BIO RAD LABORATORIES INC - 10-Q Quarterly Report

Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2003.

OR

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

For the transition period from __________ to _______________

Commission file number 1-7928

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

Delaware 94-1381833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1000 Alfred Nobel Drive, Hercules, California 94547
(Address of principal executive offices) (Zip Code)

(510)724-7000
Registrant's telephone number, including area code

No Change
Former name, former address and former fiscal year, if changed
since last report.

Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 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. Yes X No _____
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes X No _____

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date--

Shares Outstanding
Title of each Class at October 31, 2003

Class A Common Stock,
Par Value $0.0001 per share 20,684,515

Class B Common Stock,
Par Value $0.0001 per share 4,842,342

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

BIO-RAD LABORATORIES, INC.

Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)

The accompanying notes are an integral part of these statements.

1

BIO-RAD LABORATORIES, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
September 30, December 30,

The accompanying notes are an integral part of these statements.

2

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

The accompanying notes are an integral part of these statements.

3

BIO-RAD LABORATORIES, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
of Bio-Rad Laboratories, Inc. ("Bio-Rad" or the "Company"), have been
prepared in accordance with accounting principles generally accepted
in the United States of America and reflect all adjustments which are,
in the opinion of management, necessary to fairly state the results of
the interim periods presented. All such adjustments are of a normal
recurring nature. Results for the interim period are not necessarily
indicative of the results for the entire year. The condensed
consolidated financial statements should be read in conjunction with
the notes to the consolidated financial statements contained in the
Company's Annual Report for the year ended December 31, 2002. Certain
prior year items have been reclassified to conform to the current
year's presentation.

2. INVENTORIES

The principal components of inventories are as follows (in millions):

September 30, December 31,
2003 2002
----------------------------

Raw materials $ 41.2 $ 40.6
Work in process 39.9 30.8
Finished goods 108.1 95.0
------- -------
$ 189.2 $ 166.4
======= =======
3. PROPERTY, PLANT AND EQUIPMENT

The principal components of property, plant and equipment are as
follows (in millions):
September 30, December 31,
2003 2002
----------------------------

Land and improvements $ 9.8 $ 9.6
Buildings and leasehold
improvements 99.7 80.5
Equipment 273.5 239.4
------- -------
383.0 329.5
Accumulated depreciation (218.6) (187.3)
------- -------
Net property, plant and equipment $ 164.4 $ 142.2
======= =======

4

4. GOODWILL

The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets" as of January
1, 2002, which provides that goodwill is no longer subject to
amortization over its useful life. Goodwill is subject to an annual
assessment for impairment applying a fair-value based test. No
goodwill was recorded or impaired during the nine months ended
September 30, 2003.

5. ACQUISITIONS AND INVESTMENTS

On March 31, 2003, the Company acquired the outstanding shares of
Verdot Industrie of Riom, France for approximately $6 million. The
Company has included these operations in its Life Science segment.

The Company purchased 1,073,474 shares of ordinary stock of
Sartorius AG, of Goettingen, Germany, a process technology supplier
to the biotechnology, pharmaceutical, chemical and food and beverage
industries for approximately $9.6 million during the nine months
ended September 30, 2003. The Company owned approximately 13% of
the voting stock of Sartorius AG at September 30, 2003.

6. PRODUCT WARRANTY LIABILITY

The Company warrants certain equipment against defects in design,
materials and workmanship, generally for one year. Upon shipment of
that equipment, the Company establishes, as part of cost of goods
sold, a provision for the expected cost of such warranty.

Components of the product warranty liability included in Other
current liabilities, were as follows (in millions):

January 1, 2003 $ 7.1
Provision for warranty 8.6
Actual warranty costs (6.7)
------
September 30, 2003 $ 9.0
======

7. LONG-TERM DEBT

In August 2003, the Company sold $225.0 million principal amount of
Senior Subordinated Notes due 2013. The notes pay a fixed rate of
interest of 7.5% per year. The Company has the option to redeem any
or all of the notes at any time prior to August 15, 2008 at a
redemption price equal to 100% of the principal amount of the notes
plus the "applicable premium"(as defined by the indenture) plus
accrued and unpaid interest and certain other charges. The notes may
be redeemed in whole or in part after August 15, 2008 and before
August 15, 2009 at a redemption price of 103.75%; after August 15,
2009 and before August 15, 2010 at a redemption price of 102.50%; for
the interim period to August 15, 2011 at 101.25%; thereafter at 100%.
The Company's obligations under the notes are not secured and rank
junior to all the Company's existing and future senior debt.

