Bio-Rad Laboratories
Annual Report
22 Letter to StockhoLderS
If I had to describe 2020 overall,
I would say it was a year to remember… and a year to
forget. The year started out well enough, but went off course
almost immediately and in a most unprecedented way, with
the arrival of COVID-19, changing the priorities of many of
our customers. In the March to April time frame, the outlook
for the year looked bleak as the pandemic took over,
but we managed to persevere and ended the year ahead of our original plan. We
reported sales of $2.5 billion, a 10.3 percent increase over last year, on a constant
currency basis, with an underlying operating income of $411.0 million, representing
16.1 percent of sales.
Along with many other companies in healthcare, we quickly refocused our efforts to
aid in the battle against the pandemic. Our first task was to set out three near-term
principles to govern our activities for this very unique year.
On top of our list was the safety of our employees. We transitioned as many people
as possible to work from home, and we reconfigured and monitored access to our
facilities to ensure that those in the workspace were safe. As you might imagine, since
the onset of the pandemic, we have seen a number of COVID-19 cases within our own
Bio-Rad bubble. Of those employees who have become ill, we are extremely thankful
that all have recovered or are currently in recovery. This is a great achievement given
the state of the world pandemic.
The next priority was to serve our customers, adapting to the dynamics of very altered
supply and demand landscapes. The operational challenges that confronted us were
considerable. Our supply chain was severely impacted in the early days of the pandemic
when critical suppliers categorized as non-essential businesses by government entities
were being shut down just as we were scaling up the manufacture of critical instruments.
As we ironed out these problems, we also worked to meet increased demand. We
relocated the manufacture of certain products to optimize utilization and capabilities
present in our various manufacturing locations, while also temporarily idling others.
2020 ProdUct SPotLIGht : coVId-19 PandemIc
Covid-19
BeSt In cLaSS SenSItIVIty & accUracy
Bio-Rad offers a range of products to join in the fight against COVID-19 including diagnostic screening
of the virus, confirmation of test results, surveillance, as well as products that support therapy and
vaccine research and development. From molecular testing using real-time PCR and Droplet Digital PCR
technology to immunology assays, our products offer best in class sensitivity and accuracy.
Our offering primarily consists of instruments, reagents, and consumables that are needed to detect
the virus either in a clinical or a community setting. These core products are used for detection of the
virus by polymerase chain reaction, or PCR, an accurate and sensitive method of molecular testing.
Early in 2020, our Platelia SARS-CoV-2 Total Ab Assay (shown directly above) was the first total
antibody test to receive Emergency Use Authorization (EUA) from the FDA to help determine an
individual’s immune status to this coronavirus. The test can be used manually or on an automated
immunoassay platform such as our EVOLIS System (shown upper left), which offers high
throughput processing and sample traceability.
Also in 2020, we received another EUA from the FDA for our SARS-CoV-2 Droplet Digital PCR
(ddPCR ) Kit, which runs on our Droplet Digital PCR platforms.
Our Droplet Digital PCR technology is proving to offer great value in detecting very low levels of
the virus. This technology is being used by some diagnostic labs for improved sensitivity, but it has
also found value in monitoring community wastewater streams to pinpoint areas of outbreak.
Together, these products support the many efforts to address the COVID-19 pandemic, reflecting
Bio-Rad’s ongoing commitment to improving healthcare for all.
2020 ProdUct SPotLIGht : cFX oPUS SyStemS
CFX opus
systems
an eVoLUtIon oF QUantItatIVe Pcr
Our CFX Opus Systems represent the next generation of our CFX Real-Time PCR family
of quantitative PCR (qPCR) platforms. Introduced in 2020, the CFX Opus 96 and CFX Opus
384 Real-Time PCR Systems offer the same optical design that is used across our portfolio
of CFX products, but the Opus Systems offer enhanced usability with features designed for
academic, commercial, and biopharma labs conducting research, process development,
and quality control.
Providing reliability our customers can depend on, the Opus Systems feature enhanced
connectivity options including BR.io, Bio-Rad’s new cloud platform that enables users to
design experiments, analyze data, and access their experiments remotely. BR.io offers
seamless data transfer and the ability for users to monitor instrument status from any
internet connection, with no software installation required.
Used in research and genomic testing as well as in pathogen detection and infectious
disease testing, the Opus platforms offer a simplified qPCR experience delivering a robust
solution to meet the needs of our customers, helping them find answers to complex
biological questions.
Letter to StockhoLderS
For our part, the pandemic product focus has largely been around instruments
and reagents needed to detect the virus either in a clinical or a community setting.
Our core products are instruments used for detection of the virus by a method
called polymerase chain reaction, or PCR. This is a very accurate and sensitive
method and today is considered the gold standard for molecular testing. We are
well known for our products in this area and, as a result, were able to exponentially
increase production to meet the unanticipated demand, not only for instruments,
but also for some of the associated reagents.
In record time, we were also able to introduce a serology test, which is useful for
determining an individual’s immune status to this coronavirus. We were fortunate
to have an assay, developed in 2004, when the predecessor to the COVID-19
virus (SARS) first appeared, and we were able to modify and repurpose the original
test into a robust assay for SARS-CoV-2, the virus associated with COVID-19.
In addition, we introduced quality controls for use in the antibody and molecular
testing of SARS-CoV-2. These controls provide laboratories with an unbiased
independent assessment of the laboratory’s test system for greater confidence in
patient test results.
In addition, our Droplet Digital PCR technology is proving to be of great value when
there is need to detect very low levels of the virus. Not only is this technology being
used by some diagnostic labs for improved sensitivity, but it has also found value
in monitoring community wastewater streams to pinpoint areas of outbreak for
advanced surveillance.
Finally, adding to our roster of products being used in the battle against COVID-19,
in early 2021 we introduced Bio-Plex Pro Human IgG SARS-CoV-2 Serology
Assays, for research use only. This qualitative multiplex immunoassay kit detects
IgG antibodies against four SARS-CoV-2 antigens, helping vaccine developers
determine therapeutic efficacy, from development through all clinical evaluation
phases. Our Reliance SARS-CoV-2/FluA/FluB RT-PCR and Reliance SARS-CoV-2
RT-PCR Assay Kits were also granted Emergency Use Authorization by the FDA in
2021, providing labs with access to sensitive and reliable qPCR tests to help guide
patient treatment decisions.
Our third priority in 2020 was to not lose sight of the longer term. In spite of this
unusual year, I am pleased to share that we have continued to make progress on
all of our operational improvements planned for 2020. In 2017, we communicated
a goal to achieve higher profit margins and improved cash flow. I am happy to
3
Letter to StockhoLderS
report that this goal was achieved, and more, by the end of 2020. While most of the
overage is due to gains associated with our COVID-19 related products and reduced
travel during the year, our underlying progress is something we feel is sustainable
and forms a good base from which to grow.
At the end of 2020, we communicated our outlook for the next three years,
which projects further growth and margin expansion going forward. We are well
positioned in the growing markets of life science and healthcare. Our broad
portfolio of products and technologies provides us with innumerable opportunities
to introduce new, innovative products. We also see opportunity to continue to
improve our operating margins through several targeted operational initiatives.
While much of our new product focus during the year centered around COVID-19,
there were a number of other notable introductions including the QX ONE Droplet
Digital PCR System that extends the market for this powerful technology. The
system integrates the entire workflow and provides us access to higher-volume
users, such as the increasingly important biopharma customer segment. We
also introduced an updated line of real-time thermal cyclers referred to as the
“CFX Opus Systems”. They represent the next generation of our CFX Real-Time
PCR platforms, offering enhanced usability for academic research as well as
commercial and biopharma labs.
Our latest imaging system, the GelDoc Go Gel Imaging System—another notable
introduction in 2020—is a personal benchtop device offering sensitivity and
reliability in a compact system. During the year we added single-cell analysis
capabilities with the acquisition of Celsee, extending our reach into the rapidly
growing world of precision medicine and single-cell analysis. This technology helps
scientists isolate, analyze, and interpret cellular behavior, at the individual cell level.
Also of note, we were pleased to have Dara Wright join our organization, leading
our Clinical Diagnostics Group. Dara brings a wealth of experience and has a
proven track record of success. She replaces John Hertia, who retired at the end
of 2019. We would like to thank John for his many contributions to Bio-Rad over
the years.
We will continue to work on other opportunities where we might contribute to battling
COVID-19. The dramatic dip we saw in sales early in the year has given way to a
slow steady return to more normal sales volumes, as researchers return to labs and
the healthcare system rebalances between a COVID and a non-COVID environment.
4
2020 ProdUct SPotLIGht : QX one For waStewater teStInG
QX oNe
PrecISIon & accUracy In one InteGrated SyStem
Introduced in 2020, the QX ONE Droplet Digital PCR System automates
Bio-Rad’s Droplet Digital PCR (ddPCR ) technology into a single and easy-to-
use integrated platform. Designed for biopharmaceutical drug development,
manufacturing quality control, and other highly critical testing environments, the
high-throughput system automates each step of the ddPCR workflow: droplet
generation, amplification, and droplet reading, offering continuous operation that
can analyze up to 480 samples in a single day.
Helping to monitor COVID-19 in communities, the QX ONE Droplet Digital PCR
System and the QX200 Droplet Digital PCR System are helping officials detect,
track, and trace the spread of the virus in wastewater (sewage), creating an
early warning system. Analyzing the wastewater of a community using Droplet
Digital PCR can predict an outbreak several days in advance of anyone showing
symptoms, detecting both symptomatic and asymptomatic individuals in the
population or community.
2020 ProdUct SPotLIGht : GeLdoc Go GeL ImaGInG SyStem
GeLdoC
Go
PerSonaL BenchtoP ImaGInG
The GelDoc Go Imaging System is the latest addition to our GelDoc
product line, offering researchers a way to visualize and document
molecules quickly and easily with an instrument that is compact enough
to fit right on a benchtop. Easy to use, the system produces crisp,
publication-ready images, helping researchers better understand the
quantity and quality of nucleic acids and proteins with just a few taps on
the integrated touchscreen, saving time and providing results quickly.
Offering sensitivity, performance, and flexibility, the advanced optical
design provides a large screen area to image one large gel or up to four
mini gels at a time. Researchers can image gels using their preferred
nucleic acid or protein stains or with Bio-Rad’s Stain-Free technology.
Image Lab Touch Software and a built-in USB port makes it easy to
transfer data to another network.
Moving research forward quickly and easily, the GelDoc Go System
brings high quality imaging to your fingertips.
Letter to StockhoLderS
After a year like this, it is hard to predict exactly what 2021 has in store for us.
We plan for the pandemic to be with us for most of the year ahead, with gradual
relief coming as widespread vaccination gets the world closer to herd immunity
and a return to normal. One encouraging observation over the past year is
that the remote work environment can be a productive one. Consequently,
we will likely see an increase in remote work, balanced with the connectivity
and collaboration that is optimal in a physically co-located environment. The
communication tools and technology we have adopted over the past twelve
months will, no doubt, also be embedded as a valuable way to more efficiently
and rapidly respond to our customers.
As for the business in general, we look forward to another year of progress,
both internally, as we continue to drive efficiency and effectiveness throughout
the organization, and externally, as we better serve our expanding markets. The
pandemic has certainly reinforced the value of biological science, demonstrated by
the ability of the biopharma community to develop and introduce a vaccine in less
than a year. It has also reinforced the value of diagnostics, which have been
so critical in managing this situation. These are the areas in which we participate,
a great place to be in this day and age.
In closing, I want to take this opportunity to recognize our employees around the
world who went the extra mile to serve our customers in 2020 and beyond. Their
contributions have allowed us to continue to grow and have helped our customers
to advance discovery and improve lives.
Thank you for your interest in Bio-Rad.
Norman Schwartz
CHAIRmAN OF THE BOARD, PRESIDENT AND CEO
7
2020 Financial Highlights
2020 SALES BY GROUP
2020 SALES BY GROUP
2020 SaLeS By GroUP
(IN MILLIONS)
(IN MILLIONS)
(IN MILLIONS)
2020 SALES BY REGION
2020 SaLeS By reGIon
2020 SALES BY REGION
48%
Life Science
51%
$1,231.8
Clinical
Diagnostics
$1,305.2
51%
Clinical
Diagnostics
$1,305.2
48%
Life Science
$1,231.8
1%
Other
1%
Other
21%
Pacific Rim
21%
Pacific Rim
45%
Americas
45%
Americas
34%
Europe
34%
Europe
NET SALES
(IN MILLIONS)
NET SALES
net SaLeS
(IN MILLIONS)
(IN MILLIONS)
CASH FLOW FROM OPERATIONS
CASH FLOW FROM OPERATIONS
caSh FLow From oPeratIonS
(IN MILLIONS)
(IN MILLIONS)
(IN MILLIONS)
BASIC EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
2016
2016
$ 2,068.2
$ 2,068.2
2016
2016
$ 216.1
$ 216.1
2016
2016
$ 0.88
$ 0.88
2017
2017
$ 2,160.2
$ 2,160.2
2017
2017
$ 104.1
$ 104.1
2017
2017
$ 4.12
$ 4.12
2018
2018
$ 2,289.4
$ 2,289.4
2018
2018
$ 285.5
$ 285.5
2018
2018
$ 12.25
$ 12.25
2019
2019
$ 2,311.7
$ 2,311.7
2019
2019
$ 457.9
$ 457.9
2019
2019
$ 58.93
$ 58.93
2020
2020
$ 2,545.6
$ 2,545.6
2020
2020
$ 575.3
$ 575.3
2020
2020
$ 127.86
$ 127.86
BIO-RAD, DDPCR, DROPLET DIGITAL PCR, QX200, QX ONE, PLATELIA, EVOLIS, RELIANCE, GELDOC, BIO-PLEX PRO, CFX, CFX OPUS
are trademarks of Bio-Rad Laboratories, Inc. in certain jurisdictions.
8
2020 at a glance 2016 2017 2018 2019 2020(in millions, except for return on sales and per share data)Net Sales $ 2,068.2 $ 2,160.2 $ 2,289.4 $ 2,311.7 $ 2,545.6Gross Profit $ 1,138.4 $ 1,187.7 $ 1,223.2 $ 1,257.0 $ 1,437.8Operating Income (Loss) $ 55.7 $ 119.3 $ (103.3) $ 229.7 $ 411.0Cash Flow from Operations $ 216.1 $ 104.1 $ 285.5 $ 457.9 $ 575.3FIVe-year record$ 2,068.22016$ 2,160.22017$ 2,289.42018$ 2,311.72019NET SALES (IN MILLIONS)$ 2,545.62020$ 216.12016$ 104.12017$ 285.52018$ 457.92019CASH FLOW FROM OPERATIONS (IN MILLIONS)$ 0.882016$ 4.122017$ 12.252018$ 58.932019BASIC EARNINGS PER SHARE$ 127.862020$ 575.320202020 SALES BY REGION45%Americas21%Pacific Rim34%Europe2020 SALES BY GROUP (IN MILLIONS)51%Clinical Diagnostics$1,305.248%Life Science$1,231.81%Other$ 2,068.22016$ 2,160.22017$ 2,289.42018$ 2,311.72019NET SALES (IN MILLIONS)$ 2,545.62020$ 216.12016$ 104.12017$ 285.52018$ 457.92019CASH FLOW FROM OPERATIONS (IN MILLIONS)$ 0.882016$ 4.122017$ 12.252018$ 58.932019BASIC EARNINGS PER SHARE$ 127.862020$ 575.320202020 SALES BY REGION45%Americas21%Pacific Rim34%Europe2020 SALES BY GROUP (IN MILLIONS)51%Clinical Diagnostics$1,305.248%Life Science$1,231.81%Other 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, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________________ to _________________________________
Commission file number 1-7928
BIO-RAD LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
94-1381833
(I.R.S. Employer Identification No.)
1000 Alfred Nobel Drive,
Hercules,
(Address of principal executive offices)
California
94547
(Zip Code)
Registrant's telephone number, including area code
(510) 724-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Class A Common Stock Par Value $0.0001 per share
Class B Common Stock Par Value $0.0001 per share
Securities registered pursuant to Section 12(g) of the Act: NONE
Trading
Symbols
BIO
BIOb
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
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
☒ No
☐ Yes
☒ No
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
¨ No
☒ Yes
¨ No
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 has filed a report on and attestation to its management's assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
☒
☐
Yes ☒ No
As of June 30, 2020, 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 $9,501,744,303 and the aggregate market value of the registrant's Class B Common Stock held by non-
affiliates was approximately $85,986,722.
As of February 10, 2021, there were 24,768,670 shares of Class A Common Stock and 5,075,386 shares of Class B Common Stock outstanding.
