Bio-Rad Laboratories Annual Report 2012

FY2012 Annual Report · Bio-Rad Laboratories

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REFLECTIONS

Bio-RAD CeleBRAtes its DiAmoND ANNiveRsARy
Bio-RAD CeleBRAtes its DiAmoND ANNiveRsARy

ShININg STaR

In a world replete with companies devoted
to improving healthcare, Bio-Rad stands out
as an example of strength and endurance.

From its humble beginnings in the middle of the last century
to the modern, global enterprise it is today, many things
have changed at Bio-Rad over the past six decades.

But one thing has not: Bio-Rad’s focus on providing useful
products that help scientists in life science research
accelerate the discovery process and laboratorians in
clinical diagnostics obtain faster and more accurate results.

This year, Bio-Rad celebrates its 60th year of operations
by taking a look back at the many significant contributions
it has made to these fields over the years, resulting in
improved healthcare for all.

It is a mission that, thanks to the foresight of the company’s
late, beloved founder, David Schwartz, continues to shine
brightly into the future.

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2012 was a year of invest-ment for Bio-Rad in several ways. While markets and growth were slow, we had the opportunity to invest internally in our operations and do some muscle build-ing. The most visible invest-ment we made, and are continuing to make, is in our ERP or business systems, which will provide us with a backbone of information and operating standardization that we need to scale the business and reach our next near-term goal. Throughout the year we focused on the creation of a global design as well as readiness for the first implementation of the new system. In the process of designing a global system, we have taken the time to evaluate our processes and think about how to best organize certain parts of the business to operate more effectively as the company grows. As a result, a number of functions are transitioning Our progress came in the face of continuing economic challenges around the world. The economies of Europe provided the biggest challenge during the year as many countries continued to enact austerity measures and control expenditures to restore fiscal balance. Our expectation is that 2013 will be a similar picture for Europe. On the other hand, the U.S., which was first to experience an economic slowdown, appears to have stabilized and there are some encouraging signs of growth, at least at a modest level, for the year to come. Asia and many of the other emerging markets continue to grow for us at a steady pace as they invest in re-search and improved health-care systems. Our global footprint and geographic balance is a strength for us as we navigate selectively choppy markets.to be more centrally man-aged in a shared services mode. We expect to go live with our first deployment of ERP in early 2013. We have taken a phased approach to this large project and expect it will continue to be an area of considerable investment as we transition our business systems to this new platform.Although many of our investments were directed inward in 2012, our under-lying focus in new products and technologies was not compromised in the process. We invested $214 million, or roughly 10% of every sales dollar, in new product development efforts. The resulting flow of new products and the ever increasing number of new patents being granted to us is a good indication of the return on this investment.Letter to our sharehoLders2012 was another year of progress for Bio-Rad and in many respects it was a milestone for the company. We reached our 60th year of operation in 2012 and in the spring were honored to be named a 2011 Fortune 1000 company. While sales for the year approached $2.1 billion, some of the currencies in countries where we do business moved dramatically, with the consequence that reported sales were down slightly from 2011. Neutralizing for these currency changes, our underlying year-over-year growth was 3.6%.

panel for celiac disease, an

autoimmune disorder that

is caused by a reaction to

gluten in the diet.

cytometry technology that

is somewhat of a transition

is the core of our expansion

year with the passing of my

into the cell biology market.

father, one of the founders

Early in 2013, we also com-

of Bio-Rad. He would have

This year was also one of

external investments as we

acquired or continued to

invest in recently acquired

operations. With the

pleted the acquisition of AbD

described his many years

Serotec, bringing us a port-

dedicated to building a

folio of antibodies that are

successful and sustaining

complementary to a number

company with a passion

of our key product areas.

for both our customers and

our markets. He leaves us

with a great legacy and a

bright future.

acquisition of QuantaLife

We expect 2013 to be

and droplet digital technol-

another year of progress as

ogy for PCR late in 2011,

we established the Digital

we benefit from our 2012 in-

vestments in R&D, acquired

Biology Center in order to

products or technologies,

better exploit this exciting

and global operations.

technology across both of

our life science research and

diagnostics markets. During

the year, we acquired flow

For many of you who are

longer-term shareholders,

Norman Schwartz

you will also note that this

PReSideNt

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As we head into 2013, we have a number of new platforms being introduced. Key among them is a new laboratory chromatography system. This next genera-tion instrument is poised to meet the ever advancing needs of this market seg-ment. We are also launch-ing a cell sorter, a major entry into the growing area of cell analysis. In addition to the systems announced to date, we enter the year with increased content, or reagents, to enhance our instrument offerings. One notable introduction is a test

A DIAmonD
In The Rough

The middle of the last century was a time of burgeoning scientific
innovation. From James Watson’s and Francis Crick’s discovery
of the structure of DNA in 1953 to Jonas Salk’s invention of a
polio vaccine in 1955, medical science was moving forward
on many fronts around the world. America, in particular, was
emerging as a leader in scientific and healthcare advancement.

Before she could begin

Although their first product

being used as a method of

her research, however, she

was not the success the

purification. But before the

faced the laborious task of

couple had envisioned, it

resins could be used, the

creating her research mate-

turned out that the ultra-

founders needed to first

rial, which involved growing

centrifuge they used to

remove impurities in the

plants, infecting them, and

isolate the virus, was. The

material, thereby producing

then harvesting the virus in

high-speed instrument was

“analytical grade” ion ex-

which to study. It was during

used to separate particles

change resins. Believing that

the course of Alice’s time-

from one another in order to

the purified material would

consuming prep work that it

determine the size and

be useful in the lab setting

occurred to Dave that per-

molecular weight of anything

for various applications,

haps she was not the only

from polyethylene to the fat

Dave and Alice added a new

one struggling with this type

content in hamburger meat.

product line to Bio-Rad’s ser-

of problem. What if they cre-

Considered a sophisticated

vice offerings, analytical grade

ated the material, packaged

and expensive technology

ion exchange resins, which

it, and made it available to

at the time, Dave and Alice

would eventually become one

the research community?

realized there was a market

of the company’s first suc-

Soon after, the two formed a

company with the purpose of

making life in the lab easier

for researchers—one that

for selling time on the

cessful enduring products.

device to local companies, a

service that became one of

Bio-Rad’s earliest successes.

The polishing of the

diamond had begun.

would simplify processes and

The separation of materials

save time, improve research

would soon lead the com-

methods and materials, and

pany in another direction.

ultimately, accelerate the

Ion exchange resins were

discovery process.

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It was during this period of scientific breakthroughs that David Schwartz and his wife Alice, both recent graduates of the University of California, Berkeley, made an unexpected discovery of their own. At the time, Alice was working at a lab studying the physical properties of tobacco mosaic virus, attempting to determine why the rod-like virus broke in certain places.

What’s in a name?

The name “Bio-Rad”

is based on the words

biochemicals and

radiochemicals, which

described some of

the company’s first

offerings. However,

instead of calling the

company Biochemical-

Radiochemical

Laboratories, the

founders shortened

it to simply Bio-Rad

Laboratories.

OppOrtunity at 35,000 feet

In October of 1966, on a

transatlantic flight, Dave

struck up a conversation

with the gentleman sitting

next to him, an engineer

from another scientific

instrument company.

They discovered they

had much in common,

including, in particular,

an interest in developing

an amino acid analyzer.

The pair landed in Munich

and the conversation

continued. Upon an

invitation from his new

friend to remain in the city

instead of continuing on to

Frankfurt, Dave ultimately

decided to open Bio-Rad’s

first office in Munich.

His new friend decided

to join Bio-Rad and lead

the effort to develop

a fully automated,

computer-compatible

amino acid analyzer.

Opportunities can

sometimes be found in the

most unexpected places.

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SeekIng new
FRonTIeRS

With the expansion of business internationally in the
1960s, Bio-Rad took its first steps toward finding markets
for its products overseas. Soon after, the company was
on its way to becoming a true global enterprise.

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GoING WHERE oUR CUSToMERS ARE

Worldwide interest in biological discovery and improved healthcare grew
in the 1960s, and Bio-Rad saw tremendous growth opportunities. During
the decade, living standards continued to improve worldwide, as the post-
war years’ focus on “basic capital goods” industries, such as steel and
construction, shifted to a variety of high technology fields and healthcare.

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With this fresh focus happening around them, Bio-Rad felt that
the potential growth of biological research and advances in
healthcare would continue. Greater emphasis was being placed
on preventive screening and early detection of many health
conditions, and there was an ever-increasing interest in getting
to the root cause of disease. This focus was not just a U.S.
phenomenon. Many countries around the world were taking up
the challenge to eradicate disease and improve healthcare.

In 1966, with approximately

offices throughout Europe

Expansion of the company

$1 million in sales and

soon followed, as did those

continued throughout the

having just gone public,

in Asia Pacific and later in

years and today Bio-Rad

the company opened its

Latin American and Africa.

has established a presence

first international office in

Geographic expansion efforts

in nearly every significant

Munich, Germany.

were not limited to sales

geographic market. With

The model for the German

office centered on Bio-Rad’s

long-standing belief in being

close to its customers and

having an in-depth knowl-

edge of the local market.

This was especially true

offices and distribution cen-

more than 60% of sales

ters, however. The company

coming from outside the

continued to find opportuni-

U.S., Bio-Rad serves over

ties to make acquisitions that

100,000 customers through-

provided Bio-Rad with new

out the world. Supplement-

products, capabilities, and

ing this physical presence,

technologies.

where matters of language

Today, Bio-Rad’s manu-

and culture posed barriers.

facturing and distribution

With local employees, the

centers offer its customers

company would gain a

even more convenience,

greater understanding of its

value, and support. Product

customers’ needs and work-

training sites located around

flows and therefore was able

the globe are proving to be

to serve them better.

another valuable resource,

offering post-sales technical

support to ensure that cus-

tomers are able to success-

fully use Bio-Rad products

in their labs.

Bio-Rad has continued to

invest in its e-commerce

channel to meet the evolv-

ing needs and desires of

its customers so they are

able to transact business

electronically.

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The meTABolISm
oF gRowTh

By the mid-1960s, Bio-Rad was a recognized leader in
separations materials for research. The company was
beginning to diversify and apply its technology to meet
the demands for new applications.

Curiously, some of these demands were coming not from
research chemists, but from the medical community.

In one notable case, diag-

It was Alice Schwartz who

More products soon followed,

nosticians were seeking a

led the charge. Building on

to the point where today, the

more reliable method for

earlier work she had done

Clinical Diagnostics Group

determining thyroid func-

for the National Institutes

develops, manufactures,

tion, an important measure

of Health, she developed a

sells, and supports a large

of human metabolism. The

methodology based on the

portfolio of products in a

conventional test that was

adaptation of ion exchange

wide variety of testing areas.

used at the time had severe

techniques to the field of

These products span a

limitations, often producing

clinical chemistry. The clini-

breadth of specialties includ-

erroneous results. Intrigued

cal test developed, using a

ing diabetes monitoring,

by the challenge and

small disposable column,

blood virus testing, blood

potential, Bio-Rad scientists

provided for straightforward

typing, HIV, autoimmune and

began collaboration on the

T-4 (thyroxine) separations

genetic disorders testing,

development of a diagnostic

and, for the first time, of-

and quality control systems.

test that could better deter-

fered physicians an accurate

mine thyroid function.

method for determining thy-

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roid function. The test was

so well received that Bio-Rad

created a second arm of the

company, focused on the

growing area of diagnostics.

With its technical expertise

in separations chemistry,

Bio-Rad was now positioned

to contribute to a developing

clinical diagnostics market.

research, meet reality

With the T-4 test, Bio-Rad

recognized that laboratory

diagnostics was evolving

into “applied biochemistry”,

in which the knowledge and

techniques of research are

applied to medicine and

diagnostics. It was a turning

point for the industry—and

the company.

SweeT SucceSS

Maintaining control of blood glucose (blood sugar) is a challenge for
those suffering from diabetes. Uncontrolled blood glucose levels cause
complications that can affect nearly every system and organ in a
diabetic’s body. While glucose monitoring is one way diabetics who take
insulin can monitor their blood sugar, it has its limitations. It measures
only a moment in time: the point at which the sample is drawn.

Without the context of a broader time period, it is nearly
impossible for a physician to know whether a patient is
in compliance with his or her treatment—a combination
of diet, exercise, and medication over time.

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In the 1970s, it was discov-

and became the first company

funded medical study called the

ered that “glycosylated” hemo-

to measure “A1C”, a subset

Diabetes Control and Compila-

globin (GHb), which contained

of hemoglobin A1 and a more

tions Trial was getting underway.

a protein called hemoglobin

precise indicator of average

The study would ultimately

A1, showed elevated levels in

blood glucose levels over time.

conclude that patients keeping

diabetics. This measurement

offered insight into average

blood glucose levels in diabet-

ics over a several-month

period, providing a baseline

for monitoring and controlling

the disease.

Bio-Rad researchers began to

explore methods for providing

a more efficient separation that

would be suitable for routine

use in the lab. By 1978, the

company developed the first

commercial test for measur-

ing hemoglobin A1 in diabet-

ics using a small, disposable

open chromatography column.

However, a challenge remained:

the separated hemoglobin

A1 contained impurities that

caused uncertainty about test

results. By 1982, Bio-Rad had

eliminated these interferences

With the A1C test pioneered

by Bio-Rad, a physician had

only one measurement to

consider, representing the pa-

tient’s compliance to his or her

treatment over the prior two to

three months.

As the new test became

adopted as a standard of

care, test volumes increased,

prompting the need for im-

proved test efficiencies. The

company proceeded to add

automation to the process,

and has since introduced a

variety of platforms to meet

the varied needs of laborato-

ries, both large and small.

By 1983, as use of Bio-Rad’s

A1C monitoring products

continued to increase, a

landmark, U.S. government-

blood glucose levels as close to

normal as possible slowed the

onset of complications caused

by diabetes. An automated

Bio-Rad high-performance

liquid chromatography (HPLC)

testing method was utilized in

the trial, further establishing the

usefulness of A1C testing.

The road leading to the

company’s market position of

today’s A1C monitoring prod-

ucts was marked by continu-

ous improvement, and today

Bio-Rad’s A1C platforms and

reagents are considered the

industry’s gold standard. From

the D-10™ and VARIANT™ line

of hemoglobin testing systems

to the compact in2it™ analyzer

point-of-care system, Bio-Rad

offers products to fit the

testing volume needs of labs

around the world.

a grOWing challenge

As the number of people with diabetes

Diabetes Association. Worldwide, an

increases, so does the disease’s economic

estimated 347 million people suffer from

impact. In the U.S. alone, more than one

the disease. Type 2 diabetes (or adult onset)

in 10 healthcare dollars are being spent

comprises approximately 90 percent of

directly on diabetes and its complications,

individuals with the disease worldwide.

according to a recent study by the American

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A unIque chemISTRy

At Bio-Rad, our work is held to extremely high standards—our own.
This means incorporating the latest advances in the areas of life
science research and laboratory diagnostics, as well as the highest
level of quality in our products, our service, and our support.

These values, however, are surpassed by something else:
the standards of our customers.

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For over half a century, Bio-Rad’s commitment to developing
strong, long-lasting relationships with our customers has been
one of our defining characteristics. This connection—
a continual feedback loop of wants, needs, and product
enhancements—reflects the integral role that the company’s
customers play in the development of Bio-Rad products.

With our customer immersion

Incorporated into Bio-Rad’s

process, for example, market-

product development cycle,

ing, engineering, and research

this activity invariably leads

scientists travel to customer

to instrument enhancements,

sites to observe and talk with

new products and services,

researchers, at their bench—

and the broadening of current

where it matters the most.

product lines.

This level of observation and

interaction gives the company

a deeper understanding of the

kinds of products our custom-

ers are using, how they’re us-

ing them, and what obstacles

they may be encountering in

the course of their work.

Bio-Rad’s commitment to

being directly connected to

our customers is an example

of the company’s belief in the

importance of building trust.

Customers know that no

matter what, their voice will

be heard, their products will be

These observations provide

delivered on time, and they will

Bio-Rad insight in to how we

receive immediate and con-

can improve our products

tinuous service should it be

and methods, making the

required. our recently introduced

process of research more

BRiCare software application

productive and successful for

gives us the ability to remotely

our customers. It is a level

diagnose and in some cases

of detail that can only be

repair a customer’s instrument,

achieved by working closely

an extremely valuable resource

with our customers.

when it is difficult for a Bio-Rad

engineer to be at a customer

site in a timely manner.

Providing this level of cus-

tomer care throughout the

sales cycle requires more of

an investment on our part, but

we believe it is worth it. our

efforts in this area continue

to produce relationships that

have, in some cases, spanned

three decades or more … and

counting.

It’s what we—and our

customers—expect.

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Faster,
smaller,
easier...
repeat.

If you ask Bio-Rad customers what they want in a process
or instrument, they will typically say they want fewer steps, a
smaller footprint, greater ease of use, and faster time to result.
The better they are able to do their jobs, the better the odds are
of improved healthcare outcomes for people everywhere.

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Therefore, it is our mission to provide life science researchers and diagnosticians the superior products they need, and then improve upon them—constantly.At Bio-Rad, we manufacture over 8,000 products for our customers around the world, a vast portfolio of instruments, reagents, and software that covers a wide spectrum of research and diagnostic applications. Improving these products is not just a goal, it is a process: an automatic, ongoing progression of enhancements that allow our customers to continually improve the work that they do. Whether it is a researcher who is concerned about test quality and instrument uptime, a lab manager who needs high throughput and fast turnaround time, or a purchasing agent concerned with cost, Bio-Rad products are designed to satisfy the needs of our customers with state-of-the-art performance as well as value… until the next improvement.

IsolatIng InnovatIon

The human genome was sequenced

in the 1990s using a process called

electrophoresis, a common analytical

technique in which the molecules, nucleic

acids, for example, are separated and

identified based on their migration

through a gel under the influence of an

electrical current. In 1969, Bio-Rad began

to offer products for gel electrophoresis,

introducing its first electrophoresis-grade

chemicals for researchers who “hand-cast”

their own gels.

Seeing opportunities for improvement,

Bio-Rad continued to expand its line

of products in this area and introduced

“ready to run” precast gels. The new gels

were not only reliable, fast, cost-efficient,

and ready to use right out of the box, they

also offered standardization, eliminating

variability that could often result from the

hand-casting of gels.

Further improvements were on the

way. The introduction of the Experion™

electrophoresis system in 2004 automated

the entire process, providing results

quickly and more cost effectively.

Today, Bio-Rad is a worldwide market

leader of electrophoresis products with a

complement of instruments and reagents

including gels that offer a multitude of

innovations such as increased speed;

gradients with even finer, more granular,

results; and “stain-free” technology, which

offers in-gel protein visualization.

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v3 in the real WOrld

Cancer researchers often

study cell signaling pathways

to understand mechanisms of

cancer proliferation. Western

blotting is used to understand

which signaling proteins are

being expressed and in what

quantities. The V3 Western

Workflow™ allows researchers

to perform these experiments

more quickly, while providing

higher confidence in the results.

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The compleTe
pAckAge

By offering a seamless connection between the
instrument, the assay, and the reliable result, Bio-Rad’s
integrated platforms and solutions allow customers to
focus on their work, and not on what it takes to get
that work accomplished.

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FoCUSING oN WHAT’S IMPoRTANT

A misspelled word in a text is automatically corrected without the user
having to do a thing. A dialed number, not written down, can be re-dialed
at a touch. A picture can be snapped, uploaded, and printed, with just a
few simple taps—all without the need for an instruction manual.

Each of these examples illustrates how technology can be
designed to work behind the scenes, seamlessly providing
conveniences and capabilities to users—before it may even
occur to them to make the request.

This is exactly what Bio-Rad

Cell counting and sorting

The system is capable of

strives to provide its cus-

are yet other examples of

identifying and isolating cell

tomers in the life science

a Bio-Rad product area

types of interest for further

research and clinical diag-

integration. The human body

analysis. All of this at a rate of

nostic fields.

is made up of tens of thou-

30,000 cells every second.

sands of different types of

cells that serve a variety of

functions. To help research-

ers understand the compo-

sition of cells in, for example,

a cancerous tumor, the cells

must be isolated first. This

is where Bio-Rad S3™ cell

sorter comes in.

The TC20™ automated cell

counter is the perfect com-

panion to the S3 cell sorter.

It accurately counts both

before and after sorting cells,

in one simple step, which

takes a mere 30 seconds.

BIO-RAD

This integration can be seen

in our V3 Western Workflow,

a series of best-in-class

products designed to

streamline the process for

running western blots, an

analytical technique used to

identify specific proteins and

determine their weight in a

given sample. The products

work together, saving time

and generating more reliable

and robust data. Combining

traditional blotting tech-

niques with the latest

advances in electrophore-

sis, imaging, and transfer,

the workflow offers visual

checkpoints throughout the

process that allow scientists

to actually see the results as

the workflow progresses.

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PROCESS

SEPARATIONS

IMAGING SYSTEMS

& SOFTWARE

FOOD

SCIENCE

AMPLIFICATION/

PCR

TRANSFECTION

SAMPLE

QUANTITATION

LIFE SCIENCE

EDUCATION

FLOW

CYTOMETRY

ELECTROPHORESIS

& BLOTTING

BIO-PLEX®

SUSPENSION

ARRAY SYSTEM

MICROPLATE

SYSTEMS

SELDI

TECHNOLOGY

CELL

COUNTING

LIQUID HANDLING

& PIPETTING

CHROMATOGRAPHY

NUCLEIC

ACID SAMPLE

PREPARATION &

PURIFICATION

PROTEIN SAMPLE

PREPARATION

PROTEIN

INTERACTION

ANALYSIS

LIFE SCIENCE

RESEARCH

AUTOIMMUNE

BIOPLEX 2200

MULTIPLEX

TESTING

BLOOD

VIRUS

NEWBORN

SCREENING

MICROBIOLOGY

IMMUNOHEMATOLOGY

DIABETES

TESTING

CLINICAL

DIAGNOSTICS

QUALITY

CONTROL

HEMOGLOBINOPATHIES

INFORMATICS

SPECIAL

CHEMISTRY

INSTRUMENTATION

CRITICAL RAW

MATERIALS

PROCESS
SEPARATIONS

IMAGING SYSTEMS
& SOFTWARE

FOOD
SCIENCE

AMPLIFICATION/
PCR

TRANSFECTION

SAMPLE
QUANTITATION

LIFE SCIENCE
EDUCATION

FLOW
CYTOMETRY

ELECTROPHORESIS
& BLOTTING

BIO-PLEX®
SUSPENSION
ARRAY SYSTEM

MICROPLATE
SYSTEMS

SELDI
TECHNOLOGY

CELL
COUNTING

LIQUID HANDLING
& PIPETTING

CHROMATOGRAPHY

NUCLEIC
ACID SAMPLE
PREPARATION &
PURIFICATION

PROTEIN SAMPLE
PREPARATION

PROTEIN
INTERACTION
ANALYSIS

LIFE SCIENCE
RESEARCH

AUTOIMMUNE

BIOPLEX 2200
MULTIPLEX
TESTING

BLOOD
VIRUS

NEWBORN
SCREENING

MICROBIOLOGY

IMMUNOHEMATOLOGY

DIABETES
TESTING

CLINICAL
DIAGNOSTICS

QUALITY
CONTROL

HEMOGLOBINOPATHIES

INFORMATICS

SPECIAL
CHEMISTRY

INSTRUMENTATION

CRITICAL RAW
MATERIALS

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BIO-RAD

iN MeMORY OF dAVid SCHWARtZ

oNE oF A kIND
Until almost the end of his life, you could always find Dave
in his corner office. Chances are, he was thinking up a
new idea or recalling a colleague’s comment that seemed
interesting to him. opportunities are not always obvious,
and sometimes as quiet as a whisper, but one thing we
knew for sure about Dave: he was always listening.