5

Through July 2003, the Company repurchased in the open market $17.3
million (par value) of its Senior Subordinated Notes due in 2007 at
an expense, including interest, unamortized issue costs and
unamortized original issue discount of $2.5 million. The remaining
$88.7 million (par value) of Senior Subordinated Notes due in 2007
were tendered and repurchased with a portion of the proceeds from
the sale of the 7.5% Senior Subordinated Notes at an expense,
including interest, unamortized issue costs and unamortized original
discount of $11.6 million. This expense is included in interest
expense.

During the quarter, the Company also negotiated a new five-year $150.0
million revolving credit facility to replace its $100.0 million
revolving credit facility. The new credit facility contains financial
covenants and maintenance tests including a leverage ratio test, an
interest coverage test and a consolidated net worth test. Restrictive
covenants include restrictions on the Company's ability to declare or
pay dividends, incur debt, guarantee debt, enter into transactions
with affiliates, merge or consolidate, sell assets, make investments,
create liens and prepay subordinated debt. The new credit facility is
secured by substantially all of the Company's personal property assets
and the assets of its domestic subsidiaries and 65% of the capital
stock of certain foreign subsidiaries, and is guaranteed by all of its
existing and future domestic subsidiaries (other than immaterial
domestic subsidiaries as defined for purposes of the new credit
facility). The Company terminated its existing credit facility
simultaneously with the closing of its new facility.

8. EARNINGS PER SHARE

The Company calculates basic earnings per share (EPS) and diluted
EPS in accordance with SFAS No. 128, "Earnings per Share." Basic
EPS is computed by dividing net income (loss) by the weighted
average number of common shares outstanding for that period.
Diluted EPS takes into account the effect of dilutive instruments,
such as stock options, and uses the average share price for the
period in determining the number of common stock equivalents that
are to be added to the weighted average number of shares
outstanding. Common stock equivalents are excluded from the diluted
earnings per share calculation if the effect would be anti-dilutive.

Weighted average shares used for diluted earnings per share include
the dilutive effect of outstanding stock options of 961,000 and
911,000 shares, for the three months ended September 30, 2003 and
2002, respectively. There were no anti-dilutive shares for the
three months ended September 30, 2003 and 2002.

Weighted average shares used for diluted earnings per share include
the dilutive effect of outstanding stock options of 912,000 and
928,000 for the nine month periods ended September 30, 2003 and
2002, respectively. There were no anti-dilutive shares for the nine
months ended September 30, 2003 and 2002.

6

9. STOCK OPTIONS AND PURCHASE PLANS

Stock Option Plans
------------------

The Company maintains incentive and non-qualified stock option plans
for officers and certain other key employees. Under the 1994 Stock
Option Plan, 302,933 shares were granted during the first quarter of
2003. No options have been granted subsequently. No options have
been issued to non-employees.

In March of 2003, stockholders approved the 2003 Stock Option Plan
of Bio-Rad Laboratories, Inc. (the Plan). The Plan authorizes the
grant to employees of incentive stock options and non-qualified
stock options. A total of 1,675,000 shares have been reserved for
issuance and may be of either Class A or Class B Common Stock. No
options have been granted from this plan during the first nine
months of 2003.

The Company applies the recognition and measurement principles of
APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for those plans. No stock-
based employee compensation expense is reflected in net income as
all options granted under those plans had an exercise price equal to
or greater than the market value of the underlying common stock on
the date of grant.

