Bio-Rad Laboratories Annual Report 2019

← All annual reports

FY2019 Annual Report · Bio-Rad Laboratories

Loading PDF…

Bio-Rad Laboratories
2019 Form 10-K

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, 2019

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)

Registrant's telephone number, including area code

(510) 724-7000

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

94547

(Zip Code)

Title of Each Class

Class A Common Stock Par Value $0.0001 per share
Class B Common Stock Par Value $0.0001 per share

Trading
Symbols

BIO
BIOb

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.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes

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

Large accelerated filer
Non-accelerated file

Accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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, 2019, 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 $6,613,310,960 and the aggregate market value of the registrant's Class B Common Stock held by non-
affiliates was approximately $67,954,565.

As of February 24, 2020, there were 24,839,715 shares of Class A Common Stock and 5,085,621 shares of Class B Common Stock outstanding.

(1)

Definitive Proxy Statement to be mailed to stockholders in connection with the

registrant's 2020 Annual Meeting of Stockholders (specified portions)

III

Documents Incorporated by Reference

Document

Form 10-K Parts

BIO-RAD LABORATORIES, INC.

FORM 10-K DECEMBER 31, 2019

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

Item 16. Form 10-K Summary

Signatures

100

INFORMATION RELATING TO FORWARD-LOOKING 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 but not limited to those identified under “Item 1A, Risk Factors” of this Annual Report.
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 law.

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 locations outside and inside these 35 countries, 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 38% and
61%, respectively, of our net sales for the year ended December 31, 2019. We generated approximately 39% of our
consolidated net sales for the year ended December 31, 2019 from U.S. sales and approximately 61% from sales in
our remaining worldwide markets.

For a description of business and financial information on industry and geographic segments, see Note 14 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 leader in the life sciences market and develop, manufacture and market approximately 6,000
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, cellular biology
and food safety. We estimate that the worldwide market that our portfolios can address for products in these
selected segments of our addressable markets is approximately $9 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 seek to 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. We estimate that the worldwide sales for products in the markets we serve were approximately $12 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 therefore
typically 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, computing and peripheral devices. Most of these materials and components are available from numerous
sources, and generally we have not experienced difficulty in securing adequate supplies. However, in certain
instances we acquire components and materials from a sole supplier. Due to the regulatory environment in which
we operate, we may be unable to quickly establish additional or replacement sources for some components or
materials.

Patents, Trademarks and Licenses

We own over 2,000 U.S. and international patents and numerous trademarks. We also hold licenses under U.S. and
foreign patents owned by third parties and pay royalties on the sales of certain products under the licenses. We
view these patents, trademarks and license agreements as valuable assets; however, we believe that our ability to
develop and manufacture our products depends primarily on our knowledge, technology and special skills rather
than our patent, trademark and licensing positions.

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, employing approximately 920 direct
sales and sales management personnel around the world. Our sales force typically consists of experienced industry
professionals with scientific training, and we maintain a separate specialist sales force for each of our segments.
We believe that this direct sales approach allows us to sell a broader range of our products that creates more brand
awareness and long-term relationships with our customers.

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

Our customer base is broad and diversified. Our worldwide customer base includes (1) prominent university and
research institutions; (2) hospital, public health and commercial laboratories; (3) other leading diagnostic
manufacturers; and (4) leading companies in the biotechnology, pharmaceutical, chemical and food industries.
There has been no single customer that accounted for more than three percent of our total net sales. Our sales are
affected by a number of external factors. For example, a number of our customers, particularly in the Life Science
segment, are substantially dependent on government grants and research contracts for their funding.

Most of our international sales are generated by our wholly-owned international subsidiaries and their branch
offices. Certain of these subsidiaries also have manufacturing facilities. 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.

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. We seek to compete primarily in market
segments where our products and technology offer customers specific advantages over the competition.

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

Major competitors of our Clinical Diagnostics segment include Roche, Abbott Laboratories, Siemens, Danaher,
Thermo Fisher, Becton Dickinson, bioMérieux, Ortho Clinical Diagnostics, Tosoh, Immucor and DiaSorin. We
compete in our customer segments by providing high quality products, broad product portfolios and outstanding
customer support.

Research and Development

We conduct extensive research and development activities in all areas of our business, employing approximately
780 employees worldwide in these activities, including degreed scientists and technical support staff. Research and
development has played a major role in Bio-Rad’s growth and is 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.

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 U.S. 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. After a product that is subject to FDA regulation is
placed on the market, numerous regulatory requirements apply, including, for example, the requirement that we
comply with recordkeeping and reporting requirements, such as the FDA’s medical device reporting regulations and
reporting of corrections and removals. The FDA enforces these requirements by inspection and market
surveillance. 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.

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

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

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

Our operations are subject to federal, state, local and foreign environmental laws and regulations that govern 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, 2019, Bio-Rad had approximately 8,120 employees. Approximately seven percent of our
approximately 3,180 U.S. employees are covered by a collective bargaining agreement, which will expire on
November 14, 2023. Many of our non-U.S. full-time employees, especially in France, are covered by collective
bargaining agreements. We consider our employee relations to be generally 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 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

In evaluating our business and whether to invest in any of our securities, you should carefully read the following
risk factors in addition to the other information contained in this Annual Report. We believe that any of the
following risks could have a material effect on our business, results of operations or financial condition, our
industry or the trading price of our common stock. We operate in a continually changing business environment,
and new risks and uncertainties emerge from time to time. We cannot predict these new risks and uncertainties, nor
can we assess the extent to which any such new risks and uncertainties or the extent to which the risks and
uncertainties set forth below may adversely affect our business, results of operations, financial condition, our
industry or the trading price of our common stock.

Our international operations expose us to additional costs and legal and regulatory risks, which could have a
material adverse effect on our business, results of operations and financial condition.

We have significant international operations. We have direct distribution channels in over 35 countries outside the
United States, and in 2019 our foreign entities generated 61% of our net sales. Compliance with complex foreign
and U.S. laws and regulations that apply to our international operations increases our cost of doing business. These
numerous and sometimes conflicting laws and regulations include, among others, data privacy requirements
(including the requirements for compliance with the EU General Data Protection Regulation, which went into effect
May 25, 2018), labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, tariffs,
duties, quotas and other trade barriers, export requirements, U.S. laws such as the Foreign Corrupt Practices Act and
other U.S. federal laws and regulations established by the office of Foreign Asset Control, foreign laws such as the
UK Bribery Act 2010 or other foreign laws which prohibit corrupt payments to governmental officials or certain
payments or remunerations to customers. In addition, changes in laws or regulations potentially could be disruptive
to our operations and business relationships in the affected regions. For example, the United Kingdom's withdrawal
from the European Union (commonly referred to as “Brexit”) could disrupt the free movement of goods, services
and people between the United Kingdom and the European Union and result in increased regulatory, legal, labor
and tax complexities.

Given the high level of complexity of the foreign and U.S. laws and regulations that apply to our international
operations, there is a risk that we may inadvertently breach some provisions, for example, through fraudulent or
negligent behavior of individual employees, our failure to comply with certain formal documentation requirements,
or otherwise. Our success depends, in part, on our ability to anticipate these risks and manage these challenges
through policies, procedures and internal controls. However, we have a dispersed international sales organization,
and we use distributors and agents in many of our international operations. This structure makes it more difficult
for us to ensure that our international selling operations comply with laws and regulations, and our global policies
and procedures.

Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our
employees, requirements to obtain export licenses, cessation of business activities in sanctioned countries,
implementation of compliance programs, and prohibitions on the conduct of our business. Violations of laws and
regulations also could result in prohibitions on our ability to offer our products in one or more countries and could
materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain
employees, or our business, results of operations and financial condition. See also our risk factors regarding
government regulations and regarding global economic conditions below.

The industries and market segments in which we operate are highly competitive, and we may not be able to
compete effectively.

The life science and clinical diagnostics markets are each highly competitive. Some of our competitors have
merged, and some of our competitors have greater financial resources than we do, 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. Many public tenders have become more competitive
due to governments lengthening the commitments of their public tenders to multiple years, which reduce the
number of tenders in which we can participate annually. Because the value of these multiple-year tenders is so
high, our competitors have been more aggressive with their pricing. Our failure to compete effectively and/or
pricing pressures resulting from competition could adversely affect our business, results of operations and financial
condition.

We may not be able to grow our business because of our failure to develop new or improved products.

Our future growth depends in part on our ability to continue to improve our product offerings and develop and
introduce new product lines and extensions that integrate technological advances. In particular, we may not be able
to keep up with changes in the clinical diagnostics industry, such as the trend toward molecular diagnostics or point-
of-care tests. 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 business, results
of operations and financial condition will be adversely affected. We have experienced product launch delays in the
past, and may do so in the future. We cannot assure you that our product and process development efforts will be
successful or that new products we introduce will achieve market acceptance. Failure to launch successful new
products or improvements to existing products may cause our products to become obsolete, which could harm our
business, results of operations and financial condition.

Breaches of our information systems could have a material adverse effect on our business and results of
operations.

We have experienced and expect to continue to experience attempts by computer programmers and hackers to
attack and penetrate our layered security controls, like the December 2019 Cyberattack that is further discussed in
Item 7 of this Annual Report. Through our sales and eCommerce channels, we collect and store confidential
information that customers provide to, among other things, purchase products or services, enroll in promotional
programs and register on our web site. We also acquire and retain information about suppliers and employees in the
normal course of business. Such information on our systems includes personally identifiable information and, in
limited instances, protected health information. We also create and maintain proprietary information that is critical
to our business, such as our product designs and manufacturing processes. Despite recent initiatives to improve our
technology systems, such as our enterprise resource planning implementation and the centralization of our global
information technology organization, we could experience a significant data security breach. Because the
techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently
and often are not recognized until launched against a target, we may not be able to anticipate all of these techniques
or to implement adequate preventive measures. Computer hackers have attempted to penetrate and will likely
continue to attempt to penetrate our and our vendors’ information systems and, if successful, could misappropriate
confidential customer, supplier, employee or other business information, such as our intellectual property. Third
parties could also gain control of our systems and use them for criminal purposes while appearing to be us. As a
result, we could lose existing customers, have difficulty attracting new customers, be exposed to claims from
customers, financial institutions, payment card associations, employees and other persons, have regulatory sanctions
or penalties imposed, incur additional expenses or lose revenues as a result of a data privacy breach, or suffer other
adverse consequences. Our operations and ability to process sales orders, particularly through our eCommerce
channels, could also be disrupted, as they were in the December 2019 Cyberattack. Any significant breakdown,
intrusion, interruption, corruption, or destruction of our systems, as well as any data breaches, could have a material
adverse effect on our business and results of operations. See also our risk factors regarding our information
technology systems and our enterprise resource planning system (ERP) implementation below.

If our information technology systems are disrupted, or if we fail to successfully implement, manage and
integrate our information technology and reporting systems, our business, results of operations and financial
condition could be harmed.

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, results of operations and financial condition. 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 may experience disruption of our IT systems
due to redundancy issues with our network servers. 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 may suffer
interruptions in service, loss of data or reduced functionality when we upgrade or change systems. If we fail to
successfully manage and integrate our IT systems, reporting systems and operating procedures, it could adversely
affect our business, results of operations and financial condition. See also our risk factors regarding our data
security above and ERP implementation and events beyond our control below.

We are subject to foreign currency exchange fluctuations, which could have a material adverse effect on our
results of operations and financial condition.

As stated above, a significant portion of our operations and sales are outside of the United States. When we make
purchases and sales in currencies other than the U.S. dollars, we are exposed to fluctuations in foreign currencies
relative to the U.S. dollar that may adversely affect our results of operations and financial condition. Our
international sales are largely denominated in local currencies. As a result, the strengthening of the U.S. dollar
negatively impacts our consolidated net sales expressed in U.S. dollars. Conversely, when the U.S. dollar weakens,
our expenses at our international sites increase. In addition, the volatility of other currencies may negatively impact
our operations outside of the United States and increase our costs to hedge against currency fluctuations. We cannot
assure you that future shifts in currency exchange rates will not have a material adverse effect on our results of
operations and financial condition.

Our reported financial results may be materially affected by changes in the market value of our investment in
Sartorius AG.

Changes in the market value of our investment in Sartorius AG may continue to materially impact our Consolidated
Statements of Income and other financial statements. A decline in the market value of our investment in Sartorius
AG could result in significant losses due to write-downs in the value of the equity securities. An increase in the
market value of our investment in Sartorius AG could result in a significant and favorable impact to net income
independent of the actual operating performance of our business. For example, our net income for 2019 was
significantly and favorably impacted by recognition, on the income statement, of an increase in the fair market
value of equity securities of $2,031.0 million, primarily related to the holdings of our investment in Sartorius AG.
Net income for 2018 was also significantly and favorably impacted by recognition, on the income statement, of an
increase in the fair market value of equity securities of $606.2 million, primarily related to the holdings of our
investment in Sartorius AG.

Our share price may change significantly based upon changes in the market valuation of Sartorius AG, and such
change may be unrelated to the actual performance of our business. Non-operating income for a period may be
significantly impacted by the timing of dividends paid by Sartorius AG, particularly in comparison to prior year
periods.

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 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 also have positions in equity securities, including our investment in Sartorius AG. Financial markets are
volatile and the markets for these equity securities can be illiquid as well. A decline in the market value of our
investments in equity securities that we own could result in significant losses due to write-downs in the value of the
equity securities. In addition, if we need to convert these positions to cash, we may not be able to sell these equity
securities without significant losses.

We may experience difficulties implementing our new global enterprise resource planning system.

We are engaged in a multi-year implementation of a new global enterprise resource planning system (ERP). The
ERP is designed to efficiently maintain our books and records and provide information important to the operation of
our business to our management team. The ERP will continue to require significant investment of human and
financial resources. In implementing the ERP, we may experience significant delays, increased costs and other
difficulties. Any significant disruption or deficiency in the design and implementation of the ERP could adversely
affect our ability to process orders, ship product, send invoices and track payments, fulfill contractual obligations or
otherwise operate our business. For example, we experienced system implementation issues in our Clinical
Diagnostics segment during our first deployment that impacted invoicing and caused an increase in accounts
receivable. In our second deployment, we experienced delays in manufacturing and logistics, which adversely
impacted our sales. In our third deployment in Western Europe in April 2017, we experienced system
implementation issues impacting the timing of payment of vendor invoices and resulting in delays in product
availability and shipments. We also experienced lower productivity levels related to the April 2017 go-live of the
ERP in Western Europe, which adversely impacted our sales during the second and third quarters of 2017. We
expect to implement the remaining smaller phases of the ERP platform over the next few years. In addition, our
efforts to centralize various business processes and functions within our organization in connection with our ERP
implementation may continue to disrupt our operations and negatively impact our business, results of operations
and financial condition.

Recent and planned changes to our organizational structure and executive management team could negatively
impact our business.

We made significant changes to our organizational structure over the past few years. In 2016, we began
implementing the reorganization of the structure of our European organization, and we have continued
implementing this reorganization in 2017, 2018 and 2019. The Board of Directors appointed a new Chief Financial
Officer effective April 6, 2019 and a new Chief Operating Officer effective April 22, 2019. At the beginning of
2020, we appointed a new executive to head our Clinical Diagnostics segment, and we restructured this segment
based on functional groups rather than product line divisions. These changes may have unintended consequences,
such as distraction of our management and employees, business disruption, attrition of our workforce, inability to
attract or retain key employees, and reduced employee morale or productivity.

Violations of the U.S. Foreign Corrupt Practices Act or similar anti-corruption laws could have a material
adverse effect on our business, results of operations and financial condition.

As further discussed above in our risk factor concerning our international operations, we have significant
international operations which expose us to additional costs and legal and regulatory risks, including the risk of
violating anti-corruption laws such as the U.S. Foreign Corrupt Practices Act (FCPA) or similar anti-corruption
laws. As previously disclosed, we entered into a non-prosecution agreement (NPA) with the U.S. Department of
Justice (DOJ) and the Securities and Exchange Commission (SEC) and consented to the entry of an Order by the
SEC (SEC Order), effective November 3, 2014, which actions resolved both the DOJ and the SEC investigations
into our violations of the FCPA. Any future violations of the FCPA could result in more punitive actions by the
SEC and DOJ and/or could harm our reputation with customers, either of which could materially adversely affect
our business, results of operations and financial condition.

Our failure to establish and maintain effective internal control over financial reporting could result in material
misstatements in our financial statements, 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.