(1)
Definitive Proxy Statement to be mailed to stockholders in connection with the
registrant's 2021 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, 2020
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
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INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Other than statements of historical fact, statements made in this Annual Report include forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements with respect to our
future financial performance, operating results, plans and objectives that involve risk and uncertainties. These
forward-looking statements may also include statements regarding the impact of the COVID-19 pandemic on Bio-
Rad’s results and operations and steps governments, universities, hospitals and private industry, including
diagnostic laboratories, are taking or may take as a result of the pandemic. 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 the duration, severity and impact of
the COVID-19 pandemic, global economic conditions, our ability to develop and market new or improved products,
our ability to compete effectively, foreign currency exchange fluctuations, reductions in government funding or
capital spending of our customers, international legal and regulatory risks, supply chain issues, product quality and
liability issues, our ability to integrate acquired companies, products or technologies into our company successfully,
changes in the healthcare industry, natural disasters and other catastrophic events beyond our control, and other
risks and uncertainties 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
Bio-Rad Laboratories, Inc. (referred to in this report as “Bio-Rad,” “we,” “us,” and “our”) is a multinational
manufacturer and worldwide distributor of our own life science research and clinical diagnostics products. 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.
We have direct distribution channels in over 36 countries outside the United States through subsidiaries whose focus
is sales, customer service and product distribution. In some locations outside and inside these 36 countries, sales
efforts are supplemented by distributors and agents.
Description of Business
Business Segments
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 49% and 51%,
respectively, of our net sales for the year ended December 31, 2020. We generated approximately 39% of our
consolidated net sales for the year ended December 31, 2020 from U.S. sales and approximately 61% from sales in
our remaining worldwide markets.
3
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 $14 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. These tools are typically
used to separate, purify, characterize, or quantitate biological materials such as cells, proteins, and nucleic acids in
the research laboratory or the biopharmaceutical manufacturing and quality control process, for food safety and
science education and literacy. We are focused on the translational research market segment where our products
help accelerate the timelines from discovery in the lab to the clinic and the patient.
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 is approximately $16 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, diagnostic 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 while we have historically not experienced difficulty in securing adequate supplies, the impact of
COVID-19 on our suppliers' operations has created some challenges in procuring materials. For more discussion
relating to the impacts of the COVID-19 pandemic, please see “Item 1A, Risk Factors” to this Annual Report. 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.
4
Patents, Trademarks and Licenses
We own over 2,200 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 these 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 880 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 to
ensure their compliance with all applicable laws, including adhering to our anti-corruption standards to ensure a
transparent sale to our customers.
Our customer base is broad and diversified. Our worldwide customer base includes (1) prominent university and
research institutions; (2) hospital, public health and commercial laboratories; (3) other leading diagnostic
manufacturers; and (4) leading companies in the biotechnology, pharmaceutical, chemical and food industries.
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 operations. Bio-Rad’s international operations are
subject to certain risks common to foreign operations in general, such as changes in governmental regulations,
import restrictions and foreign exchange fluctuations.
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.
Our Life Science segment does not face the same competitors for all of its products due to the breadth of its product
lines. 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 comprehensive
solutions.
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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 across a variety of attributes including service, quality and portfolio.
Research and Development
We conduct extensive research and development activities in all areas of our business, employing approximately
880 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 and donor screening products) are subject to regulation in the United
States by the Center for Devices and Radiological Health (CDRH) and/or the Center for Biologics Evaluation and
Research (CBER) 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.
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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.
Human Capital Resources
At Bio-Rad, we consider our employees to be our most valuable asset, and critical to the effective development,
manufacture, sale, distribution and servicing of our vast array of products and services. Our employees are essential
to satisfying our customers’ needs for products to advance science and healthcare. At December 31, 2020, we had
approximately 8,000 employees, the overwhelming majority of which are full-time employees. Our employees are
located throughout the world with roughly 45% in the Americas, 40% in Europe, the Middle-East and Africa, and
15% in Asia Pacific. Our employees are represented by more than 90 self-identified nationalities working in over
140 locations in 36 different countries around the world.
Diversity, Equity and Inclusion
At Bio-Rad, we recognize that diversity is a strength. Our differences offer new and unique ideas and perspectives
to our organization. We foster a work culture that embraces the diverse experience and knowledge of every
employee, creating an inclusive culture regardless of race, gender, age, sexual orientation, disability, or nationality.
We have been purposeful in our efforts to hire, develop and retain diverse talent as well as in our efforts to create an
inclusive culture. We actively encourage employee engagement and regularly solicit feedback regarding job
satisfaction, career growth and development, collaboration, empowerment, ethics, and manager effectiveness. We
use employee input to help our managers make focused and strategic commitments to improve and sustain
engagement in their teams. Bio-Rad requires that all management and employees participate in ongoing training
intended to increase awareness of the importance of a diverse and inclusive culture.
Compensation and Benefits
We provide a competitive total rewards program consisting of broad-based salary and bonus plans as well as annual
management stock grants. These programs combine to recognize and reward performance based on individual,
group, and overall company contributions. We provide competitive health and welfare programs which include
medical, dental, vision and life insurance, a 401(k) plan, an employee stock purchase program, local pension plans,
profit sharing, employee assistance, child and elder care programs, employee recognition and a host of other
localized programs tied to the unique needs of our employees. Pay equity is an integral part of our compensation
strategy at Bio-Rad. We have ongoing processes and protocols to help us pay each individual employee
appropriately based on her or his skills, performance, experience, location, market practices, etc., regardless of race,
gender and other non-performance related attributes.
Health, Wellness and Safety
The health and welfare of our employees is of the highest importance to Bio-Rad. We prioritize, manage, and
carefully track safety performance at all locations globally and integrate sound safety practices in every aspect of
our operations. We offer work site hazard evaluations, workplace safety surveys, safety equipment selection, safety
program reviews, chemical and radiation exposure monitoring, safety training, and disposal of hazardous chemical,
radioactive and infectious waste. In response to the COVID-19 pandemic and related mitigation measures, we
implemented changes in our business in March 2020 in an effort to protect our employees and customers from
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COVID-related exposures. For example, we installed physical barriers between and distanced our employees in
production facilities, implemented extensive cleaning and sanitation processes for both production and office spaces
and broad work-from-home initiatives for employees in our administrative functions. While Bio-Rad’s essential
workers have continued to work at our facilities and provide vital service to our customers, most employees in our
administrative functions have effectively worked remotely since mid-March 2020. We require employees to isolate
and quarantine when appropriate to protect their fellow workers and deploy rapid COVID-19 testing when
appropriate.
Training and Talent Development
We provide training programs for managers and employees to support their growth and development. Our
management series of courses cover essential management and leadership learning to provide our managers with the
necessary skills and experience needed to more effectively lead and develop their teams. In addition, available
courses for employees help them to be more effective at work, enhance interpersonal effectiveness, and help them
achieve their full potential. We also support employees’ professional development by providing an educational
reimbursement program for qualified educational expenses. We have moved our learning and development efforts
to a virtual platform in response to the global pandemic.
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. Please carefully consider the following discussion of significant factors, events
and uncertainties that make an investment in our securities risky and provide important information for the
understanding of the “forward-looking” statements discussed this Annual Report. In addition to the effects of the
COVID-19 pandemic and resulting global disruptions on our business and operations discussed in this Annual
Report, additional or unforeseen effects from the COVID-19 pandemic and the global economic climate may give
rise to or amplify many of these risks discussed below.
8
Business, Economic, Legal and Industry Risks
Pandemics or disease outbreaks, such as the COVID-19 pandemic, have affected and could materially adversely
affect our business, operations, financial condition, and results of operations.
The COVID-19 pandemic is having and is expected to continue to have an adverse effect on the United States and
global economies, as well as on aspects of our operations and those of third parties on whom we rely. The
COVID-19 pandemic has impacted and, we expect, will continue to impact parts of our business, operations,
financial condition and results of operations in a variety of ways.
Although demand has increased for certain of our products being used in fighting the COVID-19 pandemic, we are
experiencing a decrease in product demand with reduced sales activity and customer orders in a number of our
businesses. Many of our customers have reduced or modified operations, resulting in labs, universities and other
customers' facilities being closed or opened at reduced capacity, hospital visits have declined as people delay
elective surgeries and avoid non-essential trips to the hospital, and routine diagnostic testing has slowed. Although
certain locations have experienced an improvement in conditions related to the pandemic, we expect that parts of
our business will continue to suffer negative impacts from the pandemic even as conditions improve in some
locations.
On the supply side, we are experiencing challenges with the supply of raw materials and components used in the
production of our products, with suppliers operating at reduced or modified capacity and otherwise unable to meet
our increased demand for raw materials and inputs to manufacture our products being used in fighting the
COVID-19 pandemic. In addition, we are experiencing transportation challenges in moving goods across regions,
including reduced freight availability as many airlines have significantly scaled back flight operations and increased
freight surcharges due to reduced freight capacity. Countries have closed their borders and imposed travel
restrictions and may continue to impose measures that restrict the movement of our goods. The invocation by the
U.S. federal government of the Defense Production Act of 1950 with respect to our manufacturing operations, or the
enforcement of comparable laws by other governmental entities, could disrupt our manufacturing and distribution
operations.
With respect to our personnel, as a critical health care supplier, we continue to keep certain essential production,
distribution and service teams onsite working in manufacturing and supply chain facilities throughout the world.
Although we are adhering to government mandated and Environmental, Health and Safety protocols, an outbreak of
COVID-19 at one or more of our facilities could nonetheless cause shutdowns of facilities and a reduction in our
workforce, which could dramatically affect our ability to operate our business and our financial results.
The duration of the COVID-19 pandemic is unknown, even with the distribution of a vaccine, and it is difficult to
predict the full extent of potential impacts the pandemic will have in the future on our business, operations, and
financial results, or on our customers, suppliers, logistics providers, or on the global economy as a whole.
.
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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 36 countries outside the
United States, and for the year ended December 31, 2020 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, 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 ("FCPA") 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. 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. See also our risk factors regarding the COVID-19 pandemic above and regarding government
regulations and global economic conditions below.
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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 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. The COVID-19 pandemic may delay our ability to
develop and introduce new products. 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 was previously discussed in
Item 7 of our Annual Report for the period ended December 31, 2019. 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. Increased use of remote work arrangements and rapidly evolving work scenarios in
response to the COVID-19 pandemic expose us to additional risk of cyberattack and disruption. 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
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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.
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Changes in the market value of our position in Sartorius AG materially impact our financial results and might
cause us to be deemed an investment company.
Changes in the market value of our position 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 position 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 position in Sartorius AG could result in a significant and favorable impact to net income independent of
the actual operating performance of our business. As a result of the market value of our position in Sartorius AG,
we might be deemed to be an “investment company” under Section 3(a)(1)(C) of the Investment Company Act of
1940, as amended (the “Investment Company Act”), even though we are primarily engaged in a business other than
that of investing, reinvesting, owning, holding or trading in securities. Because the Company might be deemed an
investment company under the Investment Company Act based on the market value of our position in Sartorius AG
alone, the Company has limited access to the capital markets and may not be able to obtain additional financing
until it is determined that the Company is not an investment company. The Company does not believe it is an
investment company and intends to continue to conduct our operations so that we will not be deemed an investment
company. If the Company were deemed to be an investment company such determination could have a material
adverse effect on our business.
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, particularly in light of the COVID-19 pandemic, 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 position 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, as we already have with some of our earlier deployments. 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. 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.
13
Recent and planned changes to our organizational structure could negatively impact our business.
We made significant changes to our organizational structure over the past few years. We have continued to
reorganize aspects of our European operations since 2016, including the reorganization announced in February
2021. At the beginning of 2020, we restructured the Clinical Diagnostics 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.
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. The COVID-19 pandemic,
as discussed above, is currently causing disruptions to global economic conditions. It is unknown how long such
disruptions will continue and whether such disruptions will become more severe. A deterioration in the global
economic environment may, and is currently, resulting generally in decreased demand for our products (other than
with respect to certain of our products being used in fighting the COVID-19 pandemic), increased competition,
downward pressure on the prices for our products and longer sales cycles. A weakening of macroeconomic
conditions may, and currently is, also adversely affecting our suppliers, which could result in interruptions in supply
in the future. 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. See also our risk factors regarding the COVID-19 pandemic and 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.
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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.
15
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. Certain tenders in China and India also are including local manufacturing
preferences or requirements. 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.
16
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. 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, as they have occurred in the past. 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.
17
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. See also our risk factor regarding the COVID-19 pandemic above.
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.
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. The tax effect of
our position 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.
18
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.
As of December 31, 2020, we have a revolving credit facility that provides for up to $200.0 million in borrowing
capacity, $0.2 million of which has been utilized for domestic standby letters of credit. Our existing credit facility
and agreements we may enter in the future, contain or may contain covenants imposing 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. Existing 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.
As noted above, because the Company might be deemed an investment company under the Investment Company
Act based on the market value of our position in Sartorius AG, the Company may not be able to access the capital
markets or otherwise obtain additional financing until it is determined that the Company is not an investment
company. The inability to obtain additional financing may have a negative impact on the Company’s existing
business, our ability to grow our business, and our ability to make acquisitions.
19
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.
20
Risks Related to Being a Public Company
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. Material weaknesses in our internal control over financial reporting
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 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.
General Business Risks
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 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.
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.
21
The forum selection provision in our bylaws could increase costs to bring a claim, discourage claims or limit the
ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more
favorable for disputes with the Company or the Company’s directors, officers or other employees.
Our bylaws provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery
of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court located within
the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal district
court for the District of Delaware) shall be the sole and exclusive forum for (i) any derivative action or proceeding
brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any
director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action
arising pursuant to any provision of the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or the Bylaws (in each case, as may be amended from time to time) or (iv) any action asserting a
claim against the Company or any of its directors, officers or other employees governed by the internal affairs
doctrine of the State of Delaware. This choice of forum provision may increase costs to bring a claim, discourage
claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the
Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the
Company or the Company’s directors, officers and other employees. Alternatively, if a court were to find the choice
of forum provision contained in the Company’s bylaws to be inapplicable or unenforceable in an action, the
Company may incur additional costs associated with resolving such action in other jurisdictions.
Application of the choice of forum provision may be limited in some instances by applicable law. Section 27 of the
Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by
the Exchange Act or the rules and regulations thereunder. As a result, the choice of forum provision will not apply
to actions arising under the Exchange Act or the rules and regulations thereunder. Section 22 of the Securities Act
creates concurrent jurisdiction for federal and state courts over suits brought to enforce any duty or liability created
by the Securities Act or the rules and regulations thereunder, subject to a limited exception for certain “covered
class actions.” There is uncertainty, particularly in light of current litigation, as to whether a court would enforce the
choice of forum provision with respect to claims under the Securities Act. Our stockholders will not be deemed, by
operation of the Company’s choice of forum provision, to have waived claims arising under the federal securities
laws and the rules and regulations thereunder.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
22
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
We are a party to various 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.
23
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 10, 2021, we had 174 holders of record of Class A Common Stock and 99 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 (“Share
Repurchase Program”). In July 2020, the Board of Directors authorized increasing the share repurchase program to
allow the Company to repurchase up to an additional $200.0 million of stock. During the three months ended
December 31, 2020, we did not purchase or otherwise acquire any shares of common stock. As of December 31,
2020, $273.1 million remained under the share repurchase program.
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.
24
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, 2015, and
reinvestment of dividends if paid:
(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.
25
DOLLARSBio-RadPeer Group (1)S&P MidCap 40020152016201720182019202050100150200250300350400450
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, net
Income before income taxes
(Provision for) benefit from income taxes
Net income
Basic earnings per share
Diluted earnings per share
Total assets
Long-term debt, net of current maturities
$
$
$
$
$
$
2020
2019
Year Ended December 31,
2018
2017
2016
2,545,626 $
1,107,804
1,437,822
800,267
226,598
2,311,659 $
1,054,663
1,256,996
824,625
202,710
2,289,415 $
1,066,264
1,223,151
834,783
199,196
2,160,153 $
972,450
1,187,703
806,790
250,157
2,068,172
929,744
1,138,428
814,697
205,708
—
21,861
1,771
—
23,416
2,245
292,513
23,962
2,861
11,506
23,014
9,128
(4,495,825)
(24,488)
4,907,638
(1,101,371)
3,806,267 $
(2,030,987)
(26,094)
2,261,081
(502,406)
1,758,675 $
(606,230)
(36,593)
512,659
(147,045)
365,614 $
—
(10,697)
97,805
24,444
122,249 $
62,305
23,380
4,542
—
(13,764)
41,560
(15,560)
26,000
127.86 $
126.20 $
12,972,618 $
12,258 $
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
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 reportable segments, Life Science and Clinical
Diagnostics, with the mission to provide scientists with specialized tools needed for biological research and health
care specialists with products needed for 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.
26
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 is the withdrawal of the United Kingdom from the European
Union. Approximately 39% of our 2020 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.
COVID-19
The full impact of the COVID-19 pandemic is inherently uncertain at the time of this report. The COVID-19
pandemic has impacted and, we expect, will continue to disrupt parts of our business operations, impacting our
financial conditions and results of operations in a variety of ways. We saw strong demand for products associated
with COVID-19 testing and related research, however, we saw lower demand for many of our products in the rest of
our business. For more discussion relating to the impacts of the COVID-19 pandemic, please see "Item 1A, Risk
Factors" to this Annual Report.
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. We have found no evidence of unauthorized transfer or misuse of personal
data, and there is no indication that customer systems were affected.
We have insurance coverage for costs resulting from cyberattacks. We did not pay a ransom in connection with this
incident.