Had compensation cost for the Company's stock option and stock
purchase plans been accounted for under SFAS No. 123, "Accounting
for Stock-Based Compensation," the Company's pro forma net income
and earnings per share would have been as follows (in millions,
except per share data):

Three Months Nine Months
Ended Ended
September 30, September 30,
------------------------------------
2003 2002 2003 2002
------------------------------------

Net income, as reported $ 9.7 $ 16.6 $ 57.0 $ 51.6
Deduct: Total stock based
employee compensation expense
determined under fair value
methods for all awards,
net of related tax effects 0.6 0.7 1.8 1.2
------ ------ ------ ------
Pro forma net income $ 9.1 $ 15.9 $ 55.2 $ 50.4
====== ====== ====== ======
Earnings per share:
Basic - as reported $0.38 $0.66 $2.25 $ 2.06
===== ===== ===== ======
Basic - pro forma $0.36 $0.63 $2.17 $ 2.01
===== ===== ===== ======

Diluted - as reported $0.37 $0.64 $2.17 $1.99
===== ===== ===== =====
Diluted - pro forma $0.34 $0.61 $2.11 $1.94
===== ===== ===== =====

7

For purposes of the pro forma disclosures, the estimated fair value of
the options granted is amortized to expense over the options' vesting
period. There were no options granted during the three month periods
ended September 30, 2003 and 2002. The fair value of options granted
was estimated using the Black-Scholes model with the following
weighted average assumptions:

Nine Months Ended
September 30,
2003 2002
-------------------

Expected volatility 37% 35%
Risk free interest rate 2.65% 3.99%
Expected life (in years) 4.2 4.2
Expected dividend -- --

The weighted average fair value of employee stock options granted
during the nine months ended September 30, 2003 and 2002 was $11.85
and $9.75, respectively.

Employee Stock Purchase Plan
----------------------------

The Company has an employee stock purchase plan that provides that
eligible employees may contribute up to 10% of their compensation up
to $25,000 annually toward the quarterly purchase of the Company's
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. No compen-
sation expense is recorded in connection with the plan. The Company
has authorized the sale of 1,890,000 shares of common stock under the
plan.

The Company sold 21,103 shares for $0.7 million and 17,127 shares for
$0.5 million under the plan to employees for the three months ended
September 30, 2003 and 2002, respectively. At September 30, 2003,
283,552 shares remain authorized under the plan.

The Company sold 57,001 shares for $1.8 million and 50,947 shares for
$1.3 million under the plan to employees for the nine months ended
September 30, 2003 and 2002, respectively.

The fair value of the employees' purchase rights was estimated using
the Black-Scholes model with the following assumptions:

Three Months Nine Months
Ended Ended
September 30, September 30,
----------------------------------
2003 2002 2003 2002
----------------------------------

Expected volatility 33.93% 54.03% 41.75% 45.71%
Risk free interest rate 0.77% 1.57% 0.95% 1.61%
Expected life (in years) .25 .25 .25 .25
Expected dividend -- -- -- --

8

The weighted average fair value of those purchase rights granted
during the three months ended September 30, 2003 and 2002 was $11.45
and $9.98, respectively. The weighted average fair value of those
purchase rights granted during the nine months ended September 30,
2003 and 2002, was $9.23 and $8.35, respectively.

10. FOREIGN EXCHANGE LOSSES

Foreign exchange losses include premiums and discounts on forward
foreign exchange contracts and mark-to-market adjustments on foreign
exchange contracts.

11. OTHER INCOME AND EXPENSE

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

Three Months Nine Months
Ended Ended
September 30, September 30,
---------------------------------
2003 2002 2003 2002
---------------------------------
Write-down of investment
in affiliates $ -- $ -- $ -- $ 2.0
Interest income (0.5) (0.2) (1.6) (0.8)
Other -- (0.1) (0.4) (0.6)
Total Other (income) ------ ------ ------ ------
and expense, net $ (0.5) $ (0.3) $ (2.0) $ 0.6
====== ====== ====== ======

In the first quarter of 2002, the Company recorded a $2.0 million
non-cash pre-tax charge reflecting the write-down of the Company's
investment in Digilab, LLC. This reduced the investment value to
zero.