Maintaining effective disclosure controls and procedures and internal controls over financial reporting are necessary
for us to produce reliable financial statements.

As previously discussed in Item 9A "Controls and Procedures" of our Annual Report for the period ended
December 31, 2017, and Item 4 "Controls and Procedures" of our 2018 Form 10-Qs, management identified a
material weakness in our internal control over financial reporting. During the fourth quarter of 2017 and throughout
2018, management conducted an extensive remediation plan to address its material weakness, and management
concluded that the material weakness had been remediated as of December 31, 2018. However, we cannot assure
you that additional deficiencies or material weaknesses in our internal control over financial reporting will not be
identified in the future.

Material weaknesses have adversely affected us in the past and could affect us in the future, and 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. 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 consolidated financial statements and cause us to fail to meet our reporting
obligations. This could cause us to lose public confidence, and could cause the trading price of our common stock
to decline. For further information regarding our controls and procedures, see Part II, Item 9A of this Annual
Report on Form 10-K.

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, unauthorized third parties have
attempted to copy our intellectual property, reverse engineer or obtain and use information that we regard as
proprietary, or have developed equivalent technologies independently, and may do so in the future. Additionally,
third parties have asserted patent, copyright and other intellectual property rights to technologies that are important
to us, and may do so in the future. 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. From time to time, we also must enforce our patents or other intellectual property rights
or defend ourselves against claimed infringement of the rights of others through litigation. As a result, we could
incur substantial costs, be forced to redesign our products, or be required to pay damages or royalties to an infringed
party. Any of the foregoing matters could adversely impact our business, results of operations and financial
condition.

Global economic and geopolitical conditions could adversely affect our operations.

In recent years, we have been faced with very challenging global economic conditions. A deterioration in the global
economic environment may result in decreased demand for our products, increased competition, downward
pressure on the prices for our products and longer sales cycles. A weakening of macroeconomic conditions may
also adversely affect our suppliers, which could result in interruptions in supply in the future. We have also
experienced delays in collecting receivables in certain countries in Western Europe, and we may experience similar
delays in these and other countries or regions experiencing liquidity problems. In addition, a slowing of growth in
the Chinese economy and in emerging markets, especially those oil-producing countries that would be affected by a
decline in oil prices, could adversely affect our business, results of operations or financial condition. There is also
uncertainty surrounding the impact that Brexit will have on European and worldwide economic conditions and the
stability of global financial markets, and a negative effect from any of these things could adversely affect our
business, results of operations or financial condition. Additionally, the United States and other countries, such as
China and India, recently have imposed tariffs on certain goods. While tariffs imposed by other countries on U.S.
goods have not yet had a significant impact on our business, further escalation of tariffs or other trade barriers could
adversely impact our profitability and/or our competitiveness. In addition, the geopolitical situation in locations
such as the Middle East could adversely affect our business in such locations. See also our risk factors regarding
our international operations above and regarding government regulations below.

Reductions in government funding and the capital spending programs of our customers could have a material
adverse effect on our business, results of operations or financial condition.

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, results of operations or financial condition could be materially and adversely affected.

Changes in the healthcare industry could have an adverse effect on our business, results of operations and
financial condition.

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

• 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 selling prices. Consolidation among healthcare providers
and consolidation among other participants in the healthcare industry has resulted in fewer, more powerful
groups, whose purchasing power gives them cost containment leverage. In particular, there has been a
consolidation of laboratories and a consolidation of blood transfusion centers. These industry trends and
competitive forces place constraints on the levels of overall pricing, and thus could have a material adverse
effect on our gross margins for products we sell in clinical diagnostic markets.

• Third party payors, such as Medicare and Medicaid in the United States, have reduced their reimbursements
for certain medical products and services. Our Clinical Diagnostics business is impacted by the level of
reimbursement available for clinical tests from third party payors. In the United States payment for many
diagnostic tests furnished to Medicare fee-for-service beneficiaries is made based on the Medicare Clinical
Laboratory Fee Schedule (CLFS), a fee schedule established and adjusted from time to time by the Centers
for Medicare and Medicaid Services (CMS). Some commercial payors are guided by the CLFS in
establishing their reimbursement rates. Laboratories and clinicians may decide not to order or perform
certain clinical diagnostic tests if third party payments are inadequate, and we cannot predict whether third
party payors will offer adequate reimbursement for tests utilizing our products to make them commercially
attractive. Legislation, such as the Patient Protection and Affordable Care Act, as amended by the Health
Care and Education Reconciliation Act (PPACA) and the Middle Class Tax Relief and Job Creation Act of
2012, has reduced the payments for clinical laboratory services paid under the CLFS. In addition, the
Protecting Access to Medicare Act of 2014 (PAMA) has made significant changes to the way Medicare will
pay for clinical laboratory services, which has further reduced reimbursement rates.

To the extent that the healthcare industry seeks to address the need to contain costs stemming from reform measures
such as those contained in the PPACA and the PAMA, or in future legislation, by limiting the number of clinical
tests being performed or the amount of reimbursement available for such tests, our business, results of operations
and financial condition could be 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.

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 our Clinical Diagnostic products), production processes and marketing are subject
to U.S. federal, state and local, and foreign regulation, including by the FDA in the United States and its foreign
counterparts. The FDA regulates our Clinical Diagnostic products as medical devices, and we are subject to
significant regulatory clearances or approvals to market our Clinical Diagnostic products and other requirements
including, for example, recordkeeping and reporting requirements, such as the FDA’s medical device reporting
regulations and reporting of corrections and removals. 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. Changes in the FDA’s review of
certain clinical diagnostic products referred to as laboratory developed tests, which are tests developed by a single
laboratory for use only in that laboratory, could affect some of our customers who use our Life Science instruments
for laboratory developed tests. In the past, the FDA has chosen to not enforce applicable regulations and has not
reviewed such tests for approval. However, the FDA has issued draft guidance that it may begin enforcing its
medical device requirements, including premarket submission requirements, to such tests. 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.

Many foreign governments have similar rules and regulations regarding the importation, registration, labeling, sale
and use of our products. Such agencies may also impose new requirements that may require us to modify or re-
register products already on the market or otherwise impact our ability to market our products in those countries.
For example, in April 2017 the European Parliament voted to enact final regulations that include broad changes
regarding in vitro diagnostic devices and medical devices, which will require us to modify or re-register some
products and will result in additional costs. In addition, Russia has enacted more stringent medical product
registration and labeling regulations, China has enacted stricter labeling requirements, and we expect other
countries, such as Brazil and India, to impose more regulations that impact our product registrations. Brexit also
will likely result in additional regulatory requirements associated with goods sold in the United Kingdom and will
likely result in additional complexities and possible delays with respect to goods, raw materials and personnel
moving between the United Kingdom and the European Union. In addition, new government administrations may
interpret existing regulations or practices differently. For example, the Mexican health regulatory agency
COFEPRIS in 2019 cited Bio-Rad’s Mexican subsidiary for operating practices that had been endorsed by a prior
administration, which has impacted our ability to conduct our Clinical Diagnostics business in Mexico. Due to
these evolving and diverse requirements, we face uncertain product approval timelines, additional time and effort to
comply, as well as the potential for reduced sales and/or fines for noncompliance. Increasing protectionism in such
countries also impedes our ability to compete with local companies. For example, we may not be able to participate
in certain public tenders in Russia because of increasing measures to restrict access to such tenders for companies
without local manufacturing capabilities. Such regulations could adversely affect our business, results of operations
and financial condition. See also our risk factors regarding our international operations and regarding global
economic and geopolitical conditions above.

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 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 acquisitions 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.
Goodwill and non-amortizable intangible assets are subject to impairment testing, and potential periodic goodwill
impairment charges, amortization expenses related to certain intangible assets, and other write-offs could harm our

operating results. Impairment tests are highly sensitive to changes in assumptions and minor changes to
assumptions could result in impairment losses. If the results forecast in our impairment tests are not achieved, or
business trends vary from the assumptions used in forecasts, or external factors change detrimentally, future
impairment losses may occur. For example, as we previously discussed in Item 7 of our Annual Report for the
period ended December 31, 2017, one reporting unit, whose goodwill was primarily from the acquisitions of Biotest
AG and DiaMed Holding AG, had excess fair value over book value of only 8% at December 31, 2017. The
goodwill allocated to this reporting unit as of December 31, 2017 was $263.6 million. We impaired all the goodwill
related to this reporting unit for the year ended December 31, 2018 because assumptions utilized in our 2017
forecast did not materialize.

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, results of
operations and financial condition.

Product quality and liability issues could harm our reputation and negatively impact our business, results of
operations and financial condition.

We must adequately address quality issues associated with our products, including defects in our engineering,
design and manufacturing processes, as well as defects in third-party components included in our products. Our
instruments, reagents and consumables are complex, and identifying the root cause of quality issues, especially
those affecting reagents or third-party components, is difficult. We may incur significant costs and expend
substantial time in researching and remediating such issues. Quality issues could also delay our launching or
manufacturing of new products. In addition, quality issues, unapproved uses of our products, or inadequate
disclosure of risks related to our products, could result in product recalls or product liability or other claims being
brought against us. These issues could harm our reputation, impair our relationship with existing customers and
harm our ability to attract new customers, which could negatively impact our business, results of operations and
financial condition.

Lack of key personnel could hurt our business.

Our products are very technical in nature. In general, only highly qualified and well-trained scientists have the
necessary skills to develop, market and sell our products, and many of our manufacturing positions require very
specialized knowledge and skills. In addition, the global nature of our business also requires that we have
sophisticated and experienced staff to comply with increasingly complex international laws and regulations. We
face intense competition for these professionals from our competitors, customers, marketing partners and other
companies throughout our industry. In particular, the job market in Northern California, where many of our
employees are located, is very competitive. If we do not offer competitive compensation and benefits, we may fail
to retain or attract a sufficient number of qualified personnel, which could impair our ability to properly run our
business.

In some cases we rely on temporary personnel or consultants, and we may do so in the future. Such temporary
personnel or consultants may lack the knowledge and/or specific skills necessary for our business, require time to
train without benefiting us through extended employment and increase our costs. In addition, as noted above, our
strategic initiatives, such as our internal restructuring and ERP implementation, may be burdensome and disruptive
and lead to employee dissatisfaction and attrition. Also, loss, including retirement, of long-term personnel may
negatively impact our ability to conduct our business.

A reduction or interruption in the supply of components and raw materials could adversely affect our
manufacturing operations and related product sales.

The manufacture of many of our products requires the timely delivery of sufficient amounts of quality components
and materials. We manufacture our products in numerous manufacturing facilities around the world. We acquire
our components and materials from many suppliers in various countries. We work closely with our suppliers to
ensure the continuity of supply but we cannot guarantee these efforts will always be successful. Further, while we
seek to diversify our sources of components and materials, in certain instances we acquire components and
materials from a sole supplier. In addition, due to the regulatory environment in which we operate, we may be
unable to quickly establish additional or replacement sources for some components or materials. If our supply is
reduced or interrupted or of poor quality, and we are unable to develop alternative sources for such supply, our
ability to manufacture our products in a timely or cost-effective manner could be adversely affected, which would
adversely affect our ability to sell our products.

Natural disasters, terrorist attacks, acts of war or other events beyond our control may cause damage or
disruption to us and our employees, facilities, information systems, security systems, vendors and customers,
which could significantly impact our business, results of operations and financial condition.

We have significant manufacturing and distribution facilities, including in the western United States, France,
Switzerland, Germany and Singapore. In particular, the western United States has experienced a number of
earthquakes, wildfires, floods, landslides and other natural disasters in recent years. These occurrences could
damage or destroy our facilities which may result in interruptions to our business and losses that exceed our
insurance coverage. In addition, electricity outages, strikes or other labor unrest at any of our sites or surrounding
areas could cause disruption to our business.

Acts of terrorism, bioterrorism, violence or war, or public health issues such as the outbreak of a contagious disease
like the 2019-Novel Coronavirus (COVID-19) could also affect the markets in which we operate, our business
operations and strategic plans. Political unrest may affect our sales in certain regions, such as in Southeast Asia, the
Middle East and Eastern Europe. Any of these events could adversely affect our business, results of operations and
financial condition.

We may have higher than anticipated tax liabilities.

We are subject to income taxes in the United States and many foreign jurisdictions. We report our results of
operations based on our determination of the amount of taxes owed in various tax jurisdictions in which we operate.
The determination of our worldwide provision for income taxes and other tax liabilities requires estimation,
judgment and calculations where the ultimate tax determination may not be certain. Our determination of our tax
liabilities is subject to review or examination by tax authorities in various tax jurisdictions. Tax authorities have
disagreed with our judgment in the past and may disagree with positions we take in the future resulting in
assessments of additional taxes. Any adverse outcome of such review or examination could have a negative impact
on our operating results and financial condition.

Economic and political pressures to increase tax revenues in various jurisdictions may make resolving tax disputes
more difficult. For example, in recent years, the tax authorities in Europe have disagreed with our tax positions
related to hybrid debt, research and development credits, transfer pricing and indirect taxes, among others. We
regularly assess the likelihood of the outcome resulting from these examinations to determine the adequacy of our
provision for income taxes. Although we believe our tax estimates are reasonable, the final determination of tax
audits and any related litigation could be materially different from our historical income tax provisions and
accruals.

The results from various tax examinations, audits and litigation may differ from the liabilities recorded in our
financial statements and could materially and adversely affect our financial results and cash flows in the periods in
which those determinations are made.

Changes in tax laws or rates, changes in the interpretation of tax laws or changes in the jurisdictional mix of our
earnings could adversely affect our financial position and results of operations.

On December 22, 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and
Jobs Act (the “Tax Act”) which made a number of substantial changes to how the United States imposes income tax
on multinational corporations. The U.S Treasury, Internal Revenue Service and other standard setting bodies
continue to issue guidance and interpretation relating to the Tax Act. As future guidance is issued, we may make
adjustments to amounts previously reported that could materially impact our financial statements.

Our global operations subject us to income and other taxes in the U.S. and in numerous foreign jurisdictions, each
with different tax schemes and tax rates. In addition to the changes in tax laws and the interpretation of tax laws
and tax rates in these jurisdictions, the jurisdictional mix of our earnings in countries with differing statutory tax
rates can have a significant impact on our effective tax rate from period to period.

The tax effect of our investment in Sartorius AG and the jurisdictional mix of our earnings could continue to
materially affect our financial results and cash flow.

In addition, the adoption of some or all of the recommendations set forth in the Organization for Economic Co-
operation and Development’s project on “Base Erosion and Profit Shifting” (BEPS) by tax authorities in the
countries in which we operate, could negatively impact our effective tax rate. These recommendations focus on
payments from affiliates in high tax jurisdictions to affiliates in lower tax jurisdictions and the activities that give
rise to a taxable presence in a particular country.

Our reported financial results may be materially affected by changes in accounting principles generally accepted
in the United States.

Generally accepted accounting principles in the United States, or U.S. GAAP, are subject to interpretation by the
Financial Accounting Standards Board, or FASB, the U.S. Securities and Exchange Commission, or SEC, and
various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or
interpretations could have a significant effect on our reported financial results, and could affect the reporting of
transactions completed before the announcement of a change.

For example, in January 2016, the FASB issued Accounting Standards Update No. (ASU) 2016-01, "Recognition
and Measurement of Financial Assets and Financial Liabilities." Amendments under ASU 2016-01, among other
items, require that all equity investments in unconsolidated entities (other than those accounted for using the equity
method of accounting), such as our investment in Sartorius AG, will be measured at fair value through earnings.
The impact of adoption of ASU 2016-01 in the first quarter of 2018 materially impacted our Condensed
Consolidated Statements of Income due to our investment in Sartorius AG, and this impact may continue in future
periods.

Also for example, in February 2016, the FASB issued ASU 2016-02, "Leases," which requires, among other items,
lease accounting to recognize most leases as assets and liabilities on the balance sheet. We adopted ASU 2016-02
on a modified retrospective basis effective January 1, 2019 with practical expedients. Where we act as a lessee, the
adoption of the standard resulted in material additions to the balance sheet for right-of-use assets and the associated
liabilities. Where we act as a lessor in reagent rental arrangements, there was an insignificant impact to our
consolidated financial statements.

Environmental, health and safety regulations and enforcement proceedings may negatively impact our business,
results of operations and financial condition.

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 must also comply with various health and safety regulations in the United States and abroad
in connection with our operations.