Acquisitions
On April 1, 2020, (the "Acquisition Date") we acquired all equity interests of Celsee, Inc. ("Celsee") for total
consideration of $99.3 million, including the estimated fair value of contingent consideration. The contingent
consideration of up to $60.0 million is payable in cash, upon the achievement of certain net revenues for the period
beginning on January 1, 2021 and ending on December 31, 2022.
Celsee is a manufacturer of instruments and consumables for the isolation, detection, and analysis of single cells.
We believe this acquisition will complement our Life Science product offerings. The acquisition was included in
our Life Science segment's results of operations from the Acquisition Date.
Informatics Divestiture
In April 2020, we received $12.2 million for the sale of our Informatics division, which focused on providing and
developing comprehensive, high-quality spectral databases and associated software. The division was part of our
Other Operations segment. In connection with this sale, we recorded an $11.7 million gain in Other income, net, in
the consolidated statements of income for the year ended December 31, 2020.
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Restructurings
On February 3, 2021, we initiated a strategy-driven restructuring plan in furtherance of our ongoing program to
improve operating performance. The restructuring plan primarily impacts our operations in Europe and includes the
elimination of certain positions, the consolidation of certain functions, and the relocation of certain manufacturing
operations from Europe to Asia. The restructuring plan is expected to eliminate a total of approximately 530
positions and the subsequent creation of a total of approximately 325 new positions. We anticipate the restructuring
plan will be implemented in phases and is expected to be substantially completed by the end of fiscal year 2022.
We estimate that as a result of this restructuring plan we will incur between approximately $125 million and $130
million in total cost, which we anticipate will consist of: (i) approximately $86 million cash expenditures in the
form of one-time termination benefits to the affected employees, including cash severance payments, healthcare
benefits, and related transition assistance; (ii) approximately $19 million in capital expenditures associated with the
restructuring plan; and (iii) between approximately $20 million and $25 million in one-time transition costs,
including employee transition costs, supply chain costs and regulatory costs. We anticipate that we will record
approximately $80 million to $90 million of the charges related to this restructuring plan in the first quarter of fiscal
year 2021.
The amounts are preliminary estimates based on the information currently available to management. It is possible
that additional charges and future cash payments could occur in relation to the restructuring actions.
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
We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions. Our
effective income tax rate may be affected by the changes in or interpretations of tax laws and tax agreements in any
given jurisdiction, utilization of net operating loss and tax credit carryforwards, changes in geographical mix of
income and expense, and changes in our assessment of matters such as the ability to realize deferred tax assets. As
a result of these considerations, we must estimate income taxes in each of the jurisdictions in which we operate.
This process involves estimating current tax exposure together with assessing temporary differences resulting from
the different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and
liabilities, which are included in the consolidated balance sheet.
We assess the likelihood that our deferred tax assets will be recovered from future taxable income, considering all
available evidence such as historical levels of income, expectations and risks associated with estimates of future
taxable income and ongoing prudent and feasible tax strategies. When we determine that it is not more likely than
not that we will realize all or part of our deferred tax assets, an adjustment is charged to earnings in the period when
such determination is made. Likewise, if we later determine that it is more likely than not that all or a part of our
deferred tax assets would be realized, the previously provided valuation allowance would be reversed.
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We make certain estimates and judgments about the application of tax laws, the expected resolution of uncertain tax
positions and other matters surrounding the recognition and measurement of uncertain tax benefits. In the event that
uncertain tax positions are resolved for amounts different than our estimates, or the related statutes of limitations
expire without the assessment of additional income taxes, we will be required to adjust the amounts of the related
assets and liabilities in the period in which such events occur. Such adjustments may have a material impact on our
income tax provision and our results of operations.
Business Acquisitions
Accounting for business acquisitions requires us to make significant estimates and assumptions, especially at the
acquisition date with respect to tangible and intangible assets acquired and liabilities assumed and pre-acquisition
contingencies. In a business combination, we allocate the purchase price to the acquired business’ identifiable
assets and liabilities at their acquisition date fair values. The excess of the purchase price over the amount allocated
to the identifiable assets and liabilities, if any, is recorded as goodwill.
To date, the assets acquired and liabilities assumed in our business combinations have primarily consisted of
acquired working capital and definite-lived intangible assets. The carrying value of acquired working capital
approximates its fair value, given the short-term nature of these assets and liabilities. We estimate the fair value of
definite-lived intangible assets acquired using a discounted cash flow approach, which includes an analysis of the
future cash flows expected to be generated by such assets and the risk associated with achieving such cash flows.
The key assumptions used in the discounted cash flow model include the discount rate that is applied to the
discretely forecasted future cash flows to calculate the present value of those cash flows and the estimate of future
cash flows attributable to the acquired intangible assets, which include revenue, operating expenses and taxes. Our
estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may
be up to one year from the acquisition date, we may record adjustments to the fair value of assets acquired and
liabilities assumed, with the corresponding offset to goodwill.
Goodwill
Goodwill represents the excess of (a) the aggregate of the fair value of consideration transferred in a business
combination over (b) the fair value of assets acquired, net of liabilities assumed. Goodwill is not amortized, but is
subject to annual impairment tests as described below.
We conduct a goodwill impairment analysis annually in the fourth quarter or more frequently if indicators of
impairment exist or if a decision is made to sell or exit a business. Significant judgments are involved in
determining if an indicator of impairment has occurred. Such indicators may include deterioration in general
economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which
an entity operates, increases in input costs that have a negative effect on earnings and cash flows, a trend of negative
or declining cash flows, a decline in actual or planned revenue or earnings compared with actual and projected
results of relevant prior periods, or other relevant entity-specific events such as changes in management, key
personnel, strategy or customers, contemplation of bankruptcy, or litigation. The fair value that could be realized in
an actual transaction may differ from that used to evaluate the impairment of goodwill.
We first may assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit
is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative
goodwill impairment test included in U.S. GAAP. To the extent our assessment identifies adverse conditions, or if
we elect to bypass the qualitative assessment, goodwill is tested at the reporting unit level using a quantitative
impairment test.
For the year ended December 31, 2020, we elected to perform a qualitative assessment and determined that
impairment was not more likely than not and no further analysis was required.
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Intangible Assets
We acquired intangible assets in connection with certain of our business acquisitions. These assets were recorded at
their estimated fair values at the acquisition date and are amortized over their respective estimated useful lives using
a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are used.
Estimated useful lives are determined based on our historical use of similar assets and the expectation of future
realization of cash flows attributable to the intangible assets. Changes in circumstances, such as technological
advances or changes to our business model, could result in the actual useful lives differing from our current
estimates. In those cases where we determine that the useful life of an intangible asset should be shortened, we
amortize the net book value in excess of the estimated salvage value over its revised remaining useful life. We did
not revise our previously assigned useful life estimates attributed to any of our intangible assets during the years
ended December 31, 2020, 2019 and 2018.
The estimated useful lives used in computing amortization of intangible assets are as follows:
Customer relationships/lists 4 – 16 years
Know how 14 years
Developed product technology 7 – 20 years
Licenses 12 – 13 years
Tradenames 10 – 15 years
Covenants not to compete 3 – 10 years
Impairment of Long-Lived Assets
We review our long-lived assets, including property and equipment and intangible assets, for impairment whenever
events or changes in circumstances indicate the carrying amount of an asset or an asset group may not be
recoverable. Typical indicators that an asset may be impaired include, but are not limited to:
•
•
•
a significant adverse change in the extent or manner in which a long-lived asset is being used or in its
physical condition;
a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a
projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; or
a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of
significantly before the end of its previously estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to
future undiscounted net cash flows expected to be generated. Recoverability measurement and estimating of
undiscounted cash flows for assets to be held and used is done at the lowest possible levels for which there are
identifiable cash flows. If such assets are considered impaired, generally the amount of impairment recognized
would be equal to the amount by which the carrying amount of the assets exceeds the fair value of the assets, which
we would compute using a discounted cash flow approach. Assets to be disposed of are recorded at the lower of the
carrying amount or fair value less costs to sell. Estimating future cash flows attributable to our long-lived assets
requires significant judgment and projections may vary from cash flows eventually realized. There were no
triggering events to cause us to record an impairment charge for the year ended December 31, 2020.
Revenue Recognition
We recognize revenue from operations through the sale of products, services, license of intellectual property 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.
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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 recognized 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 customer specifications, 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 in relation to the equipment has occurred at that point 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 customer acceptance 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, the
transaction price is allocated to each performance obligation based on stand-alone selling prices. The method used
to determine the stand-alone selling prices for product and service revenues is based on the observable prices when
the product or services have been sold separately.
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 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
instruments placed 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. 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. Generally these arrangements do not contain an option for the
lessee to purchase the underlying asset.
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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 at the end of each fiscal quarter. In
addition, our industry is characterized by technological change, frequent new product development and product
obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand. Our estimates
of future product demand may prove to be inaccurate, and if too high, we may have overstated the carrying value of
our inventory. In the future, if inventory is determined to be overvalued, we would be required to write down the
value of inventory to market and recognize such costs in our cost of goods sold at the time of such determination.
Therefore, although we make efforts to ensure the accuracy of our forecasts of future product demand and perform
procedures to safeguard overall inventory quality, any significant unanticipated changes in demand, technological
developments, regulations, storage conditions, or other economic or environmental factors affecting biological
materials, could have a significant impact on the value of our inventory and reported results of operations.
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, 2019
The following shows cost of goods sold, gross profit, expense items and net income as a percentage of net sales:
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expense
Research and development expense
Net income
Net sales
2020
2019
100.0 %
43.5
56.5
31.4
8.9
149.5
100.0 %
45.6
54.4
35.7
8.8
76.1
Net sales (sales) for the year ended December 31, 2020 were $2.55 billion, compared to $2.31 billion for the year
ended December 31, 2019, an increase of 10.1%. Excluding the impact of foreign currency, for the year ended
December 31, 2020 sales increased by approximately 10.3% compared to the year ended December 31, 2019.
Currency neutral sales were led by growth in Asia Pacific and Europe.
The Life Science segment sales for the year ended December 31, 2020 were $1.23 billion, an increase of 39.0%
compared to the year ended December 31, 2019. On a currency neutral basis, sales increased 38.6% compared to
the year ended December 31, 2019. The currency neutral sales increase was primarily driven by growth in our Gene
Expression, Droplet Digital PCR, and Process Media product lines. All regions reported double digit increases in
currency neutral sales. Sales for the year ended December 31, 2020 benefited from product lines used in the
diagnosis of COVID-19, the carryover related to the December 2019 cyberattack and a $32 million damages award
related to an intellectual property litigation that pertained to sales of infringing products that occurred during fiscal
years 2015 to 2018. Sales were impacted negatively in other product lines due to lab closures and reduced capacity
resulting from the COVID-19 pandemic.
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The Clinical Diagnostics segment sales for the year ended December 31, 2020 were $1.31 billion, a decrease of
7.6% compared to the year ended December 31, 2019. On a currency neutral basis, sales decreased 7.1% compared
to the year ended December 31, 2019. All regions reported a currency neutral sales decline. Sales decreased across
all product lines, with the exception of quality controls. Sales for the year ended December 31, 2020 benefited from
the carryover related to the December 2019 cyberattack but were impacted negatively due to the effect of
COVID-19 on our customers’ operations.
Gross margin
Consolidated gross margins were 56.5% for the year ended December 31, 2020 compared to 54.4% for the year
ended December 31, 2019. Life Science segment gross margins for the year ended December 31, 2020 increased by
approximately 3.1 percentage points compared to the year ended December 31, 2019, primarily due to higher sales,
favorable product mix, and lower production costs, partially offset by the $7.4 million cost of sales benefit in the
first quarter of 2019 from an escrow release related to an acquisition from 2011 and increased customs duty
recognized during the year ended December 31, 2020 relating to products shipped primarily in prior years. Clinical
Diagnostics segment gross margins for the year ended December 31, 2020 decreased slightly by approximately 0.1
percentage points compared to the year ended December 31, 2019. The lower sales for the year ended
December 31, 2020 were primarily offset by lower service and support activity as a result of COVID-19 and
favorable product mix.
Selling, general and administrative expense
Consolidated selling, general and administrative expenses (SG&A) decreased to $800.3 million or 31.4% of sales
for the year ended December 31, 2020 compared to $824.6 million or 35.7% of sales for the year ended
December 31, 2019. Decreases in SG&A were primarily related to lower travel costs, marketing and
communication expenses of $35 million mostly due to the impact of COVID-19, partially offset by higher employee
costs, and third-party professional services costs.
Research and development expense
Research and development (R&D) expense increased to $226.6 million or 8.9% of sales for the year ended
December 31, 2020 compared to $202.7 million or 8.8% of sales for the year ended December 31, 2019. Life
Science segment R&D expense increased for the year ended December 31, 2020 compared to the year ended
December 31, 2019, primarily driven by increased spending to accelerate innovation in key investment areas as well
as expenses related to the newly acquired Celsee business. Clinical Diagnostics segment R&D decreased for the
year ended December 31, 2020 from the year ended December 31, 2019 primarily due to lower spending as a result
of COVID-19 restrictions and lower headcount related to restructuring programs.
Results of Operations – Non-operating
Interest expense
Interest expense for the years ended December 31, 2020 and 2019 was $21.9 million and $23.4 million,
respectively.
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 the years ended
December 31, 2020 and 2019 were $1.8 million and $2.2 million, respectively. The 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.
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Change in fair market value of equity securities
Change in fair market value of equity securities were gains of $4.50 billion for the year ended December 31, 2020
compared to $2.03 billion for the year ended December 31, 2019, primarily resulting from the recognition of
holding gains on our position in Sartorius AG.
Other income, net
Other income, net includes investment and dividend income, interest income on our cash and cash equivalents,
short-term investments and long-term marketable securities. Other income, net for the year ended December 31,
2020 decreased to $24.5 million compared to $26.1 million for the year ended December 31, 2019. Other income,
net decreased primarily due to lower investment income of $6.0 million and lower Sartorius AG dividend income of
$6.8 million, partially offset by the gain on the sale of the Informatics division of $11.7 million for the year ended
December 31, 2020.
Effective tax rate
Our effective tax rates were 22.4% and 22.2% for the years ended December 31, 2020 and 2019, respectively. The
effective tax rates for the years ended December 31, 2020 and 2019 were driven by the unrealized gain in equity
securities that is taxed at approximately 22% as well as the geographic mix of earnings and the taxation of our
foreign earnings. 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, 2020, 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 $17.2 million. Substantially all such
amounts will impact our effective income tax rate.
Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018
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, 2019, filed on March 2, 2020, for the
discussion of the comparison of the fiscal year ended December 31, 2019 to the fiscal year ended December 31,
2018, the earliest of the three fiscal years presented in the Consolidated Statements of Operations.
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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 for 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 $200.0 million unsecured
revolving credit facility (Credit Agreement) that we entered into in April 2019, and to a lesser extent international
lines of credit. Borrowings under the 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 Credit Agreement as of December 31, 2020; however, $0.2 million was utilized for domestic
standby letters of credit that reduced our borrowing availability. 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 acquisitions of reasonable proportion to our existing total available capital. In December 2020, we paid
in full the $425.0 million principal amount of Senior Notes, including accrued interest.
Because the Company might be deemed an investment company under the Investment Company Act based on the
market value of our position in Sartorius AG, the Company may not be able to access the capital markets or
otherwise obtain additional financing until it is determined that the Company is not an investment company. The
inability to obtain additional financing may have a negative impact on the Company's ability to make acquisitions or
other non-routine investments.
At December 31, 2020, we had available $991.1 million in cash, cash equivalents and short-term investments, of
which approximately 37% 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
acquisitions. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and foreign
cash flows (both inflows and outflows).
It is generally our intention to repatriate certain foreign earnings to the extent that such repatriations are not
restricted by local laws or accounting rules, and there are no substantial incremental costs.
Demand for our products and services could change more dramatically in the short-term than in previous years due
to the impacts of the COVID-19 pandemic, as well as due to 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, 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.
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Cash Flows from Operations
Net cash provided by operations was $575.3 million and $457.9 million for the years ended December 31, 2020 and
2019, respectively. The net increase between the year ended December 31, 2020 and the year ended December 31,
2019 of $117.4 million was primarily due to higher cash received from customers as a result of the growth in sales
for product lines used for COVID-19. These increases were partially offset by higher cash paid to suppliers
primarily for supplies associated with COVID-19 products, and cash paid for employee related expenses such as
salaries and benefits, and to a lesser extent for employee restructuring programs. The decrease also consisted of
higher income taxes paid and lower investment income.
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 2021.
Cash Flows from Investing Activities
Our investing activities have consisted primarily of cash used for acquisitions, capital expenditures and activity
related to the purchases, sales and maturities of marketable securities.
Net cash used in investing activities was $60.3 million and $208.9 million for the years ended December 31, 2020
and 2019, respectively. The decrease of $148.6 million was primarily attributable to a $159.5 million increase in
net proceeds from maturities, sales and purchases of marketable securities and proceeds from a divestiture of $12.2
million, partially offset by a $17.3 million increase in payments for acquisitions.
Cash Flows from Financing Activities
Our financing activities have consisted primarily of cash used for purchases of treasury stock, taxes paid on the
vesting of restricted stock units and proceeds from the issuance of common stock for share-based compensation.