His accumulated wisdom became the DNA of the
company he and Alice founded six decades ago, a set
of values and unspoken rules that have endured the test
of time and form the basis of who the company is today.
While there are many fond memories of Dave, something
most will never forget about him was his ability to never
be satisfied and to never give up, no matter what.

In spite of the success that led him to this place—as Bio-Rad
Co-founder and Chairman of the Board of a $2 billion
business—Dave never lost his sense of curiosity, and
always remained practical and grounded. His door was
always open to anyone, and most days he could be found
in the company cafeteria having lunch with employees,
shaking hands on his way in and on his way out. Second
only to being with his family, Bio-Rad was always where
Dave wanted to be. It was his hobby, and offered him
the opportunity to interact with people, every day.

In work as in life, Dave was a remarkable individual who seemed
to effortlessly find a place in the hearts of nearly everyone
who got to know him. His diamond was the brightest of all.

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“That was my dream...

to get into a
lab somewhere
and to come
up with ideas.”

DAVID SchwARTZ 1923-2012

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Bio-Rad at a gLance
Founded in 1952, Bio-Rad has a global team of more than 7,300 employees and serves
more than 100,000 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 tech-
nology used in the growing fields of genomics, proteomics, drug discovery, food safety,
laboratory diagnostics, and more.

L i f e S c i e n c e

cLinicaL diagnoSticS

Bio-Rad’s Life Science Group

The Clinical Diagnostics

Bio-Rad’s clinical

develops, manufactures,

Group develops,

diagnostics products

and markets a wide range

manufactures, sells, and

incorporate a broad range

of laboratory instruments,

supports a large portfolio

of technologies used to

apparatus, and consumables

of products for laboratory

detect, identify, and quantify

used for research in functional

diagnostics. Bio-Rad is

substances in bodily

genomics, proteomics, cell

a leading diagnostics

fluids and tissues. The

biology, and food safety. The

company and its products

results are used as aids to

group ranks among the top

are recognized as the

support medical diagnosis,

five life science companies

gold standard for diabetes

detection, evaluation,

worldwide, and maintains a

monitoring and quality

and the monitoring and

solid reputation for quality,

control (QC) systems.

treatment of diseases and

innovation, and a long-stand-

The company is also well

other medical conditions.

ing focus on the success of

known for its blood virus

its customers. Bio-Rad’s life

testing, blood typing, and

science products are based

autoimmune and genetic

on technologies used to

disorders testing.

separate, purify, identify, ana-

lyze, and amplify biological

materials such as proteins,

nucleic acids, cells, and

bacteria. These technolo-

gies include electrophoresis,

imaging, multiplex immu-

noassay, chromatography,

microbiology, bioinformatics,

protein function analysis,

transfection, flow cytometry,

amplification, and real-time

and droplet digital PCR.

Bio-Rad products support

researchers in laboratories

throughout the world.

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2012 FiNANCiAl HigHligHtS

f i v e - Y e a R R e c o R d

(In MILLIOnS, ExCEpT FOR RETURn On SALES
AnD pER SHARE DATA)

2008

2009

2010

2011

2012

Net Sales

Gross Profit

R&D Expense

$ 1,764.4

$ 1,784.2

$ 1,927.1

$ 2,073.5

$ 2,069.2

$ 962.5

$ 999.8

$ 1,091.5

$ 1,177.9

$ 1,154.1

$ 159.5

$ 163.6

$ 172.3

$ 186.4

$ 214.0

Net Income Attributable to Bio-Rad

89.5

$ 144.6

$ 185.5

$ 178.2

$ 163.8

Return on Sales

5.1%

8.1%

9.6%

8.6%

7.9%

Book Value Per Share

$ 38.11

$ 45.76

$ 55.17

$ 61.87

$ 70.60

Basic Earnings Per Share

3.30

5.28

6.70

6.36 $

5.79

Cash Flow From operations

$ 191.4

$ 325.1

$ 225.9

$ 259.8

$ 278.9

NET SALES

CASH FLOW

BASIC EARNINGS

40%
europe

39%
Americas

21%
Pacific
Rim

2012 SALES
BY RegiON

5
.
3
7
0
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2
$

2
.
9
6
0
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2
$

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.
7
2
9
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$

2
.
4
8
7
,
1
$

4
.
4
6
7
,
1
$

NET SALES

(iN MilliONS)

NET SALES

CASH FLOW

BASIC EARNINGS

NET SALES

CASH FLOW

BASIC EARNINGS

1
.
5
2
3
$

4
.
1
9
1
$

8
.
9
5
2
$

9
.
8
7
2
$

9
.
5
2
2
$

CASH FLoW
FRoM oPERATIoNS
(iN MilliONS)

BASIC EARNINGS

PeR SHARe

0
7
.
6
$

6
3
.
6
$

9
7
.
5
$

8
2
.
5
$

0
3
.
3
$

350

300

250

200

150

100

350

300

250

200

150

100

350

300

250

200

150

100

8
8

7
7

6
6

8
8

7
7

6
6

350

300

250

200

150

100

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BiO-RAd SAleS HiStORY

$2.0 billion

$1.9 billion

$1.8 billion

$1.7 billion

$1.6 billion

$1.5 billion

$1.4 billion

$1.3 billion

$1.2 billion

$1.1 billion

$1.0 billion

$900 million

$800 million

$700 million

$600 million

$500 million

$400 million

$300 million

$200 million

$100 million

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1959

1965

1970

1975

1980

1985

1990

1995

2000

2005

2012

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2012
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________ to _________________________________

Commission file number 1-7928

BIO-RAD LABORATORIES, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

94-1381833
(I.R.S. Employer Identification No.)

1000 Alfred Nobel Drive, Hercules, California
(Address of principal executive offices)

94547
(Zip Code)

Registrant's telephone number, including area code

(510) 724-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Class A Common Stock Par Value $0.0001 per share
Class B Common Stock Par Value $0.0001 per share

Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
No

Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
Non-accelerated file

(Do not check if a smaller reporting company)

Accelerated filer
Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

As of June 30, 2012, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the
Registrant's Class A Common Stock held by non-affiliates was approximately $1,954,098,590 and the aggregate market value of the registrant's
Class B Common Stock held by non-affiliates was approximately $39,439,322.

As of March 12, 2013, there were 23,371,413 shares of Class A Common Stock and 5,127,654 of Class B Common Stock outstanding.

Documents Incorporated by Reference

Document

(1)

Definitive Proxy Statement to be mailed to stockholders in connection with the
registrant's 2013 Annual Meeting of Stockholders (specified portions)

Form 10-K Parts

III

BIO-RAD LABORATORIES, INC.

FORM 10-K DECEMBER 31, 2012

TABLE OF CONTENTS

Part I.

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Part II.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Part III.

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Part IV.

Item 15. Exhibits and Financial Statement Schedules

Signatures

PART I.

ITEM 1. BUSINESS

General

Founded in 1952 and incorporated in 1957, Bio-Rad Laboratories, Inc. (referred to in this report as “Bio-Rad,”
“we,” “us,” and “our”) was initially engaged in the development and production of specialty chemicals used in
biochemical, pharmaceutical and other life science research applications. We entered the field of clinical
diagnostics with the development of our first test kit based on separation techniques and materials developed for life
science research. Through internal research and development efforts and acquisitions we have expanded into
various markets. Today, Bio-Rad manufactures and supplies the life science research, healthcare, analytical
chemistry and other markets with a broad range of products and systems used to separate complex chemical and
biological materials and to identify, analyze and purify their components.

As we broadened our product lines, we also expanded our geographical market. We have direct distribution
channels in over 35 countries outside the United States through subsidiaries whose focus is sales, customer service
and product distribution. In some regions, sales efforts are supplemented by distributors and agents.

Description of Business

Business Segments

Today, Bio-Rad operates in two industry segments designated as Life Science and Clinical Diagnostics. Both
segments operate worldwide. Our Life Science segment and our Clinical Diagnostics segment generated 33% and
66%, respectively, of our net sales for the year ended December 31, 2012. We generated approximately 32% of our
consolidated net sales for the year ended December 31, 2012 from U.S. sales and approximately 68% from sales in
our remaining worldwide markets.

For a description of business and financial information on industry and geographic segments, see Note 14 on pages
73 through 75 of Item 8 of Part II of this report.

Life Science Segment

Our Life Science segment is at the forefront of discovery, creating advanced tools to answer complex biological
questions. We are a market leader in the life sciences market, developing, manufacturing and marketing a range of
more than 5,000 reagents, apparatus and laboratory instruments that serve a global customer base. Many of our
products are used in established research techniques, biopharmaceutical production processes and food testing
regimes. These techniques are typically used to separate, purify and identify biological materials such as proteins,
nucleic acids and bacteria within a laboratory or production setting. We focus on selected segments of the life
sciences market in proteomics (the study of proteins), genomics (the study of genes), biopharmaceutical production,
cell biology and food safety. Based on the most recent studies, we currently estimate that the worldwide market for
products in these selected segments was approximately $7 billion. Our principal life science customers include
universities and medical schools, industrial research organizations, government agencies, pharmaceutical
manufacturers, biotechnology researchers, food producers and food testing laboratories.

Clinical Diagnostics Segment

Our Clinical Diagnostics segment designs, manufactures, sells and supports test systems, informatics systems, test
kits and specialized quality controls that serve clinical laboratories in the global diagnostics market. Our products
currently address specific niches within the in vitro diagnostics (IVD) test market, and we focus on the higher
margin, higher growth segments of this market.

We supply more than 3,000 different products that cover more than 300 clinical diagnostic tests to the IVD test
market. Based on the most recent studies, we currently estimate that the worldwide sales for products in the
markets we serve were approximately $10 billion. IVD tests are conducted outside the human body and are used to
identify and measure substances in a patient’s tissue, blood or urine. Our products consist of reagents, instruments
and software, typically provided to our customers as an integrated package to allow them to generate reproducible
test results. Revenue in this business is highly recurring, as laboratories typically standardize test methodologies,
which are dependent on a particular supplier’s equipment, reagents and consumable products. An installed base of
diagnostic test systems creates an ongoing source of revenue through the sale of test kits for each sample analyzed
on an installed system. Our principal clinical diagnostic customers include hospital laboratories, reference
laboratories, transfusion laboratories and physician office laboratories.

Raw Materials and Components

We utilize a wide variety of chemicals, biological materials, electronic components, machined metal parts, optical
parts, minicomputers and peripheral devices. Most of these materials and components are available from numerous
sources and we have not experienced difficulty in securing adequate supplies.

Patents and Trademarks

We own numerous U.S. and international patents and patent licenses. We believe, however, that our ability to
develop and manufacture our products depends primarily on our knowledge, technology and special skills. We pay
royalties on the sales of certain products under several patent license agreements. We view these patents and
license agreements as valuable assets.

Seasonal Operations and Backlog

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

For the most part, we operate in markets characterized by short lead times and the absence of significant backlogs.
Management has concluded that backlog information is not material to our business as a whole.

Sales and Marketing

We conduct our worldwide operations through an extensive direct sales force and service network, employing
approximately 1,000 sales and service people around the world. Our sales force typically consists of experienced
industry practitioners with scientific training, and we maintain a separate specialist sales force for each of our
segments. Our direct sales approach contrasts with the distributor approach used by some of our competitors,
allowing us to sell a broader range of our products and have more direct contact with our customers.

Our customer base is broad and diversified. Our worldwide customer base includes (1) prominent university and
research institutions, providing us access to more than 150,000 scientists in the U.S. alone; (2) hospital, public
health and commercial laboratories; (3) other leading diagnostic manufacturers; and (4) leading companies in the
biotechnology, pharmaceutical, chemical and food industries. In 2012, no single customer accounted for more than
two percent of our total net sales. Our sales are affected by certain external factors. For example, a number of our
customers, particularly in the Life Science segment, are substantially dependent on government grants and research
contracts for their funding. A significant reduction of government funding would have a detrimental effect on the
results of this segment.

Most of our international sales are generated by our wholly-owned subsidiaries and their branch offices. Certain of
these subsidiaries also have manufacturing facilities. Bio-Rad’s international operations are subject to certain risks
common to foreign operations in general, such as changes in governmental regulations, import restrictions and
foreign exchange fluctuations. However, our international operations are principally in developed nations, which
we regard as presenting no significantly greater risks to our operations than are present in the United States.

Competition

The markets served by our product groups are highly competitive. Our competitors range in size from start-ups to
large multinational corporations with significant resources and reach. Reliable independent information on sales
and market share of products produced by our competitors is not generally available. We believe, however, based on
our own estimates, no one company is so dominant that it prevents other companies, including Bio-Rad, from
competing effectively. We compete mainly in market segments where our products and technology offer customers
specific advantages over the competition.

Because of the breadth of its product lines, the Life Science segment does not face the same competitors for all of
its products. Competitors in this market include GE Biosciences, Life Technologies, Merck Millipore, PerkinElmer
and Thermo Fisher Scientific. We compete primarily based on meeting performance specifications.

Major competitors in the Clinical Diagnostics segment include Roche, Abbott Laboratories (Diagnostic Division),
Siemens Medical Diagnostics Solutions, Danaher, Thermo Fisher, Becton Dickinson, bioMérieux, Ortho Clinical
Diagnostics, Tosoh, Immucor and DiaSorin.

Research and Development

We conduct extensive research and development activities in all areas of our business, employing approximately
860 people worldwide in these activities. Research and development have played a major role in Bio-Rad's growth
and are expected to continue to do so in the future. Our research teams are continuously developing new products
and new applications for existing products. In our development of new products and applications, we interact with
scientific and medical professionals at universities, hospitals and medical schools, and within our industry. We spent
approximately $214.0 million, $186.4 million and $172.3 million on research and development activities during the
years ended December 31, 2012, 2011 and 2010, respectively.

Regulatory Matters

The development, testing, manufacturing, marketing, post-market surveillance, distribution, advertising and
labeling of certain of our products (primarily diagnostic products) are subject to regulation in the United States by
the Center for Devices and Radiological Health of the United States Food and Drug Administration (FDA) and in
other jurisdictions by state and foreign government authorities. FDA regulations require that some new products
have pre-marketing clearance or approval by the FDA and require certain products to be manufactured in
accordance with FDA's “good manufacturing practice” regulations, to be extensively tested and to be properly
labeled to disclose test results and performance claims and limitations. The FDA has authority to take various
administrative and legal actions against us for our, or our products', failure to comply with relevant legal or
regulatory requirements, including issuing warning letters, initiating product seizures, requesting or requiring
product recalls or withdrawals, and other civil or criminal sanctions, among other things.

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

Our operations are subject to federal, state, local and foreign environmental laws and regulations that govern such
activities as transportation of goods, emissions to air and discharges to water, as well as handling and disposal
practices for solid, hazardous and medical wastes. In addition to environmental laws that regulate our operations,
we are also subject to environmental laws and regulations that create liabilities and clean-up responsibility for
spills, disposals or other releases of hazardous substances into the environment as a result of our operations or
otherwise impacting real property that we own or operate. The environmental laws and regulations could also
subject us to claims by third parties for damages resulting from any spills, disposals or releases resulting from our
operations or at any of our properties.

These regulatory requirements vary widely among countries.

Employees

At December 31, 2012, Bio-Rad had approximately 7,380 employees. Approximately seven percent of Bio-Rad's
approximately 2,975 U.S. employees are covered by a collective bargaining agreement, which will expire on
November 7, 2016. Many of Bio-Rad's non-U.S. full-time employees, especially in France, are covered by
collective bargaining agreements. We consider our employee relations in general to be good.

Available Information

Bio-Rad files annual, quarterly, and current reports, proxy statements, and other documents with the Securities and
Exchange Commission (SEC) under the Securities Exchange Act of 1934, as amended. The public may read and
copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information
statements, and other information regarding issuers, including Bio-Rad, that file electronically with the SEC. The
public can obtain any documents that we file with the SEC at http://www.sec.gov.

Bio-Rad’s website address is www.bio-rad.com. We make available, free of charge through our website, our Form
10-Ks, 10-Qs and 8-Ks, and any amendments to these forms, as soon as reasonably practicable after filing with the
SEC. The information on our website is not part of this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

The following risk factors should be read carefully in connection with evaluating our business and the forward-
looking information contained in this Annual Report on Form 10-K. We believe that any of the following risks
could have a material affect on our business, operations, industry, financial position or our future financial
performance. While we believe that we have identified and discussed below the key risk factors affecting our
business, there may be additional risks and uncertainties that are not presently known or that are not currently
believed to be significant that may adversely affect our business, operations, industry, financial position and
financial performance in the future.

The ongoing investigation by government agencies of possible violations by us of the United States Foreign
Corrupt Practices Act and similar laws could have a material adverse effect on our business.

Based on an internal investigation, we identified conduct in certain of our overseas operations that may have
violated the anti-bribery provisions of the United States Foreign Corrupt Practices Act (FCPA) and is likely to have
violated the FCPA's books and records and internal controls provisions and our own internal policies. In May 2010,
we voluntarily disclosed these matters to the U.S. Department of Justice (DOJ) and the Securities and Exchange
Commission (SEC), each of which commenced an investigation. The Audit Committee of our Board of Directors
(Audit Committee) assumed direct responsibility for reviewing these matters and hired experienced independent
counsel to conduct an investigation and provide legal advice. We provided additional information to the DOJ and
the SEC as the Audit Committee's investigation progressed. We continue to cooperate with the DOJ and SEC
investigations and to provide information to them. The Audit Committee has determined to continue its
investigation based on matters that arose in connection with an assessment of our accrual for royalties payable by us
under certain patent licenses from a third party.

However, the imposition of any of these sanctions or remedial measures could have a material adverse effect on our
business, including our results of operations, cash balance and credit rates. We have not to date determined whether
any of the activities in question violated the laws of the foreign jurisdictions in which they took place.

On April 13, 2011, a shareholder derivative lawsuit was filed against each of our directors in the Superior Court for
Contra Costa County, California. The case, which also names the Company as a nominal defendant, is captioned
City of Riviera Beach General Employees' Retirement System v. David Schwartz, et al., Case No. MSC11-00854.
In the complaint, the plaintiff alleges that our directors breached their fiduciary duties by failing to ensure that we
had sufficient internal controls and systems for compliance with the FCPA. Purportedly seeking relief on our
behalf, the plaintiff seeks an award of unspecified compensatory and punitive damages, costs and expenses
(including attorneys' fees), and a declaration that our directors have breached their fiduciary duties. We and the
individual defendants filed a demurrer requesting dismissal of the complaint in this case, as well as a motion to stay
this matter pending resolution of the above-referenced investigations by the DOJ and SEC. Following a hearing on
September 30, 2011, the court sustained our demurrer and dismissed the complaint, without prejudice, and granted
the plaintiff additional time to file an amended complaint. The court denied our motion to stay this matter because
it dismissed the complaint. The parties have agreed to a stipulated dismissal of this case, without prejudice, and to a
tolling of the statute of limitations pending the resolution of the DOJ and SEC investigations.

We have identified four significant deficiencies in our internal control over financial reporting as of December
31, 2012 that, when aggregated, constitute a material weakness in our internal control over financial reporting
as of December 31, 2012. Our failure to establish and maintain effective internal control over financial
reporting could result in our failure to meet our reporting obligations and cause investors to lose confidence in
our reported financial information, which in turn could cause the trading price of our common stock to decline.

In connection with our assessment of the effectiveness of internal control over financial reporting and the
preparation of our financial statements for the year ended December 31, 2012, our management identified four
significant deficiencies in our internal control over financial reporting as of December 31, 2012 that, when
aggregated, constitute a material weakness in our internal control over financial reporting as of December 31, 2012.
A significant deficiency is defined as a deficiency, or a combination of deficiencies, in internal control over
financial reporting that is less severe than a material weakness, yet important enough to merit attention by those
responsible for oversight of our financial reporting. A material weakness is defined as a deficiency, or a
combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a
timely basis.

The four significant deficiencies that we identified are the result of: (i) an inadequate accounting close process,
including our failure to review and adjust a contingency accrual with respect to royalties owed to a third party in a
timely manner, inadequate supporting documentation for certain key transactions and account reconciliations at
some of our foreign locations, and our lack of adequate financial statement review at our German subsidiary; (ii) an
inadequate revenue recognition process, including the unauthorized execution of distributor contracts at our Chinese
subsidiary, our lack of controls over pricing and our ineffective methods of analyzing credit risk, and in some
instances, the lack of sufficient documentation for the timing of revenue recognition; (iii) an inadequate reagent
rental process at certain of our international subsidiaries, including our failure to provide management review of
reagent rental agreements, our failure to monitor ongoing compliance with agreement terms, and our lack of timely
reconciliations of our reagent rental equipment; and (iv) inadequate expenditure controls at our German subsidiary,
including our lack of compliance with controls for vendor management and transaction approvals, and insufficient
segregation of duties.

We cannot assure you that we will be able to remediate these significant deficiencies and the resulting material
weakness or that additional significant deficiencies or material weaknesses in our internal control over financial
reporting will not be identified in the future. Any failure to maintain or implement new or improved internal
controls, or any difficulties that we may encounter in their maintenance or implementation, could result in
additional significant deficiencies or material weaknesses, result in material misstatements in our financial
statements and cause us to fail to meet our reporting obligations, which in turn could cause the trading price of our

common stock to decline. Any such failure has and could in the future adversely affect the results of our periodic
management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control
over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002.

Adverse changes in general domestic and worldwide economic conditions and instability and disruption of credit
markets could adversely affect our operating results, financial condition or liquidity.

