.4)
5.4
2.2
(0.1)
(25.5)
(22.8)
16.9
17.3
3.8
1.2
—
(47.0)
9.5
49.1
11.9
—
—
—
(6.4)
(13.3)
(7.7)
(18.7)
(12.1)
20.5
1.6
(15.0)
19.8
—
(3.0)
Net cash provided by operating activities
$ 191.6
$ 118.2
$ 108.3
48 Bio-Rad 2007 Annual Repor t
13. COMMITMENTS AND CONTINGENT LIABILITIES
Rents and Leases
Net rental expense under operating leases was $32.8 million in 2007, $26.7 million in 2006 and $23.7 million
in 2005. Leases are principally for facilities and automobiles.
Annual future minimum lease payments at December 31, 2007 under operating leases are as follows:
2008 – $31.3 million; 2009 – $23.6 million; 2010 – $19.0 million; 2011 – $12.3 million; 2012 – $8.9 million;
subsequent to 2012 – $6.3 million.
Deferred Profit Sharing Retirement Plan
We have a profit sharing plan covering substantially all U.S. employees. Contributions are made at the discretion
of the Board of Directors. Bio-Rad has no liability other than for the current year’s contribution. Contributions
charged to income were $9.4 million, $7.8 million, and $7.5 million in 2007, 2006 and 2005, respectively.
Other Post-Employment Benefits
In several foreign locations we are statutorily required to provide a lump sum severance or termination indemnity
to our employees. Under these plans, the vested benefit obligation at December 31, 2007 and 2006 was $19.4
million and $17.4 million, respectively and has been included in Other long-term liabilities in the consolidated
balance sheets. These plans are not required to be funded, and as such, there is no trust or other device used
to accumulate assets to settle these obligations.
Foreign Exchange Contracts
We enter into forward foreign exchange contracts as an economic hedge against foreign currency denominated
intercompany receivables and payables. At December 31, 2007, we had contracts maturing in January through
March 2008 to sell foreign currency with a nominal value of $98.0 million and an unrealized gain of $0.6 million.
Contracts to purchase foreign currency had a nominal value of $19.7 million with an unrealized gain of $0.2 million.
Insurance
We carry a deductible for workers’ compensation and a portion of our group health insurance cost. Accruals for
losses are based on our claims experience and actuarial assumptions followed in the insurance industry. Should
a greater amount of claims occur compared to our estimates or cost of medical care increase beyond what has
been anticipated, reserves recorded may not be sufficient and additional charges to income may be required.
Letters of Credit
In the ordinary course of business, we are at times required to post letters of credit. The letters of credit are
issued by our banks to guarantee our obligations to various parties including insurance companies. We were
contingently liable for $10.0 million of standby letters of credit with banks as of December 31, 2007.
Taxes
Settlement of open tax years, as well as tax issues in other countries where we conduct our business, are not
expected to have a material effect on the consolidated financial position or liquidity of Bio-Rad and, in the
opinion of management, adequate provision has been made for income and franchise taxes for all years under
examination or subject to future examination.
Bio-Rad 2007 Annual Report 49
noteS to conSoli dated fina n c i al Stat em entS (continued)
14. LEGAL PROCEEDINGS
On February 9, 2006, Bio-Rad completed negotiations with Applera Corporation (Applera) and Roche Molecular
Systems, Inc. to settle the patent infringement litigation against MJ Research, Inc. (MJ Research) which Bio-Rad
acquired in 2004. The total net settlement amount, including amounts related to previously accrued back
royalties, was approximately $62 million. We recognized $1.2 million of additional expense in the fourth quarter
of 2005 to adjust our estimated liability as a result of the settlements. In connection with the settlements, we
entered into a royalty-bearing license agreement with Applera relating to our real-time instrument business in
the United States and a term limited license in the rest of the world.
We are party to various claims, legal actions and complaints arising in the ordinary course of business. We
do not believe that any ultimate liability resulting from any of these lawsuits will have a material adverse effect
on our results of operations, financial position or liquidity. However, we cannot give any assurance regarding
the ultimate outcome of these lawsuits and their resolution could be material to our operating results for any
particular period, depending upon the level of income for the period.
15. SEGMENT INFORMATION
Bio-Rad is a multinational manufacturer and worldwide distributor of its own life science research products and
clinical diagnostics products. We have two reportable segments: Life Science and Clinical Diagnostics. These
reportable segments are strategic business lines that offer different products and services and require different
marketing strategies.
The Life Science segment develops, manufactures, sells and services reagents, apparatus and instruments used
for biological research. These products are sold to university and medical school laboratories, pharmaceutical
and biotechnology companies, food testing laboratories and government and industrial research facilities.
The Clinical Diagnostics segment develops, manufactures, sells and services automated test systems, infor-
matics systems, test kits and specialized quality controls for the healthcare market. These products are sold to
reference laboratories, hospital laboratories, state newborn screening facilities, physicians’ office laboratories,
transfusion laboratories, and insurance and forensic testing laboratories.
Other Operations include the remainder of our former Analytical Instruments segment.
The accounting policies of the segments are the same as those described in Significant Accounting Policies
(see Note 1). Segment profit or loss used for corporate management purposes includes an allocation of corporate
expense based upon sales and an allocation of interest expense based upon accounts receivable and inventories.
Segments are expected to manage only assets completely under their control. Accordingly, segment assets
include primarily accounts receivable, inventories and gross machinery and equipment. Goodwill balances have
been included in corporate for segment reporting purposes.