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/or 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 cannot assure you, however, that such matters or any
future obligations to comply with environmental or health and safety laws and regulations will not adversely affect
our business, results of operations or financial condition.

Our debt may restrict our future operations.

We have substantial debt and have the ability to incur additional debt. As of December 31, 2019, we had
approximately $439.8 million of outstanding indebtedness, primarily consisting of the 4.875% Notes due in
December 2020 as further discussed in Note 5 of the Consolidated Financial Statements. In addition, we have a
revolving credit facility that provides for up to $200.0 million, $0.2 million of which has been utilized for domestic
standby letters of credit. 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

•

•
•

debt;
require us to dedicate a substantial portion of our cash flow from operations to the payment of interest and
principal due under our debt, 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 existing credit facility 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: incur
additional debt; acquire other businesses or assets through merger or purchase; create liens; make investments; 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 comply with certain financial ratios, including a maximum consolidated leverage ratio test and a minimum
consolidated interest coverage ratio 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. 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.

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

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

•

the U.S. federal Anti-Kickback Statute, 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;

• U.S. 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. In addition, the U.S. federal 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;

•

the U.S. 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;

the Health Insurance Portability and Accountability Act ("HIPAA"), as amended by the Health Information
Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic
healthcare transactions and protects the security and privacy of protected health information; and

state or foreign law equivalents of each of the U.S. federal laws above, such as anti-kickback and false
claims laws, which may apply to items or services reimbursed by any third-party payor, including
commercial insurers.

These laws will continue to impose administrative, cost and compliance burdens on us. The shifting compliance
environment and the need to build and maintain robust systems to comply with multiple jurisdictions with different
compliance and/or reporting requirements increases the possibility that a healthcare company may violate one or
more of these requirements. In addition, 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. 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 of which could adversely affect our ability to operate our business, results of operations and
financial condition.

Regulations related to “conflict minerals” could adversely impact our business.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted disclosure
requirements regarding the use of certain minerals, known as conflict minerals, which are mined from the
Democratic Republic of Congo (DRC) and adjoining countries, as well as procedures regarding a manufacturer's
efforts to identify the sourcing of such minerals and metals produced from those minerals. In March and April
2017, the European Parliament and the European Council formally approved a conflict minerals regulation, and the
requirements will become effective starting in January 2021. We have incurred, and will continue to incur,
additional costs in order to comply with the SEC’s disclosure requirements. In addition, we might incur further
costs due to possible changes to our products, processes, or sources of supply as a consequence of our due diligence
activities. As our supply chain is complex, we may not be able to sufficiently verify the origins of the specified
minerals used in our products through our due diligence procedures, which may harm our reputation. In addition,
we may encounter challenges to satisfy those customers who require that all of the components of our products be
certified as “DRC conflict free”, which could place us at a competitive disadvantage if we do not do so. We filed
our report for the calendar year 2018 with the SEC on May 3, 2019.

Risks related to our common stock

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 a result of the Schwartz family's ownership of our Class A and Class B Common Stock, they are able to elect a
majority of our directors, effect fundamental changes in our direction and control matters affecting us, including the
determination of business opportunities that may be suitable for our company. The Schwartz family may exercise
its control over us according to interests that are different from other investors’ or debtors’ interests. In particular,
this concentration of ownership and voting power may have the effect of delaying or preventing a change in control
of our company.

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

Greater San Francisco Bay Area, California
Singapore, Singapore
Oxford, England

Greater San Francisco Bay Area, California
Irvine, California
Greater Seattle Area, Washington
Lille, France
Greater Paris Area, France
Nazareth-Eke, Belgium
Cressier, Switzerland
Dreieich, Germany

Owned/Leased

Owned/Leased
Leased
Leased

Owned/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

On May 27, 2015, our former general counsel, Sanford S. Wadler, filed a lawsuit in the U.S. District Court,
Northern District of California, against us and four of our then current directors and one former director. The
plaintiff’s suit alleged whistleblower retaliation in violation of the Sarbanes-Oxley Act and the Dodd-Frank Act for
raising FCPA-related concerns. Mr. Wadler also alleged wrongful termination in violation of public policy, non-
payment of wages and waiting time penalties in violation of the California Labor Code. The plaintiff sought back
pay, compensatory damages for lost wages, earnings, retirement benefits and other employee benefits,
compensation for mental pain and anguish and emotional distress, waiting time penalties, punitive damages,
litigation costs (including attorneys’ fees) and reinstatement of employment. On July 28, 2015, we filed a motion to
dismiss the plaintiff's complaint and specifically requested dismissal of the claims alleged against us under the
Dodd-Frank Act and California Labor Code 1102.5 and the claims against the directors under the Sarbanes-Oxley
Act and the Dodd-Frank Act. On October 23, 2015, the District Court granted our motion with respect to the
alleged violations of the Sarbanes-Oxley Act against all the director defendants except Norman Schwartz with
prejudice. The Court denied our motion to dismiss the claims under the Dodd-Frank Act as against both us and the
director defendants. The trial commenced on January 17, 2017 and concluded on February 6, 2017. Mr. Wadler
was awarded $10.92 million, plus prejudgment interest of $141,608, post-judgment interest, and Mr. Wadler’s
litigation costs, expert witness fees, and reasonable attorneys’ fees as approved by the Court. We previously
accrued for the judgment, interest and Mr. Wadler's litigation costs. On June 6, 2017, we filed a notice of appeal
with the United States Court of Appeals for the Ninth Circuit. Oral arguments occurred on November 14, 2018. On

February 26, 2019, the United States Court of Appeals for the Ninth Circuit issued its decision, reversing in part,
vacating in part, and affirming in part. Specifically, the court: (1) reversed the Dodd-Frank claim, which amounts
to about $2.96 million plus interest, and directed the district court to enter judgment in Bio-Rad’s favor on that
claim; (2) vacated the SOX claim due to instructional error and remanded for further proceedings, including
whether a new trial is needed; and (3) affirmed the California public policy claim and the $7.96 million in damages
attributable to it. On March 12, 2019 we filed a petition for panel rehearing or rehearing en banc with the United
States Court of Appeals for the Ninth Circuit, and this petition was denied on April 8, 2019. On September 24,
2019, Mr. Wadler filed a dismissal with prejudice of all remaining claims under the lawsuit with the U.S. District
Court, Northern District of California as a result of a Confidential Settlement Agreement and Satisfaction of
Judgment that the parties entered into that was last executed on September 6, 2019. This matter did not have a
material impact on our 2019 results of operations and is now closed.

We are also party to various other claims, legal actions and complaints arising in the ordinary course of business.
We cannot at this time reasonably estimate a range of exposure, if any, of the potential liability with respect to these
matters. While 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, 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 ticker symbols
BIO and BIOb, respectively.

On February 24, 2020, we had 209 holders of record of Class A Common Stock and 103 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.

In November, 2017, the Board of Directors authorized a new share repurchase program, granting Bio-Rad authority
to repurchase, on a discretionary basis, up to $250.0 million of outstanding shares of our common stock.
Repurchases may be made at management's discretion from time to time on the open market or through privately
negotiated transactions. This new authorization superseded the prior authorization of up to $18.0 million of Bio-
Rad's common stock and has no expiration.

The following table contains information on the shares of our common stock that we purchased or otherwise
acquired during the three months ended December 31, 2019, as required by the Securities and Exchange
Commission rules.

Period

Total Number of
Shares Purchased

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Maximum Number (or
Approximate Dollar
Value) of Shares that
May yet be Purchased
Under the Plans or
Programs (in millions)

October 1 to
October 31, 2019

November 1 to
November 30,
2019
December 1 to
December 31,
2019

—

22,343 Class A $

358.04

22,343 Class A $

—

181.1

173.1

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, 2014, and
reinvestment of dividends if paid:

S
R
A
L
L
O
D

350

300

250

200

150

100

2014

2015

2016

2017

2018

2019

Bio-Rad

Peer Group (1)

S&P MidCap 400

(1) The Peer Group consists of the following public companies: Danaher, Becton Dickinson, Thermo Fisher
Scientific, Meridian Bioscience and PerkinElmer. 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 currency exchange losses, net
Change in fair market value of equity
securities
Other (income) expense, net
Income before income taxes

(Provision for) benefit from income taxes

Net income

Basic earnings per share
Diluted earnings per share
Cash dividends paid per common share
Total assets
Long-term debt, net of current maturities

$
$
$
$
$

2019

2018

Year Ended December 31,
2017

2016

2015

2,311,659
1,054,663
1,256,996
824,625
202,710

—
23,416
2,245

2,289,415
1,066,264
1,223,151
834,783
199,196

292,513
23,962
2,861

(2,030,987)
(26,094)
2,261,081
(502,406)
1,758,675

(606,230)
(36,593)
512,659
(147,045)
365,614

2,160,153
972,450
1,187,703
806,790
250,157

2,068,172
929,744
1,138,428
814,697
205,708

11,506
23,014
9,128

—
(10,697)
97,805
24,444
122,249

62,305
23,380
4,542

—
(13,764)
41,560
(15,560)
26,000

58.93
58.27

$
$
— $
$
$

8,008,859
13,579

12.25
12.10

$
$
— $
$
$

5,611,068
438,937

4.12
4.07

$
$
— $
$
$

4,273,012
434,581

0.88
0.88

$
$
— $
$
$

3,850,504
434,186

2,019,441
897,771
1,121,670
761,990
192,972

—
21,692
10,249

—
(11,080)
145,847
(36,608)
109,239

3.74
3.71
—
3,709,718
433,883

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.

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 9,000 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 still uncertain as the need to control government social spending by many governments limits
opportunities for growth. Adding to this uncertainty was the referendum in the United Kingdom to withdraw from
the European Union. Approximately 39% of our 2019 consolidated net sales are derived from the United States and
approximately 61% are derived from international locations, with Europe being our largest international region.
The international sales are largely denominated in local currencies such as the Euro, Swiss Franc, Japanese Yen,
Chinese 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. We regularly discuss our changes in revenue and expense categories in terms of
both changing foreign exchange rates and in terms of a currency neutral basis, if notable, to explain the impact
currency has on our results.

Cyberattack

As we previously disclosed on December 9, 2019 on a Form 8-K filed with the Securities and Exchange
Commission (SEC), we detected a cyberattack on our network on the evening of December 5, 2019 PST and
immediately took affected systems offline as part of our comprehensive response to contain the activity (“December
2019 Cyberattack”). The virus was targeted at Windows-based systems and did not attack our global ERP system
(SAP) and other non-Windows-based systems. Critical systems were back online within a few days of the incident.
As part of our in-depth investigation into this incident, we engaged outside cyber security experts to assist us with
investigation and remediation efforts. To date, we have found no evidence of unauthorized transfer or misuse of
personal data, and there is no indication at this point that customer systems were affected. We anticipate some
ongoing expenses relating to this incident will continue into the first half of 2020.

We have insurance coverage for costs resulting from cyberattacks. At this time, we expect that our losses from this
incident will exceed our insurance coverage. We have not recorded any estimated proceeds resulting from an
insurance claim regarding this incident since covered expenses as a result of this incident are still not yet quantified
and, in any case, disputes over the extent of insurance coverage for claims are not uncommon. We did not pay a
ransom in connection with this incident.

Acquisitions

In October 2019, we acquired all the issued and outstanding shares of a foreign distributor for approximately $4.2
million, which included cash payments at closing, net of closing cash, of $3.6 million, and $0.6 million in
contingent consideration potentially payable to the sellers. In addition, we recorded a net gain of $0.4 million for
the settlement of preexisting conditions concurrent with the acquisition that was recorded in Selling, general and
administrative expense. The acquisition was included in our Clinical Diagnostics segment's results of operations
from the acquisition date and was accounted for as a business combination. As of December 31, 2019, the
preliminary allocation of the payments was $3.4 million to customer relationships, a definite-lived intangible, $0.2
million to deferred tax asset, $0.8 million to deferred tax liability related to the purchased intangible and $1.4
million to acquired net assets.

In August 2019, we acquired all the issued and outstanding membership interests of Exact Diagnostics, LLC for
approximately $60.0 million. Cash payments at closing, net of closing cash, were $59.7 million. The acquisition
was included in our Clinical Diagnostics segment's results of operations from the acquisition date and was
accounted for as a business combination. The final allocation of the payments was $26.8 million to purchased
intangibles consisting primarily of customer relationships, developed product technology and tradenames, $4.2
million to acquired net assets, and $28.7 million to goodwill. We believe that the acquisition will accelerate market
penetration in the areas of quality controls and assay verification panels in our Clinical Diagnostics operations.

In March 2019, we completed the acquisition of all the issued and outstanding stock of a small U.S. private
company for approximately $20.0 million. Cash payments, net of closing cash, consisted of $4.0 million paid in
November 2018 and the remaining $16.0 million paid in March 2019. The acquisition was included in our Life
Science segment's results of operations from the acquisition date and was accounted for as a business combination.
The final allocation of the payments was $15.6 million to goodwill that included workforce and time-to-market
advantage, $5.5 million to definite-lived intangibles, $0.2 million to in-process research and development, an
indefinite-lived intangible asset, and a deferred tax liability of $1.3 million related to the purchased intangibles. We
believe that the acquisition will expand our reagents suite of offerings in our Life Science operations.

The above acquisitions are immaterial to Bio-Rad taken as a whole for the periods presented.

Restructuring Costs for European and North American Reorganization

In November 2019, we announced our strategy-driven restructuring plan. We expect that a significant portion of the
net savings resulting from this restructuring plan will be repurposed in alignment with our portfolio strategy. The
restructuring plan includes a workforce reduction in Europe, United States and Canada, and is expected to be
incurred through 2020. We recorded $25.3 million of expense in restructuring charges related to severance and
employee benefits for the year ended December 31, 2019. The liability of $25.3 million as of December 31, 2019
was recorded in Accrued payroll and employee benefits in the Consolidated Balance Sheets. The amounts recorded
were reflected in Cost of goods sold of $4.8 million, in Selling, general and administrative expense of $14.4 million
and in Research and development expense of $6.1 million in the Consolidated Statements of Income for the year
ended December 31, 2019.

Restructuring Costs for Termination of a Diagnostics Research and Development Project and Facility Closures

In December 2018, we announced the closure of a small manufacturing facility outside Paris, France. We recorded
restructuring charges and adjustments related to severance and employee benefits of $(0.1) million and $3.9 million
and exit costs of zero and $0.2 million for the years ended December 31, 2019 and 2018, respectively. From
December 2018 to December 31, 2019, total expenses were $4.0 million.

In June 2018, we announced the closure of a small manufacturing operation in Munich, Germany. We recorded
restructuring charges and adjustments related to severance and employee benefits of $(0.3) million and $1.7 million
for the years ended December 31, 2019 and 2018, respectively. From June 2018 to December 31, 2019, total
expenses were $1.4 million. This restructuring plan was completed in November 2019.

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 net operating losses, tax credits, and temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Management 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.

As of December 31, 2019 and 2018, we recorded a valuation allowance of $67.2 million and $70.8 million,
respectively, due to uncertainties related to our ability to utilize deferred tax assets in some jurisdictions. 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.

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 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.

On December 22, 2017, the U.S. enacted comprehensive tax legislation (the “Tax Act”). The Tax Act made broad
and complex changes to the U.S. tax code, including the imposition of a one-time mandatory deemed repatriation
tax (“Transition Tax”) on certain earnings accumulated offshore since 1986 and the reduction of the corporate tax
rate from 35% to 21% for U.S. taxable income, resulting in a one-time remeasurement of U.S. federal deferred tax
assets and liabilities. In 2017, we recorded an income tax benefit of $70 million related to the Transition Tax and
remeasurement of our U.S. federal deferred tax assets and liabilities. We completed our accounting for the Tax Act
under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB
118”) in 2018, which resulted in an additional income tax benefit of $49 million.

Valuation of Business Acquisitions, Goodwill and Long-lived Assets. Upon the consummation of a business
combination, we use multiple analyses to determine the fair market value of the consideration of assets acquired and
liabilities assumed. Once the fair market value of the acquired business is determined, any residual value between
fair market value and the consideration is defined as goodwill.

Goodwill represents the excess of the cost over the fair value of net tangible and identifiable intangible assets of
acquired businesses, which could include contingent consideration. Contingent consideration is an obligation of the
acquirer to transfer additional assets or equity interest to the former owners of an acquiree as part of the exchange
for control of the acquiree if specified future events occur or conditions are met. Contingent consideration is
reported at fair value each reporting period until the contingency is resolved. Any changes in fair value are
recognized in earnings, which could become volatile over time depending on the facts and circumstances.