The continuing slow economic growth in developed nations may adversely affect our future results of operations.
Demand for our products and services could change more dramatically than in previous years based on activity,
funding, reimbursement constraints and support levels from government, universities, hospitals and private industry,
including diagnostic laboratories. The need for certain sovereign nations with large annual deficits to curtail
spending could lead to slower growth of, or even a decline in, our business. Although signs of limited recovery may
exist in some markets, there are continued concerns about systemic economic imbalance, the availability and cost of
credit, declining asset values and geopolitical issues that contribute to increased market volatility and uncertain
expectations for the global economy. These conditions, combined with greater volatility in business activity levels
and consumer confidence, high unemployment and volatile oil prices, contributed to unprecedented levels of
volatility in the capital markets in recent years. Continuing or recurring disruptions in the capital and credit markets
may adversely affect our business, results of operations, cash flows and financial condition.

As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely
affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally
and the strength of counterparties specifically has led many private sector investors to reduce and, in some cases,
cease to provide credit to governments, businesses and consumers. These factors have led to depressed spending by
some governments, businesses and consumers. Our customers and suppliers may experience cash flow concerns
and, as a result, customers may modify, delay or cancel plans to purchase our products and suppliers may increase
their prices, reduce their output or change terms of sales. Additionally, if customers' or suppliers' operating and
financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers
may not be able to pay, or may delay payment of, amounts owed to us. Sovereign nations either delaying payment
for goods and services or renegotiating their debts could impact our liquidity. The situation in these sovereign
nations is continuously evolving and we have no greater knowledge of the situation other than what is publicly
reported. As of December 31, 2012 and December 31, 2011, we had accounts receivable, net of allowance for
doubtful accounts, in Spain, Italy, Greece and Portugal of $64.8 million and $82.1 million, respectively. The
decrease from December 31, 2011 was primarily associated with large payments made in June 2012 of
approximately $21 million by public agencies in Spain that represented Spanish balances that were significantly
past due.

Suppliers may restrict credit or impose less favorable payment terms. Any inability of current and/or potential
customers to pay us for our products or any demands by suppliers for accelerated payment terms may adversely
affect our earnings and cash flow. Additionally, strengthening of the U.S. dollar associated with the global financial
crisis may adversely affect the results of our international operations when those results are translated into U.S.
dollars.

Furthermore, the disruption in the credit markets could impede our access to capital, especially if we are unable to
maintain our current credit ratings. Should we have limited access to additional financing sources when needed, we
may decide to defer capital expenditures or seek other higher cost sources of liquidity, which may or may not be
available to us on acceptable terms. Continued turbulence in the U.S. and international markets and economies, and
prolonged declines in business and consumer spending may adversely affect our liquidity and financial condition,
and the liquidity and financial condition of our customers, including our ability to refinance maturing liabilities and
access the capital markets to meet liquidity needs.

We cannot assure you that we will be able to integrate acquired companies, products or technologies into our
company successfully, or we may not be able to realize the anticipated benefits from the acquisitions.

As part of our overall business strategy, we pursue acquisitions of and investments in complementary companies,
products and technologies. In order to be successful in these activities, we must, among other things:

assimilate the operations and personnel of acquired companies;
retain acquired business customers;

•
•
• minimize potential disruption to our ongoing business;
retain key technical and management personnel;
•
integrate acquired companies into our strategic and financial plans;
•
accurately assess the value of target companies, products and technologies;
•
comply with new regulatory requirements;
•
harmonize standards, controls, procedures and policies;
•
• minimize the impact to our relationships with our employees and customers; and
•

assess, document and remediate any deficiencies in disclosure controls and procedures and internal control
over financial reporting.

The benefits of any acquisition may prove to be less than anticipated and may not outweigh the costs reported in our
financial statements. Completing any potential future acquisition could cause significant diversion of our
management's time and resources. If we acquire new companies, products or technologies, we may be required to
assume contingent liabilities or record impairment charges for goodwill and other intangible assets over time. We
cannot assure you that we will successfully overcome these risks or any other problems we encounter in connection
with any acquisitions, and any such acquisitions could adversely affect our business, financial position or operating
results.

The industries and market segments in which we operate are highly competitive, and we may not be able to
compete effectively with larger companies with greater financial resources than we have.

The life science and clinical diagnostics markets are each highly competitive. Some of our competitors have greater
financial resources than we do and are less leveraged than we are, making them better equipped to license
technologies and intellectual property from third parties or to fund research and development, manufacturing and
marketing efforts. Moreover, competitive and regulatory conditions in many markets in which we operate restrict
our ability to fully recover, through price increases, higher costs of acquired goods and services resulting from
inflation and other drivers of cost increases. Our competitors can be expected to continue to improve the design and
performance of their products and to introduce new products with competitive price and performance
characteristics. Maintaining these advantages will require us to continue to invest in research and development,
sales and marketing and customer service and support. We cannot assure you that we will have sufficient resources
to continue to make such investments or that we will be successful in maintaining such advantages.

We have significant international operations which subject us to various risks such as general economic and
market conditions in the countries in which we operate.

A significant portion of our sales are made outside of the United States. Our foreign subsidiaries generated 68% of
our net sales for the year ended December 31, 2012. Our international operations are subject to risks common to
foreign operations, such as general economic and market conditions in the countries in which we operate, changes
in governmental regulations, political instability, import restrictions, additional scrutiny over certain financial
instruments and currency exchange rate risks. We cannot assure you that shifts in currency exchange rates,
especially significant strengthening of the U.S. dollar compared to the Euro, will not have a material adverse effect
on our operating results and financial condition.

We are dependent on government funding and the capital spending programs of our customers, and the effect of
healthcare reform on government funding and our customers' ability to purchase our products is uncertain.

Our customers include universities, clinical diagnostics laboratories, government agencies, hospitals and
pharmaceutical, biotechnology and chemical companies. The capital spending programs of these institutions and
companies have a significant effect on the demand for our products. Such programs are based on a wide variety of
factors, including the resources available to make such purchases, the availability of funding from grants by
governments or government agencies, the spending priorities for various types of equipment and the policies
regarding capital expenditures during industry downturns or recessionary periods. If government funding to our
customers were to decrease, or if our customers were to decrease or reallocate their budgets in a manner adverse to
us, our business, financial condition or results of operations could be materially adversely affected.

Healthcare reform and the growth of managed care organizations have been and continue to be significant factors in
the clinical diagnostics market. The trend towards managed care, together with healthcare reform of the delivery
system in the United States and efforts to reform in Europe, has resulted in increased pressure on healthcare
providers and other participants in the healthcare industry to reduce costs. Consolidation among healthcare
providers has resulted in fewer, more powerful groups, whose purchasing power gives them cost containment
leverage. These competitive forces place constraints on the levels of overall pricing, and thus could have a material
adverse effect on our profit margins for products we sell in clinical diagnostics markets.

In the United States, 2010 reform measures, in particular, the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Affordability Reconciliation Act, collectively, the PPACA, impose
significant new programs and responsibilities affecting U.S. pharmaceutical and medical device industries. The
PPACA, among other things, establishes annual fees and taxes on manufacturers of certain medical devices,
including our devices, and promotes programs that increase the federal government's comparative effectiveness
research, which may be used to evaluate the selection of medical services by clinicians and others. PPACA also
mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee
Schedule of 1.75% for the years 2011 through 2015. In addition, a productivity adjustment is made to the fee
schedule payment amount. These changes in payments apply to some or all of the clinical laboratory test services
we furnish to Medicare beneficiaries.

In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was
enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending
reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted
deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals,
thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate
reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. On January 2, 2013,
President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other
things, delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget
Control Act of 2011. The ATRA also reduced Medicare payments to several providers, including hospitals, imaging
centers and cancer treatment centers, and increased the statute of limitations period for the government to recover
overpayments to providers from three to five years. To the extent that the healthcare industry seeks to address the
need to contain costs stemming from reform measures such as those contained in PPACA and ATRA, or in future
legislation, by limiting the number of clinical tests being performed, our results of operations could be materially
and adversely affected. If these changes in the healthcare markets in the United States and Europe continue, we
could be forced to alter our approach in selling, marketing, distributing and servicing our products.

Our failure to improve our product offerings and develop and introduce new products may negatively impact our
business.

Our future success depends on our ability to continue to improve our product offerings and develop and introduce
new product lines and extensions that integrate new technological advances. If we are unable to integrate
technological advances into our product offerings or to design, develop, manufacture and market new product lines
and extensions successfully and in a timely manner, our operating results will be adversely affected. We cannot
assure you that our product and process development efforts will be successful or that new products we introduce
will achieve market acceptance.

If we experience a disruption of our information technology systems, or if we fail to successfully implement,
manage and integrate our information technology and reporting systems, it could harm our business.

Our information technology (IT) systems are an integral part of our business, and a serious disruption of our IT
systems could have a material adverse effect on our business and results of operations. We depend on our IT
systems to process orders, manage inventory and collect accounts receivable. Our IT systems also allow us to
efficiently purchase products from our suppliers and ship products to our customers on a timely basis, maintain
cost-effective operations and provide customer service. We cannot assure you that our contingency plans will allow
us to operate at our current level of efficiency.

Our ability to implement our business plan in a rapidly evolving market requires effective planning, reporting and
analytical processes. We expect that we will need to continue to improve and further integrate our IT systems,
reporting systems and operating procedures by training and educating our employees with respect to these
improvements and integrations on an ongoing basis in order to effectively run our business. We are currently in the
process of implementing a global single instance Enterprise Resource Planning (ERP) platform. If we fail to
successfully manage and integrate our IT systems, reporting systems and operating procedures, including the ERP
platform, it could adversely affect our business or operating results.

Risks relating to intellectual property rights may negatively impact our business.

We rely on a combination of copyright, trade secret, patent and trademark laws and third-party nondisclosure
agreements to protect our intellectual property rights and products. However, we cannot assure you that our
intellectual property rights will not be challenged, invalidated, circumvented or rendered unenforceable, or that
meaningful protection or adequate remedies will be available to us. For instance, it may be possible for
unauthorized third parties to copy our intellectual property, to reverse engineer or obtain and use information that
we regard as proprietary, or to develop equivalent technologies independently. Additionally, third parties may assert
patent, copyright and other intellectual property rights to technologies that are important to us. If we are unable to
license or otherwise access protected technology used in our products, or if we lose our rights under any existing
licenses, we could be prohibited from manufacturing and marketing such products. We may find it necessary to
enforce our patents or other intellectual property rights or to defend ourselves against claimed infringement of the
rights of others through litigation, which could result in substantial costs to us and divert our resources. We also
could incur substantial costs to redesign our products, to defend any legal action taken against us or to pay damages
to an infringed party. The foregoing matters could adversely impact our business.

We are subject to substantial government regulation, and any changes in regulation or violations of regulations
by us, could adversely affect our business, prospects, results of operations or financial condition.

Some of our products (primarily diagnostic products), production processes and marketing are subject to federal,
state, local and foreign regulation, including by the FDA and its foreign counterparts. The FDA regulates our
diagnostic products as medical devices pursuant to the Federal Food, Drug and Cosmetic Act. Unless an exemption
applies, each medical device marketed in the United States must first receive either clearance of a 510(k) premarket
notification or approval of a premarket approval application from the FDA, depending on the risk classification of
the device. Medical devices can be marketed only for the indications for which they are cleared or approved. The
FDA has also generally exercised its enforcement discretion to not enforce applicable regulations, including

premarket requirements, with respect to certain diagnostic products referred to as laboratory developed tests, which
are tests developed by a single laboratory for use only in that laboratory. However, the FDA has indicated, since
2010, that it intends to reconsider its policy regarding enforcement and to begin drafting an oversight framework for
such tests. After a device receives 510(k) clearance, any modification that could significantly affect its safety or
effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance or could
require a PMA approval. After a device is placed on the market, regardless of the classification or pre-market
pathway, it remains subject to significant regulatory requirements. The FDA has broad regulatory and enforcement
powers. If the FDA determines that we have failed to comply with applicable regulatory requirements, it can impose
a variety of enforcement actions ranging from public warning letters, fines, injunctions, consent decrees and civil
penalties to suspension or delayed issuance of approvals, seizure or recall of our products, total or partial shutdown
of production, withdrawal of approvals or clearances already granted, and criminal prosecution. The FDA can also
require us to repair, replace or refund the cost of devices that we manufactured or distributed.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing
regulations, or take other actions, which may prevent or delay approval or clearance of our products or impact our
ability to modify our currently approved or cleared products on a timely basis. For example, the FDA recently
initiated a review of the pre-market clearance process in response to internal and external concerns regarding the
510(k) program. In January 2011, the FDA announced 25 action items designed to make the process more rigorous
and transparent. Some of these proposals, if enacted, could impose additional regulatory requirements upon us,
which could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our
ability to maintain our current clearances. Any delay in, or failure to receive or maintain, clearance or approval for
our products could prevent us from generating revenue from these products and adversely affect our business
operations and financial results. Additionally, the FDA and other regulatory authorities have broad enforcement
powers. Regulatory enforcement or inquiries, or other increased scrutiny on us, could affect the perceived safety
and efficacy of our products and dissuade our customers from using our products.

We are also subject to government regulation of the use and handling of a number of materials and controlled
substances. The U.S. Drug Enforcement Administration establishes registration, security, recordkeeping, reporting,
storage, distribution and other requirements for controlled substances pursuant to the Controlled Substances Act of
1970. Failure to comply with present or future laws and regulations could result in substantial liability to us,
suspension or cessation of our operations, restrictions on our ability to expand at our present locations or require us
to make significant capital expenditures or incur other significant expenses.

We are subject to federal and state healthcare fraud and abuse laws and regulations and could face substantial
penalties if we are unable to fully comply with such laws.

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

•

the federal Anti-Kickback Law, which prohibits, among other things, persons or entities from soliciting,
receiving, offering or providing remuneration, directly or indirectly, in return for or to induce either the
referral of an individual for, or the purchase order or recommendation of, any item or services for which
payment may be made under a federal healthcare program such as the Medicare and Medicaid programs;
federal false claims laws which, prohibit, among other things, individuals or entities from knowingly
presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party
payors that are false or fraudulent, and which may apply to entities like us to the extent that our interactions
with customers may affect their billing or coding practices;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which established new
federal crimes for knowingly and willfully executing a scheme to defraud any healthcare benefit program or
making false statements in connection with the delivery of or payment for healthcare benefits, items or
services; and
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which
may apply to items or services reimbursed by any third-party payor, including commercial insurers.
12

If our operations are found to be in violation of any of the laws described above or any other governmental
regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines,
exclusion from the Medicare and Medicaid programs, and the curtailment or restructuring of our operations. Any
penalties, damages, fines, exclusions, curtailment or restructuring of our operations could adversely affect our
ability to operate our business and our financial results. The risk of our being found in violation of these laws is
increased by the fact that many of these laws are broad and their provisions are open to a variety of interpretations.
Further, the PPACA amends the intent requirement of the federal anti-kickback and criminal health care fraud
statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.
In addition, the government may assert that a claim including items or services resulting from a violation of the
federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. Any
action against us for violation of these laws, even if we successfully defend against it, could cause us to incur
significant legal expenses and divert our management's attention from the operation of our business.

Further, the PPACA includes provisions known as the Physician Payment Sunshine Act, which requires certain
manufacturers of drugs, biologics, devices and medical supplies to record any transfers of value to U.S. physicians
and U.S. teaching hospitals. Manufacturers must also disclose investment interests held by physicians and their
family members. Failure to submit the required information may result in civil monetary penalties of up to $1
million per year for known violations and may result in liability under other federal laws or regulations.
Manufacturers will be required to begin data collection on August 1, 2013 and report such data to the Centers for
Medicare and Medicaid Services by March 31, 2014. Several states in the U.S. have also implemented similar
reporting requirements, and an increasing number of countries worldwide either have adopted or are considering
similar laws requiring transparency of interactions with health care professionals. These laws will impose
administrative, cost and compliance burdens on us. If we are found to be in violation of any of these laws and other
applicable state and country laws, we may be subject to penalties, including fines.

We are currently subject to environmental regulations and enforcement proceedings.

Our operations are subject to federal, state, local and foreign environmental laws and regulations that govern such
activities as transportation of goods, emissions to air and discharges to water, as well as handling and disposal
practices for solid, hazardous and medical wastes. In addition to environmental laws that regulate our operations,
we are also subject to environmental laws and regulations that create liability and clean-up responsibility for spills,
disposals or other releases of hazardous substances into the environment as a result of our operations or otherwise
impacting real property that we own or operate. The environmental laws and regulations also subject us to claims
by third parties for damages resulting from any spills, disposals or releases resulting from our operations or at any
of our properties.

We may in the future incur capital and operating costs to comply with currently existing laws and regulations, and
possible new statutory enactments, and these expenditures may be significant. We have incurred, and may in the
future incur, fines related to environmental matters and liability for costs or damages related to spills or other
releases of hazardous substances into the environment at sites where we have operated, or at off-site locations
where we have sent hazardous substances for disposal. We can provide no assurance, however, that such matters or
any future obligations to comply with environmental laws and regulations will not have a material impact on our
operations or financial condition.

Loss of key personnel could hurt our business.

Our products and services are highly technical in nature. In general, only highly qualified and trained scientists have
the necessary skills to develop and market our products and provide our services. In addition, some of our
manufacturing positions are highly technical. We face intense competition for these professionals from our
competitors, customers, marketing partners and other companies throughout our industry. We generally do not
enter into employment agreements requiring these employees to continue in our employment for any period of time.
Any failure on our part to hire, train and retain a sufficient number of qualified personnel could substantially
damage our business. Additionally, if we were to lose a sufficient number of our research and development

scientists and were unable to replace them or satisfy our needs for research and development through outsourcing, it
could adversely affect our business.

A significant majority of our voting stock is held by the Schwartz family, which could lead to conflicts of interest.

We have two classes of voting stock, Class A Common Stock and Class B Common Stock. With a few exceptions,
holders of Class A and Class B Common Stock vote as a single class. When voting as a single class, each share of
Class A Common Stock is entitled to one-tenth of a vote, while each share of Class B Common Stock has one vote.
In the election or removal of directors, the classes vote separately and the holders of Class A Common Stock are
entitled to elect 25% of the Board of Directors, with holders of Class B Common Stock electing the remaining
directors.

As of February 15, 2013, the Schwartz family collectively held approximately 15% of our Class A Common Stock
and 92% of our Class B Common Stock. As a result, the Schwartz family is able to elect a majority of the directors,
effect fundamental changes in our direction and control matters affecting us, including the allocation of business
opportunities that may be suitable for our company. In addition, this concentration of ownership and voting power
may have the effect of delaying or preventing a change in control of our company.

The Schwartz family may exercise its control over us according to interests that are different from other investors’
or debtors’ interests.

David Schwartz, our co-founder and former Chairman of the Board, passed away on April 1, 2012; however, we do
not expect Mr. Schwartz's death to affect the Schwartz family's majority voting power.

Natural disasters, terrorist attacks or acts of war may cause damage or disruption to us and our employees,
facilities, information systems, security systems, vendors and customers, which could significantly impact our net
sales, costs and expenses, and financial condition.

We have significant manufacturing and distribution facilities, particularly in the western United States, France and
Switzerland. In particular, the western United States has experienced a number of earthquakes, wildfires, floods,
landslides and other natural disasters in recent years. The occurrences could damage or destroy our facilities which
may result in interruptions to our business and losses that exceed our insurance coverage. Terrorist attacks, such as
those that occurred on September 11, 2001, have contributed to economic instability in the United States, and
further acts of terrorism, bioterrorism, violence or war could affect the markets in which we operate, our business
operations, our expectations and other forward-looking statements contained or incorporated in this document. Any
of these events could cause a decrease in our revenue, earnings and cash flows.

We may incur losses in future periods due to write-downs in the value of financial instruments.

We have positions in a variety of financial instruments including asset backed securities and other similar
instruments. Financial markets are quite volatile and the markets for these securities can be illiquid. The value of
these securities will continue to be impacted by external market factors including default rates, changes in the value
of the underlying property, such as residential or commercial real estate, rating agency actions, the prices at which
observable market transactions occur and the financial strength of various entities, such as financial guarantors who
provide insurance for the securities. Should we need to convert these positions to cash, we may not be able to sell
these instruments without significant losses due to current debtor financial conditions or other market
considerations.

We have substantial debt and have the ability to incur additional debt. The principal and interest payment
obligations of such debt may restrict our future operations and impair our ability to meet our obligations under
our notes.

As of December 31, 2012 we and our subsidiaries had approximately $734.2 million of outstanding indebtedness.
In addition, we are permitted to incur additional debt provided we comply with the limitation on the incurrence of
additional indebtedness and disqualified capital stock covenants contained in the indenture governing our 8%
Senior Subordinated Notes due 2016 (8.0% Notes).

The following chart shows certain important credit statistics.

Total debt
Bio-Rad’s stockholders’ equity
Debt to equity ratio

At December 31,
2012

(dollars in millions)
734.2
$
2,010.7
$
0.4

Our incurrence of substantial amounts of debt may have important consequences. For instance, it could:

• make it more difficult for us to satisfy our financial obligations, including those relating to our outstanding

•

•
•

notes;
require us to dedicate a substantial portion of our cash flow from operations to the payment of interest and
principal due under our debt, including our outstanding notes, which will reduce funds available for other
business purposes;
increase our vulnerability to general adverse economic and industry conditions;
limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we
operate;
place us at a competitive disadvantage compared with some of our competitors that have less debt; and
limit our ability to obtain additional financing required to fund working capital and capital expenditures and
for other general corporate purposes.

Our ability to satisfy our obligations and to reduce our total debt depends on our future operating performance and
on economic, financial, competitive and other factors, many of which are beyond our control. Our business may
not generate sufficient cash flow, and future financings may not be available to provide sufficient net proceeds, to
meet these obligations or to successfully execute our business strategy.

Our existing credit facility, the indenture governing our 8.0% Notes and the terms of our other debt instruments,
including agreements we may enter in the future, contain or will contain covenants imposing significant restrictions
on our business. These restrictions may affect our ability to operate our business and may limit our ability to take
advantage of potential business opportunities as they arise. These covenants place restrictions on our ability to,
among other things:

•
•
•
• make investments;
•
•
•
•

incur additional debt;
acquire other businesses or assets through merger or purchase;
create liens;

enter into transactions with affiliates;
sell assets;
in the case of some of our subsidiaries, guarantee debt; and
declare or pay dividends, redeem stock or make other distributions to stockholders.