12. COMPREHENSIVE INCOME

SFAS No. 130, "Reporting Comprehensive Income" requires disclosure of
total non-stockholder changes in equity, which include unrealized
gains and losses on securities classified as available-for sale under
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities", foreign currency translation adjustments accounted for
under SFAS No. 52 "Foreign Currency Translation" and minimum pension
liability adjustments made pursuant to SFAS No. 87 "Employers'
Accounting for Pensions."

9

The components of the Company's total comprehensive income were
(in millions):

Three Months Nine Months
Ended Ended
September 30, September 30,
----------------------------------
2003 2002 2003 2002
----------------------------------

Net Income $ 9.7 $ 16.6 $ 57.0 $ 51.6
Currency translation
adjustments (0.3) (1.5) 14.2 16.6
Net unrealized holding
gains (losses) 0.4 (0.4) 1.0 (0.3)
------ ------ ------ ------
Total comprehensive income $ 9.8 $ 14.7 $ 72.2 $ 67.9
====== ====== ====== ======

13. SEGMENT INFORMATION

Information regarding industry segments for the three months ended
September 30, 2003 and 2002 is as follows (in millions):

Life Clinical Other
Science Diagnostics Operations Total
------------------------------------------

Segment net sales 2003 $118.0 $127.6 $ 2.1 $247.7
2002 $106.0 $116.8 $ 2.1 $224.9

Segment profit(loss) 2003 $14.1 $ 15.3 $ -- $ 29.4
2002 $17.3 $ 12.9 $(0.2) $ 30.0

Information regarding industry segments for the nine months ended
September 30, 2003 and 2002 is as follows (in millions):

Life Clinical Other
Science Diagnostics Operations Total
------------------------------------------

Segment net sales 2003 $349.8 $381.0 $ 6.4 $737.2
2002 $307.3 $336.3 $ 6.1 $649.7

Segment profit(loss) 2003 $51.7 $ 49.8 $ 0.1 $101.6
2002 $52.3 $ 33.5 $(1.0) $ 84.8

Segment results are presented in the same manner as the Company
presents its operations internally to make operating decisions and
assess performance. Net corporate operating income (expense) consists
of receipts and expenditures that are not the primary responsibility
of segment operating management.

10

Interest expense is charged to segments based on the carrying amount
of inventory and receivables employed by that segment. The following
reconciles total segment profit to consolidated income before taxes
(in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
2003 2002 2003 2002
---------------------------------------

Total segment profit $ 29.4 $ 30.0 $101.6 $ 84.8
Foreign exchange losses (1.5) (2.7) (2.8) (5.5)
Costs related to bond redemption (13.1) -- (14.1) --
Net corporate operating,
interest and other income
and expense not allocated
to segments (0.9) (1.2) (1.7) 0.7
Other income and (expense),net 0.5 0.3 2.0 (0.6)
------ ------ ------ ------
Consolidated income before taxes $ 14.4 $ 26.4 $ 85.0 $ 79.4
====== ====== ====== ======

14. LEGAL PROCEEDINGS

The Company is party to various claims, legal actions and complaints
arising in the ordinary course of business. The Company does not
believe that any ultimate liability resulting from any of these
lawsuits will have a material adverse effect on its results of
operations, financial position or liquidity. However, the Company
cannot give any assurance regarding the ultimate outcome of these
lawsuits and their resolution could be material to the Company's
operating results for any particular period, depending upon the level
of income for the period.

15. RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the Financial Accounting Standards Board (FASB)issued
SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections." One of
the major changes of this statement is to change the accounting for the
classification of gains and losses from the extinguishment of debt.
The Company adopted SFAS No. 145 as of January 1, 2002 and will follow
APB 30, "Reporting the Results of Operations -- Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" in determining whether
such extinguishment of debt may be classified as extraordinary. As a
result of adoption, the expenses incurred (including premiums paid
above par, unamortized debt issuance cost and unamortized original
issue discount) in the repurchase of outstanding debt on the open
market has been included in interest expense. The adoption of SFAS No.
145 did not have any other impact on the condensed consolidated
financial statements of the Company.

SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal
Activities", was issued in June 2002 and addresses accounting for
restructuring and similar costs. SFAS No. 146 requires that a
liability for costs associated with an exit or disposal activity be
recognized and measured initially at fair value only when the
liability is incurred. SFAS No. 146 is effective for exit or disposal
activities that were initiated after December 31, 2002. The adoption
of SFAS No. 146 did not have any impact on the condensed consolidated
financial statements of the Company.

11

In November 2002, the FASB issued Financial Interpretation No. (FIN)
45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others,"
which requires certain guarantees to be recorded at fair value. The
interpretation also requires a guarantor to make new disclosures, even
when the likelihood of making any payments under the guarantee is
remote. In general, the interpretation applies to contracts or
indemnification agreements that contingently require the guarantor to
make payments to the guaranteed party based upon changes in an
underlying obligation that is related to an asset, liability, or an
equity security of the guaranteed party. The adoption of FIN 45 did
not have an impact on our operating results or financial position.

On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure, an Amendment of
FASB Statement No. 123." This statement provides alternative methods
of transition for companies who voluntarily change to the fair value-
based method of accounting for stock-based employee compensation in
accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation." The statement requires prominent disclosures in both
annual and interim financial statements about the method of accounting
for stock-based compensation and the effect of the method used on
reported results. The Company has adopted the disclosure requirements
as required by the statement.

The Company continues to account for stock-based compensation using
the intrinsic value method in accordance with the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," elected under SFAS No. 123, as amended. As a
result, the adoption of SFAS No. 148 did not have any impact on the
condensed consolidated financial statements of the Company
(see Note 9).

During January 2003, the FASB issued FIN 46, "Consolidation of
Variable Interest Entities". FIN 46 requires that if an entity has a
controlling financial interest in a variable interest entity, the
assets, liabilities and results of activities of the variable interest
entity should be included in the consolidated financial statements of
the entity. FIN 46 requires that its provisions are effective
immediately for all arrangements entered into after January 31, 2003.
For any arrangements entered into prior to January 31, 2003, the FIN
46 provisions are required to be adopted at the beginning of the first
interim or annual period beginning after June 15, 2003. The Company
does not expect the adoption of FIN 46 to have an impact on its
operating results or financial position.

During April 2003, the FASB issued SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities". SFAS
No. 149 amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts,
and for hedging activities under SFAS 133. SFAS No. 149 is effective
for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The guidance
should be applied prospectively. The Company does not expect the
adoption of SFAS No. 149 to have a significant impact on its operating
results or financial position.

12

During May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity". SFAS No. 150 clarifies the accounting for certain financial
instruments with characteristics of both liabilities and equity and
requires that those instruments be classified as liabilities in
statements of financial position. Previously, many of those financial
instruments were classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003 and
otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The Company does not expect the
adoption of SFAS No. 150 to have a significant impact on its operating
results or financial position.

13

Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition.

The following discussion should be read in conjunction with the
Company's unaudited condensed consolidated financial statements
and notes thereto included elsewhere in this Form 10-Q and the
Company's Consolidated Financial Statements for the year ended
December 31, 2002.

The following table shows gross profit and expense items as a
percentage of net sales:

Three Months Ended Nine Months Ended Year Ende
September 30, September 30, December
2003 2002 2003 2002 2002
---- ---- ---- ---- ----

Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 44.5 42.6 43.5 42.6 42.9
----- ----- ----- ----- -----
Gross profit 55.5 57.4 56.5 57.4 57.1

Selling, general and
administrative 32.4 32.6 32.1 32.1 32.4

Product research and
development 9.6 8.9 9.2 9.2 9.3

Net income 3.9% 7.4% 7.7% 7.9% 7.6%
===== ===== ===== ===== =====

Critical Accounting Policies

As previously disclosed in the Company's Annual Report on
Form 10-K for the year ended December 31, 2002, the Company has
identified accounting for income taxes, valuation of long-lived
and intangible assets and goodwill, and valuation of inventories
as the accounting policies critical to the operations of the
Company. For a full discussion of these policies, please refer to
the Form 10-K.