50 Bio-Rad 2007 Annual Repor t
Information regarding industry segments at December 31, 2007, 2006 and 2005 and for the years then ended
is as follows (in millions):
Segment net sales
Allocated interest expense
Depreciation and amortization
Segment profit (loss)
Segment assets
Capital expenditures
Life
Science
Clinical
Diagnostics
Other
Operations
$ 615.1
$ 832.2
$
13.8
575.6
549.9
684.9
618.4
13.4
12.6
$ 12.2
$
19.2
$
13.0
13.8
18.8
18.7
$ 19.1
$
44.8
$
18.0
24.6
33.8
33.0
$ 24.7
$
80.7
$
25.7
(0.5)
89.6
64.4
$ 321.3
$ 677.1
$
318.5
276.3
458.8
392.9
$
8.9
$
40.3
$
10.3
11.9
34.7
25.1
0.2
0.2
0.1
0.1
0.3
0.1
0.6
0.6
(0.6)
8.3
7.8
5.4
0.1
0.3
0.1
2007
2006
2005
2007
2006
2005
2007
2006
2005
2007
2006
2005
2007
2006
2005
2007
2006
2005
The Clinical Diagnostics segment profit (loss) for 2007 includes $7.7 million of in-process research and development
expense purchased in the DiaMed acquisition.
The Life Science segment profit (loss) for 2006 includes $3.8 million of in-process research and development
expense purchased in the Ciphergen acquisition and 2005 includes $19.8 million of impairment losses on long-lived
assets (see Note 6).
Bio-Rad 2007 Annual Report 51
noteS to conSoli dated fina n c i al Stat em entS (continued)
The difference between total segment allocated interest expense, depreciation and amortization, and capital
expenditures and the corresponding consolidated amounts is attributable to our corporate headquarters. The
following reconciles total segment profit to consolidated income before taxes and minority interests (in millions):
Total segment profit
Other income, net
Foreign exchange gains (losses)
Net corporate operating, interest and other
Year Ended December 31,
2007
2006
2005
$ 106.0
$ 115.9
$
63.3
19.8
(2.6)
29.0
(1.1)
29.0
1.5
income and expense not allocated to segments
(2.4)
(1.8)
(0.4)
Consolidated income from continuing operation
before taxes and minority interests
$ 120.8
$ 142.0
$
93.4
The following reconciles total segment assets to consolidated total assets (in millions):
Total segment assets
Cash and other current assets
Net property, plant and equipment excluding
segment specific gross machinery and equipment
Goodwill
Other long-term assets
Total assets
December 31,
2007
2006
$ 1,006.7
$ 785.1
363.3
594.2
(49.0)
328.4
322.2
(50.8)
119.5
148.2
$ 1,971.6
$ 1,596.2
The following presents sales to external customers by geographic area based primarily on the location of the use
of the product or service (in millions):
Europe
Pacific Rim
United States
Other (primarily Canada and Latin America)
Total sales
Year Ended December 31,
2007
2006
2005
$ 671.2
$ 559.4
$ 508.3
209.9
498.1
81.9
200.7
443.7
70.1
193.6
421.3
57.8
$ 1,461.1
$ 1,273.9
$ 1,181.0
52 Bio-Rad 2007 Annual Repor t
The following presents long-lived assets by geographic area based upon the location of the asset (in millions):
Europe
Pacific Rim
United States
Other (primarily Canada and Latin America)
Total long-lived assets
Year Ended December 31,
2007
2006
2005
$
523.4
$
88.1
$
12.9
402.3
4.0
9.2
366.0
3.1
75.0
8.5
332.1
2.8
$
942.6
$
466.4
$
418.4
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 2007 and 2006 are as follows (in millions, except per share data):
2007
Net sales
Gross profit
Net income
Basic earnings per share
Diluted earnings per share
2006
Net sales
Gross profit
Net income
Basic earnings per share
Diluted earnings per share
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
322.5
$
339.1
$
339.7
$
179.4
27.0
1.02
0.99
$
$
190.0
25.7
0.96
0.95
$
$
188.4
28.0
1.05
1.03
$
$
$
$
$
308.3
$
317.7
$
304.8
$
175.5
31.2
1.19
1.16
$
$
184.7
32.3
1.22
1.20
$
$
166.8
23.2
0.88
0.86
$
$
$
$
459.7
233.6
12.4
0.46
0.45
343.1
185.6
16.6
0.63
0.61
Bio-Rad 2007 Annual Report 53
repor t of indepen den t r eg iSter ed puBlic accounting firm
Board of Directors and Stockholders
Bio-Rad Laboratories, Inc.,
Hercules, California
We have audited the accompanying consolidated balance sheets of Bio-Rad Laboratories, Inc. and subsidiaries
(the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. We
also have audited the Company’s internal control over financial reporting as of December 31, 2007, 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 its assessment the internal control over financial reporting at DiaMed Holding AG,
which was acquired on October 1, 2007 and whose financial statements constitute 42% and 31% of net and
total assets, respectively, and 4% of revenues of the consolidated financial statement amounts as of and for the
year ended December 31, 2007. Accordingly, our audit did not include the internal control over financial reporting
at DiaMed Holding AG. The Company’s management is responsible for these financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits.
We conducted our audits 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 the financial statements are free of material misstatement and whether effective internal control
over financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
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.
54 Bio-Rad 2007 Annual Repor t
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, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Bio-Rad Laboratories, Inc. and subsidiaries as of December 31, 2007 and 2006, and
the results of their operations and their cash flows for each of the three years in the period ended December
31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
As discussed in Note 1 of the Notes to the Consolidated Financial Statements, on January 1, 2007 the Company
adopted a new interpretation of accounting standards for uncertainty in income taxes. In 2006, the Company
adopted a new accounting standard for share-based payments.