Our existing credit facility also requires that we meet certain financial tests and maintain certain financial ratios,
including a maximum consolidated leverage ratio test, minimum consolidated interest coverage ratio test and a
minimum net worth test.

Our ability to comply with these covenants may be affected by events beyond our control, including prevailing
economic, financial and industry conditions. The breach of any of these restrictions could result in a default. An
event of default under our debt agreements would permit some of our lenders to declare all amounts borrowed from
them to be due and payable, together with accrued and unpaid interest. If we were unable to repay debt to our
senior secured lenders, these lenders could proceed against the collateral securing that debt. The collateral is
substantially all of our personal property assets, the assets of our domestic subsidiaries and 65% of the capital stock
of certain of our foreign subsidiaries. In addition, acceleration of our other indebtedness may cause us to be unable
to make interest payments on our outstanding notes and repay the principal amount of our outstanding notes or may
cause the future subsidiary guarantors, if any, to be unable to make payments under the guarantees.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

ITEM 2. PROPERTIES

We own our corporate headquarters located in Hercules, California. The principal manufacturing and research
locations for each segment are as follows:

Segment

Location

Life Science

Clinical
Diagnostics

Richmond, California
Hercules, California
Pleasanton, California
Singapore
Shanghai, China
Oxford, England

Hercules, California
Benicia, California
Irvine, California
Greater Seattle area, Washington
Lille, France
Greater Paris area, France
Nazareth-Eke, Belgium
Cressier, Switzerland
Dreieich, Germany

Owned/Leased

Owned/Leased
Owned/Leased
Leased
Leased
Leased
Leased

Owned/Leased
Leased
Leased
Leased
Owned
Leased
Leased
Owned/Leased
Owned/Leased

Most manufacturing and research facilities also house administration, sales and distribution activities. In addition,
we lease office and warehouse facilities in a variety of locations around the world. The facilities are used
principally for sales, service, distribution and administration for both segments.

ITEM 3. LEGAL PROCEEDINGS

have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations including, but not
limited to, injunctive relief, disgorgement, fines, penalties, modifications to business practices including the
termination or modification of existing business relationships, the imposition of compliance programs and the
retention of a monitor to oversee compliance with the FCPA. We are unable to estimate the outcome of this matter.
However, the imposition of any of these sanctions or remedial measures could have a material adverse effect on our
business or financial condition. We have not to date determined whether any of the activities in question violated
the laws of the foreign jurisdictions in which they took place.

In addition, we are party to various other claims, legal actions and complaints arising in the ordinary course of
business. We do not believe, at this time, that any ultimate liability resulting from any of these other matters 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 other matters and their resolution could be material to our
operating results for any particular period, depending on the level of income for the period.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Information Concerning Common Stock

Bio-Rad’s Class A and Class B Common Stock are listed on the New York Stock Exchange with the symbols BIO
and BIO.B, respectively. The following sets forth, for the periods indicated, the high and low intraday sales prices
for our Class A and Class B Common Stock.

2012
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2011
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

Class A

Class B

High

Low

High

Low

109.93
109.62
118.00
106.91

103.22
122.39
126.98
120.18

99.00
91.52
95.05
96.19

87.98
84.02
115.77
104.30

110.26
109.50
115.38
105.25

102.90
122.21
126.56
121.02

99.72
92.10
95.63
96.26

89.20
87.33
116.67
104.89

On February 15, 2013, we had 513 holders of record of Class A Common Stock and 146 holders of record of Class
B Common Stock. Bio-Rad has never paid a cash dividend and has no present plans to pay cash dividends.

See Item 12 of Part III of this report for the security ownership of certain beneficial owners and management and
for securities authorized for issuance under equity compensation plans.

Stock Performance Graph

The following graph compares the cumulative stockholder returns over the past five years for our Class A Common
Stock, the S&P 400 MidCap Index and a selected peer group, assuming $100 invested on December 31, 2007, and
reinvestment of dividends if paid:

(1) The Peer Group consists of the following public companies: Danaher, Becton Dickinson, Thermo Fisher
Scientific, Meridian Bioscience, PerkinElmer and Life Technologies. 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 market 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.

ITEM 6. SELECTED FINANCIAL DATA

BIO-RAD LABORATORIES, INC.
Selected Financial Data
(in thousands, except per share data)

Net sales

Cost of goods sold

Gross profit

Selling, general and administrative expense
Research and development expense
Impairment losses on goodwill and long-
lived assets
Interest expense
Foreign exchange losses, net

Other (income) expense, net
Income before income taxes and
noncontrolling interests

Provision for income taxes
Net (income) loss attributable to
noncontrolling interests

Net income attributable to Bio-Rad

Basic earnings per share

Diluted earnings per share

Cash dividends paid per common share

Total assets

Long-term debt, net of current maturities

2012

2011

Year Ended December 31,
2010

2009

2008

2,069,235
915,097
1,154,138
682,898
214,040

2,073,529
895,640
1,177,889
696,294
186,439

1,927,118
835,630
1,091,488
635,213
172,266

1,784,244
784,401
999,843
601,468
163,585

—
51,112
5,040
(21,883)

222,931
(59,084)

—
53,135
13,842
(7,583)

235,762
(57,739)

—
63,717
3,884
(3,875)

220,283
(33,348)

3,802
47,024
5,003
(6,871)

185,832
(36,667)

(69)

200

(1,445)

(4,545)

163,778

5.79

5.72

178,223

6.36

6.26

185,490

6.70

6.59

144,620

5.28

5.20

— $

1,764,365
801,843
962,522
591,304
159,518

28,757
32,113
7,634
353

142,843
(44,579)

(8,754)

89,510

3.30

3.24

—

3,436,753

732,414

3,096,803

731,698

3,062,764

731,100

2,535,853

737,919

2,037,264

445,979

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

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: changes in general domestic and worldwide economic conditions; 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 except as required
by Federal Securities law.

We announced on February 26, 2012 our preliminary unaudited results for the fourth quarter and the year ended
December 31, 2012. These results included an accrual for royalties to a third party and related interest. Since that
announcement, we have reviewed developments relating to those royalties and have increased the accrual for
royalties and related interest. The consolidated financial statements included in this annual report on Form 10-K for
the year ended December 31, 2012 reflect the increased accrual for royalties and interest, as well as the related
impact on our provision for income taxes.

Overview. We are 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 do not disclose quantitative information about our different
products and services as it is impractical to do so based primarily on the numerous products and services that we
sell and the global markets that we serve.

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
standardization for their experiments and test results, much of our revenues are recurring.

We are impacted by the support of many governments for both research and healthcare. The current global
economic outlook is becoming increasingly uncertain as the need to control government social spending by many
governments limits opportunities for growth. Approximately 32% of our 2012 consolidated net sales are derived
from the United States and approximately 68% are derived from international locations. The international sales are
largely denominated in local currencies such as Euros, Swiss Franc, Japanese Yen, China Yuan and British Sterling.
As a result, our consolidated net sales expressed in dollars benefit when the U.S. dollar weakens and suffer when
the dollar strengthens. When the U.S. dollar strengthens, we benefit from lower cost of sales from our own
international manufacturing sites as well as non-U.S. suppliers and from lower international operating expenses.

In January 2013, we acquired AbD Serotec, a division of MorphoSys AG, for approximately 53 million Euros
(approximately $70 million) in cash. The acquisition will be included in our Life Science segment's results of
operations from the acquisition date and will be accounted for as a business combination. We believe that with
AbD Serotec's comprehensive catalog of antibodies, we will be able to offer our customers total assay solutions that
can be validated on many of our research platforms for western blotting, multiplex protein expression, ELISA and
cell sorting.

In August 2012, we acquired from Propel Labs, Inc. a new cell sorting system, an automated, easy-to-use benchtop
cell sorting flow cytometer. This asset acquisition was accounted for as a business combination and is included in
our Life Science segment's results of operations from the acquisition date. The fair value of the consideration as of
the acquisition date was $49.6 million, which included $5.0 million paid in cash at the closing date and $44.6
million in contingent consideration related to the achievement of certain development and sales milestones valued
at $19.9 million and $24.7 million, respectively, that could potentially be payable to Propel Labs' shareholders. The
contingent consideration was recognized at its estimated fair value of $44.6 million as of December 31, 2012. The
fair values of the net assets acquired from Propel Labs, Inc. as of the acquisition date were determined to be $17.4
million of goodwill, $32.1 million of definite-lived intangible assets and $0.1 million of net tangible assets. The
acquired cell sorting system fits well into Bio-Rad's existing Life Science segment product offerings and may offer
researchers greater access to this technology.

In July 2012, we acquired all of the outstanding shares of DiaMed Benelux for 4.6 million Euros (approximately
$5.6 million) in cash. This acquisition was accounted for as a business combination and is included in our Clinical
Diagnostics segment's results of operations from the acquisition date. We acquired net tangible liabilities with a fair
value of $2.3 million and the fair values of the assets acquired as of the acquisition date were determined to be $3.0
million of goodwill and $4.9 million of definite-lived intangible assets. DiaMed Benelux became the exclusive
distributor of certain Bio-Rad immunohematology products in the Benelux market as a result of our 2007
acquisition of DiaMed Holding AG. This distributor acquisition is consistent with our stated objective to control
the distribution of our own products and services.

In January 2012, we purchased, for cash, certain assets from a raw material supplier for approximately $12.5
million. This asset acquisition was accounted for as a business combination and is included in our Clinical
Diagnostics segment's results of operations from the acquisition date. The fair value of the assets acquired at the
acquisition date was determined to be $6.3 million of net tangible assets, $5.1 million of intangible assets and $1.1
million of goodwill. In addition, we paid $2.0 million for employment agreements as an incentive to certain
employees of the acquired business to remain with Bio-Rad. Such amount will be expensed over the next two years
and is recorded in Prepaid expenses, taxes and other current assets and Other assets in our Consolidated Balance
Sheet. We believe this acquisition will allow us to secure the supply of critical raw materials and lower our overall
costs in the Clinical Diagnostics segment.

In October 2011, we acquired all of the issued and outstanding stock of QuantaLife, Inc. (QuantaLife). The fair
value of the consideration as of the acquisition date was $179.4 million, which was comprised of $150.3 million
paid in cash at the closing date, a $5.0 million holdback of cash until the completion of certain post-closing matters,
and $24.1 million in contingent consideration potentially payable to QuantaLife shareholders. As of December 31,
2012, the fair value of the contingent consideration was $8.0 million and could potentially reach $37 million upon
the achievement of the remaining sales and development milestones. The operating results of this business are
included in the results of operations of our Life Science segment from the acquisition date. Integrating the acquired
QuantaLife business into Bio-Rad is expected to expand our current portfolio of products for the amplification and
study of DNA and we believe it will complement Bio-Rad's existing business.

The determination of the fair value of net assets acquired of QuantaLife was based upon valuation information,
estimates and assumptions available at October 4, 2011. During the second quarter of 2012, we finalized the
determination of fair value for certain acquired tax attributes and adjusted the preliminary carrying values of
goodwill and certain other assets and liabilities in order to reflect final information received, resulting in an overall
reduction of goodwill of $0.6 million. These measurement period adjustments had no impact on our results of
operations for the year ended December 31, 2012. The final fair values of the net assets acquired as of the
acquisition date were determined to be $105.5 million of goodwill, $94.7 million of intangible assets and $20.8
million of net tangible liabilities.

During the first quarter of 2012, we identified an error in the consolidated financial statements for the years 2007
through 2011, related to a foreign supplemental tax associated with social benefits. We incorrectly interpreted and
applied the local statutes to our circumstances. We accrued $6.1 million for these foreign supplemental taxes,
including penalties and interest, during the first quarter of 2012, all of which has been paid. The foreign
supplemental tax, and the related penalties and interest, were not deductible for income tax purposes, and as such
this error did not have an impact on Bio-Rad's provision for income taxes.

We evaluated the materiality of the error from a qualitative and quantitative perspective. Based on such evaluation,
we concluded that while the accumulation of the error was significant to the three-month period ended March 31,
2012, the correction was not material to any individual prior period or for the year ended December 31, 2012, nor
did it have an effect on the trend of financial results, taking into account the requirements of the Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108).

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

Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expense
Research and development expense
Net income attributable to Bio-Rad

2012

Year Ended December 31,
2011

2010

100.0%
44.2
55.8
33.0
10.3
7.9

100.0%
43.2
56.8
33.6
9.0
8.6

100.0%
43.4
56.6
33.0
8.9
9.6

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 accounting 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, 2012 and 2011.

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 U.S. generally accepted accounting
principles (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 adjustment.
Actual results could differ from these estimates. We have determined that for the periods reported in this Annual
Report on Form 10-K the following accounting policies and estimates are critical in understanding our financial
condition and results of operations.

Accounting for Income Taxes. Management is required to make estimates related to our income tax provision in
each of the jurisdictions in which we operate. This process involves estimating our current tax exposures, as well as
making judgments regarding the recoverability of deferred tax assets in each jurisdiction. Deferred tax assets and
liabilities reflect the tax effects of losses, credits, and temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Management
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 Consolidated Statements of Income may result.

We have recorded a valuation allowance of $52.9 million and $48.9 million as of December 31, 2012 and 2011,
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. 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 tax assets
for which a valuation allowance has been provided occur, the provision for income taxes may decrease, raising
income and positively impacting Bio-Rad’s financial position.

benefits recognized in the financial statements on a particular tax position are measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits
is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax
law, new regulations or interpretations by the taxing authorities, new information obtained during a tax
examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate,
related to unrecognized tax benefits in income tax expense. Our overall effective tax rate is subject to fluctuations
because of changes in the geographic mix of earnings, changes to statutory tax rates and tax laws, and because of
the impact of various tax audits and assessments, as well as generation of tax credits.

Valuation of Goodwill and Long-lived Assets. Goodwill represents the excess of the cost over the fair value of net
tangible and identifiable intangible assets of acquired businesses. Goodwill amounts are assigned to reporting units
at the time of acquisition and are adjusted for any subsequent significant transfers of business between reporting
units. We assess the impairment of goodwill annually in the fourth quarter or whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. We perform the impairment tests of
goodwill at our reporting unit level, which is one level below our reporting segments. The goodwill impairment test
consists of a two-step process. The first step of the goodwill impairment test, used to identify potential impairment,
compares the fair value of a reporting unit to its carrying value, including goodwill. If the fair value of the
reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second
step of the impairment test is not required. The second step, if required, compares the implied fair value of the
reporting unit goodwill with the carrying amount of that goodwill. The fair value of a reporting unit is allocated to
all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had
been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the
reporting unit. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment
charge is recognized in an amount equal to that excess.

We use a projected discounted cash flow model to determine the fair value of a reporting unit. This discounted cash
value method for determining goodwill may be different from the fair value that would result from an actual
transaction between a willing buyer and a willing seller. Projections such as discounted cash flow models are
inherently uncertain and accordingly, actual future cash flows may differ materially from projected cash flows.
Management judgment is required in developing the assumptions for the discounted cash flow model. These
assumptions include revenue growth rates, profit margins, future capital expenditures, working capital needs,
expected foreign currency rates, discount rates and terminal values. We estimate future cash flows using current
and longer-term high level financial forecasts. These forecasts take into account the current economic environment.
The discount rates used are compiled using independent sources, current trends in similar businesses and other
observable market data. Changes to these rates might result in material changes in the valuation and determination
of the recoverability of goodwill. For example, an increase in the discount rate used to discount cash flows will
decrease the computed fair value. In order to evaluate the sensitivity of the fair value calculations on the goodwill
impairment test, we apply a 10% decrease to the fair value of each reporting unit.

To validate the reasonableness of the reporting unit fair values, we reconcile the aggregate fair values of the
reporting units to the enterprise market capitalization including an implied control premium. In performing the
reconciliation we may, depending on the volatility of the market value of our stock price, use either the stock price
on the valuation date or the average stock price over a range of dates around the valuation date. We compare the
implied control premium to premiums paid in observable recent transactions of comparable companies to determine
if the accumulated fair values of all the reporting units are reasonable.

For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets are grouped with
other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash
flows of other assets and liabilities. We assess the impairment of long-lived assets (including identifiable
intangibles) whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Factors that we consider important that could trigger an impairment review include:

•

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;
a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of
before the end of its previously estimated useful life; and
significant negative industry, legal, regulatory or economic trends.

When management determines that the carrying value of long-lived assets 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. Projected future operating results and cash flows of the asset or asset group are
used to establish the fair value used in evaluating the carrying value of long-lived and intangible assets. We
estimate the future cash flows of the long-lived assets using current and long-term financial forecasts. The carrying
amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to
result from the use and eventual disposition of the asset. If this is the case, an impairment loss would be
recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value.
There were no impairment losses recorded in 2012, 2011 and 2010.

Valuation of Inventories. We value inventory at the lower of the actual cost to purchase and/or manufacture the
inventory, or the current estimated net realizable value of the inventory. We review inventory quantities on hand
and reduce the cost basis of excess and obsolete inventory based primarily on an estimated forecast of product
demand, production requirements and the quality, efficacy and potency of raw materials. This review is done 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, and if too high, we may have overstated the carrying value of our inventory. In the future, if inventory is
determined to be overvalued, we would be required to write down the value of inventory to market and recognize
such costs in our cost of goods sold at the time of such determination. Therefore, although we make efforts to
ensure the accuracy of our forecasts of future product demand and perform procedures to safeguard overall
inventory quality, any significant unanticipated changes in demand, technological developments, regulations,
storage conditions, or other economic or environmental factors affecting biological materials, could have a
significant impact on the value of our inventory and reported results of operations.

Valuation of Investments. We regularly review our investments for factors that may indicate that a decline in the
fair value of an investment below its carrying value is other-than-temporary. Some factors considered in evaluating
whether or not a decline in fair value is other-than-temporary include our ability and intent to retain the investment
for a period of time sufficient to allow for a recovery in value, the duration and extent to which the fair value has
been less than cost and the financial condition and prospects of the issuer. Such reviews are inherently uncertain in
that the value of the investment may not fully recover or may decline further in future periods resulting in realized
losses.

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 repairs 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 reserve is 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.

Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts for estimated losses resulting
from the collectability of our customer accounts. 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 allowance. Uncertainty in the current economic
environment, if prolonged, could result in greater amounts becoming uncollectible in the future. Should the

estimates of losses 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.

Litigation Accruals. We record as liabilities in our Consolidated Balance Sheets estimated amounts for claims that
are probable and can be reasonably estimated. The likelihood of a material change in these estimated liabilities 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 disclose in the footnotes of the financial statements
when we are unable to make a reasonable estimate of a material 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.

Results of Operations - Sales, Gross Margins and Expenses

Net sales

Net sales (sales) in 2012 were relatively unchanged at $2.07 billion compared to 2011. Excluding the impact of
foreign currency, 2012 sales increased by approximately 3.6% compared to 2011. Currency neutral sales growth
was achieved in all regions, however Europe grew by less than 1% percent.

The Life Science segment sales in 2012 were $688.4 million, a decrease of 0.9% compared to 2011. On a currency
neutral basis, sales increased 1.5% compared to 2011. The currency neutral sales increase was primarily in
laboratory separation and process chromatography, as well as increased sales from the droplet digital PCR product
line associated with the QuantaLife acquisition. The Life Science segment currency neutral sales increased in
North America, Latin America, Europe and Asia.

The Clinical Diagnostics segment sales in 2012 were $1.37 billion, an increase of 0.1% compared to 2011. On a
currency neutral basis, sales increased 4.7% compared to 2011. Clinical Diagnostics product lines generating
growth were quality controls, diabetes, microbiology, blood virus and BioPlex® 2200. In 2011, sales were
impacted by a one-time blood typing equipment sale of approximately $8 million. Currency neutral sales growth
was achieved in the Pacific Rim, the Americas and the emerging markets, while currency neutral sales declined in
western Europe.

Sales in 2011 increased to $2.07 billion from $1.93 billion in 2010, a sales increase of 7.6%. Excluding the impact
of foreign currency, 2011 sales increased by approximately 3.1% compared to 2010. Currency neutral sales growth
was achieved in many regions, except for Europe.

The Life Science segment sales in 2011 were $694.7 million, an increase of 7.2% compared to 2010. On a currency
neutral basis, sales increased 3.4% compared to 2010. Product groups showing growth included process
chromatography media, imaging systems, amplification and electrophoresis. Currency neutral sales growth in the
Life Science segment was primarily in the U.S., Latin America and the Pacific Rim. In many developed countries,
constraints in government budgets had limited sales growth opportunities.

The Clinical Diagnostics segment sales in 2011 were $1.36 billion, an increase of 7.8% compared to 2010. On a
currency neutral basis, sales increased 2.9% compared to 2010. Clinical Diagnostics product lines generating
growth were immunohematology, quality controls, BioPlex® 2200, diabetes monitoring and clinical microbiology.
Currency neutral sales growth was primarily in the Pacific Rim, partially offset by weaker sales in Europe due to
spending constraints in several countries' national healthcare systems.

Gross margin

Consolidated gross margins were 55.8% in 2012 compared to 56.8% in 2011. Life Science segment gross margins
in 2012 decreased from 2011 by approximately 3.3% primarily due to amortization expense of $10.0 million related
to the droplet digital PCR products and cell sorting system acquisitions, an incremental royalty accrual related to a

dispute with a third party, as well as a $3.8 million soil remediation expense associated with a manufacturing plant.
Clinical Diagnostics segment gross margins in 2012 were relatively unchanged from 2011, reflecting an increase of
0.1%.

Beginning in 2013, under the Patient Protection and Affordable Health Care and the Health Care and Education
Reconciliation Acts of 2010, among other initiatives, the legislation provides for a 2.3% annual excise tax on the
sales of certain medical devices in the U.S. Bio-Rad will be required to pay this excise tax on most of our U.S.
Clinical Diagnostic sales and estimate that the effect on gross margins to be less than 0.25%.

Consolidated gross margins were 56.8% in 2011 compared to 56.6% in 2010 and were relatively unchanged for
both the Life Science segment and the Clinical Diagnostics segment.

Selling, general and administrative expense

Consolidated selling, general and administrative expenses (SG&A) represented 33.0% of sales in 2012 compared to
33.6% of sales in 2011. Decreases in SG&A relative to sales were primarily driven by the 2012 adjustments to the
fair value of the QuantaLife contingent consideration of $16.1 million, a decline in third party commissions
compared to 2011, and a lower bad debt expense provision compared to 2011, primarily in Spain of approximately
$8.6 million associated with large payments made in June 2012 by public agencies that represented Spanish
balances that were significantly past due, partially offset by an increase in incentive compensation and professional
fees compared to 2011. The decrease in the contingent consideration liability for QuantaLife was primarily due to
not achieving the first three short-term milestones as a result of recent weakening in funding to the research and
development markets and a longer sales cycle for this new technology, causing a revision in sales forecasts for the
remaining sales milestone contractual period ending in March 2014.