Net cash used in financing activities was $523.0 million compared to $22.8 million for the years ended
December 31, 2020 and 2019, respectively. This increase was primarily attributable to the repayment of the $425
million principal amount of Senior Notes, and $72.0 million to purchase treasury stock.
Treasury Shares
During the year ended December 31, 2020, 117,423 shares of Class A treasury stock with an aggregate total cost of
$38.5 million were reissued to fulfill grants to employees under our restricted stock program. Upon reissuing the
Class A treasury stock, a loss of $9.0 million was incurred as they were reissued at a lower price than their average
cost, which reduced Retained earnings, while $29.5 million reduced Additional paid-in capital.
During the year ended December 31, 2019, 117,993 shares of Class A treasury stock with an aggregate total cost of
$33.2 million were reissued to fulfill grants to employees under our restricted stock program. Upon reissuing the
Class A treasury stock, 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.
The re-issuance of the treasury stock for the years ended December 31, 2020 and 2019 did not require cash
payments or receipts and therefore did not affect liquidity.
During the year ended December 31, 2020, we repurchased 291,941 shares of Class A common stock for $100.0
million under our repurchase program, compared to the repurchase of 88,486 shares of our common stock for $28.0
million during the year ended December 31, 2019. We designated these repurchased shares as treasury stock.
36
During the year ended December 31, 2019, 19,755 shares of Class A treasury stock with an aggregate total cost of
$5.4 million were reissued to fulfill our Employee Stock Purchase Plan purchases. A loss of $1.6 million was
incurred upon reissuing the Class A treasury stock as they were reissued at a lower price than their average cost,
which reduced Retained earnings and resulted in net proceeds of $3.8 million.
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 (“Share
Repurchase Program”). In July 2020, the Board of Directors authorized increasing the Share Repurchase Program
to allow the Company to repurchase up to an additional $200.0 million of stock. As of December 31, 2020, $273.1
million remained under the Share Repurchase Program.
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, 2020 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
14.1 $
8.6 $
252.9 $
16.6 $
134.0 $
1.8 $
0.9 $
43.6 $
14.1 $
2.7 $
2.2 $
1.5 $
68.3 $
2.3 $
19.3 $
0.8 $
1.4 $
50.4 $
0.2 $
9.4 $
9.3
4.8
90.6
—
102.6
(1) These amounts represent expected cash payments, primarily from finance lease obligations, which are included in our December 31, 2020
consolidated balance sheet. 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 $65.5
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.
37
ITEM 7A. QUANTITATIVE 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
$18 million on our derivative position as of December 31, 2020. 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
instruments we have outstanding, there would not be a material impact to earnings or cash flows if interest rates
moved adversely by 10%. Our holdings of long-term debt instruments consist primarily of fixed-rate instruments
and are thus insulated from interest rate changes. As of December 31, 2020, the overall interest rate risk associated
with our debt instruments was not significant.
38
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, 2020 and 2019
Consolidated Statements of Income for each of the three years in the period ended
December 31, 2020
Consolidated Statements of Comprehensive Income for each of the three years in the period
December 31, 2020
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2020
Consolidated Statements of Changes in Stockholders’ Equity for each of the three years
in the period ended December 31, 2020
Notes to Consolidated Financial Statements
Page
40-42
43-44
45
46
47
48
49-90
39
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, 2020 and 2019, 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, 2020, and the related notes (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, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2020, 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, 2020, 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 12, 2021 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.
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.
40
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 determined to generally be the noncancelable
period. The revenue allocated to the reagent rental lease elements was approximately 3% of total revenue
for the year ended December 31, 2020 and it is included as part of Net Sales in the Consolidated Statement
of Income.
We identified the assessment of the lease term for 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 following are the primary procedures we performed to address this critical audit matter. We evaluated
the design and tested the operating effectiveness of certain internal controls related to the Company’s lease
classification process. This included controls related to the Company’s process for determining the lease
term including consideration of contractual termination penalties. We assessed the Company’s policy for
determining that the lease term of its reagent rental arrangements was 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 and evaluated management’s judgment on the determination of the length of the lease
term. We evaluated the sufficiency of the evidence obtained by assessing the results of procedures
performed, including the appropriateness of the nature and extent of such evidence.
/s/ KPMG LLP
We have served as the Company's auditor since 2013.
Santa Clara, California
February 12, 2021
41
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, 2020, 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, 2020, 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, 2020 and 2019, 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, 2020, (collectively, the consolidated financial statements), and our report dated February 12,
2021 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 12, 2021
/s/ KPMG LLP
42
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 $19,807 and $20,205
as of December 31, 2020 and 2019, respectively
$
662,205 $
328,913
5,560
660,672
453,973
5,560
419,424
392,672
December 31,
2020
2019
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
126,911
151,931
343,411
622,253
109,570
146,131
298,306
554,007
90,621
10,859
2,139,835
102,331
10,940
2,180,155
25,739
363,048
1,063,974
1,452,761
(961,390)
491,371
25,215
341,598
1,015,359
1,382,172
(882,833)
499,339
202,136
291,916
199,497
9,561,140
86,723
201,868
264,131
145,525
4,638,205
79,636
$ 12,972,618 $ 8,008,859
The accompanying notes are an integral part of these consolidated financial statements.
43
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 - 25,072,619 and 24,966,035 at 2020 and 2019, respectively; shares
outstanding - 24,767,870 and 24,835,804 at 2020 and 2019, respectively
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; shares
issued and outstanding - 5,076,186 and 5,089,532 at 2020 and 2019, respectively
Additional paid-in capital
Class A treasury stock at cost, 304,749 shares at 2020 and 130,231 shares at 2019
Retained earnings
Accumulated other comprehensive income (loss)
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2020
2019
$
139,451 $
222,875
1,798
23,282
34,053
36,507
42,468
131,102
631,536
107,014
180,084
426,172
8,763
27,522
35,365
33,735
86,840
905,495
12,258
2,076,785
175,128
196,971
3,092,678
13,579
997,787
176,018
160,923
2,253,802
—
2
—
2
1
429,376
(99,907)
1
410,020
(38,397)
5,470,779
(87,348)
5,755,057
$ 12,972,618 $ 8,008,859
9,268,012
282,456
9,879,940
The accompanying notes are an integral part of these consolidated financial statements.
44
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, net
Income before income taxes
Provision for 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,
2020
2019
2018
2,545,626 $
1,107,804
1,437,822
800,267
226,598
—
410,957
21,861
1,771
(4,495,825)
(24,488)
4,907,638
(1,101,371)
3,806,267 $
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
127.86 $
29,768
58.93 $
29,843
12.25
29,836
126.20 $
30,160
58.27 $
30,184
12.10
30,228
The accompanying notes are an integral part of these consolidated financial statements.
45
BIO-RAD LABORATORIES, INC.
Consolidated Statements of Comprehensive Income
(In thousands)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Foreign other post-employment benefits adjustments
Net unrealized holding gains (losses) on available-for-sale (AFS)
investments
Other comprehensive income (loss), net of tax
Comprehensive income
Year Ended December 31,
2019
2020
$ 3,806,267 $ 1,758,675 $
2018
365,614
371,057
(3,806)
(36,953)
(7,363)
(112,857)
7,549
2,553
369,804
3,926
(40,390)
$ 4,176,071 $ 1,718,285 $
(1,187)
(106,495)
259,119
The accompanying notes are an integral part of these consolidated financial statements.
46
BIO-RAD LABORATORIES, INC.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2019
2020
2018
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
(Payments for) proceeds from 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 division
(Payments for) proceeds from acquisitions, net of cash received
Recovery of (payments for) purchases of intangible assets
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:
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 financing activities
Effect of foreign exchange rate changes on cash
Net increase 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
$ 2,531,135 $ 2,311,925 $ 2,326,310
(1,886,988) (1,818,575) (1,989,685)
(22,703)
(62,414)
26,383
7,603
285,494
(22,330)
(45,081)
31,673
285
457,897
(21,639)
(65,244)
21,488
(3,424)
575,328
(98,920)
70
12,240
(96,655)
3,414
(248,457)
89,734
278,324
(60,250)
(98,532)
129
—
(79,386)
8,818
(371,450)
104,632
226,900
(208,889)
(129,825)
4,315
6,964
266
(3)
(371,019)
77,029
225,295
(186,978)
(426,938)
—
(643)
(486)
(2,961)
—
20,198
(12,930)
13,113
(8,096)
14,133
(8,862)
—
—
(48,912)
(2,078)
(48,680)
(655)
49,181
384,983
$ 667,115 $ 662,651 $ 434,164
3,831
(28,000)
(2,477)
(22,758)
2,237
228,487
434,164
(100,004)
(3,367)
(523,041)
12,427
4,464
662,651
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):
Year Ended December 31,
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
2020
2019
$ 662,205 $ 660,672 $ 431,526
111
2,527
93
1,886
3,994
916
2018
$ 667,115 $ 662,651 $ 434,164
These restricted cash items are primarily related to performance guarantees and other restricted deposits.
The accompanying notes are an integral part of these consolidated financial statements.
47
BIO-RAD LABORATORIES, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)
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
Balance at December 31, 2019
Net income
Other comprehensive income, net of
tax
Issuance of common stock
Stock compensation expense
Purchase of treasury stock
Reissuance of treasury stock
Common
Stock
Additional Paid-
in Capital
Treasury Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Total
Stockholders'
Equity
$
3 $ 361,231 $
(217) $ 1,830,439 $ 738,794 $ 2,930,250
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
5,271
27,840
—
394,342
—
—
5,017
35,593
—
(24,932)
410,020
—
—
7,268
41,556
—
(29,468)
—
1,543,747
(679,257)
864,490
—
—
—
(17,591)
(136)
365,614
—
—
—
(17,591)
(136)
365,614
—
—
—
—
—
—
—
(48,912)
(49,129) 3,722,073
1,758,675
—
(106,495)
—
—
—
(106,495)
5,271
27,840
(48,912)
(46,958) 4,020,331
1,758,675
—
—
—
—
(28,000)
—
—
—
—
(40,390)
—
—
—
(40,390)
5,017
35,593
(28,000)
(9,969)
38,732
(38,397) 5,470,779
3,806,267
—
—
3,831
(87,348) 5,755,057
3,806,267
—
—
—
—
(100,004)
38,494
—
—
—
—
(9,034)
369,804
—
—
—
—
369,804
7,268
41,556
(100,004)
(8)
Balance at December 31, 2020
$
3 $ 429,376 $
(99,907) $ 9,268,012 $ 282,456 $ 9,879,940
* 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.
48
BIO-RAD LABORATORIES, INC.
Notes to Consolidated Financial Statements
1.
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.
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, 2020 and 2019 represent a money market
fund that is provided as collateral to secure worker's compensation and general liability insurance.
Available-for-Sale Investments
Available-for-sale investments consist of corporate obligations, municipal securities, asset backed securities and
U.S. government sponsored agencies. 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. On January 1, 2020, we adopted Accounting Standards Update
(ASU) 2016-13 described below under "Recent Accounting Pronouncements Adopted." In accordance with the
adopted guidance, we replaced the incurred loss approach with an expected loss model for instruments measured at
amortized cost and we record allowances for available-for-sale debt securities rather than to reduce the carrying
amount for other-than-temporary impairment as was followed under the other-than-temporary impairment model
prior to January 1, 2020. Realized gains and losses and other-than-temporary impairments on investments are
included in Other income and expense, net (see Note 10).
49
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.
Credit risk for trade accounts receivable is generally limited due to the large number of customers and their
dispersion across many geographic areas. We manage our accounts receivable credit risk through ongoing credit
evaluation of our customers' financial conditions. We generally do not require collateral from our customers.
Accounts Receivable and Allowance for Doubtful Accounts
We record trade accounts receivable at the net invoice value and such receivables are non-interest bearing. We
consider receivables past due based on the contractual payment terms. On January 1, 2020 we adopted ASU
2016-13, "Measurement of Credit Losses on Financial Instruments" as described below and review our exposure to
accounts receivable and reserve for amounts if collectability is no longer reasonably assured based on an assessment
of various factors including historical loss rates and expectations of forward-looking loss estimates. Prior to
January 1, 2020, the allowance for doubtful accounts was 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.
Any adjustments made to our historical loss experience reflect current differences in asset-specific risk
characteristics, including, for example, accounts receivable by customer type (public or government entity versus
private entity) and by geographic location of the customer.
Changes in our allowance for doubtful accounts were as follows (in millions):
December 31,
Beginning balance
Provision for expected credit losses (2020),
bad debt (reversal) expense (2019 and 2018)
Write-offs charged against the allowance
Recoveries collected
Ending balance
Inventory
2020
2019
2018
$
20.2 $
26.7 $
25.5
1.2
(1.6)
—
19.8 $
(1.2)
(6.6)
1.3
20.2 $
3.9
(2.7)
—
26.7
$
Inventories are valued at the lower of cost and net realizable value and include material, labor and overhead costs.
Cost is determined using standard costs, which approximate actual costs, and are relieved from inventory on a first-
in, first-out or average cost basis. We classify our inventories based on our historical and anticipated levels of sales;
any inventory in excess of its normal operating cycle (1 – 3 years depending on our product line) is classified as
long-term on our consolidated balance sheets. The long-term inventory was immaterial as of December 31, 2020
and 2019.
50
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Additions and
improvements are capitalized, and maintenance and repairs are expensed as incurred. 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.
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, 10-50 years; leasehold improvements, the
life of the improvements or the term of the lease, whichever is shorter; reagent rental equipment, 1-5 years; and
equipment, 3-12 years.
When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are
relieved from the accounts and the net gain or loss is included in operating expenses.
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
Sheets. 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 Sheets.
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."
Intangible Assets
Our intangible assets principally include goodwill, acquired technology / know how, license, tradenames and
customer relationships. Intangible assets with finite lives, which include acquired technology / know how,
tradenames, licenses and customer relationships, are carried at cost and amortized using the straight-line method
over their useful lives ranging from 3 to 20 years. Intangible assets with indefinite lives, which include only
goodwill, are recorded at cost and evaluated at least annually for impairment.
51
Impairment of Long-Lived Assets
We review long-lived assets, such as property, plant and equipment, and finite-lived intangible assets, for
impairment whenever events indicate that the carrying amounts might not be recoverable. Recoverability of
property, plant and equipment, and other finite-lived intangible asset is measured by comparing the projected
undiscounted net cash flows associated with those assets to their carrying values. If an asset is considered impaired,
it is written down to its fair value, which is determined based on the asset's projected discounted cash flows or
appraised value, depending on the nature of the asset. For purposes of recognition of impairment for assets held for
use, we group assets and liabilities at the lowest level for which cash flows are separately identifiable.
For the year ended December 31, 2018, we impaired some finite-lived intangible assets in the amount of $10.5
million that were included in our Life Science segment's results of operations. There were no impairments of finite-
lived intangible assets for the years ended December 31, 2020 and 2019.
Impairment of Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable
intangible assets acquired in each business combination. We conduct a goodwill impairment analysis annually in
the fourth quarter or more frequently if indicators of impairment exist or if a decision is made to sell or exit a
business. Significant judgments are involved in determining if an indicator of impairment has occurred. Such
indicators may include deterioration in general economic conditions, negative developments in equity and credit
markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative
effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among
others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the
impairment of goodwill.
In reviewing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the
existence of events or circumstances leads to a determination that it is more likely than not (greater than 50%) that
the estimated fair value of a reporting unit is less than its carrying amount. For the year ended December 31, 2020,
we elected to perform a qualitative assessment and determined that an impairment was not more likely than not and
no further analysis was required. We also may elect not to perform the qualitative assessment and, instead, proceed
directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment review for a
reporting unit should be the same whether we choose to perform the qualitative assessment or proceed directly to
the quantitative impairment test.
For the year ended December 31, 2018, we impaired goodwill in the amount of $282.0 million, which was included
in our Clinical Diagnostics and our Life Science segments' results of operations in the amounts of $276.1 million
and $5.9 million, respectively. There was no impairment of goodwill for the years ended December 31, 2020 and
2019.
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.
52
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.
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.
Revenue Recognition
We recognize revenue from operations through the sale of products, services, license of intellectual property 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 recognized 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 customer specifications, 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 in relation to the equipment has occurred at that point 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 customer acceptance 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 recorded 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.
53
Service revenues on extended warranty contracts are recognized ratably over the life of the service agreement as a
stand-ready performance obligation. For arrangements that include a combination of products and services, the
transaction price is allocated to each performance obligation based on stand-alone selling prices. The method used
to determine the stand-alone selling prices for product and service revenues is based on the observable prices when
the product or services have been sold separately.
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.
In the fourth quarter of fiscal year 2020, we received $35.3 million in court awarded damages related to an
intellectual property litigation for sales of products infringing on our patents during 2015 to 2018. Of the total
amount, we recognized $32.3 million as revenue upon receipt of the damages based on the estimated stand-alone
royalty rate associated with the infringed patents.
Reagent Rental Agreements
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
instruments placed 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. 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. Generally these arrangements do not contain an option for the
lessee to purchase the underlying asset.