San Francisco, California
February 29, 2008
Bio-Rad 2007 Annual Report 55
man agement’S diScuSSion an d an alySiS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
This discussion should be read in conjunction with the information contained in our consolidated financial statements
and the accompanying notes which are an integral part of the statements.
Other than statements of historical fact, statements made in this Annual Report include forward looking statements,
such as statements with respect to our future financial performance, operating results, plans and objectives that
involve risk and uncertainties. Forward-looking statements generally can be identified by the use of forward-looking
terminology such as, “believe”, “expect,” “may,” “will,” “intend,” “estimate,” “continue,” or similar expressions or
the negative of those terms or expressions. Such statements involve risks and uncertainties, which could cause
actual results to vary materially from those expressed in or indicated by the forward-looking statements. 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 ability to successfully develop and market new products; our reliance
on and access to necessary intellectual property; our ability to successfully integrate any acquired business; our
substantial leverage and ability to service our debt; competition in and government regulation of the industries in
which we operate; and the monetary policies of various countries. We caution you not to place undue reliance on
forward-looking statements, which reflect an analysis only and speak only as of the date hereof. We undertake
no obligation to publicly update or revise any forward looking statements, whether as a result of new information,
future events, or otherwise.
Overview
Bio-Rad is a multinational manufacturer and worldwide distributor of our own life science research and clinical
diagnostics products. Our business is organized into two primary segments, Life Science and Clinical Diagnostics,
with the mission to provide scientists with specialized tools needed for biological research and clinical diagnostics.
We sell more than 8,000 products and services to a diverse client base comprised of scientific research,
healthcare, education and government customers worldwide. We manufacture and supply our customers with
a range of reagents, apparatus and equipment to separate complex chemical and biological materials and to
identify, analyze and purify components. Because our customers require replication of results in manufacturing
processes, research experiments and diagnostic tests, much of our revenues are recurring. Approximately 34%
of our 2007 consolidated net sales are from the United States and approximately 66% are international sales,
largely denominated in local currency with the majority of these sales in Euros, Yen and British Sterling. As a
result, our consolidated net sales expressed in dollars benefit when the U.S. dollar weakens and suffer when the
U.S. dollar strengthens in relation to other currencies. Currency fluctuations benefited our consolidated net sales
expressed in U.S. dollars in 2007 and 2006. The market for reagents and apparatus remains good while growth
rates have slowed due to both public and private grant funding being more measured. The market for large capital
equipment has slowed, as many pharmaceutical and biotechnology customers delayed or reduced their capital
spending. Bio-Rad is generally less impacted by trends in capital spending as lower priced reagents and apparatus
comprise more than 70% of product sales.
56 Bio-Rad 2007 Annual Repor t
The following shows gross profit and expense items as a percentage of net sales:
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expense
Product research and development expense,
excluding in-process research and development
Income from continuing operations
Discontinued operations
Net income
Year Ended December 31,
2007
100.0%
45.8
54.2
34.8
9.6
6.4
—
6.4
2006
100.0%
44.1
55.9
34.5
9.7
8.1
—
8.1
2005
100.0%
45.3
54.7
35.2
9.7
6.6
0.3
6.9
We intend that the discussions of critical accounting policies and estimates and recent accounting pronouncements
that follow will assist you in understanding how such principles, estimates and pronouncements affect our financial
condition and results of operations as well as significant factors that caused changes in our financial condition and
results of operations for the years ended December 31, 2007 and 2006.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The accompanying discussion and analysis of our financial condition and results of operations are based
upon our consolidated financial statements, which have been prepared in accordance with generally accepted
accounting principles in the United States of America (GAAP). The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets, liabilities and contingencies as of the date of the financial statements and reported amounts of revenues
and expenses during the reporting periods. We evaluate our estimates on an on-going basis. We base our
estimates on historical experience and on other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. However, future events may cause us to change
our assumptions and estimates which may require routine adjustment. Actual results could differ from these
estimates. We have determined that for the periods reported in our Annual Report the following accounting policies
and estimates are critical in understanding our financial condition and results of operations.
Accounting for Income Taxes
As part of the process of preparing consolidated financial statements, management is required to estimate our
income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax
exposure together with assessing temporary differences resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax assets and liabilities, which are included within
our consolidated balance sheet. Management then assesses the likelihood that the deferred tax assets will be
recovered from future taxable income and to the extent management believes that recovery is not likely, a
valuation allowance must be established. To the extent management establishes a valuation allowance or
increases this allowance in a period, an increase to expense within the provision for income taxes in the statement
of income will result.
Bio-Rad 2007 Annual Report 57
man agement’S diScuSSion an d an alySiS
(continued)
Significant management judgment is required in determining the provision for income taxes, deferred tax assets
and liabilities and any valuation allowance recorded in connection with the deferred tax assets. We have recorded
a valuation allowance of $31.1 million and $26.5 million as of December 31, 2007, and 2006, respectively, due
to uncertainties related to our ability to utilize some of the deferred tax assets, primarily consisting of certain
foreign net operating losses carried forward, before they expire. The valuation allowance is based on management’s
current estimates of taxable income for the jurisdictions in which we operate and the period over which the
deferred tax assets will be recoverable. In the event that actual results differ from these estimates, or these
estimates are adjusted in future periods, an additional valuation allowance may need to be established which
would increase the tax provision, lowering income and impacting our financial position. Should realization of
these deferred assets previously reserved occur, the provision for income tax would decrease, raising income
and positively impacting Bio-Rad’s financial position.