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
operating segments. A goodwill impairment will be the amount by which a reporting unit's carrying value exceeds
its fair value, not to exceed the carrying amount of goodwill.

We use a projected discounted cash flow model to determine the fair value of a reporting unit. This discounted cash
flow 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 and discount rates. In addition, for some diagnostic units
where they supply reagent rental equipment, capital expenditures can have a significant impact. We estimate future
cash flows using current and longer-term 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.

Impairment tests are highly sensitive to changes in assumptions and minor changes to assumptions could result in
impairment losses. Our forecasts utilized in our 2019 impairment test assumed, among other things, sales growth
from executing our sales and marketing programs, new product introductions, successful product development and
timely registration of our products when required, while controlling costs to manufacture and service our equipment
at the customer site. In addition, external factors, such as competitive pricing in the market, currency, inflation
rates, cost of capital, and forecasted tax rates could affect the determination of fair value of our reporting units. Our
impairment tests resulted in excessive fair value over book value ranging from 75% to more than 400% for our
various reporting units. If the initiatives mentioned above do not achieve the desired results, or external factors
change detrimentally, future impairment losses may occur.

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. 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.

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.
In addition to the required quantitative review, we also review quarterly qualitative factors that we consider
important, which could trigger an impairment review and include:

•

significant reporting unit 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.

In conjunction with our annual valuation of goodwill, there were no impairment losses in 2019. In 2018, we
impaired goodwill associated with our 1999 acquisition of Pasteur Sanofi Diagnostics S.A., 2007 through 2012
acquisitions of DiaMed Holding AG, DiaMed Fennica Oy, DiaMed (G.B.) Limited, and DiaMed Benelux
(collectively DiaMed), 2010 acquisition of Biotest AG, and 2013 acquisition of AbD Serotec in the amounts of
$18.1 million, $247.2 million, $10.8 million and $5.9 million, respectively. Goodwill for DiaMed, Biotest AG and
AbD Serotec was fully impaired at December 31, 2018. In 2018, we impaired developed product technology and
fully impaired covenants not to compete in the amounts of $8.8 million and $1.7 million, respectively, associated
with our 2012 acquisition of a cell sorting system from Propel Labs, Inc.

In 2017, we impaired goodwill associated with our 1999 acquisition of Pasteur Sanofi Diagnostics S.A. and with
our 2013 acquisition of AbD Serotec in the amounts of $2.8 million and $8.7 million, respectively.

All the impairments above were based upon a revision of our Level 3 valuation inputs, i.e., expected future cash
flows.

Revenue Recognition. We recognize revenue from operations through the sale of products, services, and rental of
instruments. Revenue from contracts with customers is recognized upon transfer of control of promised products or
services to customers in an amount that reflects the consideration we expect to receive in exchange for those
products or services. We enter into contracts that can include various combinations of products and services, which
are generally accounted for as distinct performance obligations. Revenue is recognized net of any taxes collected
from customers (sales tax, value added tax, etc.), which are subsequently remitted to government authorities.

Our contracts from customers often include promises to transfer multiple products and services to a customer.
Determining whether products and services are considered distinct performance obligations that should be
accounted for separately versus together may require significant judgment, and may or may not impact the timing of
revenue recognition. Revenue associated with equipment that requires factory installation is not recorded until
installation is complete and customer acceptance, if required, has occurred. Certain equipment requires installation
due to the fact that the instruments are being operated in a clinical/laboratory environment, and the installation
services could result in modification of the equipment in order to ensure that the instruments are working according
to specifications of the customer which are subject to validation tests upon completion of the installation. In these
arrangements, which require factory installation, the delivery of the equipment and the installation are separate
performance obligations. We will recognize the transaction price allocated to the equipment only upon customer
acceptance, as the transfer of control has occurred in relation to the equipment at that point in time as the customer
has the ability to direct the use of and obtain substantially all of the remaining benefits from the asset. The
transaction price allocated to the installation services is also recognized upon completion of the services because
without the completion of the installation services and related customer acceptance the customer cannot receive any
of the benefits of the service.

At the time revenue is recognized, a provision is recognized for estimated product returns as this right is considered
variable consideration. Accordingly, when product revenues are recognized, the transaction price is reduced by the
estimated amount of product returns.

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

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

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.

Results of Operations - Sales, Gross Margins and Expenses - Incorporating by Reference the Results of
Operations - Sales, Gross Margins and Expenses from our Annual Report on Form 10-K for the fiscal year
ended December 31, 2018

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
Impairment losses on goodwill and long-lived assets
Net income

Net sales

2019

2018

100.0%
45.6
54.4
35.7
8.8
—
76.1

100.0%
46.6
53.4
36.5
8.7
12.8
16.0

Net sales (sales) in 2019 were $2.31 billion, an increase of 1.0% compared to $2.29 billion in 2018. Excluding the
impact of foreign currency exchange rate fluctuations, 2019 sales increased by approximately 3.3% compared to
2018. Currency neutral sales increased in all regions.

The Life Science segment sales in 2019 were $885.9 million, an increase of 2.8% compared to 2018. On a currency
neutral basis, sales increased 4.6% compared to 2018. The currency neutral sales increase was primarily driven by
growth in our Droplet Digital™ PCR, Food Safety and Process Media product lines. Currency neutral sales
increases occurred mostly in the Americas and Europe. Sales in Asia were most impacted by the December 2019
Cyberattack .

The Clinical Diagnostics segment sales in 2019 were $1.41 billion, relatively flat compared to 2018. On a currency
neutral basis, sales increased 2.8% compared to 2018. The currency neutral sales in 2018 benefited from a one-time
$6.0 million receipt for the resolution of a dispute involving a licensed patent. Excluding the one-time receipt last
year, we saw currency neutral sales growth across all three regions, primarily in the Americas and Asia. Product
lines that contributed to the growth included Quality Controls, Blood Typing, Immunology and Diabetes.
Management expects sales growth in Europe to continue to be challenging due to government initiatives to contain
healthcare spending, along with increased competition.

Gross margin

Consolidated gross margins were 54.4% in 2019 compared to 53.4% in 2018. Life Science segment gross margins
in 2019 increased when compared to 2018 by approximately 2.7 percentage points primarily due to $7.4 million and
$1.5 million of cost of sales benefits in 2019 from escrow releases related to 2011 and 2017 acquisitions within the
Life Science group, respectively, and product mix, as well as a decrease in service costs. Clinical Diagnostics
segment gross margins in 2019 were flat compared to 2018. Unfavorable manufacturing costs included
restructuring costs, lower absorption, and higher service costs primarily associated with a larger installed base.
These costs were primarily offset by lower excess and obsolete inventory related costs, logistics costs, and royalty
expenses. The gross margin in 2018 benefited from a one-time receipt of $6.0 million for the resolution of a dispute
involving a licensed patent, partially offset by a restructuring charge related to a manufacturing facility closure.

Selling, general and administrative expense

Consolidated selling, general and administrative expenses (SG&A) decreased to $824.6 million or 35.7% of sales in
2019 compared to $834.8 million or 36.5% of sales in 2018, an overall decrease of $10.2 million. Decreases to
SG&A primarily were related to lower professional fees of $27.7 million, lower bad debt of $14.6 million and lower
travel of $8.6 million. Decreases in SG&A were partially offset primarily by increases in employee related
expenses of $40.8 million, which included higher expenses associated with the restructuring plans in 2019
compared to those in 2018.

Research and development expense

Research and development expense increased to $202.7 million or 8.8% of sales in 2019 compared to
$199.2 million or 8.7% of sales in 2018. Life Science segment research and development expense increased in
2019 from 2018, primarily driven by additional spending for personnel, outside consultants and supplies that were
related to new product innovation within the Droplet Digital PCR product line. Clinical Diagnostics segment
research and development expense decreased in 2019 from 2018 primarily from lower spending due to the timing of
projects that led to lower outside professional services expense and lower supplies expense, partially offset by the
restructuring plan in the fourth quarter of 2019.

Impairment losses on goodwill and long-lived assets

In conjunction with our annual valuation of goodwill, there were no impairment losses in 2019. In 2018, we
impaired goodwill associated with our 1999 acquisition of Pasteur Sanofi Diagnostics S.A., 2007 through 2012
acquisitions of DiaMed Holding AG, DiaMed Fennica Oy, DiaMed (G.B.) Limited, and DiaMed Benelux
(collectively DiaMed), 2010 acquisition of Biotest AG, and 2013 acquisition of AbD Serotec in the amounts of
$18.1 million, $247.2 million, $10.8 million and $5.9 million, respectively. Goodwill for DiaMed, Biotest AG and
AbD Serotec was fully impaired at December 31, 2018. Impairments for the Pasteur Sanofi Diagnostics S.A.,
DiaMed and Biotest AG were included in our Clinical Diagnostics segment's results of operations, and the
impairment for AbD Serotec was included in our Life Science segment's results of operations.

In 2018, we impaired developed product technology and fully impaired covenants not to compete in the amounts of
$8.8 million and $1.7 million, respectively, associated with our 2012 acquisition of a cell sorting system from
Propel Labs, Inc. These impairments were included in our Life Science segment's results of operations.

Results of Operations – Non-operating

Interest expense

Interest expense in 2019 was $23.4 million, a slight decrease compared to 2018 of $24.0 million.

Foreign currency exchange gains and losses

Foreign currency exchange gains and losses consist primarily 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 2019 and 2018 were
$2.2 million and $2.9 million, respectively. The 2019 and 2018 net foreign currency exchange losses were
attributable to market volatility, the result of the estimating process inherent in the timing of shipments and
payments of intercompany debt, and the cost of hedging. All years are affected by the economic hedging program
we employ to hedge our intercompany receivables and payables denominated in foreign currencies.

Change in fair market value of equity securities

Change in fair market value of equity securities were gains of $2,031.0 million for 2019 compared to
$606.2 million for 2018, primarily resulting from the recognition of holding gains on our investment in Sartorius
AG.

Other (income) expense, net

Other (income) expense, net includes investment and dividend income, interest income on our cash and cash
equivalents, short-term investments and long term marketable securities. Other (income) expense, net in 2019
decreased to $26.1 million of income compared to $36.6 million of income in 2018. Other income, net decreased
primarily due to a land sale of $4.1 million and a divestiture of a product line of $5.1 million that both occurred in
2018, and higher other-than-temporary impairment losses on equity method investments that were recorded in light
of the investees' financial condition in 2019.

Effective tax rate

Our effective tax rate was 22.2% and 28.7% in 2019 and 2018, respectively. The effective tax rate for 2018 was
driven by detriments due to non-deductible impairment charges and the taxation of our foreign operations, partially
offset by a $49 million benefit recorded as a result of the completion of our accounting for the Tax Act under SAB
118. Our effective tax rate may be impacted in the future, either favorably or unfavorably, by many factors
including, but not limited to, changes in the geographic mix of earnings, changes to statutory tax rates, changes in
tax laws or regulations, tax audits and settlements, and generation of tax credits.

Our income tax returns are routinely audited by U.S. federal, state and foreign tax authorities. We are currently
under examination by many of these tax authorities. There are differing interpretations of tax laws and regulations,
and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of
deductions and allocations of income among various tax jurisdictions. We do not believe any currently pending
uncertain tax positions will have a material adverse effect on our consolidated financial statements, although an
adverse resolution of one or more of these uncertain tax positions in any period may have a material impact on the
results of operations for that period.

We record liabilities for unrecognized tax benefits related to uncertain tax positions. We do not believe the
resolution of our uncertain tax positions will have a material adverse effect on our consolidated financial
statements, although an adverse resolution of one or more of these uncertain tax positions in any period may have a
material impact on the results of operations for that period.

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

Comparison of the Year Ended December 31, 2018 to the Year Ended December 31, 2017

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

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
expenditures, interest and taxes. In addition to the annual positive cash flow from operating activities, additional
liquidity is readily available via the sale of short-term investments and access to our domestic $200.0 million
unsecured Credit Agreement that we entered into in April 2019, and to a lesser extent international lines of credit.
Borrowings under the 2019 Credit Agreement are available on a revolving basis and can be used to make permitted
acquisitions, for working capital and for other general corporate purposes. We had no outstanding borrowings under
the 2019 Credit Agreement as of December 31, 2019; however, $0.2 million was utilized for domestic standby
letters of credit that reduced our borrowing availability. The 2019 Credit Agreement matures in April 2024. In total
under domestic and international lines of credit, standby letters of credit and guarantee arrangements, we had
approximately $207.5 million available for borrowing and usage as of December 31, 2019, which was reduced by
approximately $4.2 million that was utilized for standby letters of credit and guarantee arrangements issued by our
banks to support our obligations. Management believes that this availability, together with cash flow from
operations, will be adequate to meet our current objectives for operations, research and development, capital
additions for manufacturing and distribution, plant and equipment, information technology systems and an
acquisition of reasonable proportion to our existing total available capital. However, we have outstanding $425.0
million principal amount of Senior Notes that are due in December 2020 (4.875% Notes). We are currently
assessing the repayment of the 4.875% Notes and believe we have adequate resources to repay or finance this
obligation.

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

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, and international trade disputes and increased regulation, 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.

Cash Flows from Operations

Net cash provided by operations was $457.9 million and $285.5 million in 2019 and 2018, respectively. The net
increase between 2019 and 2018 of $172.4 million primarily resulted from:

•
•
•
•

•

lower cash paid to suppliers that included value added tax refunds of approximately $53 million in 2019,
lower income tax payments in 2019 compared to 2018, and
higher investment income received, partially offset by
lower comparative cash received from customers in 2019 was primarily due to higher collections in 2018
subsequent to the ERP implementation in 2017, and
forward foreign exchange contracts had lower net proceeds in 2019 compared to 2018.

Cash flows from operations during the first quarter have historically had larger payments for royalties, fourth quarter
sales commissions to third parties and annual employee bonuses, and we expect this pattern to recur in the first
quarter of 2020.

Cash Flows from Investing Activities

Net cash used in investing activities was $208.9 million and $187.0 million for 2019 and 2018, respectively. The net
increase between 2019 and 2018 of $21.9 million was primarily due to payments for acquisitions in 2019, and to a
lesser extent proceeds for a divestiture of a product line in 2018 as discussed below. These were partially offset
primarily by lower capital expenditures in 2019 than in 2018 as discussed below, and for sales of marketable
securities and investments that increased by $27.6 million in 2019 compared to 2018. Other items that affected cash
flows from investing activities are further discussed below.

Our investment objective is to maintain liquidity to meet anticipated operational and other corporate requirements in
which capital is preserved and increased through investing in low risk, high quality securities with commensurate
returns, consistent with our risk tolerance level.

During the first quarter of 2019, we received $7.4 million from an escrow release related to an acquisition from 2011
within the Life Science Group. During the first quarter of 2018, we received $7.0 million for a divestiture of a
product line and $4.1 million for a land sale.

The above acquisitions are immaterial to Bio-Rad taken as a whole for the periods presented.

We continue to review possible acquisitions, including early stage businesses, to expand both our Life Science and
Clinical Diagnostics segments. We routinely meet with the principals or brokers of the subject companies. However,
it is not certain at this time that any of these discussions will advance to completion.

Capital expenditures in 2019 totaled $98.5 million, compared to $129.8 million in 2018. Capital expenditures
represent the addition and replacement of production machinery and research equipment, ongoing manufacturing and
facility additions for expansion, regulatory, environmental and compliance. Also included in capital expenditures are
investments in business systems and data communication upgrades and enhancements, including the remaining
phases of the global enterprise resource planning (ERP) platform. All periods include equipment placed with Clinical
Diagnostics segment customers who then contract to purchase our reagents for use. Capital expenditures were lower
in 2019 than in 2018 primarily due to implementing smaller phases of the ERP platform. In addition in 2018, we
made an investment in two office buildings and adjacent land in the greater San Francisco Bay Area, California.

Cash Flows from Financing Activities

Net cash used in financing activities was $22.8 million compared to $48.7 million in 2019 and 2018, respectively.
Net cash used in financing activities was lower in 2019 than 2018 primarily due to lower repurchases of our common
stock in 2019 than in 2018 of $20.9 million.