Forward Looking Statements

Other than statements of historical fact, statements made in this
report include forward looking statements, such as statements
with respect to the Company's future financial performance,
operating results, plans and objectives. We have based these
forward looking statements on our current expectations and
projections about future events. However, actual results may
differ materially from those currently anticipated depending on a
variety of risk factors including among other things: our ability
to successfully develop and market new products; our reliance on
and access to necessary intellectual property; our substantial
leverage and ability to service our debt; competition in and
government regulation of the industries in which we operate; and
the monetary policies of various countries. We undertake no
obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future
events, or otherwise.

14

The Company 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.

Three Months Ended September 30, 2003
Compared to Three Months Ended September 30, 2002

Corporate Results - Sales, Margins and Expenses

Net sales (sales) for the third quarter of 2003 were $247.7
million compared to $224.9 million in the third quarter of 2002,
an increase of 10.2%. The favorable impact from a weakening U.S.
dollar provided 6.0% of the reported sales growth for the
Company. Growth in Life Science, excluding the favorable impact
from currency translation, was 5.4%. Sales increased for the
Company's products in the areas of Life Science consumables,
imaging instrumentation, and process chromatography products.
Sales adjusted for currency declined for the Company's bovine
spongiform encephalopathy (BSE) test as competitive pricing
pressure impacted the market. Clinical Diagnostics grew by 3.0%
excluding the favorable impact from currency translation.
Product groups contributing to growth include quality controls
and blood virus screening.

Consolidated gross margins were 55.5% for the third quarter of
2003 compared to 57.4% for the third quarter of 2002 and 57.1%
for all of 2002. Life Science margins declined on reduced
average selling prices in the food testing product line, costs
associated with integrating recent acquisitions and not achieving
planned factory activity levels. Clinical Diagnostics margins
remained virtually unchanged.

Selling, general and administrative expense (SG&A) decreased
slightly to 32.4% of sales in the third quarter of 2003 from
32.6% of sales in the third quarter of 2002. Life Science grew
SG&A faster than sales growth due to increased spending on
personnel, demonstration equipment and professional fees
associated with information technology enhancements primarily in
the United States. Clinical Diagnostics grew SG&A at a slower
rate than sales. The Company expects that the for next several
quarters SG&A growth will continue to reflect similar spending
levels as it plans to relocate some Life Science facilities in
Northern California and make information technology improvements.
The longer-term goal for Bio-Rad remains a gradual reduction in
SG&A spending as a percent of sales.

Product research and development expense increased to 9.6% of
sales compared to 8.9% in the prior period. In terms of absolute
dollar spending both segments increased spending with the larger
portion of the growth attributable to Clinical Diagnostics. The
Company plans to reinvest between 9% and 10% of sales in research
and development to continue to introduce new and enhanced
products.

15

Corporate Results - Other Items

In the third quarter of 2003, interest expense of $17.9 million
reflects the cost of redeeming the remaining 11-5/8% bonds due in
2007 ($13.1 million), the write-off of unamortized origination
costs on the Company's 1999 $100.0 million line of credit of
($0.5 million) and recurring interest expense for the period.
Third quarter 2002 interest expense included of $1.6 million of
bond redemption costs as the Company made it first purchase of
the bonds in this quarter.

Foreign exchange losses decreased by $1.2 million compared to the
third quarter of 2002. During the third quarter of 2002, the
Company recorded atypical currency losses on unhedged Brazilian
and Russian currency positions due to the extreme currency
declines in the period. These dramatic declines did not repeat
in 2003. Further, the Company has hedged a portion of its
Brazilian exposure in 2003 which has led to increased costs to
the Company. Included in foreign exchange losses is the net
premium or discount of the Company's forward exchange contracts
used to hedge its net intercompany receivable/payable balances.

The Company's effective tax rate was 33% for the third quarter of
2003 compared to 37% in the third quarter of 2002. For the full
year 2002, the effective tax rate was 35%. The decrease is the
result of the elimination of tax losses in locations which did
not provide for a consolidated tax benefit in the third quarter
of 2002.