Valuation of Long-lived and Intangible Assets and Goodwill
We assess the impairment of identifiable intangibles, long-lived assets and goodwill annually in the fourth quarter
or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Projected future operating results and cash flows of the reporting units’ asset or asset group are used to establish
the fair value used in evaluating the carrying value of long-lived, intangible assets and goodwill. Factors that
we consider important that could trigger an impairment review include the following:
• significant under-performance relative to expected, historical or projected future operating results;
• significant changes in the manner of use of the long-lived assets, intangible assets or the strategy for
our overall business;
• significant negative industry or economic trends.
When management determines that the carrying value of intangibles, long-lived assets or goodwill may not be
recoverable based upon the existence of one or more of the above indicators of impairment, we test for any
impairment based on a projected undiscounted cash flow method.
There were no impairments taken in the years 2007 and 2006. For the year 2005, that review indicated an
impairment had taken place in purchased intangible assets related to existing thermal cycler and microarray
technology.
Valuation of Inventories
We value inventory at the lower of the actual cost to purchase and/or manufacture the inventory, or the current
estimated market value of the inventory. We review inventory quantities on hand and record a provision for
excess and obsolete inventory based primarily on an estimated forecast of product demand and production
requirements for the next twelve months on a quarterly basis or, if warranted by the circumstances, more frequently.
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, in which case we may have understated
or overstated the valuation allowance required for excess and obsolete inventory. In the future, if inventory is
determined to be overvalued, we would be required to recognize such costs in our cost of goods sold at the
time of such determination by initiating or increasing our inventory valuation allowance. Likewise, if the inventory
valuation allowance is determined to be no longer required, we may have over-reported cost of goods sold in
previous periods and would be required to recognize such additional operating income at the time of sale
58 Bio-Rad 2007 Annual Repor t
until the inventory allowance is depleted. In no case is inventory valued at an amount greater than cost. Therefore,
although we make efforts to ensure the accuracy of our forecasts of future product demand, any significant
unanticipated changes in demand, technological developments or regulations could have a significant impact
on the value of our inventory and reported results of operations.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers
to make required payments. The amount of the allowance is determined by analyzing known uncollectible
accounts, the age of our receivables, economic conditions in the customers’ country or industry, historical
losses and our customers’ general credit-worthiness. Amounts later determined and specifically identified to be
uncollectible are charged or written off against this reserve. This valuation allowance is reviewed on a quarterly
basis to determine whether an increase or decrease is warranted. Should the estimates be higher than the actual
uncollectible accounts, we would report lower profitability when the estimates are made and higher profitability
when the receivable is collected.
Warranty Reserves
We warrant certain equipment against defects in design, materials and workmanship, generally for a period of
one year. Upon delivery and on acceptance of that equipment, we establish, as part of cost of goods sold, a
provision for the expected costs of such warranty based on historical experience, specific warranty terms and
customer feedback. A review is performed on a quarterly basis to assess the adequacy of our warranty reserve
and it is adjusted if necessary. The warranty percentage and accrual are based on actual experience and
expected future costs to be incurred. Should realized costs be higher than expected costs, cost of goods sold
would be lower in the period of estimation and higher when realized.
Litigation Reserves
We estimate amounts for claims that are probable and can be reasonably estimated are recorded as liabilities in
our consolidated balance sheets. The likelihood of a material change in these estimated reserves is dependent
on the possible outcome of settlement negotiations, regulatory or judicial review and the development of facts
and circumstances in extended litigation which could change claims or assessments when both the amount
and range of loss on some outstanding litigation is uncertain. We are obligated to disclose in the footnotes of
the financial statements when we are unable to make a reasonable estimate of the liability that could result from
unfavorable outcomes in litigation. As events occur, we will assess the potential liability related to our pending
litigation and revise our estimates. Such revisions could materially impact our results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the FASB issued Financial Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes,
which clarifies the accounting for uncertainty in income taxes recognized in our financial statements in accor-
dance with SFAS No. 109, Accounting for Incomes Taxes. FIN 48 provides that a tax benefit from an uncertain
tax position may be recognized when it is more likely than not that the position will be sustained upon examina-
tion, including resolutions of any related appeals or litigation processes, based on the technical merits. Income
tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon
the adoption of FIN 48 and in subsequent periods. This interpretation also provides guidance on measurement,
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN
48 is effective for fiscal years beginning after December 15, 2006.
Bio-Rad 2007 Annual Report 59
man agement’S diScuSSion an d an alySiS
(continued)
Bio-Rad adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48,
we recognized approximately a $5.0 million increase in the liability for unrecognized tax benefits, which was
accounted for as a reduction to the January 1, 2007, balance of retained earnings.
In December 2004, the FASB issued SFAS 123(R), Share-Based Payment, which is a revision of SFAS 123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees. SFAS 123(R) requires companies to recognize the cost of employee services received in
exchange for awards of equity instruments, based on the grant date fair value of those awards in their financial
statements. Pro forma disclosure is no longer an alternative under the new Standard. SFAS 123(R) also requires
the benefits associated with tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow rather than as an operating cash flow as was previously required.
Bio-Rad has adopted the provisions of SFAS 123(R) beginning January 1, 2006 under the modified prospec-
tive transition method. Under this method, compensation cost for the unvested portion of previously granted
awards and all new awards will be recognized on or after the date of adoption. The compensation cost related
to unvested awards at the date of adoption is based on the grant-date fair value of those awards as calculated
for pro forma disclosures under the original SFAS 123 as adjusted for the effect of estimated forfeiture rates.