We have outstanding 4.875% Notes of $425.0 million, which are due in December 2020. We are currently assessing
the repayment of the 4.875% Notes and believe we have adequate resources to repay or finance this obligation.
We believe the current cash is sufficient to meet normal operating costs, and funding for research and development of
new products, as well as routine outflows of capital expenditures, interest and taxes.

Treasury Shares

During 2019, 137,748 shares of our Class A treasury stock and 917 shares of our Class B treasury stock, with an
aggregate total cost of $38.7 million, were reissued to fulfill annual grants to employees under our restricted stock
program, and to fulfill our Employee Stock Purchase Plan purchases. Upon reissuing the Class A and B treasury
stock under our restricted stock program, a loss of $8.4 million was incurred as they were reissued at a lower price
than their average cost, which reduced Retained earnings while $24.9 million reduced Additional paid-in-capital.
These reissuances for the restricted stock program did not require cash payments or receipts and therefore did not
affect liquidity. Upon fulfilling our Employee Stock Purchase Plan purchases, a loss of $1.6 million was incurred as
they were issued at a lower price than the average cost, which reduced Retained earnings and resulted in net proceeds
of $3.8 million.

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, 2019 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 (1)
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

440.4
28.8
255.4
35.8
118.4

426.8
20.1
41.0
34.0
5.2

3.1
1.7
64.4
1.3
17.3

0.8 $
1.4
46.3
0.3
7.6

9.7
5.6
103.7
0.2
88.3

(1) These amounts represent expected cash payments, including finance lease obligations, which are included in our December 31, 2019
Consolidated Balance Sheet. Our debt is fixed and primarily consists of the 4.875% Notes. See Note 5 of the Consolidated Financial Statements
for additional information about our debt.

(2) Operating lease obligations are described in Note 16 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. Recognition of purchase obligations occurs
when products or services are delivered to Bio-Rad.

(4) These amounts primarily represent recognized long-term obligations for other post-employment benefits mostly due in more than 5 years,
and long-term deferred revenue. Excluded from this table are tax liabilities for uncertain tax positions and contingencies in the amount of $47.6
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 Pronouncements Adopted and to be Adopted

See Note 1 to the consolidated financial statements for recent accounting pronouncements adopted and to be adopted.

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, Japanese Yen, Chinese Yuan and British Sterling. 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
$25 million on our derivative position as of December 31, 2019. 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, 2019, the overall interest rate risk associated with our debt was not significant.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2019 and 2018
Consolidated Statements of Income for each of the three years in the period ended

December 31, 2019

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

December 31, 2019

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

December 31, 2019

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

in the period ended December 31, 2019
Notes to Consolidated Financial Statements

Page

41-43

44-45

49
50-92

Report of Independent Registered Public Accounting Firm

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

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Bio-Rad Laboratories, Inc. and subsidiaries (the
Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive
income, changes in stockholders’ equity, and cash flows for each of the years in the three year period ended
December 31, 2019, and the related notes and financial statement schedule (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted
accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 28, 2020 expressed an unqualified
opinion on the effectiveness of the Company's internal control over financial reporting.

Changes in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting
for leases effective January 1, 2019 due to the adoption of Accounting Standard Update (ASU) 2016-02, Leases,
and related accounting standard updates.

Also as discussed in Note 1 to the consolidated financial statements, the Company has changed its method of
accounting for revenue recognition effective January 1, 2018, due to the adoption of Accounting Standards
Codification (ASC) 606, Revenue from Contracts with Customers.

Also as discussed in Note 1 to the consolidated financial statements, the Company changed its method of
accounting for equity instruments effective January 1, 2018 due to the adoption of ASU 2016-01, Recognition and
Measurement of Financial Assets and Financial Liabilities and ASU 2018-03, Technical Corrections and
Improvements to Financial Instruments - Recognition and Measurement of Financial Assets and Financial
Liabilities.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the
accounts or disclosures to which they relate.

Assessment of Lease Term for Reagent Rental Arrangements

As discussed in Note 1 to the consolidated financial statements, the Company earns revenue from reagent
rental agreements with its customers. Each agreement generally includes lease elements subject to the lease
accounting standards and non-lease elements subject to the revenue accounting standards. The classification
of the lease component as an operating or sales-type lease can impact the timing of revenue recognition and
cost attributable to the underlying lease elements. While most reagent rental arrangements contain an option
for a lessee to extend and the option for the lessee to cancel or both, the period in which the contract is
enforceable is generally short, and the lease term has been limited to the noncancellable period. The
revenue allocated to the reagent rental lease elements is approximately 3% of total revenue and it is
included as part of Net Sales in the Consolidated Statement of Income.

We identified the assessment of the lease term for the reagent rental agreements, including the impact from
any associated contractual termination penalties, as a critical audit matter. The Company’s determination of
lease classification as operating or sales-type lease is primarily dependent on the initial determination of the
lease term. The Company’s process is based on the manual examination of a high volume of agreements
that are negotiated individually across the world with diverse terms. Testing the determination of the lease
term, including consideration of contractual termination penalties, required a high degree of auditor
judgment to design and execute the audit procedures.

The primary procedures we performed to address the critical audit matter included the following. We tested
certain internal controls over the Company’s process for determining the lease term, including consideration
of contractual termination penalties. We assessed the Company’s policies for determining that the lease
term of its reagent rental arrangements were in accordance with U.S generally accepted accounting
principles. Additionally, for a selection of reagent rental agreements, we read the underlying contract, and
compared relevant terms within the contract to the Company’s determination of lease term analysis.

We have served as the Company's auditor since 2013.

/s/ KPMG LLP

Santa Clara, California
February 28, 2020

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Bio Rad Laboratories, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Bio-Rad Laboratories, Inc. and subsidiaries' (the Company) internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated
statements of income, comprehensive income, changes in stockholders' equity, and cash flows for each of the years in the three-
year period ended December 31, 2019, and the related notes and financial statement schedule (collectively, the consolidated
financial statements), and our report dated February 28, 2020 expressed an unqualified opinion on those consolidated financial
statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Santa Clara, California
February 28, 2020

/s/ KPMG LLP

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

ASSETS
Current assets:

Cash and cash equivalents
Short-term investments
Restricted investments
Accounts receivable, less allowance for doubtful accounts of $20,205 at 2019 and

$26,713 at 2018

Inventories:

Raw materials
Work in process
Finished goods

Total inventories

Prepaid expenses
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

Operating lease right-of-use assets
Goodwill, net
Purchased intangibles, net
Other investments
Other assets

Total assets

December 31,

2019

2018

660,672
453,973
5,560

431,526
413,270
5,560

392,672

392,443

109,570
146,131
298,306
554,007

108,008
145,051
330,756
583,815

102,331
10,940
2,180,155

187,249
9,615
2,023,478

25,215
341,598
1,015,359
1,382,172
(882,833)
499,339

201,868
264,131
145,525
4,638,205
79,636
8,008,859

25,185
331,563
970,081
1,326,829
(818,139)
508,690

—
219,770
133,123
2,655,709
70,298
5,611,068

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
Current maturities of long-term debt
Income taxes payable
Other taxes payable
Current operating lease liabilities
Deferred revenue
Other current liabilities

Total current liabilities

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

Commitments and contingent liabilities

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 - 24,966,035 and 24,884,265 at 2019 and 2018, respectively; shares
outstanding - 24,835,804 and 24,704,772 at 2019 and 2018, respectively

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

issued - 5,089,532 and 5,096,421 at 2019 and 2018, respectively; shares
outstanding - 5,089,532 and 5,095,504 at 2019 and 2018, respectively
Additional paid-in capital

Class A treasury stock at cost, 130,231 shares at 2019 and 179,493 shares at 2018
Class B treasury stock at cost, 0 shares at 2019 and 917 shares at 2018

Retained earnings
Accumulated other comprehensive loss

Total stockholders’ equity
Total liabilities and stockholders’ equity

December 31,

2019

2018

107,014
180,084
426,172
8,763
27,522
35,365
33,735
86,840
905,495

13,579
997,787
176,018
160,923
2,253,802

122,450
143,510
493
27,513
28,675
—
26,936
101,218
450,795

438,937
553,239
—
147,766
1,590,737

—

1
410,020
(38,397)
—
5,470,779
(87,348)
5,755,057
8,008,859

1
394,342
(49,040)
(89)
3,722,073
(46,958)
4,020,331
5,611,068

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
Impairment losses on goodwill and long-lived assets

Income (loss) from operations

Interest expense
Foreign currency exchange losses, net
Change in fair market value of equity securities
Other (income) expense, net

Income before income taxes

(Provision for) benefit from income taxes

Net income

Basic earnings per share:

Net income per basic share
Weighted average common shares - basic

Diluted earnings per share:

Net income per diluted share
Weighted average common shares - diluted

Year Ended December 31,

2019

2018

2017

2,311,659 $
1,054,663
1,256,996
824,625
202,710
—
229,661
23,416
2,245
(2,030,987)
(26,094)
2,261,081
(502,406)
1,758,675 $

2,289,415 $
1,066,264
1,223,151
834,783
199,196
292,513
(103,341)
23,962
2,861
(606,230)
(36,593)
512,659
(147,045)
365,614 $

2,160,153
972,450
1,187,703
806,790
250,157
11,506
119,250
23,014
9,128
—
(10,697)
97,805
24,444
122,249

58.93 $

12.25 $

29,843

29,836

4.12
29,655

58.27 $
30,184

12.10 $
30,228

4.07
30,034

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

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

Net income
Other comprehensive (loss) income:

Year Ended December 31,
2018
365,614 $

2019
$ 1,758,675

2017
122,249

Foreign currency translation adjustments

(36,953)

(112,857)

76,050

Foreign other post-employment benefits adjustments, net of
income taxes
Net unrealized holding gains (losses) on available-for-sale
(AFS) investments, net of income taxes and effect of
adoption of ASU 2018-02*

Other comprehensive (loss) income, net of income taxes
Comprehensive income

(7,363)

7,549

(3,767)

3,926
(40,390)
$ 1,718,285

(1,187)
(106,495)
259,119 $

248,745
321,028
443,277

*ASU 2018-02, "Reclassification of Certain Tax effects from Accumulated Other Comprehensive Income," as
disclosed in our December 31, 2017 Form 10-K

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

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

Year Ended December 31,
2018

2019

2017

Cash flows from operating activities:
Cash received from customers
Cash paid to suppliers and employees
Interest paid, net
Income tax payments, net
Investment proceeds and miscellaneous receipts, net
Proceeds from (payments for) forward foreign exchange contracts, net
Net cash provided by operating activities

Cash flows from investing activities:

Capital expenditures
Proceeds from dispositions of property, plant and equipment
Proceeds from divestiture of a product line

(Payments for) proceeds from acquisitions and long-term investment
Recovery of (payments for) purchases of intangible assets
Payments for purchases of restricted investment
Payments for purchases of marketable securities and investments
Proceeds from sales of marketable securities and investments
Proceeds from maturities of marketable securities and investments
Net cash used in investing activities

Cash flows from financing activities:

Net payments on line-of-credit arrangements and notes payable
Payments on long-term borrowings
Payments for credit agreement renewal fees

Proceeds from issuances of common stock for share-based
compensation

Tax payments from net share settlement

Proceeds from reissuances of treasury stock for shared-based
compensation, net
Payments for purchases of treasury stock
Payments of contingent consideration
Net cash (used in) provided by financing activities

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

$ 2,311,925
(1,818,575)
(22,330)
(45,081)
31,673
285
457,897

$ 2,326,310
(1,989,685)
(22,703)
(62,414)
26,383
7,603
285,494

$ 2,093,948
(1,916,119)
(22,224)
(52,136)
18,392
(17,724)
104,137

(98,532)
129
—
(79,386)
8,818
—
(371,450)
104,632
226,900
(208,889)

—
(643)
(486)

13,113
(8,096)

(129,825)
4,315
6,964

266
(3)
—
(371,019)
77,029
225,295
(186,978)

—
(2,961)
—

14,133
(8,862)

(111,332)
86
—
(76,645)
(3,795)
(1,000)
(282,656)
97,523
202,247
(175,572)

(36)
(316)
—

14,604
(7,310)

3,831
(28,000)
(2,477)
(22,758)
2,237
228,487
434,164
$ 662,651

—
(48,912)
(2,078)
(48,680)
(655)
49,181
384,983
434,164

—
(2,920)
(3,681)
341
(1,094)
(72,188)
457,171
$ 384,983

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated
Balance Sheets that agrees to the same amounts shown in the Consolidated Statements of Cash Flows (in thousands):

Cash and cash equivalents
Restricted cash included in Other current assets
Restricted cash included in Other assets
Total cash, cash equivalents, and restricted cash shown
in the Consolidated Statements of Cash Flows

Year Ended December 31,

2019
$660,672
93
1,886

2018
$431,526
111
2,527

2017
$383,824
882
277

$662,651

$434,164

$384,983

These restricted cash items are primarily related to performance guarantees.
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
Stockholders'
Equity

Balance at December 31, 2016
Net income
Effect of adoption of ASU 2016-09*

Other comprehensive income, net of
tax

Effect of adoption of ASU
2018-02**
Issuance of common stock
Stock compensation expense
Purchase of treasury stock
Reissuance of treasury stock
Balance at December 31, 2017
Effect of adoption of ASU 2016-01
and ASU 2018-03***

Effect of adoption of ASU
2016-16****
Effect of adoption of ASC 606*****
Net income
Other comprehensive loss, net of tax
Issuance of common stock
Stock compensation expense
Purchase of treasury stock
Balance at December 31, 2018
Net income
Other comprehensive loss, net of tax
Issuance of common stock
Stock compensation expense
Purchase of treasury stock
Reissuance of treasury stock

3
—
—

—

—
—
—
—
—
3

—

—
—
—
—
—
—
—
3
—
—
—
—
—
—

332,911
—
391

(101) $ 1,828,581
122,249
(256)

—
—

417,766
—
—

$ 2,579,160
122,249
135

—

200,893

—
4,490
23,439
—
—
361,231

—
—
—
(2,920)
2,804
(217)

(120,135)
—
—
—

120,135
—
—
—

1,830,439

738,794

—
4,490
23,439
(2,920)
2,804
2,930,250

—

— 1,543,747

(679,257)

864,490

—
—
—
—
5,271
27,840
—
394,342
—
—
5,017
35,593
—
(24,932)

—
—
—
—
—
—
(48,912)
(49,129)

(17,591)
(136)
365,614
—
—
—
—
3,722,073
— 1,758,675
—
—
—
—
—
—
(28,000)
—
(9,969)
38,732

(17,591)
(136)
365,614
(106,495)
5,271
27,840
(48,912)
4,020,331
— 1,758,675
(40,390)
5,017
35,593
(28,000)
3,831

—
—
(106,495)
—
—
—
(46,958)

(40,390)
—
—
—
—

Balance at December 31, 2019

410,020

(38,397) $ 5,470,779

(87,348) $ 5,755,057

* ASU 2016-09, "Improvements to Employee Shared-Based Payment Accounting," as disclosed in our December 31, 2017 Form 10-K

** ASU 2018-02,"Reclassification of Certain Tax effects from Accumulated Other Comprehensive Income," as disclosed in our

December 31, 2017 Form 10-K

*** ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities, and ASU 2018-03, "Technical Corrections
and Improvements to Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities," as disclosed in our
December 31, 2018 Form 10-K

**** ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory," as disclosed in our December 31, 2018 Form 10-K

***** See Note 1, "Significant Accounting Policies" under "Revenue Recognition"

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.

Short-term Restricted Investments

Short-term restricted investments of $5.6 million at both December 31, 2019 and 2018 represent a money market
fund that is renewed annually for collateral that secures worker's compensation and general liability insurance.
Investment income accrues to Bio-Rad and is recorded in Cash and cash equivalents in the Consolidated Balance
Sheets.

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. Effective January 1, 2018, changes in
fair value for equity securities are reported in Change in fair market value of equity securities in the Consolidated
Statements of Income due to the adoption of ASU 2016-01, "Recognition and Measurement of Financial Assets and
Financial Liabilities." 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 debt securities 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.

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.

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 cost and 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. The estimated useful
lives of property, plant and equipment are generally as follows: buildings and leasehold improvements, 10-39 years
or the term of the leases or life of the improvements, whichever is shorter; reagent rental equipment, 1-5 years; and
equipment, 3-12 years.