Nine Months Ended September 30, 2003
Compared to Nine Months Ended September 30, 2002

Corporate Results - Sales, Margins and Expenses

Sales for the nine months ended September 30, 2003 were $737.2
million compared to $649.7 million for the nine months ended
September 30, 2002, an increase of 13.5%. The favorable impact
from a weakening U.S. dollar provided 8.6% of the reported sales
growth for the Company. Sales increased 4.9% in Life Science on
a constant currency basis. Clinical Diagnostics sales growth on
a constant currency basis was 4.9%. The growth in Life Science
is attributed to demand for the Company's process chromatography
products for bio-pharmaceutical manufacturing, laboratory
supplies and imaging equipment. The growth in Clinical
Diagnostics was from products for quality controls, diabetes
monitoring and autoimmune testing.

Adjusted for currency, sales growth was up over 7.0% for the
United States and Asia for the nine months ended September 30,
2003 compared to the same period in 2002.

16

Consolidated gross margins were 56.5% for the nine months ended
September 30, 2003 compared to 57.4% for the nine months ended
September 30, 2002 and 57.1% for all of 2002. The net overall
decrease is attributable to Life Science, as Clinical Diagnostics
margins improved 0.6%. Gross margins decreased in Life Science
principally due to lower average selling price in food safety
products. To a lesser extent the underabsorption of factory
overhead from planned levels has also contributed to the decline.
Clinical Diagnostics margins improved due to improved sales in
the form of increased unit volume led by its quality control
product line.

SG&A as a percent of sales remained unchanged at 32.1% for the
nine months ended September 30, 2003 compared to the same period
in 2002. Overall, Life Science grew SG&A at a rate that exceeded
sales growth while Clinical Diagnostics' grew SG&A at a much
reduced rate when compared to sales growth. Life Science has
increased spending on personnel, demonstration equipment and
professional services. This segment has current initiatives to
grow proteomic and genomic sales, preserve its market share in
food safety and enhance its current information technology.

Product research and development expense increased in absolute
dollars to $67.9 million or 9.2% of sales for the nine months
ended September 30, 2003 compared to $60.0 million or 9.2% of
sales in the prior year. Spending increased in both Life Science
and Clinical Diagnostics in absolute dollars. The Company plans
to reinvest between 9% and 10% of sales in research and
development going forward to support growth. The Company's
spending level during the nine months ended September 30, 2003
was lower than anticipated, as the Company anticipates an annual
spending pattern above the current year-to-date rate.

Corporate Results - Other Items

Interest expense for the nine months ended September 30, 2003
includes costs associated with redeeming the 11-5/8% bonds due in
2007 of $14.1 million, the write-off of unamortized origination
costs of the Company's 1999 $100.0 million line of credit of $0.5
million and recurring interest expense. For the year-to-date,
2002 includes only $1.6 million of bond redemption costs.
Recurring interest expense declined for the year 2003 as overall
debt levels were lower prior to the Company's issuance of $225.0
million of 7.5% subordinated notes due 2013 in mid August 2003.

Other (income) and expense, net for the nine months ended
September 30, 2003 is principally comprised of interest income
and other investment income. The nine months ended September 30,
2002 includes a $2.0 million non-cash pre-tax expense reflecting
impairment in the Company's investment in Digilab LLC. Foreign
exchange losses decreased compared to the same period in 2002 as

17

the exchange losses incurred at the Company's Brazilian
subsidiary have not occurred in 2003. Foreign exchange losses
also include premiums and discounts for the Company's hedging
program.

The Company's effective tax rate declined to 33% for the nine
months ended September 30, 2003 compared to 35% for the same
period in 2002. The decline is attributed to improved
profitability in countries which in the prior period had losses
which did not provide a benefit to the overall Company effective
rate.

Liquidity and Capital Resources

The Company, as of September 30, 2003, had available
approximately $150.0 million, or 100% under its restated and
amended Revolving Credit Facility signed September 5, 2003 and
$37.7 million under various foreign lines of credit. Cash and
cash equivalents available were $140.7 million. Management
believes that this availability, together with cash flow from
operations, will be adequate to meet our current objectives for
operations, research and development, capital additions for
plant, equipment, and systems and an acquisition or acquisitions
with an accumulated value of around $200 million.