CORPORATE RESULTS—SALES, MARGINS AND EXPENSES
Our net sales increased by 14.7% for the year 2007 to $1,461.0 million. This includes $62.0 million of sales in
the fourth quarter related to the recent acquisition of DiaMed Holding AG (DiaMed) completed on October 1,
2007. Excluding these sales, sales growth was 9.8%. The impact of foreign exchange translation aided sales
growth by approximately $59 million or 4.6%.
The Life Science segment achieved sales growth of 6.9% in 2007 aided by the impact of foreign exchange
translation of 4.2%. Excluding the impact of the food science product line, this segment grew by 11.0%.
Increased sales were the result of growth in multianalyte detection, protein interaction and process chromatography
product lines. Sales in the United States, Emerging markets and Asia Pacific (excluding Japan), were the drivers
of increased sales growth. The decline in sales of BSE (bovine spongiform encephalopathy) products continued
in 2007, as multiple test providers lowered product prices and government mandated tests declined.
The Clinical Diagnostics segment achieved sales growth of 21.5% in 2007 which includes sales growth that
resulted from our acquisition of DiaMed. Going forward, we will include DiaMed’s results in this reporting segment
because DiaMed’s customers, technology, distribution channels and economics (post integration) are all similar
to our Clinical Diagnostics segment. DiaMed’s position as an industry leader enhances our ability to expand
product offerings to our existing customers, broaden our customer base and more deeply penetrate the blood
bank, transfusion and clinical laboratory areas. DiaMed’s sales provided 9.1% of our Clinical Diagnostics sales
growth. The impact of foreign exchange on Clinical Diagnostics segment sales growth added approximately
5.1% to total segment sales. The Clinical Diagnostics segment experienced growth across a wide range of its
product offerings. Geographically, the drivers of sales growth excluding the DiaMed acquisition were in the
United States and Asia Pacific (excluding Japan).
Bio-Rad net sales increased 8% for the year 2006 to $1,273.9 million. The impact of foreign exchange translation
aided sales growth by approximately 0.2%.
60 Bio-Rad 2007 Annual Repor t
The Life Science segment achieved sales growth of 5% in 2006 with no significant impact from foreign
exchange translation. Excluding the impact of the food science product line, the Life Science segment grew by
11%. Increased sales were generated by process media sales, multi-analyte detection, and the return of thermal
cycler sales after the legal settlement allowed our products from the acquisition of MJ GeneWorks to be sold.
Sales to Asia and to developing markets in Eastern Europe were particularly strong. The decline in the sales of
food science products continued in 2006.
The Clinical Diagnostics segment achieved sales growth of 11% in 2006, aided by an approximate 0.3% impact
from foreign currency translation. Significant sales growth was provided by blood virus and quality control
products. Included in the blood virus sales is royalty revenue of $11.7 million from the settlement of a dispute
over past infringement. The Clinical Diagnostics segment was particularly successful in Eastern Europe where it
received some large government tenders. These large tenders are subject to intense competition and may not
be either available in subsequent years or awarded to us. The Middle East, Asia and Latin America regions also
contributed significantly to diagnostics growth. Diabetes and clinical microbiology products also contributed to
sales growth but not to the same extent.
The 2007 consolidated gross margin of 54.2% represents a decline of 1.7% from the prior year. Life Science
segment gross margins declined by just less than 1% as the underabsorption of factory costs due to lower than
planned activity in the first half of 2007, rising costs throughout the year and sales mix all contributed. The
Clinical Diagnostics segment gross margins declined by 2.4% from the prior year, as the result of the DiaMed
acquisition but offset somewhat by favorable inclusion of $11.7 million in 2006 of back royalties, with no related
costs. Excluding both these items, the gross margin was unchanged for 2006. DiaMed gross margins include
the effect of the amortization of purchased intangibles. This amortization is subject to change pending the
completion of all valuations related to the DiaMed acquisition.
The 2006 consolidated gross margin of 55.9% represents an improvement of 1.2% from the prior year. This
improvement was largely the result of higher gross margins in the Clinical Diagnostics segment. Life Science
segment margins improved by approximately one quarter of one percent as the positive impact of sales increases,
a reduction in customer warranty costs from the thermal cycler injunction and the reduction in MJ intangibles
amortization were offset by declining BSE product gross margin caused by lower average selling prices. Clinical
Diagnostics segment margins improved near 2%. The receipt of back royalties with no associated costs were
one factor in the improvement. A more substantial impact though, was higher sales volumes improving factory
overhead utilization while actively limiting the growth in factory overhead costs.
Consolidated selling, general and administrative expense (SG&A) was 34.8% of net sales for the year ended
2007. Excluding the impact of DiaMed from reported results had little impact in the relationship between sales
and spending. Increased spending on a currency neutral basis represents approximately $32 million of SG&A
growth for Bio-Rad in 2007, excluding DiaMed. Two-thirds of the increased spending is related to the Clinical
Diagnostics segment with the remainder associated with the Life Science segment. The largest component in
incremental SG&A spending is the cost of personnel. Personnel and related costs account for approximately
60% of total SG&A expense. Other increasing areas of costs are travel, marketing and technology costs.
Bio-Rad 2007 Annual Report 61
man agement’S diScuSSion an d an alySiS
(continued)
Consolidated SG&A expense was 34.5% of net sales for the year 2006 compared to 35.2% for the year 2005.