Consolidated SG&A represented 33.6% of sales in 2011 compared to 33.0% of sales in 2010. Growth in SG&A
was greater than the rate of sales growth. Increases were primarily driven by employee-related costs (our largest
cost), professional services, bad debt provisions primarily associated with public agencies in southern Europe,
facilities, travel, information technology and marketing.

Research and development expense

Research and development expense increased to $214.0 million or 10.3% of sales in 2012 compared to $186.4
million or 9.0% of sales in 2011, primarily in the Life Science segment. Life Science segment research and
development expense increased in 2012 from 2011 primarily related to the droplet digital PCR products and cell
sorting system acquisitions, which had high research and development costs relative to sales for these new products.
Clinical Diagnostics segment research and development expense increased in 2012 from 2011 primarily due to
increased investment in enhanced product offerings in blood typing, quality controls, diabetes and blood virus
product lines.

Research and development expense increased to $186.4 million or 9.0% of sales in 2011 compared to $172.3
million or 8.9% of sales in 2010. Life Science segment research and development expense increased in 2011 from
2010 in part due to the acquisition of QuantaLife in October 2011. Life Science segment efforts were concentrated
on genomics, proteomics and process chromatography applications. Clinical Diagnostics segment research and
development expense increased in 2011 from 2010 with efforts concentrated on diabetes and immunohematology,
and is focused mainly on the development and cost reduction of instruments.

Results of Operations – Non-operating

Interest expense

Interest expense in 2012 decreased 3.8% to $51.1 million compared to 2011 primarily due to the refinancing of a
portion of our debt that was completed in January 2011, lowering our overall borrowing costs. The interest rates on
our current borrowings are fixed for our $300.0 million Senior Subordinated Notes through 2016 at 8.0% and for
our $425.0 million Senior Notes through 2020 at 4.875%.

Interest expense in 2011 decreased 16.6% to $53.1 million compared to 2010 primarily due to the refinancing of a
portion of our debt in December 2010 through January 2011, lowering our overall borrowing rate.

Foreign currency exchange gains and losses

Foreign currency exchange gains and losses consist of foreign currency transaction gains and losses on
intercompany net receivables and payables and the change in fair value of our forward foreign exchange contracts
used to manage our foreign currency exchange risk. Net foreign currency exchange losses for 2012, 2011 and 2010
were $5.0 million, $13.8 million and $3.9 million, respectively. The 2012, 2011 and 2010 net foreign currency
exchange losses were attributable to market volatility, increasing costs to hedge and the result of the estimating
process inherent in the timing of shipments and payments of intercompany debt. In addition, approximately $4.6
million of the 2011 loss was attributable to entering into a larger forward foreign exchange contract than required.
All years are affected by the economic hedging program we employ to hedge our intercompany receivables and
payables.

Other income and expense, net

Other income and expense, net includes investment and dividend income, generally interest income on our cash and
cash equivalents, short-term investments and long term marketable securities. Other (income) expense, net in 2012
increased to $21.9 million income compared to $7.6 million income in 2011. The increase was primarily due to
higher realized gains on the sale of equity investments in 2012 of $8.0 million compared to 2011 and a 2012 gain of
$4.3 million on the sale of a building in our Clinical Diagnostics segment.

Other (income) expense, net in 2011 increased to $7.6 million income compared to $3.9 million income in 2010.
The increase was primarily due to higher investment income, which included dividend income from holdings in
Sartorius AG whose dividends almost doubled from 2010, and a settlement of a legal dispute in the third quarter of
2010, partially offset by higher other-than-temporary impairment losses on certain investments during 2011 than in
2010.

Effective tax rate

Our effective tax rate was 27%, 24% and 15% in 2012, 2011 and 2010, respectively. The effective tax rate for 2012
reflected a tax benefit related to an adjustment to the fair value of the QuantaLife contingent consideration. The
American Taxpayer Relief Act of 2012, enacted on January 2, 2013, retroactively reinstated the federal research and
development credit from January 1, 2012 through December 31, 2013. The effect of this change in the tax law
related to 2012 is estimated to be between $2.7 million and $3 million and will be recognized as a benefit to income
tax expense in the first quarter of fiscal 2013, the quarter the law was enacted. The effective tax rate for 2011
reflected tax benefits from nontaxable dividend income and the release of tax liabilities. The lower effective tax
rate in 2010 was due to a $22.0 million foreign tax credit benefit related to a $164.0 million distribution from our
foreign affiliates to the U.S.

our U.S. statutory tax rate of 35%. Our effective tax rates are also significantly reduced by French tax incentives
related to our research and development activities.

Our effective tax rate may be impacted in the future, either favorably or unfavorably, by many factors including, but
not limited to, changes to statutory tax rates, changes in tax laws or regulations, tax audits and settlements, and the
generation of tax credits.

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 are then shipped to local
distribution facilities around the world. Our product mix is diversified, and certain products compete largely on
product efficacy, while others compete on price. Gross margins are generally sufficient to exceed normal operating
costs, and funding for research and development of new products, as well as routine outflows of capital expenditure,
interest and taxes. In addition to the annual positive cash flow from operating activities, additional liquidity is
readily available via the sale of short-term investments and access to our $200.0 million Amended and Restated
Credit Agreement (Credit Agreement) that we entered into in June 2010. Borrowings under the Credit Agreement
are on a revolving basis and can be used to make acquisitions, for working capital and for other general corporate
purposes. We had no outstanding borrowings under the Credit Agreement as of December 31, 2012. The Credit
Agreement expires on June 21, 2014.

At December 31, 2012, we had available $921.1 million in cash, cash equivalents and short-term investments, of
which approximately 30% was in our foreign subsidiaries. We believe that our holdings of cash, cash equivalents
and short-term investments in the U.S. and in our foreign subsidiaries are sufficient to meet both the current and
long-term needs of our global operations. The amount of funds held in the United States can fluctuate due to the
timing of receipts and payments in the ordinary course of business and due to other reasons, such as business-
development activities. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and
foreign cash flows (both inflows and outflows). Repatriation of overseas funds will result in additional U.S. federal
and state income tax payments. In general, it is our practice and intention to reinvest the cash generated by our
foreign subsidiaries in our foreign subsidiaries' operations.

Under domestic and international lines of credit, we had $226.8 million available for borrowing as of December 31,
2012, of which $11.6 million is reserved for standby letters of credit issued by our banks to guarantee our
obligations, mostly to meet the deductible amount under insurance policies for our benefit. Management believes
that this availability, together with cash flow from operations, will be adequate to meet our current objectives for
operations, research and development, capital additions for manufacturing and distribution, plant and equipment,
information technology systems and an acquisition of reasonable proportion to our existing total available capital.

The continuing slow economic growth in developed nations may adversely affect our future results of operations.
Demand for our products and services could change more dramatically than in previous years based on activity,
funding, reimbursement constraints and support levels from government, universities, hospitals and private industry,
including diagnostic laboratories. The need for certain sovereign nations with large annual deficits to curtail
spending could lead to slower growth of, or even a decline in, our business. Sovereign nations either delaying
payment for goods and services or renegotiating their debts could impact our liquidity. The situation in these
sovereign nations is continuously evolving and we have no greater knowledge of the situation other than what is
publicly reported. As of December 31, 2012 and December 31, 2011, we had accounts receivable, net of allowance
for doubtful accounts, in Spain, Italy, Greece and Portugal of $64.8 million and $82.1 million, respectively. The
decrease from December 31, 2011 was primarily due to payments made in June 2012 of approximately $21 million
by public agencies in Spain that represented Spanish balances that were significantly past due.

The instability in credit markets along with inadequate capitalization in some parts of the financial services industry
could impact both our ability and our customer’s ability to access the necessary capital for acquisition, equipment

and technology modernization, and the financing of inventory and receivables. Without this crucial intermediary
function, manufacturers and end users may have to renegotiate existing arrangements, reduce activity levels or seek
other business partners.

Cash Flows from Operations

Net cash provided by operations was $278.9 million, $259.8 million and $225.9 million in 2012, 2011, and 2010,
respectively. The net increase between 2012 and 2011 of $19.1 million primarily represented higher cash received
from customers that in part reflected improved payments in 2012 from Southern European customers, and a decline in
interest paid due to the refinancing of a portion of our debt that was completed in January 2011, partially offset by
higher income tax payments as 2011 included an income tax refund of approximately $25 million. Also affecting
cash flows from operations was the Enterprise Resource Planning (ERP) project that was considered in the
"Preliminary Project Stage" in 2011, which requires internal labor costs to be expensed, whereas in 2012 we were in
the "Application Development Stage," which requires internal labor costs to be capitalized and is currently included
in cash flows from investing activities. We continue to focus on cash flow improvements as a global company-wide
goal.

The net increase between 2011 and 2010 of $33.9 million primarily represented higher cash received from customers
due to higher sales, a decline in interest expense due to the refinancing of a portion of our debt in December 2010 and
January 2011, and a decline in income taxes paid that was caused by timing differences and an income tax refund in
2011, partially offset by an increase in the amount paid to suppliers and employees. During the second quarter of
2010, Bio-Rad made a large payment of 22.6 million Euros to a certain licensor, covering royalties for multiple years.

We regularly review the allowance for uncollectible receivables and believe net accounts receivable are fully
realizable. We also routinely review inventory for the impact of obsolescence and changes in market prices caused by
the introduction of new products, technologies and in government reimbursement policies. We expect the first quarter
of 2013 cash flows from operations to be lower than the fourth quarter of 2012 as Bio-Rad historically has made
larger payments for royalties, fourth quarter sales commissions to third parties and annual employee bonuses during
this period.

Cash Flows from Investing Activities

Net cash used in investing activities, including capital expenditures, was $412.8 million, $383.4 million and $216.5
million for 2012, 2011 and 2010, respectively. Capital expenditures in 2012 totaled $152.4 million, compared to
$102.9 million and $88.5 million in 2011 and 2010, respectively. Capital expenditures represent the addition and
replacement of production machinery and research equipment, ongoing manufacturing and facility additions for
expansion, regulatory and environmental, and compliance. Also included in capital expenditures are investments in
business systems and data communication upgrades and enhancements. All periods include equipment placed with
Clinical Diagnostics segment customers who then contract to purchase our reagents for use. Capital expenditures
have increased and we anticipate them to continue to remain historically higher for the next three to four years due to
the implementation of a global single instance ERP platform and to expand our e-commerce platform. The ERP
software was purchased in December 2010. The estimated global implementation cost for the single instance ERP
platform could reach up to $200 million and is estimated to take approximately four more years to fully implement.

In August 2012, we acquired from Propel Labs, Inc. a new cell sorting system, an automated, easy-to-use benchtop
cell sorting flow cytometer. This business acquisition is included in our Life Science segment's results of operations
from the acquisition date. The fair value of the consideration as of the acquisition date was $49.6 million, which
included $5.0 million paid in cash at the closing date and $44.6 million in contingent consideration related to the
achievement of certain development and sales milestones valued at $19.9 million and $24.7 million, respectively, that
could potentially be payable to Propel Labs' shareholders. The contingent consideration was recognized at its
estimated fair value of $44.6 million as of December 31, 2012. The fair values of the net assets acquired from Propel
Labs, Inc. as of the acquisition date were determined to be $17.4 million of goodwill, $32.1 million of definite-lived

intangible assets and $0.1 million of net tangible assets. The acquired cell sorting system fits well into Bio-Rad's
existing Life Science segment product offerings and may offer researchers greater access to this technology.

In July 2012, we acquired all of the outstanding shares of DiaMed Benelux for 4.6 million Euros (approximately $5.6
million) in cash. This acquisition was accounted for as a business combination and is included in our Clinical
Diagnostics segment's results of operations from the acquisition date. We acquired net tangible liabilities with a fair
value of $2.3 million and the fair values of the assets acquired as of the acquisition date were determined to be $3.0
million of goodwill and $4.9 million of definite-lived intangible assets. DiaMed Benelux became the exclusive
distributor of certain Bio-Rad immunohematology products in the Benelux market as a result of our 2007 acquisition
of DiaMed Holding AG. This distributor acquisition is consistent with our stated objective to control the distribution
of our own products and services.

In January 2012, we purchased, for cash, certain assets from a raw material supplier for approximately $12.5 million.
This asset acquisition was accounted for as a business combination and is included in our Clinical Diagnostics
segment's results of operations from the acquisition date. The fair value of the assets acquired at the acquisition date
was determined to be $6.3 million of net tangible assets, $5.1 million of intangible assets and $1.1 million of
goodwill. In addition, we paid $2.0 million for employment agreements as an incentive to certain employees of the
acquired business to remain with Bio-Rad. Such amount will be expensed over the next two years and is recorded in
Prepaid expenses, taxes and other current assets and Other assets in our Consolidated Balance Sheet. We believe this
acquisition will allow us to secure the supply of critical raw materials and lower our overall costs in the Clinical
Diagnostics segment.

In October 2011, we acquired all the issued and outstanding stock of QuantaLife for a total consideration of $179.4
million that was comprised of $150.3 million in cash, a $5.0 million holdback of cash until the completion of certain
post-closing matters, and contingent consideration potentially payable to QuantaLife shareholders. As of
December 31, 2012, the fair value of the contingent consideration was $8.0 million and could potentially reach $37
million upon the achievement of the remaining sales and development milestones. This transaction was accounted for
as the acquisition of a business and the operating results of QuantaLife are included in our Life Science segment from
the acquisition date. Integrating the acquired QuantaLife business into Bio-Rad is expected to expand our current
portfolio of products for the amplification and study of DNA and we believe it will complement Bio-Rad's existing
business.

In June 2011, we acquired the remaining outstanding shares of DiaMed S.E.A. Limited (DiaMed Thailand) from
multiple noncontrolling shareholders for approximately $0.2 million in cash. In February 2011, we acquired an
additional 39% of Distribuidora de Analitica para Medicina Ibérica S.A. (DiaMed Spain) from multiple
noncontrolling shareholders, increasing our ownership in DiaMed Spain to 90% for approximately 2.5 million Euros,
or approximately $3.4 million in cash. In September 2010, we acquired the remaining noncontrolling interests of
DiaMed France SA for 10.2 million Euros, or approximately $12.9 million in cash. In January 2010, we acquired
certain diagnostic businesses of Biotest AG for 45 million Euros, or approximately $64.9 million in cash. In October
2007, we began acquiring the outstanding shares of DiaMed Holding AG, with the final shares purchased in February
2010 for a total consideration over the years of $464.3 million, of which 86% of the outstanding shares payment was
in October 2007. All of these acquisitions are included in our Clinical Diagnostics segment.

In January 2013, we acquired AbD Serotec, a division of MorphoSys AG, for approximately 53 million Euros
(approximately $70 million) in cash. The acquisition will be included in our Life Science segment's results of
operations from the acquisition date and will be accounted for as a business combination. We believe that with AbD
Serotec's comprehensive catalog of antibodies, we will be able to offer our customers total assay solutions that can be
validated on many of our research platforms for western blotting, multiplex protein expression, ELISA and cell
sorting.

We continue to review possible acquisitions to expand both our Life Science and Clinical Diagnostics segments. We
routinely meet with the principals or brokers of the subject companies. It is not certain that any of these discussions
will advance beyond the preliminary stages to completion at this time.

Cash Flows from Financing Activities

Net cash provided by financing activities was $12.6 million and $228.7 million in 2012 and 2010, respectively, and
net cash used in financing activities was $213.6 million in 2011. Cash provided in 2012 was primarily from proceeds
from issuance of our common stock. Cash used in 2011 was attributable to the redemption in January 2011 of our
$225.0 million 7.5% Senior Subordinated Notes, including a call premium of $2.8 million that was recorded in
Interest expense in the Consolidated Statements of Income. Cash provided in 2010 was primarily due to issuing
$425.0 million Senior Notes that were used to retire our 2014 bonds and our 2013 bonds in December 2010 and
January 2011, respectively. We have outstanding Senior Notes of $425.0 million and Senior Subordinated Notes of
$300.0 million, which are not due until 2020 and 2016, respectively.

The Credit Agreement that was entered into in June 2010 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 and expires in June 2014.

The Board of Directors has authorized the repurchase of up to $18.0 million of Bio-Rad's common stock, of which
$3.3 million has yet to be repurchased in the open market as of December 31, 2012. The Amended and Restated
Credit Agreement (Credit Agreement) and the indenture governing our 8.0% Senior Subordinated Notes due 2016
limit our ability to repurchase our stock. In accordance with the terms of awards under the 2007 Incentive Award
Plan, in June 2012, we withheld 122 shares of our Class A common stock and 917 shares of our Class B common
stock to satisfy tax obligations due upon the vesting of restricted stock of certain of our employees, which is
considered a repurchase of our stock. We had no other repurchases of our stock during 2012, 2011 or 2010. In 2013,
we estimate repurchasing approximately 1,000 shares to satisfy tax obligations due upon the vesting of restricted
stock of certain of our employees.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have had or are reasonably likely to have a current or future
material effect on our financial condition, results of operations or liquidity.

Contractual Obligations

The following summarizes certain of our contractual obligations as of December 31, 2012 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)

Payments Due by Period

Less
Than
One Year

Total

1-3
Years

3-5
Years

More
than
5 Years

732.6
253.7
166.2
65.5
96.9

0.2
44.7
35.3
56.0
—

0.4
89.4
54.0
9.5
39.0

297.3 $
58.4
33.3
—
4.9

434.7
61.2
43.6
—
53.0

(1) These amounts represent expected cash payments, including capital lease obligations and are included in our December 31, 2012
Consolidated Balance Sheets. See Note 5 of the Consolidated Financial Statements for additional information about our debt.

(2) Operating lease obligations are described in Note 12 of the Consolidated Financial Statements.

(3) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding to Bio-Rad and that specify
all significant terms. Purchase obligations exclude agreements that are cancelable without penalty.

(4) Excluded from this table is our liability for income taxes payable, including uncertain tax positions, in the amount of $11.2 million. We
are not able to reasonably estimate the timing of future cash flows of these tax liabilities, therefore, our income tax obligations are excluded
from the table above. See Note 6 of the Consolidated Financial Statements for additional information about our income taxes.

Recent Accounting Standards Updates

In March 2013, the Financial Accounting Standards Board (FASB) issued guidance in regard to a parent's accounting
upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign
entity. This guidance specifies that a cumulative translation adjustment (CTA) should be released into earnings when
an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign
entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For
sales of an equity method investment that is a foreign entity, a pro rata portion of CTA attributable to the investment
would be recognized in earnings upon sale of the investment. When an entity sells either a part or all of its
investment in a consolidated foreign entity, CTA would be recognized in earnings only if the sale results in the parent
no longer having a controlling financial interest in the foreign entity. CTA would be recognized in earnings in a
business combination achieved in stages (i.e., a step acquisition). This guidance will be effective prospectively for
annual and interim reporting periods beginning after December 15, 2013. We do not expect that the adoption of this
guidance will have a material impact on our consolidated financial statements.

In July 2012, the FASB issued guidance in regard to testing indefinite-lived intangible assets for impairment. The
new guidance provides entities the option of performing a "qualitative" assessment to determine whether the existence
of events and circumstances indicates that it is more likely than not that the indefinite-lived asset is impaired and
hence if further testing is necessary. An entity also has the option to bypass the qualitative assessment for any
indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An
entity will be able to resume performing the qualitative assessment in any subsequent period. This guidance was
effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and is
not expected to have a material impact on our consolidated financial statements.

from each component of accumulated other comprehensive income based on its source and the income statement line
items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety,
companies would instead cross reference to the related footnote for additional information. This guidance was
effective for annual and interim reporting periods beginning after December 15, 2012.

In May 2011, the FASB issued guidance in regard to fair value measurement. The new guidance results in a
consistent definition of fair value and common requirements for measurement of and disclosure about fair value
between GAAP and International Financial Reporting Standards (IFRS). We adopted this guidance as of January 1,
2012 and it did not have a material impact on our results of operations or financial position.

ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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, and
forward and spot 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. 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, Swiss Franc, British Sterling, Singapore Dollar, Brazilian Real 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
$42 million on our derivative position as of December 31, 2012. 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, 2012, the overall interest rate risk associated with our debt was not significant.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2012 and 2011
Consolidated Statements of Income for each of the three years in the period ended

December 31, 2012

Consolidated Statements of Comprehensive Income for each of the three years in the period

ended December 31, 2012

Consolidated Statements of Cash Flows for each of the three years in the period ended

December 31, 2012

Consolidated Statements of Changes in Stockholders’ Equity for each of the three years

in the period ended December 31, 2012
Notes to Consolidated Financial Statements

Page

36
37-38

42
43-76

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of Bio-Rad Laboratories, Inc.

We have audited the accompanying consolidated balance sheets of Bio-Rad Laboratories, Inc. as of December 31,
2012 and 2011, and the related consolidated statements of income, comprehensive income, cash flows, and changes
in stockholders' equity for each of the three years in the period ended December 31, 2012. Our audits also included
the financial statement schedule listed in the Index at Item 15(a)2. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements and schedule 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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Bio-Rad Laboratories, Inc. at December 31, 2012 and 2011, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended December 31, 2012 in conformity with
U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the
information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Bio-Rad Laboratories, Inc.’s internal control over financial reporting as of December 31, 2012,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 18, 2013, expressed an adverse opinion
thereon.

/s/ Ernst & Young LLP

Redwood City, California
March 18, 2013

BIO-RAD LABORATORIES, INC.
Consolidated Balance Sheets
(In thousands)

ASSETS
Current assets:

Cash and cash equivalents
Short-term investments
Accounts receivable, less allowance for doubtful accounts of $29,202 at 2012 and

$33,259 at 2011

Inventories:

Raw materials
Work in process
Finished goods

Total inventories

Deferred tax assets
Prepaid expenses, taxes and other current assets

Total current assets

Property, plant and equipment:
Land and improvements
Buildings and leasehold improvements
Equipment
Total property, plant and equipment
Less: accumulated depreciation and amortization

Property, plant and equipment, net

Goodwill, net
Purchased intangibles, net
Long-term deferred tax assets
Other assets

Total assets

December 31,

2012

2011

463,388
457,685

574,231
238,884

398,739

398,674

93,009
124,737
230,624
448,370

99,326
120,191
213,993
433,510

57,751
103,999
1,929,932

53,777
99,079
1,798,155

18,898
268,217
724,919
1,012,034
(595,096)
416,938

19,044
249,615
613,253
881,912
(532,411)
349,501

495,418
260,939
15,477
318,049
3,436,753

468,933
259,497
11,189
209,528
3,096,803

The accompanying notes are an integral part of these consolidated financial statements.