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-
use (“ROU”) assets, Current operating lease liabilities, and Operating lease liabilities in our Consolidated Balance
Sheet as of December 31, 2019. Finance leases are included in Property, plant and equipment, Current maturities of
long-term debt, and Long-term debt, net of current maturities in our Consolidated Balance Sheet as of
December 31, 2019.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized
at the commencement date based on the present value of lease payments over the lease term. As our leases do not
provide an implicit rate, we use our incremental borrowing rate based on the information available at the
commencement date in determining the present value of lease payments. The operating lease ROU asset also
includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or
terminate the lease. For purposes of determining the lease term used in the measurement of operating lease ROU
assets and operating lease liabilities, we include the noncancellable period of the lease together with those periods
covered by the option to extend the lease if we are reasonably certain to exercise that option, the periods covered by
an option to terminate the lease if we are reasonably certain not to exercise that option, and the periods covered by
the option to extend (or to not terminate) the lease in which exercise of the option is controlled by the lessor. Lease
expense for lease payments is recognized on a straight-line basis over the lease term. Where we act as lessee, we
elected not to separate lease and non-lease components.

Where we act as lessor in our reagent rental arrangements, we allocate the consideration in the contract to the
separate lease components and non-lease components. After allocation, the amount of variable payments allocated
to lease components will be recognized as income under the lease accounting standard ASC 842, while the amount
of variable payments allocated to non-lease components will be recognized as income in accordance with ASC 606.
Such reagent rental arrangements are more fully described below under the caption "Reagent Rental Agreements."

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 in the fourth
quarter 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 operating
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 amount will be the amount by which a reporting unit's carrying value exceeds its fair
value, not to exceed the carrying amount of goodwill. We use a projected discounted cash flow model to determine
the fair value of a reporting unit.

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 and operating lease right-of-use 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 net operating losses, tax
credits, and temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. They are determined using enacted tax rates in effect for
the year in which such temporary 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 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.
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

On January 1, 2018, we adopted Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with
Customers," using the modified retrospective method applied to those contracts that were not completed as of
January 1, 2018. We recorded a net reduction to opening retained earnings of $0.1 million as of January 1, 2018
due to the cumulative impact of adopting ASC 606 with the impact primarily related to a customer loyalty program
in the United States for which the resulting non-cash consideration is treated as variable consideration under the
new revenue recognition accounting standard.

We recognize revenue from operations through the sale of products, services, and rental of instruments. Revenue
from contracts with customers is recognized upon transfer of control of promised products or services to customers
in an amount that reflects the consideration we expect to receive in exchange for those products or services. We
enter into contracts that can include various combinations of products and services, which are generally accounted
for as distinct performance obligations. Revenue is recognized net of any taxes collected from customers (sales tax,
value added tax, etc.), which are subsequently remitted to government authorities.

In those instances where the timing of revenue recognition differs from the timing of invoicing, we have determined
that our contracts generally do not include a significant financing component. The primary purpose of our
invoicing terms is to provide customers with simple and predictable methods of purchasing our products and
services, not to either provide or receive financing to or from our customers. We record contract liabilities when
cash payments are received or due in advance of our performance.

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length
of one year or less. Our payment terms vary by the type and location of our customer, and the products and services
offered. The term between invoicing and when payment is due is not significant.

Reagent Rental Agreements

As discussed further above under the caption “Leases” and below under the caption “Recent Accounting
Pronouncements Adopted,” as well as in Note 16, Leases, we adopted ASC 842, “Leases,” on a modified
retrospective basis effective January 1, 2019 with practical expedients, and did not restate comparative prior
periods. We concluded that the use of the instrument (referred to as “lease elements”) is not within the guidance of
ASC 606 but rather ASC 842. Accordingly, we first allocate the transaction price between the lease elements and
the non-lease elements based on relative standalone selling prices. The determination of the transaction price
requires judgment and consideration of any fixed/minimum payments as well as estimates of variable consideration.
After allocation, the amount of variable payments allocated to lease components will be recognized as income
under ASC 842, while the amount of variable payments allocated to non-lease components will be recognized as
income in accordance with ASC 606.

Upon our adoption of ASC 842 in 2019, the maintenance services, along with the reagents, are now allocated to the
non-lease elements and will be recognized as income in accordance with ASC 606. This change is in alignment
with the requirements of ASC 842, and has resulted in a decrease in the amount of rental income and a
corresponding increase in the amount of maintenance service revenue that is included in total reported Net sales in
our consolidated income statements. Generally, the terms of the arrangements result in the transfer of control on
reagents upon either (i) when the consumables are delivered or (ii) when the consumables are consumed by the
customer.

Historically, our reagent rental arrangements have been predominantly comprised of variable lease payments that
fluctuate depending on the volume of reagents purchased, as very few of such arrangements contain any fixed/
minimum lease payments. As a result, our lease income is heavily variable in nature. Further, our reagent rental
arrangements are predominantly classified as operating leases, and any sales-type leases represent in aggregate a
very insignificant amount of lease income. Hence, our reported lease income is primarily variable in nature and is
recognized as the reagents are consumed by the customer or delivered.

Revenue allocated to the lease elements of these reagent rental arrangements represents approximately 3% and 5%
of total revenue for 2019 and 2018, respectively, and is included as part of the Net sales in our Consolidated
Statements of Income.

Contract costs:

As a practical expedient, we expense as incurred costs to obtain contracts as the amortization period would have
been one year or less. These costs, recorded within Selling, general and administrative expense, include our
internal sales force compensation programs and certain partner sales incentive programs, as we have determined
that annual compensation is commensurate with annual selling activities.

Disaggregation of Revenue:

The disaggregation of our revenue by geographic region based primarily on the location of the use of the product
service, and by industry segment sources, and the disaggregation of our revenues by industry segment sources are
presented in our Segment Information footnote (see Note 14).

Deferred revenues represent mostly unrecognized fees billed or collected for extended service arrangements.
Deferred revenues are generally recognized ratably over the term of the service contract as our performance extends
over the life of the arrangement. A majority of our deferred revenue balance is classified as current with an
expected length of one year or less. The increase in our total deferred revenue balance from $37.3 million at
December 31, 2018 to $45.8 million at December 31, 2019 was primarily driven by $33.1 million, net, of cash
payments received or due in advance of satisfying our performance obligations, partially offset by $24.6 million of
revenue recognized that were included in our deferred revenue balance as of December 31, 2018.

We warrant certain equipment against defects in design, materials and workmanship, generally for a period of one
year. Upon revenue recognition 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.

Components of the warranty accrual, included in Other current liabilities and Other long-term liabilities in the
Consolidated Balance Sheets, were as follows (in millions):

January 1

Provision for warranty
Actual warranty costs

December 31

Shipping and Handling

2019

2018

10.1 $
9.9
(11.0)

9.0 $

18.7
25.5
(34.1)
10.1

We classify all freight costs billed to customers as Net sales. Related freight costs are recognized upon transfer of
control of the promised products to customers as a fulfillment cost and included in Cost of goods sold.

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 in Foreign exchange losses, net in the Consolidated Statements of Income.

Share-Based Compensation Plans

Share-based compensation expense for all share-based payment awards granted is determined based on the grant-
date fair value. We recognize these compensation costs over the requisite service period of the award, which is
generally the vesting term of the share-based payment awards. Forfeitures are recognized as they occur. These
plans are described more fully in Note 9.

Earnings Per Share

Basic earnings per share is computed by dividing net income 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.

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

Anti-dilutive stock options and restricted stock awards
excluded from the computation of diluted EPS

Fair Value of Financial Instruments

Year Ended December 31,
2018

2019

2017

29,843

29,836

29,655

341
30,184

392
30,228

379
30,034

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 Pronouncements Adopted

In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a
Cloud Computing Arrangement That Is a Service Contract." ASU 2018-15 amends the definition of a hosting
arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain
implementation costs as if the arrangement was an internal-use software project. The internal-use software
guidance states that only qualifying costs incurred during the application development stage can be capitalized. We
prospectively adopted ASU 2018-15 effective January 1, 2019. As of December 31, 2019, we capitalized
$3.1 million of implementation costs for cloud computing arrangements, net of accumulated amortization, primarily
for business analytics software. These costs were recorded in Other current assets and Other assets in the
Consolidated Balance Sheet.

In August 2018, the SEC issued Final Rule Release No. 33-10532, "Disclosure Update and Simplification" that
extends to interim periods the annual disclosure requirement of presenting the changes in stockholders' equity,
which was effective in the first quarter of 2019.

In February 2016, the FASB issued ASU 2016-02, "Leases," and related accounting standard updates, which
requires, among other items, lease accounting to recognize most leases as assets and liabilities on the balance sheet.
Qualitative and quantitative disclosures are enhanced to better understand the amount, timing and uncertainty of
cash flows arising from leases. We adopted ASU 2016-02 on a modified retrospective basis effective January 1,
2019 with practical expedients, and did not restate comparative prior periods. The practical expedients elected in
transition included, among other items, for leases that existed prior to January 1, 2019, not reassessing whether any
contracts are or contain embedded leases, not reassessing the classification of existing leases, and not reassessing
whether previously capitalized initial direct costs qualify for capitalization. Where we act as a lessee, the adoption
of the standard resulted in material additions to the balance sheet for right-of-use assets and the associated
liabilities. See Note 16, Leases. Where we act as a lessee, we also elected not to separate lease and non-lease
components. Where we act as a lessor in reagent rental arrangements, there was an insignificant impact to our
Consolidated Financial Statements, which is more fully described above under the caption "Reagent Rental
Agreements."

Recent Accounting Pronouncements to be Adopted

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions between Topic 321 Investments—
Equity Securities, Topic 323 Investments—Equity Method and Joint Ventures, and Topic 815 Derivatives and
Hedging. ASU 2020-01 clarifies that a company should consider observable transactions that require a company to
either apply or discontinue the equity method of accounting under Topic 323 for the purposes of applying the
measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the
equity method. ASU 2020-01 also clarifies that, when determining the accounting for certain forward contracts and
purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities
would be accounted for under the equity method or fair value option. ASU 2020-01 is effective January 1, 2021
and early adoption is permitted at the beginning of any interim period on a prospective basis. We are currently
evaluating the effect of ASU 2020-01 and the consideration of early adoption.

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes," which
eliminates certain exceptions within ASC 740, Income Taxes, and clarifies other aspects of the current guidance to
promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December
15, 2020 and early adoption is permitted in any interim or annual period, with any adjustments reflected as of the
beginning of the fiscal year of adoption. We are currently evaluating the effect of adopting this pronouncement on
our financial statements and disclosures.

In November 2018, the FASB issued ASU 2018-18, "Clarifying the Interaction between Topic 808 and Topic 606."
Topic 808 is Collaborative Arrangements, and Topic 606 is Revenue from Contracts with Customers. ASU 2018-18
clarifies that certain transactions between collaborative partners should be accounted for as revenue under ASC 606
when the collaborative partner is a customer. We currently do not have any customers that are collaborative
partners or anticipate any in the near future. ASU 2018-18 will be effective January 1, 2020.

In August 2018, the FASB issued ASU 2018-14, "Disclosure Framework - Changes to the Disclosure Requirements
for Defined Benefit Plans." ASU 2018-14 eliminates and adds certain disclosures for defined benefit plans. ASU
2018-14 is effective for fiscal years ending after December 15, 2020 using a retrospective approach. We are
currently evaluating the disclosures but do not expect ASU 2018-14 to have a material impact to our disclosures for
defined benefit plans.

In August 2018, the FASB issued ASU 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements
for Fair Value Measurement." ASU 2018-13 eliminates, adds and modifies certain disclosures for fair value
measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and for interim
periods within those fiscal years. We do not expect ASU 2018-13 to have a material impact to our fair value
disclosures.

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." ASU
2016-13 will replace the current incurred loss approach with an expected loss model for instruments measured at
amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the
carrying amount under the current other-than-temporary impairment model. ASU 2016-13 is effective for fiscal
years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently
evaluating the effect ASU 2016-13 will have on our consolidated financial statements, however due to the generally
short duration of our customers' trade receivables, we do not expect ASU 2016-13 to have a material impact.

ACQUISITIONS

In October 2019, we acquired all the issued and outstanding shares of a foreign distributor for approximately $4.2
million, which included cash payments at closing, net of closing cash, of $3.6 million, and $0.6 million in
contingent consideration potentially payable to the sellers. In addition, we recorded a net gain of $0.4 million for
the settlement of preexisting conditions concurrent with the acquisition that was recorded in Selling, general and
administrative expense. The acquisition was included in our Clinical Diagnostics segment's results of operations
from the acquisition date and was accounted for as a business combination. The amount of acquisition-related costs
was minimal as Bio-Rad primarily represented itself during the acquisition process. Proforma financial statements
are not provided as the acquisition is immaterial to Bio-Rad taken as a whole for the periods presented.

As of December 31, 2019, the preliminary allocation of the payments was $3.4 million to customer relationships; a
definite-lived intangible, $0.2 million to deferred tax asset, $0.8 million to deferred tax liability related to the
purchased intangible and $1.4 million to acquired net assets.

In August 2019, we acquired all the issued and outstanding membership interests of Exact Diagnostics, LLC for
approximately $60.0 million. Cash payments at closing, net of closing cash, were $59.7 million. The acquisition
was included in our Clinical Diagnostics segment's results of operations from the acquisition date and was
accounted for as a business combination. The amount of acquisition-related costs was minimal as Bio-Rad
primarily represented itself during the acquisition process. The goodwill related to this acquisition is deductible for
income tax purposes. Proforma financial statements are not provided as the acquisition is immaterial to Bio-Rad
taken as a whole for the periods presented.

The final allocation of the payments was $26.8 million to purchased intangibles consisting primarily of customer
relationships, developed product technology and tradenames, $4.2 million to acquired net assets, and $28.7 million
to goodwill.

We believe that the acquisition will accelerate market penetration in the areas of quality controls and assay
verification panels in our Clinical Diagnostics operations.

In March 2019, we completed the acquisition of all the issued and outstanding stock of a small U.S. private
company for approximately $20.0 million. Cash payments, net of closing cash, consisted of $4.0 million paid in
November 2018 and the remaining $16.0 million paid in March 2019. The acquisition was included in our Life
Science segment's results of operations from the acquisition date and was accounted for as a business combination.
The amount of acquisition-related costs was minimal as Bio-Rad primarily represented itself during the acquisition
process. The goodwill related to this acquisition is not deductible for income tax purposes. Pro forma financial
statements are not provided as the acquisition is immaterial to Bio-Rad taken as a whole for the periods presented.

The final allocation of the payments was $15.6 million to goodwill that included workforce and time-to-market
advantage, $5.5 million to definite-lived intangibles, $0.2 million to in-process research and development, an
indefinite-lived intangible asset, and a deferred tax liability of $1.3 million related to the purchased intangibles.

We believe that the acquisition will expand our reagents suite of offerings in our Life Science operations.

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, 2019 are
classified in the hierarchy as follows (in millions):

Financial assets carried at fair value:
Cash equivalents:

Commercial paper
Time deposits
Asset-backed securities
Money market funds

Total cash equivalents (a)

Restricted investment
Equity Securities (b)
Available-for-sale investments:
Corporate debt securities
U.S. government sponsored agencies
Foreign government obligations
Other foreign obligations
Municipal obligations
Asset-backed securities

Total available-for-sale investments (c)

Forward foreign exchange contracts (d)

Total financial assets carried at fair value

Financial liabilities carried at fair value:
Forward foreign exchange contracts (e)
Contingent consideration (f)

Total financial liabilities carried at fair value

Level 1

Level 2

Level 3

Total

— $

31.2
—
69.9
101.1
5.6
4,664.4

—
—
—
—
—
—
—
—
4,771.1

— $
—
— $

42.9
10.0
0.1
—
53.0
—
—

204.5
106.1
4.7
3.1
11.6
72.9
402.9
0.9
456.8

1.0
—
1.0

— $
—
—
—
—
—

—

—
—
—
—
—
—
—
—
— $

42.9
41.2
0.1
69.9
154.1
5.6
4,664.4

204.5
106.1
4.7
3.1
11.6
72.9
402.9
0.9
5,227.9

— $
4.9
4.9 $

1.0
4.9
5.9

Financial assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2018 are
classified in the hierarchy as follows (in millions):

Financial assets carried at fair value:
Cash equivalents:

Commercial paper
Time deposits
Asset-backed securities
Money market funds

Total cash equivalents (a)

Restricted investment:
Equity securities (b)
Available-for-sale investments:
Corporate debt securities
U.S. government sponsored agencies
Foreign government obligations
Municipal obligations
Asset-backed securities

Total available-for-sale investments (c)

Forward foreign exchange contracts (d)

Total financial assets carried at fair value

Financial liabilities carried at fair value:
Forward foreign exchange contracts (e)
Contingent consideration (f)

Total financial liabilities carried at fair value

Level 1

Level 2

Level 3

Total

77.8
10.0
0.3
—
88.1
—
—

215.0
80.3
3.6
11.0
63.3
373.2
0.6
461.9

— $

22.7
—
36.9
59.6
5.6
2,672.9

—
—
—
—
—
—
—
2,738.1

— $
—
— $

0.7
—
0.7 $

— $
—
—
—
—
—
—

—
—
—
—
—
—
—
— $

— $
8.4

8.4

77.8
32.7
0.3
36.9
147.7
5.6
2,672.9

215.0
80.3
3.6
11.0
63.3
373.2
0.6
3,200.0

0.7
8.4
9.1

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

(b) Equity securities are included in the following accounts in the Consolidated Balance Sheets (in millions):

Short-term investments
Other investments
Total

December 31,
2019

December 31,
2018

51.0
4,613.4
4,664.4

40.2
2,632.7
2,672.9

The year-to-date unrealized gains on our equity securities still held as of December 31, 2019 were $2,031.1 million
and were primarily due to our investment in Sartorius AG and are recorded in our Consolidated Statements of
Income.