The increase of $22.9 million includes the expensing of stock options under SFAS 123(R) of $4.2 million. Personnel
costs including stock option expense accounted for approximately half of the year over year increase in SG&A
costs. Third party agent commissions and increased travel and related expenses accounted for approximately
a third of the total increase. On the segment level, the Life Science segment generally held expenses flat with
the Clinical Diagnostics segment growing at a rate below that of sales growth. Foreign exchange translation had
little impact on SG&A expense for the year 2006.
Product research and development expense in 2007 declined to 9.6% of sales excluding the purchased in-
process research and development associated with this year’s and last year’s respective acquisitions. Areas of
development for the Life Science segment were amplification, proteomics and process chromatography. Clinical
Diagnostics segment research and development were focused on additional assays for the BioPlex® 2200 testing
platform as well as enhancements to existing clinical microbiology, autoimmune, diabetes monitoring, blood
virus and quality control products. In absolute dollars, the increased spending was proportionately much higher
in the Clinical Diagnostics segment than in the Life Science segment.
Product research and development expense in 2006 remained unchanged at 9.7% of sales after excluding the
purchased in-process research and development from acquisitions. In absolute dollars, each segment had growth
in research and development spending with the Clinical Diagnostics segment having approximately twice the
growth of the Life Science segment. Life Science segment spending was focused in the areas of proteomics,
process chromatography and multi analyte detection. Clinical Diagnostics segment areas of interest include
expanded software data management for the quality control product line, expanded tests for the BioPlex 2200
platform and improvements to diabetes monitoring and blood virus diagnostic tests and systems.
CORPORATE RESULTS
Interest expense declined by approximately $0.4 million in 2007 from lower periodic use of local lines of credit
and lower outstanding amounts for legal liabilities that required interest payments until extinguished. Our principal
debt obligations are the 2003 and 2004 Subordinated Bonds totaling $425 million which carry fixed rates of
interest of 7.5% and 6.125%, and are not due until 2013 and 2014.
Interest expense declined by approximately $0.6 million in 2006 compared to the prior year. The decline reflects
lower average borrowings on local lines of credit in 2006 compared to the prior year. The majority of interest
costs are associated with the $425.0 million in Senior Subordinated notes.
Foreign exchange (gains) losses for 2007, 2006 and 2005 were $2.6 million, $1.1 million and ($1.5) million,
respectively. The largest component in the current year loss is a fourth quarter loss of approximately $2.5 million
on the exchange of Euros for Swiss Francs related to our purchase of DiaMed which required a gross payment
to the escrow agent of 477 million Swiss Francs at closing. Excluding this item, all years are effected by the
economic hedging program we employ to hedge our intercompany receivables and payables. The gains in 2005
are attributable mainly to the strengthening of the Brazilian Real versus the U.S. dollar.
62 Bio-Rad 2007 Annual Repor t
Other income and expense for the year 2007 is principally comprised of $22.0 million of investment income for
interest on cash, cash equivalents and short-term investments. Our investment income is slightly lower than in
2006. During the fourth quarter the amount of investments declined significantly as we spent approximately $400
million to purchase DiaMed. Investment income from higher invested amounts and higher yields during the first
three quarters of 2007 will decline significantly in 2008. Other factors affecting comparability between years is the
2007 impairment of two investments totaling $3.6 million. Conversely in 2006, we had other income of $4.7 million
relating to a facilitation fee received and a gain on the tendering of our shares in the merger between Accent
Semiconductor Technology Inc. and Nanometrics Inc. after the two companies merged. The investment income
of $22.3 million in 2006 is higher than 2005 as returns on short-term debt investments yielded higher returns.
Bio-Rad’s consolidated effective tax rate was 22%, 27% and 17% in 2007, 2006 and 2005, respectively. The
2007, 2006 and 2005 effective tax rates reflect tax rate benefits of 5%, 3% and 6%, respectively for nontaxable
dividend income, and 8%, 2% and 2%, respectively for tax credits. The tax benefit of 8% in 2007 is a result
of research and development credit claims and current research and development credits. The 2007, 2006
and 2005 effective tax rates also reflect benefits in the difference between U.S. and foreign taxes of 2%, 1%
and 7%, respectively. The tax rate in 2007 includes the removal of a valuation allowance related to Canadian
deferred tax assets in the amount of 3%. The effective tax rates for 2006 and 2005 reflect rate benefits of 2%
and 3%, respectively for export sales incentives. The tax rate benefit of 7% for 2005 is related to certain one
time events in France and the U.K. The 2005 effective tax rate also reflects a one time benefit of 5% related to
a capital loss for U.S. tax purposes.
Our effective tax rate may be impacted in the future, either favorably or unfavorably, by many factors including
but not limited to fluctuations in statutory tax rates and changes in tax laws or regulations, which could cause
our estimate of taxes to change.
LIQUIDITY AND CAPITAL RESOURCES
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 intermediate or finished
products are then shipped for completion and/or distribution to facilities around the globe. 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. Funding for research and development of
new products as well as routine outflows of capital expenditure, and tax expense are covered by cash flow from
operations. We currently operate with an adequate level of interest coverage and our current market capitalization
is high relative to our current level of debt. In addition to the strong positive cash flow from operating activities,
additional liquidity is readily available via the sale of short-term investments and our revolving credit facility.
At December 31, 2007, we had available $223.7 million in cash, cash equivalents and short-term investments,
and $42.1 million under international lines of credit. Under the $200.0 million restated and amended Revolving
Credit Facility, we have $195.3 million available with $4.7 million reserved for standby letters of credit issued
by our banks to guarantee our obligations to certain insurance companies. 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 plant, equipment and systems and to make the offer to the minority
shareholders of DiaMed Holding as outlined in the DiaMed purchase and sale agreement.