BIO-RAD LABORATORIES, INC.
Consolidated Balance Sheets
(continued)
(In thousands, except share data)

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued payroll and employee benefits
Notes payable and current maturities of long-term debt
Income and other taxes payable
Accrued royalties
Deferred revenue
Other current liabilities

Total current liabilities

Long-term debt, net of current maturities
Deferred income taxes
Other long-term liabilities
Total liabilities

Commitments and contingent liabilities

Stockholders’ equity:
Bio-Rad stockholders’ equity:

Preferred stock, $0.0001 par value, 7,500,000 shares authorized; issued and

outstanding - none

Class A common stock, $0.0001 par value; 80,000,000 shares authorized; shares

issued - 23,332,532 and 23,020,215 at 2012 and 2011, respectively; shares
outstanding - 23,332,410 and 23,020,215 at 2012 and 2011, respectively

Class B common stock, $0.0001 par value; 20,000,000 shares authorized; shares

issued - 5,149,771 and 5,164,765 at 2012 and 2011, respectively; shares
outstanding - 5,148,854 and 5,164,765 at 2012 and 2011, respectively
Additional paid-in capital

Class A treasury stock at cost, 122 and zero shares at 2012 and 2011, respectively
Class B treasury stock at cost, 917 and zero shares at 2012 and 2011, respectively

Retained earnings
Accumulated other comprehensive income
Total Bio-Rad stockholders’ equity

Noncontrolling interests

Total stockholders’ equity
Total liabilities and stockholders’ equity

December 31,

2012

2011

130,867
135,955
1,750
32,299
29,718
26,288
113,043
469,920

129,124
112,564
814
52,285
25,219
24,322
114,787
459,115

732,414
115,054
108,095
1,425,483

731,698
85,522
76,086
1,352,421

—

1
212,244
(12)
(89)
1,523,688
274,901
2,010,735
535
2,011,270
3,436,753

1
185,334
—
—
1,359,910
198,690
1,743,937
445
1,744,382
3,096,803

The accompanying notes are an integral part of these consolidated financial statements.

BIO-RAD LABORATORIES, INC.
Consolidated Statements of Income
(In thousands, except per share data)

Net sales

Cost of goods sold

Gross profit

Selling, general and administrative expense
Research and development expense

Income from operations
Interest expense
Foreign exchange losses, net
Other (income) expense, net

Income before income taxes

Provision for income taxes

Net income including noncontrolling interests

Net (income) loss attributable to noncontrolling interests

Net income attributable to Bio-Rad

Basic earnings per share:

Net income per share basic attributable to Bio-Rad
Weighted average common shares - basic

Diluted earnings per share:

Net income per share diluted attributable to Bio-Rad
Weighted average common shares - diluted

Year Ended December 31,

2012

2011

2010

2,069,235 $
915,097
1,154,138
682,898
214,040
257,200
51,112
5,040
(21,883)
222,931
(59,084)
163,847
(69)
163,778 $

2,073,529 $
895,640
1,177,889
696,294
186,439
295,156
53,135
13,842
(7,583)
235,762
(57,739)
178,023
200
178,223 $

1,927,118
835,630
1,091,488
635,213
172,266
284,009
63,717
3,884
(3,875)
220,283
(33,348)
186,935
(1,445)
185,490

5.79 $

6.36 $

28,290

28,031

6.70
27,665

5.72 $

6.26 $

28,642

28,468

6.59
28,151

The accompanying notes are an integral part of these consolidated financial statements.

BIO-RAD LABORATORIES, INC.
Consolidated Statements of Comprehensive Income
(In thousands)

Year Ended December 31,

2012

2011

2010

Net income including noncontrolling interests

163,847

178,023

186,935

Other comprehensive income:

Foreign currency translation adjustments

24,037

(12,494)

52,365

Reclassification of realized portion of cumulative translation
adjustments due to liquidation, net of tax expense of $0.

Other post-employment benefits adjustments, net of tax
benefit of $2.8 million, tax expense of $0.5 million and tax
benefit of $0.8 million, respectively.

Net unrealized holding gains on available-for-sale
investments, net of tax expense of $32.2 million, $7.5
million and $8.6 million, respectively.

Reclassification adjustments for gains (losses) included in
Net income including noncontrolling interests, net of tax
expense of $2.9 million, tax benefit of $0.1 million, and tax
expense of $0.2 million, respectively.

Other comprehensive income, net of tax

Comprehensive income

(1,055)

—

(8,278)

1,641

(2,535)

55,358

12,871

14,725

5,045

76,232

240,079

(104)

859

178,882

385

64,940

251,875

Comprehensive (income) loss attributable to noncontrolling
interests

(90)

(1,447)

Comprehensive income attributable to Bio-Rad

239,989

178,893

250,428

Reclassification adjustments are calculated using the specific identification method.
The accompanying notes are an integral part of these consolidated financial statements.

BIO-RAD LABORATORIES, INC.
Consolidated Statements of Cash Flows
(In thousands)

Cash flows from operating activities:
Cash received from customers
Cash paid to suppliers and employees
Interest paid
Income tax payments
Investment proceeds and miscellaneous receipts, net
Excess tax benefits from share-based compensation
Net cash provided by operating activities

Cash flows from investing activities:

Year Ended December 31,
2010

2011

2012

$ 2,063,805
(1,661,206)
(46,369)
(87,434)
12,991
(2,889)
278,898

$2,018,755
(1,656,467)
(56,859)
(52,131)
9,686
(3,168)
259,816

$ 1,877,483
(1,536,935)
(59,834)
(55,502)
3,625
(2,928)
225,909

Capital expenditures
Proceeds from sale of property, plant and equipment
Payments for acquisitions, net of cash received, and long-term
investments
Payments on purchases of intangible assets
Purchases of marketable securities and investments
Sales of marketable securities and investments
Maturities of marketable securities and investments
(Payments for) proceeds from foreign currency economic hedges, net
Restricted cash
Net cash used in investing activities

(152,417)
6,325

(102,888)
234

(88,453)
1,190

(39,443)
(1,780)
(680,966)
131,295
327,052
(2,870)
—
(412,804)

(158,538)
(436)
(509,310)
48,825
335,781
2,919
—
(383,413)

(89,307)
(4,081)
(240,286)
4,193
203,443
3,211
(6,422)
(216,512)

Cash flows from financing activities:

Net payments on line-of-credit arrangements and notes payable
Long-term borrowings
Payments on long-term borrowings
Proceeds from issuance of common stock
Debt issuance costs on long-term borrowings
Purchase of treasury stock
Excess tax benefits from share-based compensation
Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(191)
—
(620)
10,611
—
(101)
2,889
12,588
10,475
(110,843)
574,231
$ 463,388

(3,900)
—
(226,835)
14,249
(242)
—
3,168
(213,560)
4,837
(332,320)
906,551
$ 574,231

(830)
424,633
(206,706)
12,730
(4,010)
—
2,928
228,745
18,471
256,613
649,938
$ 906,551

The accompanying notes are an integral part of these consolidated financial statements.

BIO-RAD LABORATORIES, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)

Common
Stock

Additional
Paid-in
Capital

Treasury
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Total
Bio-Rad
Stockholders'
Equity

Non-
controlling
Interests

Total
Stockholders'
Equity

Balance at December 31, 2009
Net income
Other comprehensive income, net
of tax
Issuance of common stock
Stock compensation expense

Tax benefit-exercise stock options

Purchase of additional controlling
interests and other
Balance at December 31, 2010
Net income
Other comprehensive income, net
of tax
Issuance of common stock
Stock compensation expense
Tax benefit-exercise stock options

Purchase of additional controlling
interests and other
Balance at December 31, 2011
Net income
Other comprehensive income, net
of tax
Issuance of common stock
Stock compensation expense
Tax benefit-exercise stock options
Purchase of treasury stock
Balance at December 31, 2012

3
—

—
—
—

—

—
3
—

—
—
—
—

—
3
—

—
—
—
—
—
3

$ 130,444
—

$ — $ 996,197
185,490

—

$ 133,082
—

$ 1,259,726
185,490

$19,487
1,445

$ 1,279,213
186,935

—
12,730
10,201

3,161

450
156,986
—

—
14,249
10,738
3,582

—
—
—

—

—
—
—

—

64,938
—
—

—

64,938
12,730
10,201

3,161

2
—
—

—

64,940
12,730
10,201

3,161

—
—
— 1,181,687
178,223
—

—
198,020
—

450
1,536,696
178,223

(17,111)
3,823
(200)

(16,661)
1,540,519
178,023

—
—
—
—

670
—
—
—

670
14,249
10,738
3,582

189
—
—
—

859
14,249
10,738
3,582

(221)
185,334
—

—
—
— 1,359,910
163,778
—

—
198,690
—

(221)
1,743,937
163,778

(3,367)
445
69

(3,588)
1,744,382
163,847

—
10,611
12,936
3,363

—
—
—
—
— (101)

—
—
—
—
—
$ (101) $ 1,523,688

$ 212,244

76,211
—
—
—
—
$ 274,901

76,211
10,611
12,936
3,363
(101)
$ 2,010,735

21
—
—
—
—
535

76,232
10,611
12,936
3,363
(101)
$ 2,011,270

The accompanying notes are an integral part of these consolidated financial statements.

BIO-RAD LABORATORIES, INC.
Notes to Consolidated Financial Statements

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Bio-Rad Laboratories, Inc. and all of our wholly and
majority owned 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 U.S. generally
accepted accounting principles 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.

We evaluate subsequent events and the evidence they provide about conditions existing at the date of the balance
sheet as well as conditions that arose after the balance sheet date but through the date the financial statements are
issued. The effects of conditions that existed at the balance sheet date are recognized in the financial statements.
Events and conditions arising after the balance sheet date but before the financial statements are issued are
evaluated to determine if disclosure is required to keep the financial statements from being misleading. To the
extent such events and conditions exist, disclosures are made regarding the nature of events and the estimated
financial effects for those events and conditions.

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 value.

Restricted Cash

Restricted cash of approximately $6.4 million at December 31, 2010 represented a deposit in an escrow account for
the final lump sum payment under a building finance lease. That amount was paid in June 2011. There was no
restricted cash balance as of December 31, 2012 and 2011.

Available-for-Sale Investments

Available-for-sale investments consist of corporate obligations, municipal securities, asset backed securities, U.S.
government sponsored agencies and marketable equity securities. Management classifies investments at the time of
purchase and reevaluates such classification at each balance sheet date. 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. Available-for-sale investments are reported at fair
value based on quoted market prices and other observable market data. Unrealized gains and losses are reported as
a component of other comprehensive income, net of any related tax effect. Unrealized losses are charged against
income when a decline in the fair value of an individual security is determined to be other-than-temporary. We
review our available-for-sale investments for other-than-temporary losses on a quarterly basis. Realized gains and
losses and other-than-temporary impairments on investments are included in Other (income) expense, net (see Note
10).

Concentration of Credit Risk

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash and cash
equivalents, investments, foreign exchange contracts and trade accounts receivable. Cash and cash equivalents and
investments are placed with various highly rated major financial institutions located in different geographic regions.
Bio-Rad has not sustained significant losses from instruments held at financial institutions.

The forward contracts used in managing our foreign currency exposures have an element of risk in that the
counterparties may be unable to meet the terms of the agreements. We attempt to minimize this risk by limiting the
counterparties to a diverse group of highly-rated domestic and international financial institutions. In the event of
non-performance by these counterparties, the carrying values of our financial instruments represent the maximum
amount of loss we would have incurred as of our fiscal year-end. However, we do not expect to record any losses
as a result of counterparty default.

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 certain developing
countries, some Bio-Rad sales are subject to collateral letters of credit from our customers. Credit risk for trade
accounts receivable 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 Union.

Accounts Receivable

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 allowance.

Inventory

Inventories are valued at the lower of actual cost or market (net realizable value) and include material, labor and
overhead costs. The first-in, first-out method is used to relieve inventory for products sold.

Property, Plant and Equipment

Property, plant and equipment are carried at cost, less accumulated depreciation and amortization. Included in
property, plant and equipment are buildings and equipment acquired under capital lease arrangements, reagent
rental equipment and capitalized software, including costs for software developed or obtained for internal use.
Property, plant and equipment are assessed for impairment quarterly 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 term of the leases or life of the improvements,
whichever is shorter. With the exception of reagent rental equipment, which is amortized over a 1-5 year period,
equipment and capitalized software is depreciated over 3-12 years.

Goodwill

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 fair value based tests annually or whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. We perform
impairment tests of goodwill at our reporting unit level, which is one level below our reporting segments. Our

reporting units are identified as components for which discrete financial information is available and is regularly
reviewed by management. Goodwill amounts are assigned to reporting units at the time of acquisition.

The goodwill impairment test consists of a two-step process. The first step of the goodwill impairment test, used to
identify potential impairment, compares the fair value of a reporting unit to its carrying value, including goodwill.
We use a projected discounted cash flow model to determine the fair value of a reporting unit. If the fair value of
the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the
second step of the impairment test is not required. The second step, if required, compares the implied fair value of
the reporting unit goodwill with the carrying amount of that goodwill. The fair value of a reporting unit is allocated
to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit
had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire
the reporting unit. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an
impairment charge is recognized in an amount equal to that excess.

Long-Lived Assets

For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets are grouped with
other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash
flows of other assets and liabilities. We assess the impairment of long-lived assets (including identifiable intangible
assets) quarterly or whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. Factors that we consider important that could trigger an impairment review include:

•
•

•

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;
a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of at a
loss before the end of its previously estimated useful life; and
significant negative industry, legal, regulatory or economic trends.

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 reflect the tax effects of losses, credits, and
temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. They are determined 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 may reduce the provision for
income taxes. When we establish or reduce the valuation allowance against our deferred tax assets, our provision

for income taxes will increase or decrease, respectively, in the period that determination to change the valuation
allowance is made.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax
benefits recognized in the financial statements on a particular tax position are measured based on the largest benefit
that has a greater than a 50% likelihood of being realized upon settlement. The amount of unrecognized tax
benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to
existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax
examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate,
related to unrecognized tax benefits in 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, collectability is reasonably assured and title has passed to the customer or product has been delivered
absent specific contractual specifications. Revenue associated with equipment that requires factory installation is
not recorded until installation is complete and customer acceptance, if required contractually, has occurred. At the
time revenue is recognized, a provision is recognized for estimated product returns. 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.

Reagent agreements are a diagnostic industry sales method that provides use of an instrument and consumables
(reagents) to a customer on a per test basis. We evaluate our reagent agreements and account for these contracts
under the guidance pertaining to accounting for revenue arrangements with multiple deliverables. Our reagent
agreements represent one unit of accounting as the instrument and consumables are interdependent in producing a
diagnostic result that neither has a stand-alone value with respect to these agreements. All revenues that we earn
under our reagent agreements are recognized pursuant to the terms of each agreement and are based and entirely
contingent upon either (i) when the consumables to conduct a fixed number of tests are delivered or (ii) as reported
by the customer on a per test basis.

Shipping and Handling

We classify all freight costs 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, mostly for a period of one
year. Upon delivery 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 accrual.

Changes in 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

December 31

2012

2011

16.4 $
19.8
(19.8)
16.4 $

18.3
21.1
(23.0)
16.4

Research and Development

Internal research and development costs are expensed as incurred. Third-party research and development costs are
expensed when the contracted work has been performed.

Foreign Currency

Balance sheet accounts of international subsidiaries are translated at the current exchange rates as of the end of each
accounting period. Income statement items are translated at average exchange rates for the period. The resulting
translation adjustments are recorded as a separate component of stockholders’ equity.

Foreign currency transaction gains and losses are included in Foreign exchange losses, net 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.

Forward Foreign Exchange Contracts

As part of distributing our products, we regularly enter into intercompany transactions. We enter into forward
foreign exchange contracts to manage foreign exchange risk of future movements in exchange rates that affect
foreign currency denominated intercompany receivables and payables. We do not use derivative financial
instruments for speculative or trading purposes, nor do we seek hedge accounting treatment for any of our contracts.
As a result, these contracts, generally with maturity dates of 90 days or less and denominated primarily in
currencies of industrial countries, are recorded as an asset or liability measured 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, all
of which are recorded as Foreign exchange losses, net 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.

Noncontrolling Interests

A noncontrolling interest in a subsidiary is an ownership interest in a consolidated entity that is reported as equity in
the consolidated financial statements and separate from Bio-Rad’s equity. In addition, net income (loss) attributable
to noncontrolling interests is reported separately from net income attributable to Bio-Rad in the consolidated
financial statements.

We do not own 100% of the voting stock of one of our consolidated subsidiaries. The remaining shares held by a
third party represents a noncontrolling (or minority) interest in this subsidiary. Our consolidated statements present
the full amount of assets, liabilities, income and expenses of all of our consolidated subsidiaries, with a partially
offsetting amount shown in noncontrolling interests for the portion of these assets and liabilities that are not
controlled by us.

Share-Based Compensation Plans

Stock-based compensation expense for all share-based payment awards granted is determined based on the grant-
date fair value. We recognize these compensation costs net of estimated forfeitures over the requisite service period
of the award, which is generally the vesting term of the share-based payment awards. We estimated the forfeiture
rate based on our historical experience. These plans are described more fully in Note 9.

Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) attributable to Bio-Rad by the weighted average
number of common shares outstanding for that period. Diluted earnings per share takes into account the effect of
dilutive instruments, such as stock options and restricted stock, and uses the average share price for the period in

determining the number of potential common shares that are to be added to the weighted average number of shares
outstanding. Potential common shares are excluded from the diluted earnings per share calculation if the effect
would be anti-dilutive.

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and are included in the computation of earnings per share
(EPS) pursuant to the two-class method. As our unvested restricted shares qualify as participating securities, we
have included these shares in the computation of EPS.

The weighted average number of common shares outstanding used to calculate basic and diluted earnings per share
and the anti-dilutive shares are as follows (in thousands):

Basic weighted average shares outstanding
Effect of potentially dilutive stock options
and restricted stock awards
Diluted weighted average common shares

Year Ended December 31,
2011

2010

2012

28,290

28,031

27,665

352
28,642

437
28,468

486
28,151

Anti-dilutive shares excluded from the computation of diluted
EPS

114

Fair Value of Financial Instruments

For certain financial instruments, including cash and cash equivalents, short-term investments, accounts receivable,
marketable securities, notes payable, accounts payable and foreign exchange contracts, the carrying amounts
approximate fair value.

The estimated fair value of financial instruments is based on the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) using available market information or other appropriate valuation
methodologies in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants. 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 (see Note 3).

Recent Accounting Standards Updates

In March 2013, the Financial Accounting Standards Board (FASB) issued guidance in regard to a parent's
accounting upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment
in a foreign entity. This guidance specifies that a cumulative translation adjustment (CTA) should be released into
earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a
consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of
the foreign entity. For sales of an equity method investment that is a foreign entity, a pro rata portion of CTA
attributable to the investment would be recognized in earnings upon sale of the investment. When an entity sells
either a part or all of its investment in a consolidated foreign entity, CTA would be recognized in earnings only if
the sale results in the parent no longer having a controlling financial interest in the foreign entity. CTA would be
recognized in earnings in a business combination achieved in stages (i.e., a step acquisition). This guidance will be
effective prospectively for annual and interim reporting periods beginning after December 15, 2013. We do not
expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

existence of events and circumstances indicates that it is more likely than not that the indefinite-lived asset is
impaired and hence if further testing is necessary. An entity also has the option to bypass the qualitative assessment
for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative
impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period.
This guidance was effective for annual and interim impairment tests performed for fiscal years beginning after
September 15, 2012 and is not expected to have a material impact on our consolidated financial statements.

In June 2011, the FASB issued guidance in regard to the presentation of comprehensive income. In the new
guidance an entity has the option to present the total of comprehensive income, the components of net income, and
the components of other comprehensive income either in a single continuous statement of comprehensive income or
in two separate but consecutive statements. We adopted this guidance using the two separate but consecutive
statements as of January 1, 2012. In February 2013, the FASB issued guidance requiring that companies present
either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts
reclassified from each component of accumulated other comprehensive income based on its source and the income
statement line items affected by the reclassification. If a component is not required to be reclassified to net income
in its entirety, companies would instead cross reference to the related footnote for additional information. This
guidance was effective for annual and interim reporting periods beginning after December 15, 2012.

ACQUISITIONS

In August 2012, we acquired from Propel Labs, Inc. a new cell sorting system, an automated, easy-to-use benchtop
cell sorting flow cytometer. The new system will be sold exclusively under the Bio-Rad brand as the S3TM Cell
Sorter. This asset acquisition was accounted for as a business combination as the new cell sorting system
represented an integrated set of activities and assets that is capable of being conducted and managed for the purpose
of providing a return and therefore constitutes a business in accordance with GAAP. The amount of acquisition-
related cost was minimal as Bio-Rad primarily represented itself during the acquisition process. This business
acquisition is included in our Life Science segment's results of operations from the acquisition date.

The fair value of the consideration as of the acquisition date was $49.6 million, which included $5.0 million paid in
cash at the closing date and $44.6 million in contingent consideration potentially payable to Propel Labs'
shareholders. The contingent consideration was based on a probability-weighted income approach related to the
achievement of certain development and sales milestones. The contingent consideration for the development
milestones was valued at $19.9 million, based on assumptions regarding the probability of achieving the milestones,
with such amounts discounted to present value. The contingent consideration for the sales milestones was valued at
$24.7 million, based on a statistically significant number of simulations for each potential outcome. The contingent
consideration was recognized at its estimated fair value of $44.6 million as of December 31, 2012. (See Note 3 for
further discussion of the contingent consideration valuation and underlying assumptions.)

The fair values of the net assets acquired from Propel Labs, Inc. as of the acquisition date were determined to be
$17.4 million of goodwill, $32.1 million of definite-lived intangible assets and $0.1 million of net tangible assets.
We expect the goodwill recorded to be deductible for income tax purposes. The acquired cell sorting system fits
well into Bio-Rad's existing Life Science segment product offerings and may offer researchers greater access to this
technology.

In July 2012, we acquired all of the outstanding shares of DiaMed Benelux for 4.6 million Euros (approximately
$5.6 million) in cash. This acquisition was accounted for as a business combination as DiaMed Benelux
represented an integrated set of activities and assets that was capable of being conducted and managed for the

purpose of providing a return and therefore constitutes a business in accordance with GAAP. The amount of
acquisition-related cost was minimal as Bio-Rad primarily represented itself during the acquisition process. This
business acquisition is included in our Clinical Diagnostics segment's results of operations from the acquisition
date.