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 accordance
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 Net sales in our
consolidated statements of income. Generally, the terms of the arrangements result in the transfer of control for
reagents upon either (i) when the consumables are delivered or (ii) when the consumables are consumed by the
customer.
54
Our reagent rental arrangements are 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. Further, our reagent rental arrangements are predominantly classified as operating leases, and any sales-
type leases represent in aggregate an immaterial amount of lease income. Our reported lease income is primarily
variable in nature and is recognized upon delivery or as the reagents are consumed by the customer.
Revenue allocated to the lease elements of these reagent rental arrangements represented approximately 3% of total
revenue at both December 31, 2020 and 2019, respectively, and 5% at December 31, 2018, and are 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 include our internal sales force and certain partner sales incentive programs and
are recorded within Selling, general and administrative expense in our consolidated statements of income.
Disaggregation of Revenue:
The disaggregation of our revenue by geographic region is based primarily on the location of the use of the product
or service, and by industry segment sources. The disaggregation of our revenues by industry segment sources are
presented in our Segment Information footnote (see Note 14).
Deferred revenues primarily represent unrecognized fees billed or collected for extended service arrangements. The
deferred revenue balance at December 31, 2020 and December 31, 2019 was $60.0 million and $45.8 million,
respectively. The short-term deferred revenue balance at December 31, 2020 and December 31, 2019 was $42.5
million and $33.7 million, respectively.
We warrant certain equipment against defects in design, materials and workmanship, generally for a period of one
year. We estimate the cost of warranties at the time the related revenue is recognized based on historical
experience, specific warranty terms and customer feedback. These costs are recorded within Cost of goods sold in
our consolidated statements of income.
Warranty liabilities are included in Other current liabilities and Other long-term liabilities in the Consolidated
Balance Sheets. Change in our warranty liability were as follows (in millions):
January 1
Provision for warranty
Actual warranty costs
December 31
Shipping and Handling
2020
2019
2018
$
$
9.0 $
9.4
(8.6)
9.8 $
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
All research and development costs are expensed as incurred. Types of expense incurred in research and
development include materials and supplies, employee compensation, consulting and third-party services,
depreciation, facility costs and information technology.
55
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 of
including such securities 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 that are excluded from the diluted earnings per share calculation 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
Year Ended December 31,
2019
2020
2018
29,768
29,843
29,836
392
30,160
341
30,184
392
30,228
44
98
84
56
Fair Value of Financial Instruments
For certain financial instruments, including cash and cash equivalents, short-term investments, accounts receivable,
marketable securities, notes payable, accounts payable and foreign exchange contracts, the carrying amounts
approximate fair value.
The estimated fair value of financial instruments is based on the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) using available market information or other appropriate valuation
methodologies in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants. Estimates are not necessarily indicative of the amounts that could be realized in a
current market exchange as considerable judgment is required in interpreting market data used to develop estimates
of fair value. The use of different market assumptions or estimation techniques could have a material effect on the
estimated fair value (see Note 3).
Equity Investments
Investments in publicly traded companies in which we do not have the ability to exercise significant influence are
reported at fair value, with unrealized gains and losses reported as a component of change in fair market value of
equity securities in our consolidated statements of income. Companies in which we do not have a controlling
financial interest, but over which we have significant influence, are accounted for using the equity method. Our
share of the after-tax earnings of equity method investees is included in other income, net in our consolidated
statements of income. Investments in privately held companies in which we do not have the ability to exercise
significant influence are accounted for using the cost method with adjustments for observable changes in price or
impairments (see Note 3).
Recent Accounting Pronouncements Adopted
In March 2020, the FASB issued ASU No. 2020-04, "Facilitation of the Effects of Reference Rate Reform on
Financial Reporting (Topic 848)." The ASU provides optional expedients and exceptions for applying GAAP to
transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to
ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial
reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. We will evaluate transactions
or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional
guidance on an ongoing basis. The ASU is currently not expected to have a material impact on our consolidated
financial statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurements," which aims to improve the overall
usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing
fair value measurement disclosures. We adopted this standard effective January 1, 2020, which did not have a
material impact on our consolidated financial statements.
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 was effective for fiscal years ending after December 15, 2020. We adopted the standard using a
retrospective approach, which did not have a material impact to our disclosures for defined benefit plans.
57
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." ASU
2016-13 replaces the incurred loss approach with an expected loss model for instruments measured at amortized
cost and requires entities to record allowances for available-for-sale debt securities rather than reduce the carrying
amount as done under the former other-than-temporary impairment model. We adopted ASU 2016-13 as of January
1, 2020 using the cumulative effect transition method. We have evaluated our impacted instruments for credit
quality indicators, and have determined that there is no cumulative effect transition adjustment to retained earnings
as of our adoption date. ASU 2016-13 had an insignificant impact to our consolidated financial statements for 2020.
See also Note 3, Fair Value Measurements, and the section above under the caption “Accounts Receivable and
Allowance for Doubtful Accounts.”
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 was effective for fiscal years
beginning after December 15, 2020. We do not expect ASU 2020-01 to have a material impact to our consolidated
financial statements.
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 was effective for fiscal years beginning after
December 15, 2020, with any adjustments reflected as of January 1, 2021. The adoption of ASU 2019-12 is not
expected to have a material impact on the consolidated financial statements.
58
2.
ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
Celsee Acquisition:
On April 1, 2020 (the "Acquisition Date"), we acquired all equity interests of Celsee, Inc. ("Celsee") for total
consideration of $99.3 million (as described in the table below), including the estimated fair value of contingent
consideration. The contingent consideration of up to $60.0 million is payable in cash, upon the achievement of
certain net revenues for the period beginning on January 1, 2021 and ending on December 31, 2022.
Celsee is a manufacturer of instruments and consumables for the isolation, detection, and analysis of single cells.
We believe this acquisition will complement our Life Science product offerings. The acquisition was included in
our Life Science segment's results of operations from the Acquisition Date. The amount of acquisition-related costs
was minimal as Bio-Rad primarily represented itself during the acquisition process.
Celsee met the definition of a business, and therefore is accounted for as a business combination.
The fair value of consideration transferred for the Celsee acquisition consists of the following (in millions):
Purchase price (cash)
Fair value of contingent consideration (earn-out)
Fair value of total consideration transferred
$
$
99.2
0.1
99.3
The following table summarizes the final fair values of the assets acquired and liabilities assumed at the Acquisition
Date (in millions):
Cash and cash equivalents
Intangible assets
Deferred tax assets
Deferred tax liabilities
Other identifiable assets acquired, net
Net identifiable assets acquired
Goodwill
Net assets acquired
Fair Value
0.6
79.9
8.4
(19.7)
0.3
69.5
29.8
99.3
$
$
Goodwill related to the acquisition is primarily attributable to opportunities and economies of scale from combining
the operations and technologies of Bio-Rad and Celsee, and is not deductible for tax purposes.
The following table summarizes the final fair values and estimated useful lives of the components of identifiable
intangible assets acquired as of the Acquisition Date (in millions):
59
Developed product technology
Customer relationships
Covenants not to compete
In-process research and development
Total identifiable intangible assets acquired
Fair Value
Estimated Useful
Life (years)
$
$
70.3
3.6
1.4
4.6
79.9
18.9
4.0
3.0
Intangible assets acquired as a result of the Celsee acquisition are being amortized over their estimated useful lives
using the straight-line method of amortization, which materially approximates the distribution of the economic
value of the identified intangible assets. Amortization of acquired developed technology of $2.8 million for the year
ended December 31, 2020 is included in Cost of goods sold in the consolidated statements of income. Amortization
of the acquired customer relationships of $0.7 million and covenants not to compete of $0.4 million for the year
ended December 31, 2020 are included in Selling, general and administrative expense in the consolidated statements
of income.
In-process research and development (IPR&D) is accounted for as an indefinite-lived asset. Once the project is
completed, the carrying value of the IPR&D will be amortized over the estimated useful life of the asset. IPR&D is
assessed for impairment on an annual basis until the project is completed.
We believe the values of acquired intangible assets reported above represent their fair values and approximate the
amounts a market participant would pay for these intangible assets as of the Acquisition Date.
We included Celsee's fair value of assets acquired and liabilities assumed in our consolidated balance sheets
beginning on the Acquisition Date. The results of operations for Celsee subsequent to the Acquisition Date have
been included in, but are immaterial to, our consolidated statements of income for the year ended. Pro forma results
of operations for the Celsee acquisition have not been presented because they are not material to the condensed
consolidated statements of income.
Distributor Acquisition:
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.
The final 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. The final allocation of payments was unchanged from our preliminary allocation for
the period ended December 31, 2019.
60
Exact Diagnostics, LLC Acquisition:
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.
U.S. private company Acquisition:
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.
During the year ended December 31, 2020, goodwill was decreased by $2.0 million due to the release from an
escrow account setup during our acquisition, which should have been classified as a prepaid asset in its opening
balance sheet as of acquisition date.
We believe that the acquisition will expand our reagents suite of offerings in our Life Science operations.
DIVESTITURE
Informatics Divestiture:
In April 2020, we received $12.2 million for the sale of our Informatics division, which focused on providing and
developing comprehensive, high-quality spectral databases and associated software. The division was part of our
Other Operations segment. In connection with this sale, we recorded an $11.7 million gain in Other income, net, in
the consolidated statements of income for the year ended December 31, 2020.
61
3. FAIR VALUE MEASUREMENTS AND INVESTMENTS
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, 2020 are
classified in the hierarchy as follows (in millions):
Level 1
Level 2
Level 3
Total
Financial assets carried at fair value:
Cash equivalents:
Commercial paper
Time deposits
Asset-backed securities
U.S. government sponsored agencies
Money market funds
Total cash equivalents (a)
Restricted investments (b)
Equity Securities (c)
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 (d)
Forward foreign exchange contracts (e)
Total financial assets carried at fair value
Financial liabilities carried at fair value:
Forward foreign exchange contracts (f)
Contingent consideration (g)
Total financial liabilities carried at fair value
$
$
$
$
— $
17.6
—
—
60.1
77.7
6.7
9,582.4
—
—
—
—
—
—
—
—
9,666.8 $
41.7 $
10.0
0.9
2.5
—
55.1
—
—
133.2
76.9
4.0
2.1
15.2
36.2
267.6
1.0
323.7 $
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
41.7
27.6
0.9
2.5
60.1
132.8
6.7
9,582.4
133.2
76.9
4.0
2.1
15.2
36.2
267.6
1.0
9,990.5
— $
—
— $
1.0 $
—
1.0 $
— $
0.7
0.7 $
1.0
0.7
1.7
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):
62
Financial assets carried at fair value:
Cash equivalents:
Commercial paper
Time deposits
Asset-backed securities
Money market funds
Total cash equivalents (a)
Restricted investments (b)
Equity securities (c)
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 (d)
Forward foreign exchange contracts (e)
Total financial assets carried at fair value
Financial liabilities carried at fair value:
Forward foreign exchange contracts (f)
Contingent consideration (g)
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 $
— $
—
—
—
—
—
—
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
$
$
— $
—
— $
1.0 $
—
1.0 $
— $
4.9
4.9 $
1.0
4.9
5.9
(a) Cash equivalents are included in Cash and cash equivalents in the consolidated balance sheets.
(b) Restricted investments are included in the following accounts in the consolidated balance sheets (in
millions):
Restricted investments
Other investments
Total
December 31,
2020
December 31,
2019
$
$
5.6
1.1
6.7
$
$
5.6
—
5.6
(c) Equity securities are included in the following accounts in the consolidated balance sheets (in millions):
Short-term investments
Other investments
Total
December 31,
2020
December 31,
2019
$
$
61.4
9,521.0
9,582.4
$
$
51.0
4,613.4
4,664.4
The change in fair market value on our equity securities for the year ended December 31, 2020 was $4,495.8 million
gain, which was primarily due to our investment in Sartorius AG and is recorded in our consolidated statements of
income.
63
As of December 31, 2020, we own 12,987,900 ordinary voting shares and 9,588,908 preference shares of Sartorius
AG (Sartorius), of Goettingen, Germany, a process technology supplier to the biotechnology, pharmaceutical,
chemical and food and beverage industries. We did not purchase any incremental shares for the years ended
December 31, 2020 and 2019. We own approximately 37% of the ordinary outstanding voting shares (excluding
treasury shares) and 28% of the preference shares of Sartorius as of December 31, 2020. 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.
(d) Available-for-sale investments are included in the following accounts in the consolidated balance sheets (in
millions):
Short-term investments
Other investments
Total
December 31,
2020
December 31,
2019
$
$
267.5
0.1
267.6
$
$
402.8
0.1
402.9
(e) Forward foreign exchange contracts in an asset position are included in other current assets in the
consolidated balance sheets.
(f) Forward foreign exchange contracts in a liability position are included in other current liabilities in the
consolidated balance sheets.
(g) 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,
2020
December 31,
2019
$
$
0.6
0.1
0.7
$
$
3.3
1.6
4.9
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. We paid $3.3 million of sales milestone
payments per the purchase agreement in 2020. All sales milestones have been fulfilled and the contingent
consideration liability was accrued at its estimated fair value of $0 as of December 31, 2020.
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 currently due and is anticipated to be paid in the first half of 2021. 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, 2020.
64
During the second quarter of 2020, we recognized a contingent consideration liability upon our acquisition of
Celsee, Inc. which represents the future potential earn-out payments of up to $60.0 million payable in cash upon the
achievement of certain net revenues for the period beginning on January 1, 2021 and ending on December 31, 2022.
The fair value of the earn-out as of the Acquisition Date was approximately $0.1 million which was determined by
using a Black-Scholes-Merton option-pricing valuation model that includes significant assumptions and
unobservable inputs such as the projected revenues of Celsee over the earn-out period and the probability of the
earn-out threshold being met. The fair value of the contingent consideration is remeasured at each reporting period
based on the assumptions and inputs on the date of remeasurement. The fair value of the earn-out was
approximately $0.1 million as of December 31, 2020.
The following table provides a reconciliation of the Level 3 contingent consideration liabilities measured at
estimated fair value (in millions):
December 31, 2019
Analytical flow cytometer platform:
Payment of sales milestone
Net decrease in estimated fair value of contingent
consideration included in Selling, general and
administrative expense
$
4.9
Foreign distributor earn-outs:
Change in estimated fair value of contingent consideration
included in Selling, general and administrative expense
Celsee, Inc.:
Fair value of contingent consideration
December 31, 2020
$
(3.3)
(1.0)
—
0.1
0.7
To estimate the fair value of Level 2 debt securities as of December 31, 2020 and 2019, our primary pricing
provider used Reuters as the primary pricing source. Our pricing process allows us to select a hierarchy of pricing
sources for securities held. If Reuters does not price a Level 2 security that we hold, then the pricing provider will
utilize our custodian supplied pricing as the secondary pricing source.
Available-for-sale investments consist of the following (in millions):
December 31, 2020
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Allowances
for Credit
Losses
Estimated
Fair
Value
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
$
$
130.5 $
15.0
35.8
74.7
4.0
2.1
262.1
0.1
0.1
262.2 $
65
2.7 $
0.2
0.3
2.2
—
—
5.4
—
—
5.4 $
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
—
— $
133.2
15.2
36.1
76.9
4.0
2.1
267.5
0.1
0.1
267.6
The following is a summary of the amortized cost and estimated fair value of our debt securities at December 31,
2020 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
$
$
130.9 $
88.1
43.2
262.2 $
131.5
90.5
45.6
267.6
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
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
1.4 $
0.1
0.2
0.7
—
—
2.4
—
—
(0.1) $
—
(0.1)
(0.2)
—
—
(0.4)
—
—
204.5
11.6
72.8
106.1
4.7
3.1
402.8
0.1
0.1
Total
$
400.9 $
2.4 $
(0.4) $
402.9
The following is a summary of investments with gross unrealized losses and the associated fair value (in millions):
There were no significant unrealized losses as of December 31, 2020 in either the less than or greater than 12 month
categories.
Gross unrealized losses and associated fair value (in millions) as of December 31, 2019 were:
December 31, 2019
Less than 12 months
Greater than 12 months
Total
Description of securities:
Corporate debt securities
Asset-backed securities
U.S. government sponsored
agencies
Total
Fair Value
$
46.5 $
17.9
27.5
91.9 $
$
Unrealized
Losses
Unrealized
Losses
Unrealized
Losses
Fair Value
$
2.1 $
7.0
10.8
19.9 $
$
Fair Value
$
48.6 $
24.9
38.3
111.8 $
$
—
0.1
—
0.1
0.1
0.1
0.2
0.4
0.1
—
0.2
0.3
66
As outlined in Note 1, we adopted ASU 2016-13 as of January 1, 2020. ASU 2016-13 replaced the incurred loss
approach with an expected loss model for instruments measured at amortized cost and requires entities to record
allowances for available-for-sale debt securities rather than reduce the carrying amount as done under the former
other-than-temporary impairment model.
The factors we considered in our evaluation included the extent to which the fair value is less than the amortized
cost basis, adverse conditions specifically related to the debt security, an industry or geographic area, and any
changes in the rating of a security by a rating agency. Credit loss impairments are limited to the amount that the
fair value of an instrument is less than its amortized cost basis.