Bio-Rad 2007 Annual Report 63
man agement’S diScuSSion an d an alySiS
(continued)
Cash Flow from Operations
Net cash provided by operations was $191.6 million, $118.2 million and $108.3 million in 2007, 2006 and 2005,
respectively. The net improvement of $73.4 million represents first, approximately a $52.9 million improvement
in the net change in cash received from customers and cash paid to suppliers. Second, the reduction in payments
to ABI to settle the litigation arising from the acquisition of MJ Research, further enhanced cash flow from operations
by $42.8 million, offsetting these two positive items was an increase in tax payments of $22.2 million.
During 2007, the moderation of growth in inventory and account receivable compared to 2006 contributed to
the overall improvement in cash flow from operations. Additional cash flows were also generated by the acquisi-
tion of DiaMed. First quarter 2008 cash flows are expected to be significantly reduced, as annual payments for
royalties, bonuses and DiaMed integration and compliance costs are due in that period.
Management regularly reviews the allowance for uncollectible receivables and believes net accounts receivable
are fully realizable. Management routinely reviews inventory for the impact of obsolescence and changes in market
prices caused by the introduction of new products, technologies and in government reimbursement policies.
Cash Flow from Investing Activities
Net capital expenditures in 2007 totaled $60.6 million, compared to $53.0 million and $36.1 million in 2006 and
2005, respectively. Net capital expenditures for 2007 reflect investment in improvements to new information
technology systems and expansion of manufacturing capabilities as well as refurbishing some administrative
space. Spending on reagent rental instruments increased to $23.1 million. We place reagent rental instruments
with our Clinical Diagnostics customers for use with our clinical reagents. We continued in 2007 to invest in
business systems to modernize and standardize distribution capabilities and enhance data communication.
Other ongoing expenditures are for the replacement and improvement of production equipment and facilities to
meet the necessary Good Manufacturing Practices (GMP) mandated by the Food and Drug Administration (FDA)
for the Clinical Diagnostics segment and to meet the requirements of European and other regulatory bodies as
well as many customers in our Life Science segment.
Net cash used in investing activities was $254.4 million for the year 2007. During the year we paid cash for the
acquisition of DiaMed. We had no comparable acquisition activity in previous years. The net change in purchases
and sales of marketable securities and investments represents the liquidation of investments prior to the acquisition
of DiaMed. In 2008, we intend to offer to buy the outstanding shares of the minority shareholders of DiaMed.
We estimate this offer will use approximately another $70.0 million in cash.
Cash Flow from Financing Activities
Net cash flow used in financing activities was $7.4 million for 2007 and principally reflects the cash flow for
the exercise of stock options and receipts from the Employee Stock Purchase Plan transactions. Payments on
long-term debt represent the reduction of acquired DiaMed debt. We have previously borrowed $200 million at
6.125% due 2014 along with $225 million at 7.5% due 2013. This has provided us with capital at a fixed rate
for the next seven and six years, respectively. We routinely meet and discuss potential acquisitions with specific
companies, principals or their agents. Should we identify any significant potential acquisitions, it would most
probably require an increase in our total indebtedness.
64 Bio-Rad 2007 Annual Repor t
The $200.0 million revolving credit facility is secured by substantially all of our personal property assets and
the assets of our domestic subsidiaries and 65% of the capital stock of certain foreign subsidiaries, and is
guaranteed by all of our existing and future domestic subsidiaries (other than immaterial domestic subsidiaries
as defined for purposes of the new credit facility).
The Board of Directors has authorized us to repurchase up to $18 million of Bio-Rad’s common stock over
an indefinite period of time of which $3.3 million is remaining. Our credit agreements restrict our ability to
repurchase our own stock. There were no share repurchases made during 2007 or 2006.
CONTRACTUAL OBLIGATIONS
The following summarizes certain of our contractual obligations as of December 31, 2007 and the effect such
obligations are expected to have on our cash flows in future periods (in millions):
Contractual Obligations
Long-term debt, including
current portion(1)
Interest payments
Operating lease obligations(2)
Purchase obligations(3)
Long-term liabilities(4)
Total
Less than
One Year
1-3
Years
3-5
Years
More than
5 Years
452.8
181.5
101.4
20.9
37.5
11.0
29.1
31.3
17.7
—
10.2
58.3
42.6
2.4
15.2
6.6
58.3
21.2
0.8
0.9
425.0
35.8
6.3
—
21.4
(1) These amounts represent expected cash payments, include capital lease obligations and are included in our Consolidated Balance Sheets. See Note 7
of the Consolidated Financial Statements for additional information about our debt.
(2) Operating lease obligations are described in Note 13 of the Consolidated Financial Statements.
(3) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on Bio-Rad and that specify all significant
terms. Purchase obligations exclude agreements that are cancelable without penalty.
(4) Included within our long-term liabilities is our liability for income tax payable, including uncertain tax positions, in the amount of $20.8 million. We are not
able to reasonably estimate the timing of future cash flows of these tax liabilities. Our income tax obligations are excluded from the table above. See Note 8
of the Consolidated Financial Statements.
Bio-Rad 2007 Annual Report 65
man agement’S diScuSSion an d an alySiS
(continued)
FINANCIAL RISK MANAGEMENT
The main goal of Bio-Rad’s financial risk management program is to reduce the variance in expected cash
flows arising from unexpected foreign exchange rate and interest rate changes. Financial exposures are managed
through operational means and by using various financial instruments, including cash and liquid resources,
borrowings, spot foreign exchange contracts, and derivatives. The derivative instruments used are principally
comprised of forward foreign exchange contracts. No derivative financial instruments are entered into for the
purpose of trading or speculation. Company policy requires that all derivative positions are undertaken to
manage the risks arising from underlying business activities. These derivative transactions do not qualify for
hedge accounting treatment under SFAS 133, Accounting for Derivative Instruments and Hedging Activities.