(in millions):

Short-term investments
Other investments

Total

December 31,
2019

December 31,
2018

402.8
0.1
402.9

373.0
0.2
373.2

(d) Forward foreign exchange contracts in an asset position are included in Other current assets in the

Consolidated Balance Sheets.

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

Consolidated Balance Sheets.

(f) Contingent consideration liabilities are included in the following accounts in the Consolidated Balance

Sheets (in millions):

Other current liabilities
Other long-term liabilities
Total

December 31,
2019

December 31,
2018

3.3
1.6
4.9

3.2
5.2
8.4

During the first quarter of 2016, we recognized a contingent consideration liability upon our acquisition of a high
performance analytical flow cytometer platform from Propel Labs. At the acquisition date, the amount of
contingent consideration was determined based on a probability-weighted income approach related to the
achievement of sales milestones, ranging from 39% to 20% for the calendar years 2017 through 2020. The sales
milestones could potentially range from $0 to an unlimited amount. In the first and third quarters of 2019, we paid
$1.4 million and $1.1 million, respectively, per the purchase agreement. Since 2016 we have had a net decrease in
the cumulative valuation of the sales milestones of $13.9 million. The contingent consideration was accrued at its
estimated fair value of $4.3 million as of December 31, 2019.

During the fourth quarter of 2019, we recognized a contingent consideration liability for earn-out targets related to
our acquisition of a foreign distributor. The first earn-out payment of $0.7 million was paid by the acquisition date
and the remaining payment is due in the second quarter of 2020. The maximum earn-out payment due is
$1.4 million. The contingent consideration was accrued at its estimated fair value of $0.6 million as of
December 31, 2019.

The following table provides a reconciliation of the Level 3 contingent consideration liabilities measured at
estimated fair value (in millions):

December 31, 2018
Analytical flow cytometer platform:
Payment of sales milestone
Net decrease in estimated fair value of contingent
consideration included in Selling, general and
administrative expense

Foreign distributor earn-outs:
Acquisition of foreign distributor
December 31, 2019

$
$

8.4

(2.5)

(1.6)

0.6
4.9

The following table provides quantitative information about Level 3 inputs for fair value measurement of our
analytical flow cytometer platform contingent consideration liability as of December 31, 2019. Significant
increases or decreases in these inputs in isolation could result in a significantly lower or higher fair value
measurement.

Valuation Technique

Unobservable Input

Percentage

Analytical
flow cytometer
platform

Probability-weighted
income approach

Sales milestones:
Discount rate
Cost of debt

11.1%

3.9%

To estimate the fair value of Level 2 debt securities, our primary pricing provider used Reuters as of December 31,
2019 and Securities Evaluations as of December 31, 2018 as the primary pricing sources. Our pricing process
allowed us to select a hierarchy of pricing sources for securities held. If Reuters or Securities Evaluations did not
price a Level 2 security that we held, then the pricing provider utilized our custodian supplied pricing as the
secondary pricing source.

For all commercial paper as of December 31, 2019, our primary pricing provider used its leading pricing source in
the hierarchy to determine pricing.

Our primary pricing provider performed daily reasonableness testing of the Reuters and Securities Evaluations
prices. Price changes of 5% or greater were investigated and resolved. In addition, we performed a quarterly testing
of the Reuters and Securities Evaluations prices to custodian reported prices. Price differences outside a tolerable
variance of approximately 1% were investigated and resolved.

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

Short-term investments:

Corporate debt securities
Municipal obligations
Asset-backed securities
U.S. government sponsored agencies
Foreign government obligations

Other foreign obligations

Long-term investments:
Asset-backed securities

Total

December 31, 2019

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Estimated
Fair
Value

203.2
11.5
72.7
105.6
4.7
3.1
400.8

0.1
0.1
400.9

1.4
0.1
0.2
0.7
—
—
2.4

—
—
2.4

(0.1) $
—
(0.1)
(0.2)
—
—
(0.4)

—
—
(0.4) $

204.5
11.6
72.8
106.1
4.7
3.1
402.8

0.1
0.1
402.9

The following is a summary of the amortized cost and estimated fair value of our debt securities at December 31,
2019 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

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

Amortized
Cost

Estimated Fair
Value

174.5 $
164.2
62.2
400.9 $

174.6
165.2
63.1
402.9

Short-term investments:

Corporate debt securities
Municipal obligations
Asset-backed securities
U.S. government sponsored agencies
Foreign government obligations

Long-term investments:
Asset-backed securities

December 31, 2018

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Estimated
Fair
Value

216.2 $
11.1
63.5
80.9
3.6
375.3

0.2
0.2

0.1 $
—
—
0.2
—
0.3

—
—

(1.3) $
(0.1)
(0.4)
(0.8)
—
(2.6)

—
—

215.0
11.0
63.1
80.3
3.6
373.0

0.2
0.2

Total

375.5 $

0.3 $

(2.6) $

373.2

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

December 31,
2019

December 31,
2018

Fair value of investments in a loss position 12 months or more
Fair value of investments in a loss position less than 12 months
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

$
$
$
$

19.9 $
97.8 $
0.1 $
0.3 $

117.9
193.0
1.8
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, 2019 or at December 31, 2018.

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 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, 2019 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
from Reuters 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 following is a summary of our forward foreign currency exchange contracts (in millions):

Contracts maturing in January through March 2020 to sell foreign currency:

Notional value
Unrealized gain

Contracts maturing in January through March 2020 to purchase foreign currency:

Notional value
Unrealized loss

December 31,
2019

$
$

52.0
0.3

269.1
(0.3)

The estimated fair value of our current maturities of long-term debt, excluding leases, as of December 31, 2019 and
long-term-debt, excluding all lease and current maturities, as of December 31, 2018 that is not recognized at fair
value in the Consolidated Balance Sheets has an estimated fair value based on quoted market prices for the same or
similar issues.

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

December 31, 2019

December 31, 2018

Carrying
Amount

Estimated
Fair
Value

Fair Value
Hierarchy
Level

Carrying
Amount

Estimated
Fair
Value

Fair Value
Hierarchy
Level

Total current maturities long-term
debt, excluding leases
Total long-term debt, excluding leases

and current maturities

$ 424.4

435.5

— $

—

— $

—

423.7

435.8

Included in Other Investments in the Consolidated Balance Sheet are investments without readily determinable fair
value measured at cost with adjustments for observable price changes in price or impairments. The carrying value
of these investments was $0.3 million and $0.6 million as of December 31, 2019 and December 31, 2018,
respectively.

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 37% of the
outstanding voting shares (excluding treasury shares) of Sartorius as of December 31, 2019. 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. As of December 31, 2019, due to the adoption of
ASU 2016-01 and ASU 2018-03 as of January 1, 2018, we account for this investment at fair market value as
determined at period end by a quoted price on an organized exchange.

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 and write-offs

Goodwill, net

Acquisitions

Divestiture

Impairment

Currency fluctuations

Balances as of December 31:

Goodwill

Accumulated impairment losses and write-offs

2019

2018

Life
Science

Clinical
Diagnostics

Total

Life
Science

Clinical
Diagnostics

Total

234.5

320.5

$ 555.0

234.7

324.6

$ 559.3

(41.8)

192.7

15.6
—

—

250.1

(41.8)

(293.4)

(335.2)

27.1

28.7
—

—

219.8

44.3
—

—

349.2

599.3

(293.4)

(335.2)

(35.9)

198.8

—
—

(5.9)

(0.2)

234.5

(41.8)

(17.3)

307.3

—
(1.4)

(53.2)

506.1

—
(1.4)

(276.1)

(282.0)

(2.7)

(2.9)

320.5

555.0

(293.4)

(335.2)

Goodwill, net

208.3

55.8

$ 264.1

192.7

27.1

$ 219.8

In conjunction with the purchase of all the issued and outstanding shares of a foreign distributor in October 2019
(see Note 2, "Acquisitions"), we recorded $3.4 million of Customer relationships, a definite-lived intangible assets.

In conjunction with the purchase of all the issued and outstanding membership interests of Exact Diagnostics, LLC
in August 2019 (see Note 2, "Acquisitions"), we recorded $28.7 million of goodwill and $26.8 million of definite-
lived intangible assets: $16.1 million of Customer relationships, $8.1 million of Developed product technology,
$2.5 million of Tradenames and $0.1 million of Backlog.

In conjunction with the purchase of all the issued and outstanding stock of a small U.S. private company in March
2019 (see Note 2, "Acquisitions"), we recorded $15.6 million of goodwill that included workforce and time-to-
market advantage, $5.5 million of Developed product technology, a definite-lived intangible asset, and $0.2 million
of In-process research and development, an indefinite-lived intangible asset.

In March 2018, we wrote off $1.4 million of goodwill from our Clinical Diagnostics segment as a result of a
divestiture of a product line.

In 2018, we impaired goodwill associated with our 1999 acquisition of Pasteur Sanofi Diagnostics S.A., 2007
through 2012 acquisitions of DiaMed Holding AG, DiaMed Fennica Oy, DiaMed (G.B.) Limited, and DiaMed
Benelux (collectively DiaMed), 2010 acquisition of Biotest AG, and 2013 acquisition of AbD Serotec in the
amounts of $18.1 million, $247.2 million, $10.8 million and $5.9 million, respectively. Goodwill for DiaMed,
Biotest AG and AbD Serotec was fully impaired at December 31, 2018. Impairments for the Pasteur Sanofi
Diagnostics S.A., DiaMed and Biotest AG were included in our Clinical Diagnostics segment's results of
operations, and the impairment for AbD Serotec was included in our Life Science segment's results of operations.

The impairments were based upon a revision of our Level 3 valuation inputs, i.e., expected future cash flows.

Information regarding our identifiable purchased intangible assets with definite and indefinite lives is as follows (in
millions):

Customer relationships/lists
Know how
Developed product technology
Licenses
Tradenames
Covenants not to compete
Other
Total definite-lived intangible assets
In-process research and development
Total purchased intangible assets

Customer relationships/lists
Know how
Developed product technology
Licenses
Tradenames
Covenants not to compete
Total definite-lived intangible assets

Weighted-
Average
Amortization
Period (years)
6.36
5.71
8.31
8.74
8.50
6.01
—

Weighted-
Average
Amortization
Period (years)
3.98
6.64
8.34
9.72
3.42
7.01

December 31, 2019

Purchase
Price

Accumulated
Amortization

Net
Carrying
Amount

107.2 $
188.5
144.2
76.0
6.4
3.2
0.1
525.6
0.2
525.8 $

(74.3) $

(162.6)
(93.9)
(44.4)
(3.6)
(1.4)
(0.1)
(380.3)
—
(380.3) $

32.9
25.9
50.3
31.6
2.8
1.8
—
145.3
0.2
145.5

December 31, 2018

Purchase
Price

Accumulated
Amortization

Net
Carrying
Amount

88.7 $

190.6
130.4
76.3
3.9
3.2
493.1 $

(68.3) $

(159.8)
(86.6)
(40.9)
(3.3)
(1.1)
(360.0) $

20.4
30.8
43.8
35.4
0.6
2.1
133.1

Amortization expense related to purchased intangible assets for the years ended December 31, 2019, 2018 and 2017
was $23.5 million, $28.3 million and $30.8 million, respectively. Estimated future amortization expense (based on
existing purchased intangible assets) for the years ending December 31, 2020, 2021, 2022, 2023, 2024 and
thereafter is $23.5 million, $22.8 million, $19.6 million, $18.7 million, $16.6 million, and $44.1 million,
respectively.

NOTES PAYABLE AND LONG-TERM DEBT

Under domestic and international lines of credit, standby letters of credit and guarantee arrangements, we had
$207.5 million available for borrowing and usage as of December 31, 2019, which was reduced by $4.2 million that
was utilized for standby letters of credit and guarantee arrangements issued by our banks to support our obligations.

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

4.875% Senior Notes due 2020, net of discount
Less unamortized discount and debt issuance costs
Long-term debt less unamortized discount and debt issuance costs
Finance leases and other debt
Capital leases and other debt

Less current maturities
Long-term debt

Senior Notes due 2020

December 31,
2019

December 31,
2018

425.0
(0.6)
424.4
15.4
—
439.8
(426.2)

13.6

425.0
(1.3)
423.7
—
15.7
439.4
(0.5)

438.9

In December 2010, Bio-Rad sold $425.0 million principal amount of Senior Notes due December 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. Certain covenants apply at each year end to the 4.875% Notes including
limitations on the following: liens, sale and leaseback transactions, mergers, consolidations or sales of assets and
other covenants. We were in compliance with these covenants as of December 31, 2019. There are no restrictive
covenants relating to total indebtedness, interest coverage, stock repurchases, recapitalizations, dividends and
distributions to shareholders or current ratios.

Credit Agreement

In April 2019, Bio-Rad entered into a $200.0 million unsecured Credit Agreement. Borrowings under the Credit
Agreement are on a revolving basis and can be used to make permitted acquisitions, for working capital and for
other general corporate purposes. We had no outstanding borrowings under the Credit Agreement as of
December 31, 2019; however, $0.2 million was utilized for domestic standby letters of credit that reduced our
borrowing availability as of December 31, 2019. The Credit Agreement matures in April 2024. If we had borrowed
against our Credit Agreement, the borrowing rate would have been 3.035% at December 31, 2019.

The Credit Agreement requires 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 and create liens. We were in compliance with all of these ratios and
covenants as of December 31, 2019.

Maturities of long-term debt at December 31, 2019 were as follows: 2020 - $426.8 million; 2021 - $1.6 million;
2022 - $1.5 million; 2023 - $0.4 million; 2024 - $0.4 million; and thereafter - $9.7 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,

2019

2018

2017

1,034.0 $
1,227.1
2,261.1 $

363.4 $
149.3
512.7 $

72.8
25.0
97.8

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

Year Ended December 31,
2018

2019

2017

Current tax expense:
U.S. Federal
State
International
Current tax expense
Deferred tax expense (benefit):
U.S. Federal
State
International
Deferred tax expense (benefit)
Non-current tax expense (benefit)

13.0 $
4.4
23.5
40.9

409.7
24.4
16.1
450.2
11.3

8.8 $
2.2
30.5
41.5

114.0
6.6
0.3
120.9
(15.4)

Provision for (benefit from) income taxes

502.4 $

147.0 $

6.7
3.4
32.0
42.1

(69.8)
4.3
(19.3)
(84.8)
18.3

(24.4)

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
Nontaxable subsidies
Goodwill impairment
Share-based compensation
Nondeductible executive compensation
U.S. taxation of foreign income
Acquisition-related
U.S. tax reform
State taxes
Other
Provision for (benefit from) income taxes

Year Ended December 31,
2018

2019

2017

21.0%
(9.7)
(0.2)
(0.1)
—
(0.1)
0.1
10.3
—
—
1.0
(0.1)
22.2%

21.0%
(4.1)
(0.7)
(0.2)
5.6
(1.0)
0.2
15.5
(0.2)
(9.6)
1.7
0.5
28.7%

35.0 %
6.0
(3.8)
(2.2)
1.2
(5.3)
2.0
2.7
10.1
(71.0)
2.9
(2.6)
(25.0)%

Our effective income tax rate was 22.2%, 28.7% and (25.0)% in 2019, 2018 and 2017, respectively. The effective
tax rate for 2018 was driven by detriments due to non-deductible impairment charges and the taxation of our foreign
operations, partially offset by a $49 million benefit recorded as a result of the completion of our accounting for the
Tax Act under SAB 118. The effective tax rate for 2017 was driven by a $70 million benefit recorded as a
provisional estimate of the accounting for the Tax Act.