At December 31, 2020, we have concluded that all payments related to our available-for-sale investments are
expected to be made in full and on time at par value. The diminution of value in the intervening period is due to
market conditions such as illiquidity and interest rate movements and not due to significant, inherent credit concerns
surrounding the issuer. As a result, we have no allowances for credit losses on our available-for-sale investments
portfolio as of December 31, 2020.
Included in other current assets are $1.4 million and $2.0 million of interest receivable as of December 31, 2020
and December 31, 2019, respectively, primarily associated with securities in our available-for-sale investments
portfolio. Associated interest on these securities is typically payable semi-annually. Due to the short-term nature
of our interest receivable asset, we have made an accounting policy election not to measure an allowance for
credit losses for accrued interest receivable. We consider any uncollected interest receivable that is overdue
greater than one year to be impaired for purposes of write-off. For the year ended December 31, 2020, we have
not written-off any uncollected interest receivable.
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, 2020 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.
67
The following is a summary of our forward foreign currency exchange contracts (in millions):
Contracts maturing in January through March 2021 to sell foreign currency:
Notional value
Unrealized loss
Contracts maturing in January through March 2021 to purchase foreign currency:
Notional value
Unrealized gain
December 31,
2020
$
$
$
$
125.3
(0.4)
301.6
0.4
In December 2020, our 4.875% Senior Notes matured and were paid in full. See Note 5. The estimated fair value of
our current maturities of long-term debt, excluding leases, as of December 31, 2019 that was not recognized at fair
value in the consolidated balance sheets had an estimated fair value based on quoted market prices for the same or
similar issues.
The estimated fair value of our long-term debt and the level of the fair value hierarchy within which the fair value
measurement is categorized are as follows (in millions):
December 31, 2020
December 31, 2019
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
$ — $
—
N/A
$
424.4 $
435.5
2
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 or impairments. The carrying value of these
investments was $0.5 million and $0.3 million as of December 31, 2020 and December 31, 2019, respectively.
Also included in other investments in the consolidated balance sheet are our equity method investments, for which
our share of the equity method investees earnings is included in other income, net in our consolidated statements of
income. The carrying value of these investments was $38.4 million and $24.3 million as of December 31, 2020 and
December 31, 2019, respectively.
68
4.
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 (see Note 2)
Other adjustments (see Note 2)
Period increase, net
Balances as of December 31:
Goodwill
Accumulated impairment losses and write-offs
2020
2019
Life
Science
Clinical
Diagnostics
Total
Life
Science
Clinical
Diagnostics
Total
$
250.1 $
349.2 $ 599.3
$
234.5 $
320.5 $ 555.0
(41.8)
208.3
29.8
(2.0)
27.8
(293.4)
(335.2)
55.8
264.1
(41.8)
192.7
(293.4)
(335.2)
27.1
219.8
—
—
—
29.8
(2.0)
27.8
15.6
—
15.6
28.7
—
28.7
44.3
—
44.3
277.9
(41.8)
349.2
627.1
(293.4)
(335.2)
250.1
(41.8)
349.2
599.3
(293.4)
(335.2)
Goodwill, net
$
236.1 $
55.8 $ 291.9
$
208.3 $
55.8 $ 264.1
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
Weighted-
Average
Amortization
Period (years)
5.51
4.75
14.00
7.73
7.82
3.87
—
December 31, 2020
Purchase
Price
Accumulated
Amortization
Net
Carrying
Amount
$
$
116.6 $
196.6
218.1
65.6
6.6
4.5
0.1
608.1
4.8
612.9 $
(87.2) $
(175.4)
(107.1)
(37.4)
(4.2)
(2.0)
(0.1)
(413.4)
—
(413.4) $
29.4
21.2
111.0
28.2
2.4
2.5
—
194.7
4.8
199.5
69
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
Weighted-
Average
Amortization
Period (years)
6.36
5.71
8.31
8.74
8.50
6.01
—
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
No impairment losses related to goodwill and purchased intangibles were recorded in 2020 and 2019.
Amortization expense related to purchased intangible assets for the years ended December 31, 2020, 2019 and 2018
was $27.5 million, $23.5 million and $28.3 million, respectively. Estimated future amortization expense (based on
existing purchased intangible assets) for the years ending December 31, 2021, 2022, 2023, 2024, 2025 and
thereafter is $28.3 million, $25.1 million, $23.8 million, $20.7 million, $18.7 million, and $78.1 million,
respectively.
5.
NOTES PAYABLE AND LONG-TERM DEBT
Under domestic and international lines of credit, standby letters of credit and guarantee arrangements, we had
$207.2 million available for borrowing and usage as of December 31, 2020, which was reduced by $4.9 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
Less current maturities
Long-term debt
December 31,
2020
December 31,
2019
$
$
— $
—
—
14.1
14.1
(1.8)
12.3 $
425.0
(0.6)
424.4
15.4
439.8
(426.2)
13.6
70
4.875% Senior Notes
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
paid a fixed rate of interest of 4.875% per year. We had 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 were not secured and ranked equal in right of payment with all of our existing
and future unsubordinated indebtedness. Certain covenants applied 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. There were no restrictive covenants relating to total indebtedness, interest coverage, stock
repurchases, recapitalizations, dividends and distributions to shareholders or current ratios. We were in compliance
with required debt covenants as of December 31, 2019, and in December 2020 the 4.875% Notes were paid in full,
including accrued interest.
Credit Agreement
In April 2019, Bio-Rad entered into a $200.0 million unsecured revolving credit facility ("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, 2020; however, $0.2 million was utilized for domestic standby letters of credit that
reduced our borrowing availability as of December 31, 2020. The Credit Agreement matures in April 2024. If we
had borrowed against our Credit Agreement, the borrowing rate would have been 1.375% at December 31, 2020,
which is based on the 3-month LIBOR.
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, 2020 and 2019.
Maturities of finance leases and other debt at December 31, 2020 were as follows: 2021 - $1.8 million; 2022 - $1.8
million; 2023 - $0.4 million; 2024 - $0.4 million; 2025 - $0.4 million; and 2026 and thereafter - $9.3 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,
2020
2019
2018
$
$
2,339.7 $
2,567.9
4,907.6 $
1,034.0 $
1,227.1
2,261.1 $
363.4
149.3
512.7
The provision for income taxes consists of the following (in millions):
71
Current tax expense:
U.S. Federal
State
International
Current tax expense
Deferred tax expense:
U.S. Federal
State
International
Deferred tax expense
Non-current tax expense (benefit)
Provision for income taxes
Year Ended December 31,
2019
2020
2018
$
69.9 $
12.0
22.3
104.2
13.0 $
4.4
23.5
40.9
893.5
54.0
31.5
979.0
18.2
409.7
24.4
16.1
450.2
11.3
$
1,101.4 $
502.4 $
8.8
2.2
30.5
41.5
114.0
6.6
0.3
120.9
(15.4)
147.0
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
Goodwill impairment
U.S. taxation of foreign income
U.S. tax reform
State taxes
Other
Provision for income taxes
Year Ended December 31,
2019
2018
2020
21.0 %
(9.9)
—
10.2
—
1.1
—
22.4 %
21.0 %
(9.7)
—
10.3
—
1.0
(0.4)
22.2 %
21.0 %
(4.1)
5.6
15.5
(9.6)
1.7
(1.4)
28.7 %
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.
Our effective income tax rates were 22.4%, 22.2% and 28.7% for the years ended December 31, 2020, 2019 and
2018, respectively. The effective tax rates for the years ended December 31, 2020 and 2019 were driven by the
unrealized gain in equity securities that is taxed at approximately 22% as well as the geographic mix of earnings and
the taxation of our foreign earnings. The effective tax rate for the year ended December 31, 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.
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.
72
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,
2020
2019
$
$
29.6 $
29.8
93.5
49.3
44.8
247.0
(44.6)
202.4
23.9
23.0
83.7
48.6
26.0
205.2
(67.2)
138.0
37.0
46.8
2,143.4
2,227.2
(2,024.8) $
38.4
46.4
1,001.4
1,086.2
(948.2)
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, 2020, 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 $22.6 million for the year ended December 31,
2020. The valuation allowance for deferred tax assets is as follows (in millions):
Beginning balance
Additions charged to expenses
Deductions from reserves
Ending balance
2020
December 31,
2019
$
$
67.2
—
(22.6)
44.6
$
$
70.8
—
(3.6)
67.2
$
$
2018
66.4
4.4
—
70.8
As of December 31, 2020, our federal, state and foreign net operating loss carryforwards were approximately $26.3
million, $64.5 million and $255.0 million, respectively. Of our foreign net operating losses, $117.8 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 federal and state net operating loss carryforwards, if not utilized, will begin to expire in 2028.
As of December 31, 2020, our federal and state tax credit carryforwards were approximately $2.3 million and $37.2
million, respectively. Our federal tax credits, if not utilized, will begin to expire in 2029, and our state tax credits,
generally, may be carried forward indefinitely.
73
Federal and state tax laws impose restrictions on the utilization of net operating loss and certain tax credit
carryforwards in the event of a change in our ownership as defined by the Internal Revenue Code Sections 382 and
383. Under Section 382 and 383 of the Internal Revenue Code, substantial changes in our ownership and the
ownership of acquired companies may limit the amount of net operating loss and research and development credit
carryforwards that are available to offset taxable income. The annual limitation would not automatically result in
the loss of net operating loss or research and development credit carryforwards but may limit the amount available
in any given future period.
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):
2020
2019
2018
Unrecognized tax benefits – January 1
$
39.2 $
29.8 $
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
14.0
(1.5)
3.4
—
(0.6)
1.3
7.6
(0.7)
3.0
—
(0.4)
(0.1)
$
55.8 $
39.2 $
54.9
0.6
(20.2)
4.6
(6.8)
(1.1)
(2.2)
29.8
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, 2020, 2019 and 2018 was $14.3 million, $11.2 million and $9.5 million, respectively. Bio-Rad
accrued interest and penalties of $2.8 million, $1.7 million, and $(1.4) million for the years ended December 31,
2020, 2019, and 2018, respectively. The total unrecognized tax benefits and interest and penalties of $70.1 million
as of December 31, 2020 was partially offset by deferred tax assets of $1.5 million and prepaid taxes of $5.8
million, for a net amount of $62.8 million.
As of December 31, 2020, 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 $17.2 million. Substantially all such
amounts will impact our effective income tax rate if recognized.
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.
74
7.
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 directors, with Class B stockholders electing the remaining 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, 2018
Class B to Class A conversions
Issuance of common stock
Balance at December 31, 2018
Class B to Class A conversions
Issuance of common stock
Balance at December 31, 2019
Class B to Class A conversions
Issuance of common stock
Balance at December 31, 2020
Class A Shares
Class B Shares
24,679
30
175
24,884
24
58
24,966
32
75
25,073
5,108
(30)
18
5,096
(24)
18
5,090
(32)
18
5,076
Treasury Shares
In November 2017, the Board of Directors authorized a 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. In July 2020,
the Board of Directors authorized increasing the Share Repurchase Program to allow the Company to repurchase up
to an additional $200.0 million of 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 for the years ended December 31, 2020, 2019 and 2018 are
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
March 1, 2020 - March 31, 2020
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 $
291,941 $
273.39
291.70
292.01
339.05
358.04
342.55
193,150 $
218,571 $
244,548 $
259,293 $
281,636 $
573,577 $
201.1
193.7
186.1
181.1
173.1
73.1
For the years ended December 31, 2020 and 2019, we used 117,423 and 118,910, respectively, of the repurchased
shares in connection with the vesting of restricted stock units and in 2019 we used 19,755 shares in connection with
ESPP stock purchases. As of December 31, 2020, $273.1 million remained under the Share Repurchase Program.
75
8.
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, 2019
$
(35.5) $
(14.8) $
3.3 $
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, 2019
Other comprehensive income (loss),
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, 2020
$
(36.5)
(10.0)
—
(0.4)
(36.9)
(72.4) $
371.9
—
(0.9)
371.0
298.6 $
1.5
1.1
(7.4)
(22.2) $
(5.3)
0.3
1.2
(3.8)
(26.0) $
4.8
(0.4)
(0.5)
3.9
7.2 $
4.0
(0.6)
(0.8)
2.6
9.8 $
(47.0)
(41.7)
1.1
0.2
(40.4)
(87.4)
370.6
(0.3)
(0.5)
369.8
282.4
All amounts reclassified out of accumulated other comprehensive income were reclassified into other income, net in
the consolidated statements of income. Reclassification adjustments are calculated using the specific identification
method.
9. SHARE-BASED COMPENSATION/EQUITY AWARD AND PURCHASE PLANS
Equity Award Plan
We have the 2017 Incentive Award Plan (2017 Plan) for officers and certain other employees. The 2017 Plan
authorizes the grant of stock options, restricted stock, restricted stock units, and other types of equity awards to
employees. Stock options are granted at exercise prices not less than the fair market value of the underlying
common stock on the date of grant and have a maximum term of 10 years. We may issue stock options for either
Class A or Class B common stock. Prior to September 2020 grants, equity awards granted vest in increments of
20% per year on the yearly anniversary date of the grant. Starting in September 2020, equity awards granted vest in
increments of 25% per year on the yearly anniversary date of the grant.
A total of 2,108,050 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, 2020, there were 1,451,617 shares available to be
granted.
Employee Stock Purchase Plans
Our 2011 Employee Stock Purchase Plan (2011 ESPP) provides that eligible employees may contribute up to the
greater of 10% of their compensation or $25,000 annually towards the quarterly purchase of our Class A common
stock. The employees’ purchase price is 85% of the lesser of the fair market value of the stock on the first business
day or the last business day of each calendar quarter. We have authorized the sale of 1,300,000 shares of Class A
common stock under the 2011 ESPP.
76
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, Selling,
general and administrative expense, and Research and development expense in the Consolidated Statements of
Income.
For the year ended December 31, 2020, we recognized share-based compensation expense of $41.6 million of which
$3.4 million was allocated to Cost of goods sold, $31.8 million was allocated to Selling general and administrative
expense, and $6.4 million was allocated to Research and development expense. For the year ended December 31,
2019, we recognized share-based compensation expense of $35.6 million of which $2.9 million was allocated to
Cost of goods sold, $27.9 million was allocated to Selling general and administrative expense, and $4.8 million was
allocated to Research and development expense. For the year ended December 31, 2018, we recognized share-
based compensation expense of $27.8 million, of which $2.3 million was allocated to Cost of goods sold, $22.0
million was allocated to Selling general and administrative expense, and $3.5 million was allocated to Research and
development expense. The income tax benefit related to share-based compensation expense was $6.0 million, $5.6
million and $4.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. We did not
capitalize any share-based compensation expense in inventory as it was immaterial.
The tax benefit from equity awards vested or exercised during the years ended December 31, 2020, 2019 and 2018
was $11.2 million, $5.4 million, and $5.4 million, respectively.
For equity awards, we amortize the fair value on a straight-line basis. All equity 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 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,
2019
2018
2020
27 %
0.31 %
7.4
22 %
1.69 %
7.5
22 %
2.85 %
7.6
—
153.32
$
—
93.96
$
$
—
105.94
Expected 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.
77
The following table summarizes stock option activity:
Shares
Outstanding, December 31, 2019
Granted
Exercised
Forfeited
Outstanding, December 31, 2020
Unvested, December 31, 2020
Exercisable, December 31, 2020
Weighted-
Average
Exercise Price
162.23
524.30
112.96
269.64
196.29
344,522 $
22,527 $
(66,085) $
(15,841) $
285,123 $
Weighted-
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value
(in millions)
4.64 $
110.2
73,126 $
211,997 $
364.07
138.42
8.35 $
3.36 $
16.0
94.2
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 the years ended December 31,
2020, 2019 and 2018 was approximately $24 million, $12 million and $8 million, respectively.
Cash received from stock options exercised during the years ended December 31, 2020, 2019 and 2018 was $3.8
million, $2.6 million and $0.5 million, respectively.
As of December 31, 2020, 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 remaining weighted-average period of approximately three
years.
Restricted Stock Units
Restricted stock units are rights to receive shares of company stock. 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, 2019
Granted
Vested
Forfeited
Outstanding, December 31, 2020
469,942
$
112,162
$
(132,745) $
(62,976) $
386,383
$
279.14
523.64
246.88
280.97
360.90
1.85 $
225.2
The total fair value of restricted stock units vested for the years ended December 31, 2020, 2019 and 2018 was
$65.0 million, $44.8 million and $40 million, respectively. As of December 31, 2020, there was approximately
$125.6 million of total unrecognized compensation cost related to restricted stock units. This amount is expected to
be recognized over a remaining weighted-average period of approximately three years.
78
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,
2019
2020
41 %
0.5 %
0.25
31 %
2.25 %
0.25
2018
27 %
1.82 %
0.25
—
—
—
$ 94.93
$ 60.39
$ 55.04
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 47,548 shares for total employee contributions of $16.4 million, 58,717 shares for total employee
contributions of $14.3 million and 63,464 shares for total employee contributions of $13.6 million under the 2011
ESPP to employees for the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020,
551,983 shares remain authorized and available for issuance under the 2011 ESPP.