Derivative instruments used in these transactions are valued at fair value and changes in fair value are included
in reported earnings.
Foreign Exchange Risk
We operate and conduct business in many countries and are exposed to movements in foreign currency exchange
rates. We face transactional currency exposures that arise when we enter into transactions denominated in currencies
other than U.S. dollars. Additionally, our consolidated net equity is impacted by the conversion of the net assets of
our international subsidiaries for which the functional currency is not the U.S. dollar.
Foreign currency exposures are managed on a centralized basis. This allows for the netting of natural offsets and
lowers transaction costs and net exposures. Where possible, we seek to manage our foreign exchange risk in part
through operational means, including matching same-currency revenues to same currency costs, and same-currency
assets to same-currency liabilities. Moreover, weakening in one currency can often be offset by strengthening in
another currency. Foreign exchange risk is also managed through the use of forward foreign exchange contracts.
Positions are primarily in Euro, British Sterling and Japanese Yen. The majority of forward contracts are for periods
of 90 days or less. We record the change in value of our foreign currency receivables and payables as a foreign
exchange (gain) loss on our Consolidated Statements of Income along with the change in fair market value of the
forward exchange contract used as an economic hedge of those assets or liabilities.
Our forward contract holdings at year-end were analyzed to determine their sensitivity to fluctuations in foreign
currency exchange rates. All other variables were held constant. Market risk associated with derivative holdings
is the potential change in fair value of derivative positions arising from an adverse movement in foreign exchange
rates. A decline of 10% on quoted foreign exchange rates would result in an approximate net-present-value loss of
$12 million on our derivative position. This impact of a change in exchange rates excludes the offset derived from
the change in value of the underlying assets and liabilities, which could reduce the adverse effect significantly.
Interest Rate Risk of Debt Instruments
Bio-Rad centrally manages the short-term cash surpluses and shortfalls of its subsidiaries. Our holdings of variable
rate debt instruments at year-end were analyzed to determine their sensitivity to movements in interest rates. Due
to the relatively small amount of short-term variable rate debt we have outstanding, there would not be a material
impact to earnings or cash flows if interest rates moved adversely by 10%. Our long-term debt consists primarily
of fixed-rate instruments, and is thus insulated from interest rate changes. As of December 31, 2007 the overall
interest rate risk associated with our debt was not significant.
66 Bio-Rad 2007 Annual Repor t
cor por ate InforMatIon
D iRect oRs
David schwartz
chairman of the Board
James J. Bennett
director
Louis Drapeau
director
Albert J. Hillman
director
sanford s. Wadler
Vice president,
general counsel
and secretary
Ronald W. Hutton
treasurer
James R. stark
corporate controller
Ruediger Naumann-etienne
director
Alice N. schwartz
director
Norman schwartz
director
otHeR executives
Michael crowley
Manager,
north america sales,
clinical diagnostics
steve Binder
director,
technology development,
clinical diagnostics
off iceRs
David schwartz
chairman of the Board
Patrick Bugeon
group operations Manager,
france clinical diagnostics
Norman schwartz
president and
chief executive officer
Brad crutchfield
Vice president and
group Manager,
life science
John Goetz
Vice president and
group Manager,
clinical diagnostics
Giovanni Magni
Vice president and
International sales Manager
christine A. tsingos
Vice president and
chief financial officer
John Bussell
Manager, clinical systems
francois capit
regional Manager,
asia pacific
Patrick carroll
Manager,
north america sales,
life science
Jean-Marc chermette
Manager, food science
colleen corey
director, corporate
human resources
Diane Dahowski
Manager, Bioplex
Patrice Deletoille
Manager, Blood Virus
David forrester
regional Manager, europe
John Hertia
group operations Manager,
life science
scott Jenest
Manager, Manufacturing,
life science
Leo Kaabi
Manager, Quality systems
Bill Kuhlman
Manager,
process chromatography
Ann Madden
Manager,
clinical Microbiology
Daniel Merle
Manager,
Business development,
clinical diagnostics
todd Morrill
Manager,
Business development,
life science
Leonard Pulig
Manager, Marketing,
life science
John senaldi
Manager, protein function
sanjiv suri
regional Manager,
emerging Markets
sadashi suzuki
regional Manager, Japan
Annette tumolo
Manager, gene expression
ANNuAL MeetiNG
the annual Meeting of
stockholders will be held
on tuesday, april 22, 2008
at 4 pM, pacific time, at
the corporate offices of
the company in hercules,
california.
Bio-rad will provide without
charge to each stockholder,
upon written request to
the secretary, a copy of its
2007 annual report filed
with the securities and
exchange commission on
form 10-K.
tRANsfeR AGeNt
computershare investor
services LLc
250 royall street
canton, Ma 02021
tel: 312-360-5132
fax: 312-601-4332
www.computershare.com
AuDitoRs
Deloitte & touche LLP
san francisco, california
coMMoN sto cK
traded on the american
stock exchange
class a common stock
symbol Bio
class B common stock
symbol Biob
Bio-Rad 2007 Annual Report 5
Bio-Rad Laboratories
1000 Alfred Nobel Drive
Hercules, CA 94547
510-724-7000 TEL
510-741-5817 FAX
www.bio-rad.com