We acquired net tangible liabilities with a fair value of $2.3 million and the fair values of the assets acquired as of
the acquisition date were determined to be $3.0 million of goodwill and $4.9 million of definite-lived intangible
assets. The goodwill recorded will not be deductible for income tax purposes. DiaMed Benelux became the
exclusive distributor of certain Bio-Rad immunohematology products in the Benelux market as a result of our 2007
acquisition of DiaMed Holding AG. This distributor acquisition is consistent with our stated objective to control
the distribution of our own products and services.

In January 2012, we purchased, for cash, certain assets from a raw material supplier for approximately $12.5
million. This asset acquisition was accounted for as a business combination as the certain assets acquired
represented an integrated set of activities and assets that is capable of being conducted and managed for the purpose
of providing a return and therefore constitutes a business in accordance with GAAP. The amount of acquisition-
related cost was minimal as Bio-Rad primarily represented itself during the acquisition process. This business
acquisition is included in the Clinical Diagnostics segment's results of operations from the acquisition date. The fair
value of the assets acquired at the acquisition date was determined to be $6.3 million of net tangible assets, $5.1
million of intangible assets and $1.1 million of goodwill. We expect the goodwill recorded to be deductible for
income tax purposes. In addition, we paid $2.0 million for employment agreements as an incentive to certain
employees of the acquired business to remain with Bio-Rad. Such amount will be expensed over the next two years
and is recorded in Prepaid expenses, taxes and other current assets and Other assets in our Consolidated Balance
Sheet. We believe this acquisition will allow us to secure the supply of critical raw materials and lower our overall
costs in the Clinical Diagnostics segment.

We do not consider any of these business combinations in 2012, individually, or when aggregated, to be material
and therefore have not disclosed the pro forma results of operations as required for material business combinations.

On October 4, 2011, we acquired all of the issued and outstanding stock of QuantaLife, Inc. (QuantaLife). The fair
value of the consideration as of the acquisition date was $179.4 million, which was comprised of $150.3 million
paid in cash at the closing date, a $5.0 million holdback of cash until the completion of certain post-closing matters,
and $24.1 million in contingent consideration potentially payable to QuantaLife shareholders. The contingent
consideration was initially recognized at its estimated fair value of $24.1 million at October 4, 2011, based on a
probability-weighted income approach that would reach $48 million upon the achievement of all sales and
development milestones. The contingent consideration for the development milestone was valued based on
assumptions regarding the probability of achieving the milestone, with such amounts discounted to present value.
The contingent consideration for the sales milestones were valued based on a statistically significant number of
simulations for each potential outcome. (See Note 3 for further discussion of the contingent consideration valuation
and underlying assumptions.) The operating results of this business are included in the results of operations of our
Life Science segment from the acquisition date. The acquisition was accounted for as a business combination.

The final fair values of the net assets acquired as of the acquisition date were determined to be $105.5 million of
goodwill, $94.7 million of intangible assets and $20.8 million of net tangible liabilities. We do not expect the
goodwill recorded to be deductible for tax purposes. Integrating the acquired QuantaLife business into Bio-Rad is

expected to expand our current portfolio of products for the amplification and study of DNA and we believe it will
complement Bio-Rad's existing business.

In June 2011, we acquired the remaining outstanding shares of DiaMed S.E.A. Limited (DiaMed Thailand) from
multiple noncontrolling shareholders for approximately $0.2 million in cash. As this acquisition was accounted for
as an equity transaction, Bio-Rad's noncontrolling interest was reduced by $1.0 million and additional paid-in-
capital was increased by $0.8 million. DiaMed is included in our Clinical Diagnostics segment.

In February 2011, we acquired an additional 39% of Distribuidora de Analitica para Medicina Ibérica S.A. (DiaMed
Spain) from multiple noncontrolling shareholders, increasing our ownership in DiaMed Spain to 90%. We paid
approximately 2.5 million Euros or $3.4 million in cash. This acquisition, also included in our Clinical Diagnostics
segment, was accounted for as an equity transaction, which reduced Bio-Rad’s noncontrolling interests and
additional paid-in capital by approximately $2.4 million and $1.0 million, respectively.

3. FAIR VALUE MEASUREMENTS

We determine the fair value of an asset or liability based on the assumptions that market participants would use in
pricing the asset or liability in an orderly transaction between market participants at the measurement date. The
identification of market participant assumptions provides a basis for determining what inputs are to be used for
pricing each asset or liability. A fair value hierarchy has been established which gives precedence to fair value
measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritizes
the inputs into three broad levels as follows:

• Level 1: Quoted prices in active markets for identical instruments
• Level 2: Other significant observable inputs (including quoted prices in active markets for similar

instruments)

• Level 3: Significant unobservable inputs (including assumptions in determining the fair value of certain

investments)

Financial assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2012 are
classified in the hierarchy as follows (in millions):

Financial Assets Carried at Fair Value:
Cash equivalents (a):
Commercial paper
Foreign time deposits
U.S. government sponsored agencies
Money market funds

Total cash equivalents
Available-for-sale investments (b):

Corporate debt securities
Foreign brokered certificates of deposit
U.S. government sponsored agencies
Foreign government obligations
Municipal obligations
Marketable equity securities
Asset-backed securities

Total available-for-sale investments

Forward foreign exchange contracts (c)

Total financial assets carried at fair value

Financial Liabilities Carried at Fair Value:
Forward foreign exchange contracts (d)
Contingent consideration (e)

Total financial liabilities carried at fair value

Level 1

Level 2

Level 3

Total

— $

10.1
—
5.5
15.6

—
—
—
—
—
242.1
—
242.1
—
257.7 $

52.8 $
—
1.3
—
54.1

240.6
0.4
92.7
5.6
12.1
—
82.2
433.6
1.1
488.8 $

— $
—
—
—
—

—
—
—
—
—
—
—
—
—
— $

— $
—
— $

0.8 $
—
0.8 $

— $

52.6
52.6 $

52.8
10.1
1.3
5.5
69.7

240.6
0.4
92.7
5.6
12.1
242.1
82.2
675.7
1.1
746.5

0.8
52.6
53.4

Financial assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2011 are
classified in the hierarchy as follows (in millions):

Financial Assets Carried at Fair Value:
Cash equivalents (a):
Commercial paper
Bonds
Foreign time deposits
Money market funds

Total cash equivalents
Available-for-sale investments (b):

Total available-for-sale investments

Forward foreign exchange contracts (c)

Total financial assets carried at fair value

Financial Liabilities Carried at Fair Value:
Forward foreign exchange contracts (d)
Contingent consideration (e)

Total financial liabilities carried at fair value

Level 1

Level 2

Level 3

Total

— $
—
21.6
58.3
79.9

—
—
—
—
—
134.8
—
134.8
—
214.7 $

106.0
8.6
—
—
114.6

170.6
1.8
36.9
5.7
5.0
—
11.2
231.2
0.8
346.6

— $
—
—
—
—

—
—
—
—
—
—
—
—
—
— $

— $
—
— $

1.2
—
1.2 $

— $

24.1
24.1 $

106.0
8.6
21.6
58.3
194.5

170.6
1.8
36.9
5.7
5.0
134.8
11.2
366.0
0.8
561.3

1.2
24.1
25.3

(a) Cash equivalents are included in Cash and cash equivalents in the Consolidated Balance Sheets.

(b) Available-for-sale investments are included in the following accounts in the Consolidated Balance Sheets

(in millions):

Short-term investments
Other assets

Total

December 31,
2012

December 31,
2011

457.7
218.0
675.7

238.8
127.2
366.0

current assets in the Consolidated Balance Sheets.

(d) Forward foreign exchange contracts in a liability position are included in Other current liabilities in the

Consolidated Balance Sheets.

(e) Contingent consideration liability is included in the following accounts in the Consolidated Balance Sheet

(in millions):

Other current liabilities
Other long-term liabilities
Total

December 31,
2012

December 31,
2011

27.3
25.3
52.6

8.5
15.6
24.1

During the fourth quarter of 2011, we recognized a contingent consideration liability upon our acquisition of
QuantaLife, related to potential future payments due upon the achievement of certain sales and development
milestones. The contingent consideration was initially recognized at its estimated fair value of $24.1 million, based
on a probability-weighted income approach. The contingent consideration was recognized at its estimated fair
value of $8.0 million and $24.1 million as of December 31, 2012 and 2011, respectively. At October 4, 2011, the
contingent consideration could have originally reached a maximum of $48 million upon the achievement of all sales
milestones and a development milestone. As of December 31, 2012, the first three short-term sales milestones were
not met and therefore the contingent consideration can now only reach a maximum of $37 million upon the
achievement of all the remaining sales and development milestones. The development milestone was met as of
December 31, 2012, resulting in a payment of $6 million in January 2013.

During the third quarter of 2012, we recognized a contingent consideration liability upon our acquisition of a new
cell sorting system from Propel Labs, Inc. The contingent consideration was recognized at its estimated fair value
of $44.6 million as of December 31, 2012, based on a probability-weighted income approach related to the
achievement of certain development and sales milestones valued at $19.9 million and $24.7 million, respectively.
The development milestone could potentially reach a maximum of $20 million, which we consider the probability
to be more than likely of achieving the milestones. This form of payment guarantees that the seller transitions the
manufacturing of the product to Bio-Rad. The sales milestone could potentially range from $0 to a maximum of
60.0%, 56.7% and 54.4% of annual cell sorting system purchase orders, and payment to occur upon the anniversary
of the completion of a certain number of cell sorting systems for three consecutive years, respectively. These
maximum payout ratios begin at annual cell sorting system purchase orders in excess of $20 million, $30 million
and $45 million for the three consecutive years, respectively.

The following table provides a reconciliation of the Level 3 contingent consideration liabilities measured at fair
value based on third party valuations for the year ended December 31, 2012 (in millions):

January 1
Decrease in fair value of contingent consideration for
QuantaLife included in Selling, general and
administrative expense

Total QuantaLife

Acquisition of cell sorting system
December 31

2012

24.1

(16.1)

8.0

44.6
52.6

The decrease in the contingent consideration liability for QuantaLife was primarily due to not achieving the first
three short-term sales milestones as a result of recent weakening in funding to the research and development
markets and a longer sales cycle for this new technology, causing a revision in sales forecasts for the remaining
sales milestone contractual period ending in March 2014.

The following table provides quantitative information about Level 3 inputs for fair value measurement of our
contingent consideration liabilities as of December 31, 2012. Significant increases or decreases in these inputs in
isolation could result in a significantly lower or higher fair value measurement.

Valuation Technique
Probability-weighted
income approach

QuantaLife

Cell sorting
system

Probability-weighted
income approach

Unobservable Input

Sales milestone:
Credit adjusted discount rates
Projected volatility of growth rate
Market price of risk

Sales milestone:
Credit adjusted discount rates
Projected volatility of sales
Market price of risk
Development milestone:
Probability
Risk-adjusted discount rate

Range

From

0.64%
12.4%
0.4%

1.0%
18.0%
1.4%

99%
0.8%

1.03%
30%
N/A

1.7%

N/A

100%
1.0%

To estimate the fair value of Level 2 debt securities as of December 31, 2012 and December 31, 2011, our primary
pricing service relies on inputs from multiple industry-recognized pricing sources to determine the price for each
investment. In addition, our pricing service performed reasonableness testing of their prices on a daily basis by
comparing them to the prices reported by our custodians as well as prior day prices. If the price difference fell
outside of predetermined tolerable levels, they investigated the cause and resolved the pricing issue. Based on a
review of the results of this analysis, we utilized our primary pricing service for all Level 2 debt securities as none
of these securities tested outside of the tolerable levels.

As of December 31, 2012, our primary pricing service inputs for Level 2 U.S. government sponsored agencies,
municipal obligations, corporate and foreign government bonds, asset-backed securities and related cash
equivalents consisted of market prices from a variety of industry standard data providers, security master files from
large financial institutions and other third-party sources. These multiple market prices were used by our primary
pricing service as inputs into a distribution-curve based algorithm to determine the daily market value.

As of December 31, 2012, our primary pricing service inputs for Level 2 corporate debt securities (commercial
paper), bank deposits and related cash equivalents consisted of dynamic and static security characteristics
information obtained from several independent sources of security data. The dynamic inputs such as credit rating,
factor and variable-rate, were updated daily. The static characteristics included inputs such as day count and first
coupon upon initial security creation. These securities were typically priced utilizing mathematical calculations
reliant on these observable inputs. Other available-for-sale foreign government obligations were based on
indicative bids from market participants.

As of December 31, 2011, our primary pricing service inputs for Level 2 cash equivalents (bonds), U.S. government
sponsored agencies, municipal obligations, corporate debt securities (bonds) and asset-backed securities consisted
of market prices from a variety of industry standard data providers, security master files from large financial
institutions and other third-party sources. These multiple market prices were used by our primary pricing service as
inputs into a distribution-curve based algorithm to determine the daily market value.

As of December 31, 2011, our primary pricing service inputs for Level 2 cash equivalents (commercial paper),
corporate debt securities (commercial paper), foreign government obligations (commercial paper) and time deposits
consisted of dynamic and static security characteristics information obtained from several independent sources of
security data. The dynamic inputs such as credit rating, factor and variable-rate, were updated daily. The static
characteristics included inputs such as day count and first coupon upon initial security creation. These securities
were typically priced via mathematical calculations reliant on these observable inputs. Other available-for-sale
foreign government obligations were based on indicative bids from market participants.

Available-for-sale investments consist of the following (in millions):

Short-term investments:

Corporate debt securities
Foreign brokered certificates of deposit
Municipal obligations
Asset-backed securities
U.S. government sponsored agencies
Foreign government obligations
Marketable equity securities

Long-term investments:

Marketable equity securities
Asset-backed securities
Foreign government obligations

Total

Short-term investments:

Long-term investments:

Marketable equity securities
Asset-backed securities

Foreign government obligations

December 31, 2012

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Estimated
Fair
Value

239.3 $
0.4
12.0
81.6
92.5
5.4
24.1
455.3

54.5
0.4
0.2
55.1
510.4 $

1.4 $
—
0.1
0.4
0.3
—
0.7
2.9

163.0
—
—
163.0
165.9 $

(0.1) $
—
—
(0.1)
(0.1)
—
(0.2)
(0.5)

—
(0.1)
—
(0.1)
(0.6) $

240.6
0.4
12.1
81.9
92.7
5.4
24.6
457.7

217.5
0.3
0.2
218.0
675.7

December 31, 2011

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Estimated
Fair
Value

170.9 $
1.8
5.0
10.8
36.8
5.4
7.7
238.4

57.2
0.5
0.3
58.0

0.1 $
—
—
—
0.1
—
0.6
0.8

70.0
—
—
70.0

(0.4) $
—
—
—
—
—
—
(0.4)

(0.7)
(0.1)
—
(0.8)

170.6
1.8
5.0
10.8
36.9
5.4
8.3
238.8

126.5
0.4
0.3
127.2

366.0

Total

296.4 $

70.8 $

(1.2) $

The following is a summary of investments with gross unrealized losses and the associated fair value (in millions):

December 31,
2012

December 31,
2011

Fair value
Gross unrealized losses for investments in a loss position 12 months or more
Gross unrealized losses for investments in a loss position less than 12 months

$
$
$

99.3 $
0.1 $
0.5 $

77.8
0.4
0.8

The unrealized losses on these securities are due to a number of factors, including changes in interest rates, changes
in economic conditions and changes in market outlook for various industries, among others. Because Bio-Rad has
the ability and intent to hold these investments with unrealized losses until a recovery of fair value, or for a
reasonable period of time sufficient for a forecasted recovery of fair value, which may be maturity, we do not
consider these investments to be other-than-temporarily impaired at December 31, 2012 or at December 31, 2011.

Forward foreign 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. 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 denominated primarily in currencies of industrial countries, are recorded at their fair value at each balance
sheet date. The notional principal amounts provide one measure of the transaction volume outstanding as of
December 31, 2012 and do not represent the amount of Bio-Rad's exposure to loss. The estimated fair value of
these contracts was derived using the spot rates published in the Wall Street Journal on the last business day of the
quarter and the points provided by counterparties. The resulting gains or losses offset exchange gains or losses on
the related receivables and payables, both of which are included in Foreign exchange losses, net 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

The following is a summary of our forward foreign currency exchange contracts (in millions):

Contracts maturing in January through March 2013 to sell foreign currency:

Notional value
Unrealized loss

Contracts maturing in January through March 2013 to purchase foreign currency:

Notional value
Unrealized gain

December 31,
2012

$
$

67.2
(0.2)

389.1
0.4

The following is a summary of the amortized cost and estimated fair value of our debt securities at December 31,
2012 by contractual maturity date (in millions):

Mature in less than one year
Mature in one to five years
Mature in more than five years

Total

Amortized
Cost

Estimated Fair
Value

159.2 $
204.8
67.8

431.8 $

159.3
205.6
68.7

433.6

The estimated fair value of financial instruments in the table below has been determined using quoted prices in
active markets for identical instruments or other significant observable inputs, including quoted prices in active
markets for similar instruments. 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. Other assets include some financial instruments that have fair values based on market
quotations. Long-term debt, excluding leases and current maturities, has an estimated fair value based on quoted
market prices for the same or similar issues.

The estimated fair value of our financial instruments and the level of the fair value hierarchy within which the fair
value measurement is categorized are as follows (in millions):

December 31, 2012

December 31, 2011

Carrying
Amount

Estimated
Fair
Value

Fair Value
Hierarchy
Level

Carrying
Amount

Estimated
Fair
Value

Fair Value
Hierarchy
Level

Other assets
Total long-term debt, excluding leases

and current maturities

$ 293.6 $

497.8

$ 720.0 $

778.4

186.6 $

252.4

719.1 $

759.1

We own shares of ordinary voting stock of Sartorius AG (Sartorius), of Goettingen, Germany, a process technology
supplier to the biotechnology, pharmaceutical, chemical and food and beverage industries. We own over 30% of the
outstanding voting shares (excluding treasury shares) of Sartorius as of December 31, 2012. 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 the ability to exercise significant
influence over the operating and financial policies of Sartorius. In addition, the ordinary voting stock of Sartorius is
thinly traded. Therefore, we account for this investment using the cost method. The carrying value of this
investment is included in Other assets in our Consolidated Balance Sheets.

GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS

Changes to goodwill by segment were as follows (in millions):

Balances as of January 1:

Goodwill

Accumulated impairment losses

Goodwill, net

Acquisitions

Purchase adjustment

Goodwill written off related to excess property

Currency fluctuations

Balances as of December 31:

Goodwill

Accumulated impairment losses and write-offs

2012

2011

Life
Science

Clinical
Diagnostics

Total

Life
Science

Clinical
Diagnostics

Total

176.8

319.3

$ 496.1

70.7

320.5

$ 391.2

(27.2)

149.6

17.4
(0.6)

—

193.6

(27.2)

—

319.3

4.1
—

(1.0)

6.6

330.0

(1.0)

(27.2)

468.9

21.5
(0.6)

(1.0)

6.6

523.6

(28.2)

(27.2)

43.5

106.1
—

—

176.8

(27.2)

—

320.5

—
—

—

(1.2)

319.3

—

(27.2)

364.0

106.1
—

—

(1.2)

496.1

(27.2)

Goodwill, net

166.4

329.0

$ 495.4

149.6

319.3

$ 468.9

In December 2012, we sold a building for $6.4 million in our Clinical Diagnostics segment that was associated with
a 1999 acquisition. We recognized a gain on the sale of $4.3 million and a portion of the goodwill recorded in a
1999 acquisition was written off of $1.0 million.

In conjunction with the purchase of certain assets from Propel Labs, Inc. in our Life Science segment in August
2012, we recorded $17.4 million of goodwill and $32.1 million of definite-lived intangible assets: $27.3 million of
developed product technology, $4.7 million of covenants not to compete and $0.1 million of other intangible assets.

In conjunction with the acquisition of 100% of the outstanding shares of DiaMed Benelux in our Clinical
Diagnostics segment in July 2012, we recorded $3.0 million of goodwill and $4.9 million of definite-lived
intangible assets: $3.8 million of customer relationships/lists and $1.1 million of tradenames.

In conjunction with the acquisition of certain assets from a raw material supplier in our Clinical Diagnostics
segment in January 2012, we recorded $1.1 million of goodwill and $5.1 million of definite-lived intangible assets
considered developed product technology.

As part of the acquisition of QuantaLife in our Life Science segment in October 2011, we recorded $105.5 million
of goodwill and $94.7 million of definite-lived intangible assets considered know how.

Other than goodwill, we have no significant intangible assets with indefinite lives. Information regarding our
identifiable purchased intangible assets with definite lives is as follows (in millions):

Customer relationships/lists
Know how
Developed product technology
Licenses
Tradenames
Covenants not to compete
Other

Customer relationships/lists
Know how
Developed product technology
Licenses
Tradenames
Covenants not to compete
Patents
Other

Average
Remaining
Life (years)
1-12
1-13
1-10
1-8
1-10
1-10
1

Average
Remaining
Life (years)
1-12
1-14
1-11
1-9
1-10
1-7
—
—

December 31, 2012

Purchase
Price

Accumulated
Amortization

Net
Carrying
Amount

102.8 $
189.3
74.6
35.6
7.4
4.9
0.1
414.7 $

(38.4) $
(67.1)
(25.1)
(18.7)
(4.3)
(0.2)
—
(153.8) $

64.4
122.2
49.5
16.9
3.1
4.7
0.1
260.9

December 31, 2011

Purchase
Price

Accumulated
Amortization

Net
Carrying
Amount

98.7 $

187.0
47.6
35.6
29.5
5.8
1.0
0.1
405.3 $

(30.9) $
(45.7)
(24.6)
(15.7)
(22.1)
(5.7)
(1.0)
(0.1)
(145.8) $

67.8
141.3
23.0
19.9
7.4
0.1
—
—
259.5

No material impairment losses related to intangible assets were recorded in 2012 or 2011.

Amortization expense related to purchased intangible assets for the years ended December 31, 2012, 2011 and 2010
was $42.8 million, $39.1 million and 33.7 million, respectively. Estimated future amortization expense (based on
existing intangible assets) for the years ending December 31, 2013, 2014, 2015, 2016 and 2017 is $40.9 million,
$38.2 million, $35.3 million, $31.9 million and $23.4 million, respectively.

NOTES PAYABLE AND LONG-TERM DEBT

Notes payable includes amounts borrowed against credit lines maintained locally by our international subsidiaries,
in which the borrowing capacity was approximately $27.9 million and $23.8 million was unused at December 31,
2012. At December 31, 2011, these lines aggregated approximately $21.9 million, of which $17.5 million was
unused. The weighted average interest rate on these lines was 3.2% and 2.7% at December 31, 2012 and 2011,
respectively. Bio-Rad guaranteed most of these credit lines.