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 division
Other expense
Other income, net
Year Ended December 31,
2019
2020
2018
$
$
(18.2) $
(1.0)
4.6
—
(11.7)
1.8
(24.5) $
(30.5) $
(1.5)
5.8
—
—
0.1
(26.1) $
(26.6)
(1.6)
0.8
(4.1)
(5.1)
—
(36.6)
Other-than-temporary impairment losses on equity method investments were recorded in light of the investees'
financial condition.
79
11.
SUPPLEMENTAL CASH FLOW INFORMATION
The reconciliation of net income to net cash provided by operating activities is as follows (in millions):
Year Ended December 31,
2019
2018
2020
$
3,806.3 $
1,758.7 $
365.6
138.1
134.2
138.1
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 division
Payments for operating lease liabilities
Changes in fair value of contingent
consideration
(Increase) decrease in accounts receivable, net
(Increase) decrease in inventories, net
(Increase) decrease in other current assets
Increase (decrease) in accounts payable
and other current liabilities
Increase (decrease) in income taxes payable
Increase 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
37.1
41.6
(0.7)
40.3
35.6
(1.5)
4.6
5.8
(4,495.8)
(2,031.0)
1.1
—
(11.7)
(36.5)
(1.0)
(15.0)
(52.1)
(8.4)
124.7
39.0
978.9
(6.4)
26.9
—
4.6
1.2
—
—
(38.6)
(1.6)
1.6
24.2
61.8
10.6
(4.2)
450.2
(1.7)
13.4
—
(1.1)
Net cash provided by operating activities
$
575.3 $
457.9 $
Non-cash investing activities:
Purchased property, plant and equipment
Purchased marketable securities and
investments
Sold marketable securities and investments
$
$
$
1.2 $
8.1 $
4.6 $
— $
1.4 $
1.3 $
80
—
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
285.5
5.7
0.8
—
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
management. Bio-Rad has no liability other than for the current year’s contribution. Contribution expense was
$10.6 million, $16.1 million and $15.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Purchase Obligations
As of December 31, 2020, we had purchase obligations that have not been recognized on our balance sheet of
$16.6 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, 2020 are as follows: 2021 - $14.1 million, 2022 - $2.1 million, 2023 -
$0.1 million, 2024 - $0.1 million, 2025 - $0.1 million and after 2025 - $0.1 million.
Long-Term Liabilities
As of December 31, 2020, we had obligations that have been recognized on our balance sheet of $134.0 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, 2020 were as follows: 2021 - $2.7 million, 2022 - $12.0 million, 2023 - $7.3 million, 2024 -
$5.6 million, 2025 - $3.8 million and after 2025 - $102.6 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 $4.9 million of standby letters of credit/guarantees with financial institutions as of December 31, 2020.
Other Post-Employment Benefits
In several foreign locations we are statutorily required to provide retirement benefits or a lump sum termination
indemnity to our employees upon termination for virtually any reason. These plans are accounted for as defined
benefit plans and the associated net benefit obligation as of December 31, 2020 and 2019 of $96.1 million and
$81.5 million, respectively, has been included in Accrued payroll and employee benefits and Other long-term
liabilities in the Consolidated Balance Sheets. Most plans are not required to be funded, and as such, there is no
trust or other device used to accumulate assets or settle these obligations. However, some of these plans require
funding based on local laws in which there is a trust or other device administered by an external plan manager that
is used to accumulate assets to assist in settling these obligations. The following disclosures include such plans,
which are located in France, Switzerland, Germany, Korea, India, Thailand, Italy, Dubai and Japan.
Obligations and Funded Status
The following table sets forth the change in benefit obligations, fair value of plan assets and amounts recognized in
the Consolidated Balance Sheets for the plans (in millions):
81
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants' contributions
Actuarial loss
Gross benefits paid
Plan amendments
Settlements
Change attributable to foreign exchange
2020
2019
$153.8
$137.3
7.8
0.8
4.1
5.3
(1.7)
—
(6.4)
13.8
6.9
1.5
3.5
11.9
(2.1)
0.2
(3.8)
(1.6)
Benefit obligation at end of year
177.5
153.8
Change in plan assets:
Fair value of plan assets at beginning year
Actual return on plan assets
Employer contributions
Plan participants' contributions
Gross benefits paid
Settlements
Change attributable to foreign exchange
Fair value of plan assets at end of year
72.3
0.6
4.1
4.0
0.2
(6.4)
6.6
81.4
66.9
0.9
4.7
3.8
(0.8)
(3.8)
0.6
72.3
Under funded status of plans
$(96.1)
$(81.5)
Amounts recognized in the consolidated balance sheets:
Current liabilities (Accrued payroll and employee benefits)
Noncurrent liabilities (Other long-term liabilities)
Net liability, end of fiscal year
$(1.3)
(94.8)
$(96.1)
$(1.1)
(80.4)
$(81.5)
Components of Net Periodic Benefit Cost
The following sets forth the net periodic benefit cost (income) for the periods indicated (in millions):
2020
2019
2018
Service costs
Interest costs
Expected returns on plan assets
Amortization of actuarial losses
Amortization of prior service costs
Settlements
Net periodic benefit costs
Assumptions
$7.8
0.8
(0.7)
1.3
—
1.3
$10.5
$6.9
1.5
(1.2)
1.0
—
0.9
$9.1
$7.5
1.1
(1.1)
1.3
0.1
—
$8.9
The above actuarial net losses were primarily based on financial, demographic and experience assumptions.
The weighted-average assumptions used in computing the benefit obligations are as follows:
82
Discount rate
Compensation rate increase
2020
2019
0.3 %
1.7 %
The weighted-average assumptions used in computing the net periodic benefit costs are as follows:
Discount rate
Expected long-term rate of return on plan assets
0.5 %
1.5 %
1.1 %
1.8 %
2020
2019
2018
0.5 %
1.7 %
0.8 %
1.8 %
The accumulated benefit obligation (ABO), an estimate based on the assumption if these plans were to be
terminated immediately, as of December 31, 2020 and 2019 was $159.5 million and $138.6 million, respectively.
The ABO and fair value of plan assets for these plans with ABO in excess of plan assets were $78.1 million and
$66.3 million as of December 31, 2020 and 2019, respectively.
In some foreign locations we have service award plans that are paid based upon the number of years of employment.
Under these plans, the liability as of December 31, 2020 and 2019 was $4.1 million and $3.5 million, respectively,
and has been included in Accrued payroll and employee benefits and Other long-term liabilities in the Consolidated
Balance Sheets.
Concentrations of Labor Subject to Collective Bargaining Agreements
At December 31, 2020, approximately seven percent of Bio-Rad's approximately 3,180 U.S. employees were
covered by a collective bargaining agreement, which will expire on November 14, 2023. Many of Bio-Rad's non-
U.S. full-time employees, especially in France, are covered by collective bargaining agreements.
13.
LEGAL PROCEEDINGS
We are a party to various 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.
14. SEGMENT INFORMATION
Bio-Rad is a multinational manufacturer and worldwide distributor of its own life science research products and
clinical diagnostics products. We have two reportable segments: Life Science and Clinical Diagnostics. These
reportable segments are strategic business lines that offer more than 9,000 different products and services and
require different marketing strategies. 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.
The Life Science segment develops, manufactures, sells and services reagents, apparatus and instruments used for
biological research. These products are sold to university and medical school laboratories, pharmaceutical and
biotechnology companies, food testing laboratories and government and industrial research facilities.
83
The Clinical Diagnostics segment develops, manufactures, sells and services automated test systems, informatics
systems, test kits and specialized quality controls for the healthcare market. These products are sold to reference
laboratories, hospital laboratories, state newborn screening facilities, physicians’ office laboratories, transfusion
laboratories and insurance and forensic testing laboratories.
Other Operations include our Analytical Instruments segment, and a small miscellaneous operation that was
included in a prior acquisition.
Segment results are presented in the same manner as we present our operations internally to make operating
decisions and assess performance. The accounting policies of the segments are the same as those described in
Significant Accounting Policies (see Note 1). Segment profit or loss includes an allocation of corporate expense
based upon sales and an allocation of interest expense based upon accounts receivable and inventories. The
difference between total segment allocated interest expense, depreciation and amortization, and capital expenditures
and the corresponding consolidated amounts is attributable to our corporate headquarters. Segments are expected to
manage only assets completely under their control. Accordingly, segment assets include primarily accounts
receivable, inventories and gross machinery and equipment. Goodwill balances have been included in corporate for
segment reporting purposes.
Information regarding industry segments at December 31, 2020, 2019, and 2018 and for the years then ended is as
follows (in millions):
Segment net sales
Allocated interest expense
Depreciation and amortization
Segment profit (loss)
Segment assets
Capital expenditures
Life
Science
$ 1,231.8
885.9
861.7
Clinical
Diagnostics
1,305.2
$
1,412.0
1,411.8
Other
Operations
8.6
$
13.8
15.9
$
$
$
$
$
8.0
7.4
7.2
32.8
29.4
34.1
256.3
72.1
28.7
607.3
496.1
16.8
16.6
$
$
$
$
$
13.8
15.9
16.7
65.1
71.7
72.0
149.1
148.5
(145.7)
1,065.6
1,075.8
43.6
58.9
$
$
$
$
$
0.1
0.1
0.1
1.0
0.9
0.5
(0.6)
(1.5)
0.2
9.5
9.2
3.1
0.6
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2020
2019
Net corporate operating expense consists of receipts and expenditures that are not the primary responsibility of
segment operating management and therefore are not allocated to the segments for performance assessment by our
chief operating decision maker. The following reconciles total segment profit to consolidated income before taxes
(in millions):
84
Year Ended December 31,
2019
2018
2020
Total segment profit (loss)
Foreign currency exchange losses, net
Net corporate operating and other expense not allocated to segments
Change in fair market value of equity securities
Other income, net
Consolidated income before income taxes
$
404.8 $
(1.8)
219.1 $
(2.2)
(116.8)
(2.9)
(15.7)
(12.9)
4,495.8
24.5
2,031.0
26.1
(10.4)
606.2
36.6
$ 4,907.6 $ 2,261.1 $
512.7
The following reconciles total segment assets to consolidated total assets (in millions):
Total segment assets
Cash and other current assets
Property, plant and equipment, net, and operating lease right-of-use
assets, excluding segment specific balances
Goodwill, net
Other long-term assets
Total assets
December 31,
$
2020
1,682.4 $
1,098.2
2019
1,581.1
1,233.5
52.7
291.9
9,847.4
$ 12,972.6 $
56.0
264.1
4,863.4
8,008.9
The following presents net sales to external customers by geographic region based primarily on the location of the
use of the product or service (in millions):
Europe
Asia
United States
Other (primarily Canada and Latin America)
Total net sales
Year Ended December 31,
2019
2020
2018
$
$
857.7 $
546.5
1,004.8
136.6
2,545.6 $
770.3 $
505.0
899.1
137.3
792.0
495.5
863.6
138.3
2,311.7 $
2,289.4
The following presents Property, plant and equipment, net, Operating lease right-of-use assets and Other assets,
excluding deferred income taxes, by geographic region based upon the location of the asset (in millions):
Europe
Asia
United States
Other (primarily Canada and Latin America)
Total Property, plant and equipment, net, Operating lease right-of-use assets
and Other assets, excluding deferred income taxes
December 31,
2020
2019
$
208.6 $
53.3
454.4
12.0
198.3
51.5
468.7
12.7
$
728.3 $
731.2
85
15.
RESTRUCTURING COSTS
In December 2018, we announced the closure of a small manufacturing facility in France. Restructuring charges for
the facility closure are included in our Clinical Diagnostics segment's results of operations. This restructuring plan
is expected to be substantially complete by the first half of 2021. We recorded restructuring charges and
adjustments related to severance and employee benefits of $(0.1) million, $(0.1) million and $3.9 million and exit
costs of $0.1 million, zero and $0.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The amounts recorded were reflected in Cost of goods sold in the consolidated statements of income. The liability
of $1.6 million as of December 31, 2020 consisted of $1.5 million recorded in Accrued payroll and employee
benefits and $0.1 million recorded in Other current liabilities in the consolidated balance sheets. From December
2018 to December 31, 2020, total expenses were $4.0 million.
The following table summarizes the activity for the facility closure restructuring reserves for severance and exit
costs (in millions):
Balance as of January 1
Adjustment to expense
Cash payments
Foreign currency translation losses (gains)
Balance as of December 31
2020
2019
$
$
3.2
—
(1.8)
0.2
1.6
$
$
4.1
(0.1)
(0.7)
(0.1)
3.2
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, the United States and Canada, and is expected to
be substantially complete by the first half of 2022. We recorded $(4.8) million and $25.3 million of expenses and
adjustments in restructuring charges related to severance and employee benefits for the years ended December 31,
2020 and 2019, respectively. The liability of $2.8 million as of December 31, 2020 was recorded in Accrued
payroll and employee benefits in the consolidated balance sheets. The amounts recorded were reflected in Cost of
goods sold of $(1.9) million and $4.8 million, in Selling, general and administrative expense of $(1.7) million and
$14.4 million and in Research and development expense of $(1.2) million and $6.1 million in the consolidated
statements of income for the years ended December 31, 2020 and 2019, respectively. From November 2019 to
December 31, 2020, total expenses were $20.5 million.
The following table summarizes the activity of our European and North American reorganization restructuring
reserves for severance (in millions):
86
2020
2019
Life
Science
Clinical
Diagnostics
Total
Life
Science
Clinical
Diagnostics
Total
Balance as of January 1
Charged to expense
$
6.2 $
—
19.1 $
—
25.3 $
—
— $
6.2
— $
19.1
—
25.3
Adjustment to expense
Cash payments
(0.6)
(4.7)
(4.2)
(13.4)
(4.8)
(18.1)
—
(0.4)
—
(0.7)
—
(1.1)
Reserve transferred from
prior restructuring plan
Foreign currency translation
losses
Balance as of December 31
—
—
—
0.3
0.4
—
0.9 $
0.4
1.9 $
0.4
2.8 $
0.1
6.2 $
0.3
19.1 $
$
0.7
0.4
25.3
In June 2020, we announced a restructuring plan to consolidate certain finance and administrative activities in
Europe and the United States. The restructuring plan is expected to be substantially complete by the first half of
2022. The liability of $2.7 million as of December 31, 2020 was recorded in Accrued payroll and employee
benefits in the consolidated balance sheet. The amount reflected in Selling, general and administrative expense was
$3.9 million for the year ended December 31, 2020.
The following table summarizes the restructuring activities related to the finance and administrative reorganization
(in millions):
Balances as of January 1
Charged to expense
Adjustment to expense
Cash payments
Foreign currency translation losses
Balances as of December 31
$
$
Life Science
—
1.5
0.1
(0.5)
—
1.1
2020
Clinical Diagnostics
—
$
2.3
—
(0.8)
0.1
1.6
$
$
$
Total
—
3.8
0.1
(1.3)
0.1
2.7
87
16.
LEASES
For our accounting policies on leases, including leases where we act as lessor in reagent rental agreements, see Note
1. We have operating leases and to a lesser extent finance leases, for buildings, vehicles and equipment. Our leases
have remaining lease terms of 1 year to 18 years, which includes our determination to exercise renewal options.
The components of lease expense were as follows (in millions):
Twelve Months Ended December 31,
2020
2019
Operating lease cost
Finance lease cost:
Amortization of right-to-use assets
Interest on lease liabilities
Total finance lease cost
$
$
45.4 $
51.4
$0.6 $
$0.8
1.4 $
0.6
0.9
1.5
3.0
Sublease income
The sublease is for a building with a term that ends in 2025, with no options to extend or renew.
3.0 $
$
Operating lease cost includes original reduction in the carrying amount of right-of-use assets, the impact of
remeasurements, modifications, impairments and abandonments.
Our short-term leases are expensed as incurred, reflecting leases with a lease term of one year or less, and are not
significant for the years ended December 31, 2020 and 2019. Operating lease variable cost is primarily comprised
of reimbursed actual common area maintenance, property taxes and insurance, which are immaterial for the years
ended December 31, 2020 and 2019.
Supplemental cash flow information related to leases was as follows (in millions):
Twelve Months Ended December 31,
2020
2019
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance leases
$
$
$
$
$
44.4 $
0.6 $
0.8 $
16.1 $
0.4 $
Supplemental balance sheet information related to leases was as follows (in millions):
December 31,
Operating Leases
Operating lease right-of-use assets
Current operating lease liabilities
Operating lease liabilities
Total operating lease liabilities
2020
2019
202.1 $
36.5 $
175.1
211.6 $
$
$
$
88
47.2
0.9
0.6
28.7
0.2
201.9
35.4
176.0
211.4
Finance leases are included in Property, plant and equipment, Current maturities of long-term debt, and Long-term debt, net of
current maturities.