Many jurisdictions in which we operate have statutory tax rates that differ from the U.S. statutory tax rate of 21%.
Our effective tax rate is impacted, either favorably or unfavorably, by many factors including, but not limited to the
jurisdictional mix of income before tax, changes to statutory tax rates, changes in tax laws or regulations, tax audits
and settlements, and generation of tax credits.

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
Lease obligations
Other
Total gross deferred tax assets
Valuation allowance

Total deferred tax assets
Deferred tax liabilities:

Property and equipment
Lease assets
Investments and intangible assets

Total deferred tax liabilities

Net deferred tax liabilities

December 31,

2019

2018

23.9
23.0
83.7
48.6
26.0
205.2
(67.2)
138.0

38.4
46.4
1,001.4
1,086.2
(948.2) $

21.7
23.0
75.3
—
27.1
147.1
(70.8)
76.3

40.1
—
540.6
580.7
(504.4)

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the
appropriate character in future periods. We regularly assess our ability to realize our deferred tax assets and
establish a valuation allowance if it is more likely than not that some portion, or all, of our deferred tax assets will
not be realized. In assessing the realizability of our deferred tax assets, we weigh all available positive and negative
evidence. Due to the weight of objectively verifiable negative evidence, we believe that it is more likely than not
that our California and certain foreign deferred tax assets will not be realized as of December 31, 2019, and have
maintained a valuation allowance on such deferred tax assets. The valuation allowance against our deferred tax
assets in California and certain foreign jurisdictions decreased by $3.6 million in 2019.

As of December 31, 2019, our foreign and California net operating loss carryforwards were approximately
$239.0 million and $52.7 million, respectively. Of our foreign net operating losses, $124.7 million may be carried
forward indefinitely. The majority of the remaining foreign net operating losses, if not utilized, will begin to expire
in 2025. Our California net operating loss carryforwards, if not utilized, will begin to expire in 2028. As of
December 31, 2019, our California research tax credit carryforwards were approximately $35.7 million and may be
carried forward indefinitely.

Our income tax returns are audited by U.S. federal, state and foreign tax authorities. We are currently under
examination by many of these tax authorities. The tax years open to examination include the years 2012 and
forward for the U.S. and certain foreign jurisdictions including France, Germany, India and Switzerland. There are
differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax
authorities involving issues of the timing and amount of deductions and allocations of income among various tax
jurisdictions. We evaluate our exposures associated with our tax filing positions on a quarterly basis.

We record liabilities for unrecognized tax benefits related to uncertain tax positions. We do not believe any
currently pending uncertain tax positions will have a material adverse effect on our consolidated financial
statements, although an adverse resolution of one or more of these uncertain tax positions in any period may have a
material impact on the results of operations for that period.

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
Currency translation
Unrecognized tax benefits – December 31

2019

2018

2017

29.8 $

54.9 $

7.6
(0.7)
3.0
—
(0.4)
(0.1)

0.6
(20.2)
4.6
(6.8)
(1.1)
(2.2)

39.2 $

29.8 $

21.1

1.3
(1.0)
34.8
(0.2)
(3.4)
2.3

54.9

Bio-Rad recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
Related to the unrecognized tax benefits noted above, the cumulative amount of accrued interest and penalties as of
December 31, 2019, 2018 and 2017, respectively was $11.2 million, $9.5 million and $10.9 million. Bio-Rad
accrued interest and penalties of $1.7 million, $(1.4) million, and $(0.9) million in 2019, 2018, and 2017,
respectively. The total unrecognized tax benefits and interest and penalties of $50.4 million in 2019 was partially
offset by deferred tax assets of $1.4 million and prepaid taxes of $5.4 million, for a net amount of $43.6 million.

It is generally our intention to repatriate certain foreign earnings to the extent that such repatriations are not
restricted by local laws or accounting rules, and there are no substantial incremental costs. The determination of the
amount of the unrecognized deferred tax liability for foreign earnings that are indefinitely reinvested is not
practicable to estimate.

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 all
respects except as follows. 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 hold a majority of Bio-Rad’s voting stock. As a result, the
Schwartz family is able to exercise significant influence over Bio-Rad.

Changes to Bio-Rad's issued common stock shares are as follows (in thousands):

Balance at January 1, 2017

B to A conversions

Issuance of common stock
Balance at December 31, 2017

B to A conversions

Issuance of common stock
Balance at December 31, 2018

B to A conversions

Issuance of common stock
Balance at December 31, 2019

Class A Shares

Class B Shares

24,454

191

24,679

175

24,884

24,966

5,124
(34)
18

5,108
(30)
18

5,096
(24)
18

5,090

Treasury Shares

In November, 2017, the Board of Directors authorized a new share repurchase program, granting Bio-Rad authority
to repurchase, on a discretionary basis, up to $250.0 million of outstanding shares of our common stock.
Repurchases may be made at management's discretion from time to time on the open market or through privately
negotiated transactions. The share repurchase activity under the share repurchase program through open market
transactions in 2018 and 2019 is summarized as follows:

November 1, 2018 - November 30, 2018

May 1, 2019 - May 31, 2019

June 1, 2019 - June 30, 2019

August 1, 2019 - August 31, 2019

November 1, 2019 - November 30, 2019

Number of
Shares
Purchased

Weighted-
Average Price
per Share

Total Shares
Repurchased
To Date

Remaining
Authorized
Value
(in millions)

178,911 $

25,421 $

25,977 $

14,745 $

22,343 $

273.39

291.70

292.01

339.05

358.04

193,150 $

218,571 $

244,548 $

259,293 $

281,636 $

201.1

193.7

186.1

181.1

173.1

In 2019, we used 118,910 of the repurchased shares in connection with the vesting of restricted stock units and
19,755 shares in connection with ESPP stock purchases. The Credit Agreement may limit our ability to repurchase
our stock.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

Foreign currency
translation
adjustments

Foreign other
post-employment
benefits
adjustments

Net unrealized
holding gains
(losses) on
available-for-sale
investments

Total
Accumulated
other
comprehensive
income (loss)

Balances as of January 1, 2018

77.4 $

(22.3) $

4.4 $

59.5

Other comprehensive (loss) income, before

reclassifications

Amounts reclassified from Accumulated

other comprehensive income

Income tax effects

Other comprehensive income (loss), net of

income taxes

Balances as of December 31, 2018
Other comprehensive (loss) income, before

reclassifications

Amounts reclassified from Accumulated

other comprehensive income

Income tax effects

Other comprehensive (loss) income, net of

income taxes

Balances as of December 31, 2019

(112.9)

—

(112.9)
(35.5) $

(36.5)

—
(0.4)

(36.9)
(72.4) $

6.9

2.4

(1.8)

7.5
(14.8) $

(10.0)

1.5

1.1

(7.4)
(22.2) $

(1.4)

0.3

—

(1.1)
3.3 $

4.8

(0.4)
(0.5)

3.9

7.2 $

(107.4)

2.7

(1.8)

(106.5)
(47.0)

(41.7)

1.1

0.2

(40.4)
(87.4)

The amounts reclassified out of Accumulated other comprehensive income into the Consolidated Statements of
Income, with presentation location, were as follows:

Components of Comprehensive income
Amortization of foreign other post-employment
benefit items
Net holding gains (losses) on equity securities and
available for sale investments

December 31,

2019

2018

(1.5) $

(2.4)

Location
Selling, general and administrative
expense

0.4 $

(0.3)

Other (income) expense, net

Reclassification adjustments are calculated using the specific identification method.

9. SHARE-BASED COMPENSATION/EQUITY AWARD AND PURCHASE PLANS

Description of Share-Based Compensation Plans

We believe our share-based compensation plans align the interests of our employees with those of our shareholders.

Equity Award Plans
We have two equity award plans for officers and certain other employees: the 2007 Incentive Award Plan (2007
Plan) and the 2017 Incentive Award Plan (2017 Plan). The 2007 Plan authorized the grant of stock options,
restricted stock, restricted stock units, stock appreciation rights and other types of equity awards to employees. We
no longer grant equity under the 2007 Plan.

The 2017 Plan authorizes the grant to employees of stock options, stock appreciation rights, restricted stock,
restricted stock units, and other types of equity awards. A total of 2,095,049 shares have been reserved for issuance
of equity awards under the 2017 Plan and may be of either Class A or Class B common stock. At December 31,
2019, there were 1,507,489 shares available to be granted.

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 maximum 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.

Employee Stock Purchase Plans
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.

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 1,300,000 shares of
Class A common stock under the 2011 ESPP.

Share-Based Compensation

Included in our share-based compensation expense is the cost related to stock option grants, ESPP stock purchases
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 2019, 2018 and 2017, we recognized share-based compensation expense of $35.6 million, $27.8 million and
$23.4 million, respectively. The income tax benefit related to share-based compensation expense was $5.6 million,
$4.4 million and $5.8 million for 2019, 2018 and 2017, respectively. We did not capitalize any share-based
compensation expense in inventory.

The tax benefit from share-based compensation vested or exercised during 2019, 2018 and 2017 was $5.4 million,
$5.4 million, and $6.3 million, respectively.

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. We recognize
forfeitures as they occur.

Stock Options
The following table summarizes stock option activity:

Outstanding, December 31, 2018

Granted
Exercised
Forfeited/expired

Outstanding, December 31, 2019

Unvested, December 31, 2019
Exercisable, December 31, 2019

Weighted-
Average
Exercise Price
138.81
328.48
98.00
231.71
162.23

$
$
$
$
$

373,640
34,672
(55,490)
(8,300)
344,522

94,172
250,350

$
$

273.93
120.22

Weighted-
Average
Remaining
Contractual
Term (in
years)

Aggregate
Intrinsic
Value
(in millions)

4.76

8.45
3.46

$
$

71.6

9.1
62.5

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price.
The total intrinsic value on the date of exercise of stock options exercised during 2019, 2018 and 2017 was
approximately $12 million, $8 million and $10 million, respectively.

Cash received from stock options exercised during 2019, 2018 and 2017 was $2.6 million, $0.5 million and
$1.6 million, respectively.

As of December 31, 2019, there was $7.0 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,
2018

2017

2019

22%
1.69%
7.5
—
93.96

22%
2.85%
7.6
—
105.94

20%
1.87%
7.2
—
58.65

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 Units
Restricted stock units, which are rights to receive shares of company stock, were granted from 2009 through 2016
under the 2007 Plan and since 2017 under the 2017 Plan. The fair value of a 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
(in millions)

Outstanding, December 31, 2018

Granted
Vested
Forfeited

Outstanding, December 31, 2019

474,400
174,782
(134,525)
(44,715)
469,942

$
$
$
$
$

235.58
332.38
206.44
243.76
279.14

2.08

173.9

The total fair value of restricted stock units vested in 2019, 2018 and 2017 was $44.8 million, $40.0 million and
$27.7 million, respectively. As of December 31, 2019, there was approximately $119.5 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 3 years.

Employee Stock Purchase Plans
The fair value of the employees’ purchase rights under the 2011 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,
2018

2019

2017

31%

2.25%
0.24
—

27%
1.82%
0.24
—

19%
0.83%
0.24
—

$60.39

$55.04

$38.86

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 58,717 shares for $14.3 million, 63,464 shares for $13.6 million and 74,409 shares for $13.0 million under
the 2011 ESPP to employees in 2019, 2018 and 2017, respectively. At December 31, 2019, 599,531 shares remain
authorized and available for issuance under the 2011 ESPP.

We currently issue new shares or treasury shares, if available, 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):

Interest and investment income
Net realized gains on investments
Other-than-temporary impairment losses on investments
Gain on sale of land
Gain on divestiture of a product line
Other expense
Other (income) expense, net

Year Ended December 31,
2018

2019

2017

(30.5) $
(1.5)
5.8
—
—
0.1
(26.1) $

(26.6) $
(1.6)
0.8
(4.1)
(5.1)
—
(36.6) $

(19.1)
(0.1)
7.0
—
—
1.5
(10.7)

Other-than-temporary impairment losses on equity method investments were recorded in light of the investees'
financial condition in the first and fourth quarters of 2019.

11. SUPPLEMENTAL CASH FLOW INFORMATION
The reconciliation of net income to net cash provided by operating activities is as follows (in millions):

Net income
Adjustments to reconcile net income

to net cash provided by operating activities

Depreciation and amortization
Reduction in the carrying amount of right-of-
use assets
Share-based compensation
Gains on dispositions of securities
Other-than-temporary impairment losses on
investments
Changes in fair market value of equity
securities
Losses on dispositions of fixed assets
Gain on sale of land
Gain on divestiture of a product line

Payments for operating lease liabilities
Changes in fair value of contingent
consideration
Decrease (increase) in accounts receivable, net
Decrease (increase) in inventories, net
Decrease (increase) in other current assets
Increase (decrease) in accounts payable

and other current liabilities

Decrease in income taxes payable
Increase (decrease) in deferred income taxes
(Increase) decrease in other long term assets
Increase (decrease) in other long term liabilities
Impairment losses on goodwill and long-lived
assets
Other

Net cash provided by operating activities

Non-cash investing activities:

Purchased property, plant and equipment
Purchased marketable securities and
investments

Sold marketable securities and investments

Year Ended December 31,
2018

2019

2017

1,758.7 $

365.6 $

122.2

134.2

138.1

148.7

40.3
35.6
(1.5)

5.8

(2,031.0)
1.2

—

(38.6)

(1.6)
1.6
24.2
61.8

10.6
(4.2)
450.2
(1.7)
13.4

—
(1.1)

—
27.8
(1.6)

0.8

(606.2)
2.0

(4.1)

(5.1)

—

(6.2)
59.7
(12.9)
(15.3)

(45.6)
(20.9)
120.9
1.1
(10.0)

292.5
4.9

—
23.4
(0.1)

7.0

—
8.1

—

(18.1)
(64.1)
(47.7)
(35.7)

7.8
(22.4)
(82.0)
2.3
38.1

11.5
5.1

457.9 $

285.5 $

104.1

8.1 $

5.7 $

1.4 $

1.3 $

0.8 $

— $

—

2.8

0.3

12. COMMITMENTS AND CONTINGENT LIABILITIES

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 $16.1 million, $15.9 million and $16.0 million in 2019, 2018 and 2017, respectively.

Purchase Obligations

As of December 31, 2019, we had purchase obligations that have not been recognized on our balance sheet of
$35.8 million, which include agreements to purchase goods or services that are enforceable and legally binding to
Bio-Rad and that specify all significant terms and exclude agreements that are cancelable without penalty.
Recognition of purchase obligations occurs when products or services are delivered to Bio-Rad.

The annual future fixed and determinable portion of our purchase obligations that have not been recognized on our
balance sheet as of December 31, 2019 are as follows: 2020 - $34.0 million, 2021 - $1.0 million, 2022 -
$0.2 million, 2023 - $0.2 million, 2024 - $0.2 million and after 2024 - $0.2 million.

Long-Term Liabilities

As of December 31, 2019, we had obligations that have been recognized on our balance sheet of $118.4 million,
which primarily represent recognized long-term obligations for other post-employment benefits as indicated below
that are mostly due in more than 5 years, and long-term deferred revenue. Excluded are tax liabilities for uncertain
tax positions and contingencies. We are not able to reasonably estimate the timing of future cash flows of these tax
liabilities, therefore, our income tax obligations are excluded.

The annual future fixed and determinable portion of our obligations that have been recognized on our balance sheet
as of December 31, 2019 were as follows: 2020 - $5.2 million, 2021 - $12.8 million, 2022 - $4.5 million, 2023 -
$4.3 million, 2024 - $3.3 million and after 2024 - $88.3 million.

Letters of Credit/Guarantees

In the ordinary course of business, we are at times required to post letters of credit/guarantees. The letters of credit/
guarantees are issued by financial institutions to guarantee our obligations to various parties. We were contingently
liable for $4.2 million of standby letters of credit/guarantees with financial institutions as of December 31, 2019.