The principal components of long-term debt are as follows (in millions):

8.0% Senior Subordinated Notes due 2016
4.875% Senior Notes due 2020
Capital leases and other debt

Less current maturities
Long-term debt

Senior Subordinated Notes due 2016

December 31,
2012

December 31,
2011

296.9 $
423.0
12.7
732.6
(0.2)

732.4 $

296.3
422.8
13.2
732.3
(0.6)

731.7

In May 2009, Bio-Rad sold $300.0 million principal amount of Senior Subordinated Notes due 2016 (8.0% Notes).
The sale yielded net cash proceeds of $294.8 million at an effective interest rate of 8.3%. The 8.0% Notes pay a
fixed rate of interest of 8.0% per year. We have the option to redeem any or all of the 8.0% Notes at any time prior
to September 15, 2013 at a redemption price of 100% of the principal amount thereof plus a specified make-whole
premium (as defined in the indenture) governing the 8.0% Notes and accrued and unpaid interest thereon to the
redemption date. We also have the option to redeem any or all of the 8.0% Notes at any time on or after September
15, 2013 at various declining redemption prices plus accrued and unpaid interest thereon to the redemption date.
Our obligations under the 8.0% Notes are not secured, rank equal in right of payment with all of our existing and
future senior subordinated indebtedness and rank junior in right of payment to all of our existing and future
unsubordinated indebtedness, including any borrowings under the Credit Agreement and the 4.875% Notes.

Senior Notes due 2020

In December 2010, Bio-Rad sold $425.0 million principal amount of Senior Notes due 2020 (4.875% Notes). The
sale yielded net cash proceeds of $422.6 million at an effective rate of 4.946%. The 4.875% Notes pay a fixed rate
of interest of 4.875% per year. We have the option to redeem any or all of the 4.875% Notes at any time at a
redemption price of 100% of the principal amount (plus a specified make-whole premium as defined in the
indenture governing the 4.875% Notes) and accrued and unpaid interest thereon to the redemption date. Our
obligations under the 4.875% Notes are not secured and rank equal in right of payment with all of our existing and
future unsubordinated indebtedness. The net proceeds from the issuance of the 4.875% Notes were used, together
with cash on hand, to redeem all $200.0 million of our 6.125% Notes (as defined below) in December 2010 and all
$225.0 million of our 7.5% Notes (as defined below) in January 2011.

Senior Subordinated Notes due 2013

In August 2003, Bio-Rad sold $225.0 million principal amount of Senior Subordinated Notes due 2013 (7.5%.
Notes). In January 2011, we redeemed all of the 7.5% Senior Subordinated Notes due 2013 for $234.6 million,
including a call premium of $2.8 million, which is included in Interest expense in our Consolidated Statements of
Income.

Senior Subordinated Notes due 2014

In December 2004, Bio-Rad sold $200.0 million principal amount of Senior Subordinated Notes due 2014 (6.125%
Notes). In December 2010, we redeemed all of the 6.125% Notes for $204.3 million, including a call premium of
$4.1 million, which is included in Interest expense in our Consolidated Statements of Income.

Amended and Restated Credit Agreement (Credit Agreement)

In June 2010, Bio-Rad entered into a $200.0 million Credit Agreement. Borrowings under the Credit Agreement are
on a revolving basis and can be used for acquisitions, for working capital and for other general corporate purposes.
We had no outstanding borrowings under the Credit Agreement as of December 31, 2012 or December 31, 2011.
The Credit Agreement expires on June 21, 2014.

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 of our foreign subsidiaries. It is guaranteed by all of our
existing and future material domestic subsidiaries. The Credit Agreement and the 8.0% Notes require Bio-Rad to
comply with certain financial ratios and covenants, among other things. These ratios and covenants include a
leverage ratio test and an interest coverage test, as well as 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 of these ratios and
covenants as of December 31, 2012.

Maturities of long-term debt at December 31, 2012 are as follows: 2013 - $0.2 million; 2014 - $0.2 million; 2015 -
$0.2 million; 2016 - $297.1 million; 2017 - $0.2 million; thereafter - $434.7 million.

6. INCOME TAXES

The U.S. and international components of income before taxes are as follows (in millions):

U.S.
International
Income before taxes

Year Ended December 31,
2011

2010

2012

108.5
114.4
222.9

110.6
125.2
235.8

79.5
140.8
220.3

The provision for income taxes consists of the following (in millions):

Current tax expense (benefit):

U.S. Federal
State
International

Current tax expense

Deferred tax (benefit) expense:

U.S. Federal
State
International

Deferred tax benefit

Non-current tax (benefit) expense
Provision for income taxes

Year Ended December 31,
2011

2010

2012

34.0 $
4.0
32.1
70.1

(3.1)
(0.9)
(6.3)
(10.3)
(0.7)
59.1 $

28.6 $
3.4
35.8
67.8

6.7
0.4
(9.1)
(2.0)
(8.1)
57.7 $

(5.1)
3.9
35.2
34.0

5.9
0.2
(10.2)
(4.1)
3.4
33.3

The reconciliation between our effective tax rate on income before taxes and the statutory tax rate is as follows:

U. S. statutory tax rate
Impact of foreign operations
Research tax credits
Tax settlements and adjustments to unrecognized tax benefits
Repatriation of foreign earnings
Contingent consideration
Other
Provision for income taxes

Year Ended December 31,
2011

2010

2012

35%
(3)
(2)
—
—
(3)
—
27%

35%
(4)
(4)
(3)
—
—
—
24%

35%
(6)
(4)
2
(10)
—
(2)
15%

The effective tax rate for 2012 reflected a tax benefit related to an adjustment to the fair value of the QuantaLife
contingent consideration. The effective tax rate for 2012 does not include tax benefits from the U.S. federal tax
research credits because the law extending this credit was not enacted until 2013. The effective tax rate for 2011
reflected tax benefits from nontaxable dividend income and the release of tax liabilities. The lower effective tax
rate in 2010 was due to a $22.0 million foreign tax credit benefit related to a $164.0 million distribution from our
foreign affiliates to the U.S.

The effective tax rates for all three periods were lower than the U.S. statutory rate primarily due to tax benefits from
differences between U.S. and foreign statutory tax rates, and research and development tax credits. Our foreign
income is earned primarily in France and Switzerland. Switzerland's statutory tax rate is significantly lower than
our U.S. statutory tax rate of 35%. Our effective tax rates are also significantly reduced by French tax incentives
related to our research and development activities.

Deferred tax assets and liabilities reflect the tax effects of losses, credits, and 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:

Bad debt, inventory and warranty accruals
Other post-employment benefits, vacation and other reserves
Tax credit and net operating loss carryforwards
Other
Valuation allowance

Deferred tax liabilities:

Depreciation
Basis of capital assets and investments

Net deferred tax liabilities

December 31,

2012

2011

24.1 $
26.5
62.1
18.3
(52.9)
78.1

8.6
119.3
127.9
(49.8) $

24.7
16.6
64.2
17.2
(48.9)
73.8

13.5
86.3
99.8
(26.0)

At December 31, 2012, Bio-Rad’s international subsidiaries had combined net operating loss carryforwards of
$99.6 million. Of these loss carryforwards, $97.7 million have no expiration date. We believe that it is more likely
than not that the benefit from most of these net operating loss carryforwards will not be realized. We have provided
a valuation allowance of $25.6 million relating to these net operating loss carryforwards.

At December 31, 2012, Bio-Rad had U.S. Federal net operating loss carryforwards of approximately $36 million as
a result of acquisitions. These carryforwards are subject to limitation on their utilization and will expire between
2018 and 2030. At December 31, 2012, Bio-Rad had U.S. Federal research tax credit carryforwards of $1.5 million,
which are subject to limitations on their utilization.

At December 31, 2012, Bio-Rad had approximately $53 million of California net operating loss carryforwards
related to the acquisition of QuantaLife. We believe that it is more likely than not that the benefit from these net
operating loss carryforwards will not be realized and have recorded a full valuation allowance against these losses.
At December 31, 2012, Bio-Rad had a deferred tax asset of $17.2 million relating to California research tax credit
carryforwards, including $1.1 million from the acquisition of QuantaLife, which may be carried forward
indefinitely. Based on our judgment and consistent with prior years, we have recorded a full valuation allowance
against the deferred tax asset.

We believe that it is more likely than not that certain of these deferred tax assets described above will not be
realized in the foreseeable future. If or when recognized, the tax benefits relating to any reversal of the valuation
allowance on deferred tax assets at December 31, 2012 will be recognized as a reduction of income tax expense.

The following table summarizes at December 31, 2012 the tax years that are either currently under audit or remain
open and subject to examination by tax authorities in the major jurisdictions that Bio-Rad operates:

U.S.
Canada
France
Germany
Italy
Japan
Switzerland

2009-2012
2007-2012
2008-2012
2008-2012
2008-2012
2009-2012
2010-2012

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):

Unrecognized tax benefits – January 1

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
Unrecognized tax benefits – December 31

2012

2011

2010

12.9 $
1.3
(1.1)
2.2
—
(3.0)
2.2
—

14.5 $

20.6 $
1.2
(0.4)
2.1
(5.2)
(5.1)
—
(0.3)

12.9 $

17.5
4.1
(0.1)
3.3
(0.1)
(4.1)
—
—

20.6

Substantially all our unrecognized tax benefits at December 31, 2012, 2011 and 2010 would affect the effective tax
rate if recognized.

Bio-Rad recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
Related to the unrecognized tax benefits noted above, Bio-Rad has accrued interest of $2.0 million and $2.1 million
as of December 31, 2012 and 2011, respectively.

At December 31, 2012, we believe that it is reasonably possible that $3.7 million of our unrecognized tax benefits
may be recognized by the end of 2013 as a result of statute lapses. 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 operations.
As of December 31, 2012, Bio-Rad had not made a provision for U.S. or additional foreign withholding taxes on
approximately $484 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 circumstances. If these earnings were repatriated to
the U.S., the deferred tax liability associated with these temporary differences would be approximately $102
million.

STOCKHOLDERS' EQUITY

Bio-Rad’s issued and 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 75% 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 founders of
Bio-Rad, 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.

Treasury Shares

limit our ability to repurchase our stock. In accordance with the terms of awards under the 2007 Incentive Award
Plan, in June 2012, we withheld 122 shares of our Class A common stock and 917 shares of our Class B common
stock to satisfy the minimum statutory tax obligations due upon the vesting of restricted stock of certain of our
employees, which is considered a repurchase of our stock. We had no other repurchases of our stock during 2012 or
2011. In 2013, we estimate repurchasing approximately 1,000 shares to satisfy tax obligations due upon the vesting
of restricted stock of certain of our employees.

ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income included in our Consolidated Balance Sheets and Consolidated
Statements of Changes in Stockholders' Equity consists of the following components, all net of income taxes (in
millions):

Foreign currency translation adjustments
Other post-employment benefits adjustments
Net unrealized holding gains on available-for-sale investments
Total Accumulated other comprehensive income
Noncontrolling interests Accumulated other comprehensive loss
Bio-Rad Accumulated other comprehensive income

December 31,
2012

December 31,
2011

173.1
(8.1)
109.7
274.7
0.2
274.9

149.0
0.2
49.3
198.5
0.2
198.7

9. SHARE-BASED COMPENSATION/STOCK OPTION AND PURCHASE PLANS

Description of Share-Based Compensation Plans

Stock Option and Award Plans
We have three stock option plans for officers and certain other employees: the 1994 Stock Option Plan (1994 Plan);
the 2003 Stock Option Plan (2003 Plan); and the 2007 Incentive Award Plan (2007 Plan). The 1994 Plan and 2003
Plan authorized the grant of incentive stock options and non-qualified stock options to employees. The 2007 Plan
authorizes the grant of stock options, restricted stock awards, restricted stock units, stock appreciation rights and
other types of equity awards to employees. We no longer grant stock option grants under the 1994 Plan or 2003
Plan. Since 2007, all share-based compensation grants have been from the 2007 Plan. A total of 1,650,360 shares
have been reserved for issuance of equity awards under the 2007 Plan and may be of either Class A or Class B
common stock. At December 31, 2012, there were 653,015 shares available to be granted in the future.

Under the above plans, Class A and Class B options are granted at prices not less than fair market value of the
underlying common stock 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. Stock awards issued
under the 2007 Plan generally vest in increments of 20% per year over a five-year period on the yearly anniversary
date of the grant.

Employee Stock Purchase Plans
Our Amended and Restated 1988 Employee Stock Purchase Plan (1988 ESPP) and our 2011 Employee Stock
Purchase Plan (2011 ESPP) 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. As of January 1, 2012, we no longer issue shares from the 1988 ESPP.

The 2011 ESPP includes two components: a Code Section 423 Component that we intend to qualify as an
“employee stock purchase plan” under Section 423 of the U.S. Internal Revenue Code of 1986, as amended (the
“Code”) and a Non-423 Component, which authorizes the grant of purchase rights that does not qualify as an
“employee stock purchase plan” under Section 423 of the Code. We have authorized the sale of 600,000 shares of
Class A common stock under the 2011 ESPP.

Share-Based Compensation Expense

Included in our share-based compensation expense is the cost related to stock option grants, ESPP stock purchases,
restricted stock and restricted stock unit awards. Share-based compensation expense is allocated to Cost of goods
sold, Research and development expense, and Selling, general and administrative expense in the Consolidated
Statements of Income.

For 2012, 2011 and 2010, we recognized share-based compensation expense of $13.2 million, $10.7 million and
$10.2 million, respectively. We did not capitalize any share-based compensation expense in inventory.

For options and awards, we amortize 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.

Stock Options
The following table summarizes stock option activity.

Outstanding, January 1, 2010

Granted
Exercised
Forfeited/expired

Outstanding, December 31, 2010

Granted
Exercised
Forfeited/expired

Outstanding, December 31, 2011

Granted
Exercised
Forfeited/expired

Outstanding, December 31, 2012
Vested and expected to vest,

December 31, 2012

Exercisable, December 31, 2012

Weighted-
Average
Exercise Price
50.78
84.57
26.81
61.08
57.12
99.49
42.44
62.98
63.50
107.32
44.66
87.78
70.83

$
$
$
$
$
$
$
$
$
$
$
$
$

Shares
1,206,374
58,500
(200,125)
(6,930)
1,057,819
58,500
(220,372)
(7,197)
888,750
55,250
(181,707)
(15,000)
747,293

732,875
584,943

$
$

70.28
64.06

Weighted-
Average
Remaining
Contractual
Term (in
years)

Aggregate
Intrinsic
Value
(in millions)

4.32

4.23
3.20

$
$

25.7

25.6
24.0

The following summarizes information about stock options outstanding at December 31, 2012:

Range of
Exercise Prices
$ 35.50 - $ 56.40
$ 57.49 - $ 63.00
$ 74.27 - $ 88.48
$ 98.04 - $107.32
Totals

Number
Outstanding

202,473
225,870
210,200
108,750
747,293

Options Outstanding
Weighted-Average
Remaining
Contractual Term
(in years)

Weighted -
Average
Exercise
Price

Options Exercisable

Number
Exercisable

Weighted -
Average
Exercise Price

1.42
2.92
6.05
9.28

$
$
$
$

53.69
61.20
80.82
103.44

202,473
225,870
145,900
10,700
584,943

$
$
$
$

53.69
61.20
80.29
99.44

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 2012, 2011 and 2010 was
approximately $11 million, $14 million and $13 million, respectively. The total fair value of options vested during
2012, 2011 and 2010 was $2.3 million, $3.3 million and $4.2 million, respectively.

Cash received from stock options exercised during 2012, 2011 and 2010 was $8.1 million, $9.4 million and $5.4
million, respectively. The actual tax benefit realized for the tax deductions from stock options exercised totaled
$6.5 million, $6.0 million and $5.0 million in 2012, 2011 and 2010, respectively.

As of December 31, 2012, there was $5.7 million of total unrecognized compensation cost from stock options. This
amount is expected to be recognized in the future over a weighted-average period of approximately 3 years.

The weighted-average fair value of 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
Weighted-average fair value of options granted

Year Ended December 31,
2011

2010

2012

30%
1.53%
9.0
—
41.82

32%
1.71%
8.6
—
40.81

35%
2.40%
8.7
—
38.19

Volatility is 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.
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. We do not anticipate paying any cash dividends in the future and
therefore use an expected dividend yield of zero.

Restricted Stock
Under the 2007 Plan, restricted stock was last granted in 2008 and there will be no further grants. 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 restricted stock activity:

2012

Year Ended December 31,
2011

2010

Restricted
Stock
Shares

Weighted-
Average
Grant-Date
Fair Value

Restricted
Stock
Shares

Weighted-
Average
Grant-Date
Fair Value

Restricted
Stock
Shares

Weighted-
Average
Grant-Date
Fair Value

$
39,629
(25,124) $
(1,548) $

84.07
81.98
84.20

$
68,893
(26,179) $
(3,085) $

83.21
81.98
82.63

$
101,247
(28,518) $
(3,836) $

82.86
81.94
83.47

12,957

88.09

39,629

84.07

68,893

83.21

Nonvested shares, at
beginning of year
Vested
Cancelled/forfeited
Nonvested shares, at

end of year

As of December 31, 2012, there was approximately $0.5 million of total unrecognized compensation cost related to
restricted stock awards. This amount is expected to be recognized over a remaining weighted-average period of less
than 1 year.

Restricted Stock Units
Restricted stock units, which are rights to receive shares of company stock, were granted from 2007 through 2012
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 restricted stock unit activity:

Restricted
Stock
Units

Weighted-
Average
Grant-Date
Fair Value

Weighted-Average
Remaining
Contractual Term
(in years)

Aggregate
Intrinsic Value
as of
December 31,
2012
(in millions)

Outstanding, January 1, 2010

Granted
Vested
Forfeited

Outstanding, December 31, 2010

Granted
Vested
Forfeited

Outstanding, December 31, 2011

Granted
Vested
Forfeited

Outstanding, December 31, 2012

163,198
126,330
(33,825)
(13,481)
242,222
127,920
(54,350)
(16,430)
299,362
138,840
(75,466)
(14,235)
348,501

$
$
$
$
$
$
$
$
$
$
$
$
$

77.01
84.57
78.41
79.71
80.61
98.25
79.67
80.70
88.31
107.32
85.52
89.31
96.45

2.17

36.6

As of December 31, 2012, there was approximately $26.6 million of total unrecognized compensation cost related
to restricted stock units. This amount is expected to be recognized over a remaining weighted-average period of
approximately 4 years.

Employee Stock Purchase Plans
The fair value of the employees’ purchase rights under the 2011 ESPP and the 1988 ESPP 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
Weighted-average fair value

of purchase rights

Year Ended December 31,
2011

2010

2012

27%

0.07%
0.25
—

20%
0.06%
0.25
—

23%
0.15%
0.25
—

$20.70

$20.35

$18.27

The major assumptions are primarily based on historical data. Volatility is 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.

We sold 107,749 shares for $9.2 million, 96,362 shares for $8.1 million and 96,586 shares for $7.4 million under
the 2011 ESPP and 1988 ESPP to employees in 2012, 2011 and 2010, respectively. At December 31, 2012, 492,251
shares remain authorized and available for issuance under the 2011 ESPP.

We currently issue new shares to satisfy stock option exercises, restricted stock issuances and ESPP stock
purchases.

10. OTHER INCOME AND EXPENSE, NET

Other (income) expense, net includes the following components (in millions):

Year Ended December 31,
2011

2012

2010

Interest and investment income
Net realized gains on investments
Other-than-temporary impairment losses on investments
(Gains) losses on sale of property, plant and equipment
Miscellaneous other expense (income) items, net

(11.4) $
(8.7)
1.0
(3.8)
1.0

(8.2) $
(0.7)
2.1
0.2
(1.0)

Other (income) expense, net

(21.9) $

(7.6) $

(5.2)
(0.6)
0.2
0.5
1.2

(3.9)

Other-than-temporary impairment losses on investments were recorded in 2012, 2011 and 2010 on certain of our
available-for-sale investments in light of the continuing declines in their market prices at that time, primarily
associated with our investment in a sovereign nation with large deficits and our decision to sell holdings in a
particular adviser account.

In December 2012, we sold a building for $6.4 million in our Clinical Diagnostics segment that was associated with
a 1999 acquisition. We recognized a gain on the sale of $4.3 million and a portion of goodwill recorded in a 1999
acquisition was written off of $1.0 million.

11. SUPPLEMENTAL CASH FLOW INFORMATION

The reconciliation of net income including noncontrolling interests to net cash provided by operating activities is as
follows (in millions):

Net income including noncontrolling interests
Adjustments to reconcile net income including

noncontrolling interests to net cash provided by
operating activities (net of effects of acquisitions):

Depreciation and amortization
Share-based compensation
Foreign currency economic hedges, net
(Gains) losses on dispositions of securities
(Gains) losses on dispositions of fixed assets
Excess tax benefits from share-based compensation
Changes in fair value of contingent consideration
Decrease (increase) in accounts receivable, net
Increase in inventories, net
(Increase) decrease in other current assets
Increase (decrease) in accounts payable

and other current liabilities

(Decrease) increase in income taxes payable
Decrease in deferred income taxes
Write-off of goodwill
Other

Net cash provided by operating activities

Non-cash investing activities:
Purchased marketable securities and investments

Year Ended December 31,
2011

2010

2012

163.8 $

178.0 $

186.9

130.4
13.2
2.9
(7.6)
(4.8)
(2.9)
(16.1)
4.4
(2.2)
(6.7)

19.0
(17.3)
(10.3)
1.0
12.1

121.0
10.7
(2.9)
1.5
0.2
(3.2)
—
(20.1)
(44.0)
0.8

(6.6)
15.3
(1.6)
—
10.7

108.9
10.2
(3.2)
(0.5)
0.5
(2.9)
—
(37.0)
(15.9)
(9.3)

9.1
(19.3)
(6.5)
—
4.9

278.9 $

259.8 $

225.9

1.6 $

11.6 $

—

12. COMMITMENTS AND CONTINGENT LIABILITIES

Rents and Leases

Net rental expense under operating leases was $41.4 million, $42.4 million and $38.3 million in 2012, 2011 and
2010, respectively. Leases are principally for facilities and automobiles.

Annual future minimum lease payments at December 31, 2012 under operating leases are as follows: 2013 - $35.3
million; 2014 - $30.8 million; 2015 - $23.2 million; 2016 - $18.9 million; and 2017 and beyond - $58.0 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. Contribution
expense was $12.1 million, $12.1 million and $12.2 million in 2012, 2011 and 2010, respectively.