December 31,
Finance Leases
2020
2019
Property, plant and equipment, gross
Less: accumulated depreciation and amortization
Property, plant and equipment, net
Current maturities of long-term debt and notes payable
Long-term debt, net of current maturities
Total finance lease liabilities
$
$
$
$
12.2 $
(5.0)
7.2 $
0.5 $
11.0
11.5 $
December 31,
2020
2019
11.4
(4.2)
7.2
0.5
11.2
11.7
9
18
4.2 %
6.5 %
8
16
3.9 %
6.2 %
Operating
Leases
Finance
Leases
$
$
43.6
36.5
31.9
27.2
23.2
90.5
252.9
(41.3)
211.6
$
$
1.3
1.2
1.2
1.2
1.1
14.0
20.0
(8.5)
11.5
Weighted Average Remaining Lease Term
Operating leases - in years
Finance leases - in years
Weighted Average Discount Rate
Operating leases
Finance leases
Maturities of lease liabilities were as follows (in millions):
Year Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less imputed interest
Total
The value of our operating lease portfolio is principally for facilities with longer durations than the lesser value
vehicles and other equipment with shorter terms and higher-turn over.
As of December 31, 2020, operating leases that have not commenced are not material.
Operating Leases Under ASC 840, Leases
Rents and Leases
Rental expense under operating leases was $47.4 million in 2018. Leases were principally for facilities and
automobiles.
89
17. QUARTERLY FINANCIAL DATA (UNAUDITED - see accompanying accountants' report)
Summarized quarterly financial data for the years ended December 31, 2020 and 2019 are as follows (in millions,
except per share data):
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
$
$
$
$
$
$
$
571.6 $
317.4 $
685.9 $
22.97 $
22.72 $
554.0 $
311.8 $
865.2 $
29.03 $
28.74 $
536.9 $
293.0 $
966.4 $
32.59 $
32.15 $
572.6 $
307.8 $
598.8 $
20.08 $
19.86 $
647.3 $
367.3 $
1,314.8 $
44.24 $
43.64 $
560.6 $
307.0 $
(258.8) $
(8.68) $
(8.68) $
789.8
460.1
839.2
28.13
27.81
624.5
330.4
553.5
18.50
18.31
2020
Net sales
Gross profit
Net income
Basic earnings per share
Diluted earnings per share
2019
Net sales
Gross profit
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
18. SUBSEQUENT EVENT
On February 3, 2021, we initiated a strategy-driven restructuring plan in furtherance of our ongoing program to
improve operating performance. The restructuring plan primarily impacts our operations in Europe and includes the
elimination of certain positions, the consolidation of certain functions, and the relocation of certain manufacturing
operations from Europe to Asia. The restructuring plan is expected to eliminate a total of approximately 530
positions and the subsequent creation of a total of approximately 325 new positions. We anticipate the restructuring
plan will be implemented in phases and is expected to be substantially completed by the end of fiscal year 2022.
We estimate that as a result of this restructuring plan we will incur between approximately $125 million and
$130 million in total cost, which we anticipate will consist of: (i) approximately $86 million cash expenditures in
the form of one-time termination benefits to the affected employees, including cash severance payments, healthcare
benefits, and related transition assistance; (ii) approximately $19 million in capital expenditures associated with the
restructuring plan; and (iii) between approximately $20 million and $25 million in one-time transition costs,
including employee transition costs, supply chain costs and regulatory costs. We anticipate that we will record
approximately $80 million to $90 million of the charges related to this restructuring plan in the first quarter of fiscal
year 2021.
The amounts are preliminary estimates based on the information currently available to management. It is possible
that additional charges and future cash payments could occur in relation to the restructuring actions.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
90
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (“Exchange Act”), that are designed to ensure that information
required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in Securities and Exchange Commission rules and
forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow for timely decisions
regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management
recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.
Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of
any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions.
Subject to the limitations noted above, our management, with the participation of our CEO and CFO, has evaluated
the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the year
covered by this Annual Report on Form 10-K. Based on that evaluation, our CEO and CFO concluded that our
disclosure controls and procedures were effective to meet the objective for which they were designed and operate at
the reasonable assurance level.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
for the Company as defined in Rule 13a-15(f) or 15(d)-15(f) of the Exchange Act. Our internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S.
generally accepted accounting principles, and includes those policies and procedures that: (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles,
and that our receipts and expenditures are being made only in accordance with authorizations of our management
and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on our consolidated financial
statements.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2020 using the criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this assessment and
those criteria, management concluded that our internal control over financial reporting was effective as of
December 31, 2020. Our internal control over financial reporting has been audited by KPMG, LLP, an independent
registered public accounting firm, as stated in their report, which appears in Part II, Item 8 of this Form 10-K.
91
(c) Changes in Internal Control over Financial Reporting
Management continuously reviews disclosure controls and procedures, and internal control over financial reporting,
and accordingly may, from time to time, make changes aimed at enhancing their effectiveness to ensure that its
systems evolve with its business. There were no changes in our internal controls over financial reporting (as
defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the year ended December 31, 2020 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(d) Inherent Limitations on Effectiveness of Internal Controls
Because of its inherent limitations, our 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.
ITEM 9B. OTHER INFORMATION
None.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Part of the information required to be furnished pursuant to this item is incorporated by reference from portions of
Bio-Rad’s definitive proxy statement to be mailed to stockholders in connection with our 2021 annual meeting of
stockholders (the “2021 Proxy Statement”) under “Executive Officers,” “Election of Directors,” “Committees of the
Board of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance.”
Bio-Rad’s Board of Directors has determined that each of Jeffrey L. Edwards, Gregory K. Hinckley and Melinda
Litherland is an “audit committee financial expert,” as defined in Item 407(d)(5) of Regulation S-K. Each of Jeffrey
L. Edwards, Gregory K. Hinckley and Melinda Litherland is also an “independent” director, as determined in
accordance with the independence standards set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as
amended, and Section 303A.02 of the New York Stock Exchange (NYSE) Listed Company Manual.
We have adopted a code of business ethics and conduct that applies to our principal executive officer, principal
financial officer, controller and all other employees and is available through the Corporate Governance section of
our website (www.bio-rad.com). We will also provide a copy of the code of ethics to any person, without charge,
upon request, by writing to us at “Bio-Rad Laboratories, Inc., Investor Relations, 1000 Alfred Nobel Drive,
Hercules, CA 94547.” We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an
amendment to, or waiver from, a provision of the code of ethics by posting such information on the Corporate
Governance section of our website (www.bio-rad.com).
92
ITEM 11. EXECUTIVE COMPENSATION
The information required to be furnished pursuant to this item is incorporated by reference from portions of the
2021 Proxy Statement under “Compensation Discussion and Analysis,” “Summary Compensation Table,” “Grants
of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and Stock Vested
Table,” “Pension Benefits,” “Nonqualified Deferred Compensation Plans,” “Potential Payments on Termination or
Change in Control,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation” and
"Pay Ratio Disclosure.” In addition, the information from a portion of the 2021 Proxy Statement under
“Compensation Committee Report” is incorporated herein by reference and furnished on this Form 10-K and shall
not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Part of the information required to be furnished pursuant to this item is incorporated by reference from a portion of
the 2021 Proxy Statement under “Principal and Management Stockholders.”
Equity Compensation Plan Information as of December 31, 2020
Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(a)
Weighted-average exercise
price of
outstanding options,
warrants and rights
(b)(3)
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
(c)
671,506 $
—
671,506 $
196.29
—
196.29
2,003,600
(2)
—
2,003,600
Plan category
Equity compensation
plans approved by
security holders (1)
Equity compensation
plans not approved by
security holders
Total
(1) Consists of the Bio-Rad Laboratories, Inc. 2017 Incentive Award Plan, and the Bio-Rad Laboratories, Inc. 2011
Employee Stock Purchase Plan.
(2) Consists of 1,451,617 shares available under the Bio-Rad Laboratories, Inc. 2017 Incentive Award Plan and 551,983
shares available under the Bio-Rad Laboratories, Inc. 2011 Employee Stock Purchase Plan.
(3) Excludes Restricted Stock Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required to be furnished pursuant to this item is incorporated by reference from portions of the
2021 Proxy Statement under “Transactions with Related Persons” and “Committees of the Board of Directors.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required to be furnished by this item is incorporated by reference from a portion of the 2021 Proxy
Statement under “Report of the Audit Committee of the Board of Directors.”
93
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)1
Index to Financial Statements – See Item 8 of Part II of this report “Financial Statements and
Supplementary Data" on page 39 for a list of financial statements.
2
Schedule II Valuation and Qualifying Accounts
All financial statement schedules are omitted because they are not required, or the required
information is included in the consolidated financial statements or the notes thereto.
3.
Index to Exhibits
The exhibits listed below in the accompanying Index to Exhibits are filed or incorporated by reference as part
of this report.
94
BIO-RAD LABORATORIES, INC.
INDEX TO EXHIBITS ITEM 15(a)3
Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be “filed under the Securities Exchange Act of
1934.”
Exhibit No.
3.1 Restated Certificate of Incorporation of Bio-Rad Laboratories, Inc. (1)
3.1.1 Certificate of Amendment to Restated Certificate of Incorporation of Bio-Rad Laboratories, Inc. (1)
3.2 Amended and Restated Bylaws of Bio-Rad Laboratories, Inc. (2)
4.1 Description of Bio-Rad Laboratories, Inc. Class A and Class B Common Stock (3)
10.1 Credit Agreement, dated as of April 15, 2019, by and among Bio-Rad Laboratories, Inc., the lenders referred to
therein, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., HSBC Bank USA
National Association, and Mug Bank, Ltd., as co-syndication agents, and Citibank, N.A., and Wells Fargo Bank,
N.A., National Association as co-documentation agents. (4)
10.2 Bio-Rad Laboratories, Inc. 2011 Employee Stock Purchase Plan. (5)*
10.2.1 First Amendment to the Bio-Rad Laboratories, Inc. 2011 Employee Stock Purchase Plan (6)*
10.3 Employees’ Deferred Profit Sharing Retirement Plan (Amended and Restated effective January 1, 1997). (7)*
10.4 2007 Incentive Award Plan. (8)*
10.4.1 Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2007
Incentive Award Plan. (9)*
10.4.2 Amendment to the Bio-Rad Laboratories, Inc. 2007 Incentive Award Plan. (10)*
10.5 Bio-Rad Laboratories, Inc. 2017 Incentive Award Plan (11)*
10.5.1 Global Restricted Stock Unit Award Grant Notice and Global Restricted Stock Unit Award Agreement under
2017 Incentive Award Plan (12)*
10.5.2 Stock Option Grant Notice and Non-Qualified Stock Option Agreement under 2017 Incentive Award Plan (13)*
10.5.3 Global Restricted Stock Unit Award Grant Notice and Global Restricted Stock Unit Award Agreement under
2017 Incentive Award Plan (updated September 2020) (14)*
10.5.4 Stock Option Grant Notice and Non-Qualified Stock Option Agreement under 2017 Incentive Award Plan
(updated September 2020) (15)*
10.6 Employment Offer Letter between the Company and Ilan Daskal dated March 15, 2019 (16)*
95
10.7 Employment Offer Letter between the Company and Andrew J. Last dated March 15, 2019 (17)*
10.8 Form of Indemnification Agreement. (18)
21.1 Listing of Subsidiaries.
23.1 Consent of Independent Registered Public Accounting Firm.
31.1 Certification of Chief Executive Officer Required by Rule 13a-14(a) (17CFR 240.13a-14(a)).
31.2 Certification of Chief Financial Officer Required by Rule 13a-14(a) (17CFR 240.13a-14(a)).
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
101.INS
The instance document does not appear in the interactive data file because its XBRL tags are embedded within
the inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Labels Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document
(1) Incorporated by reference to the Exhibits to Bio-Rad’s Form 10-K filing for the fiscal year ended
December 31, 2010.
(2) Incorporated by reference to Exhibit 3.1 to Bio-Rad’s Form 8-K filing, dated October 27, 2017.
(3) Incorporated by reference to Exhibit 4.1 to Bio-Rad’s Form 10-K filing, dated March 2, 2020.
(4) Incorporated by reference to the Exhibit 10.1 to Bio-Rad’s 8-K filing, dated April 16, 2019.
(5) Incorporated by reference to Exhibit 10.9 to Bio-Rad's June 30, 2011 Form 10-Q filing, dated August 4, 2011.
(6) Incorporated by reference to Exhibit 10.2 to Bio-Rad’s Form 10-Q filing, dated May 9, 2017.
(7) Incorporated by reference to Exhibit 10.6 to Bio-Rad’s September 30, 1997 Form 10-Q filing, dated
November 13, 1997.
(8) Incorporated by reference to Exhibit 4.1 to Bio-Rad’s Form S-8 filing, dated July 30, 2007.
(9) Incorporated by reference to Exhibit 10.8.1 to Bio-Rad’s September 30, 2009 Form 10-Q filing, dated
November 4, 2009.
(10) Incorporated by reference to Exhibit 10.1 to Bio-Rad’s March 31, 2014 Form 10-Q filing, dated May 8, 2014.
96
(11) Incorporated by reference to Exhibit 10.1 to Bio-Rad’s Form 10-Q filing, dated May 9, 2017.
(12) Incorporated by reference to Exhibit 10.1 to Bio-Rad’s Form 10-Q filing, dated November 9, 2017.
(13) Incorporated by reference to Exhibit 10.2 to Bio-Rad’s Form 10-Q filing, dated November 9, 2017.
(14) Incorporated by reference to Exhibit 10.1 to Bio-Rad’s Form 10-Q filing, dated October 30, 2020.
(15) Incorporated by reference to Exhibit 10.2 to Bio-Rad’s Form 10-Q filing, dated October 30, 2020.
(16) Incorporated by reference to Exhibit 10.1 to Bio-Rad’s 8-K filing, dated April 2, 2019.
(17) Incorporated by reference to Exhibit 10.1 to Bio-Rad’s 8-K filing, dated April 22, 2019.
(18) Incorporated by reference to Exhibit 10.1 to Bio-Rad’s Form 10-Q filing, dated August 7, 2017.
* Indicates a management contract or compensatory plan or arrangement.
Item 16. FORM 10-K SUMMARY
Not applicable.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
BIO-RAD LABORATORIES, INC.
By:
/s/ Ilan Daskal
Ilan Daskal
Executive Vice President, Chief Financial Officer
Date:
February 12, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
97
Principal Executive Officer:
/s/ Norman Schwartz
(Norman Schwartz)
Principal Financial Officer:
/s/ Ilan Daskal
(Ilan Daskal)
Principal Accounting Officer:
/s/ Ajit Ramalingam
(Ajit Ramalingam)
Other Directors:
/s/ Jeffrey L. Edwards
(Jeffrey L. Edwards)
Chairman of the Board, President
and Chief Executive Officer
February 12, 2021
Executive Vice President,
Chief Financial Officer
February 12, 2021
Senior Vice President,
Chief Accounting Officer
February 12, 2021
Director
February 12, 2021
/s/ Gregory K. Hinckley
Director
February 12, 2021
(Gregory K. Hinckley)
/s/ Melinda Litherland
(Melinda Litherland)
/s/ Arnold A. Pinkston
(Arnold A. Pinkston)
/s/ Alice N. Schwartz
(Alice N. Schwartz)
Director
Director
Director
February 12, 2021
February 12, 2021
February 12, 2021
98
BIo-rad LaBoratorIeS corPorate InFormatIon
AnnuAl MeetingThe Annual Meeting of Stockholders will be virtual-only and held on Tuesday, April 27 at 4 PM, Pacific Time. Please refer to our proxy statement for details on how to connect to the meeting.Bio-Rad will provide without charge to each stockholder, upon written request to the Secretary, a copy of its 2020 Annual Report filed with the Securities and Exchange Commission on Form 10-K.trAnsfer AgentComputershare c/o Shareholder Services 462 South 4th Street, Suite 1600 Louisville, KY 40202 www.computershare.comAuditorsKPMg llPCoMMon stoCKTraded on the New York Stock ExchangeClass A Common Stock Symbol BioClass B Common Stock Symbol BiobOther SeNIOr executIveSJim BarrySenior Vice President, Quality Systems Lee BoydSenior Vice President, Global Commercial Operations, Asia Pacificcolleen coreyExecutive Vice President, Global Human ResourcesDiane DahowskiExecutive Vice President, Global Supply Chain Kurt DeLangheSenior Vice President, Global Commercial Operations, Europe, Middle East, AfricaSimon MaySenior Vice President, Digital Biology Grouperik MolitorSenior Vice President, Global Technology & SystemsGeoffrey Schwartz Senior Vice President, Global Commercial Operations, AmericasJonathan SeatonSenior Vice President, Corporate Business DevelopmentDirectorsNorman schwartz Chairman of the BoardJeffrey L. edwards DirectorGregory K. HinckleyDirectorMelinda LitherlandDirectorArnold A. PinkstonDirectorAlice N. schwartzDirectorofficersNorman schwartz President and Chief Executive Officer Andrew Last Executive Vice President, Chief Operating Officerilan DaskalExecutive Vice President, Chief Financial OfficerMichael crowley Executive Vice President, Global Commercial Operationstimothy s. ernstExecutive Vice President, General Counsel & SecretaryAnnette tumoloExecutive Vice President, President, Life Science GroupDara WrightExecutive Vice President, President, Clinical Diagnostics Groupronald HuttonVice President, TreasurerAjit ramalingamSenior Vice President, Chief Accounting Officer CORPORATE OFFICES
1000 Alfred Nobel Drive
Hercules, California 94547 USA
+1 510-724-7000 PHONE
+1 510-741-5817 FAX
www.bio-rad.com