At September 30, 2003, consolidated accounts receivable increased
by $8.4 million from December 31, 2002. The increase is due to
the appreciation of receivables denominated in foreign currency
as the Euro, for example, has appreciated approximately 11% since
December 31, 2002. Reducing the impact of this appreciation is
overall improved collections. Management regularly reviews
receivables for collectibility.

At September 30, 2003, consolidated net inventories increased by
$22.8 million from December 31, 2002. Approximately one-third of
this increase is due to the strengthening of European and
Japanese currency against the U.S. dollar. The remaining
increase largely represents levels necessary to meet customer
demands for Life Science consumable products and preparation for
the upcoming relocation of the distribution and assembly plant
from Richmond to Hercules, California. The Clinical Diagnostics
inventory growth is attributable to the quality controls product
line as unit volume growth has exceeded the average Diagnostic
segments growth. The Clinical Diagnostics controls business is
characterized by long lead times and large infrequent batch
production which is necessary to meet customer requirements. Bio-
Rad management regularly reviews inventory valuation for excess,
obsolete and slow moving products.

Net capital expenditures totaled $47.7 million for the first nine
months of 2003 compared to $31.3 million for the same period of

18

2002. The Company's construction of a new facility on its Hercules
campus in California represents $16.9 million of spending for the
first nine months of 2003. In total, the Company has capitalized
$18.6 million of the estimated $25.0 million to complete the
project. The project should be complete in the first quarter of
2004. Capital expenditures for the period include reagent rental
equipment placed with Clinical Diagnostic customers who then commit
to purchase the Company's diagnostic reagents for use. Other
expenditures represent the Company's investment in business systems,
data communication, production equipment and improvements to
production and other facilities.

The Company continues to review possible acquisitions to expand both
its Life Science and Clinical Diagnostics segments. The Company
routinely meets with the principals or brokers of the subject
companies. Currently no discussions involving a material
acquisition (defined as having the potential to be greater than
either 5% of Bio-Rad's current total assets, sales or net income)
have progressed beyond the most initial phases.

The Board of Directors has authorized the Company to repurchase up
to $18 million of its common stock over an indefinite period of
time. Through September 30, 2003, the Company has cumulatively
repurchased 1,179,272 shares of Class A Common Stock and 60,000
shares of Class B Common Stock for a total of $14.7 million. The
Company's credit agreements restrict its ability to repurchase its
own stock. There were no share repurchases made during 2002 or in
2003 to date. The repurchase is designed to improve shareholder
value and to satisfy the Company's obligations under its employee
stock purchase and stock option plans.

The Company completed three significant financing transactions
during the third quarter of 2003. These transactions were the
completion of a new $150.0 million revolving credit facility, the
placement of $225.0 million aggregate principal amount of Senior
Subordinated Notes in a private offering and completion of a cash
tender offer to retire all of its outstanding 11-5/8% Senior
Subordinated Notes due in 2007.

The new $150.0 million revolving credit facility is secured by
substantially all of the Company's personal property assets and the
assets of its domestic subsidiaries and 65% of the capital stock of
certain foreign subsidiaries, and is guaranteed by all of its
existing and future domestic subsidiaries (other than immaterial
domestic subsidiaries as defined for purposes of the new credit
facility). The Company terminated its existing $100.0 million
revolving credit facility prior to the closing of the new revolving
credit facility. Interest varies upon a number of factors including
the duration of the specific borrowing and is based upon either the
Eurodollar, the Federal Funds effective or the Company corporate
based rate. A fee of $0.5 million was paid for originating the

19

loan. The Company will pay a commitment fee annually on the daily
unused portion of the revolving credit facility.

On August 11, 2003 the Company completed the sale of $225 million
aggregate principal amount of its 7.5% Senior Subordinated Notes due
2013 in a private offering. The Company used $98.2 million of the
net proceeds from this offering to fund the purchase of the
outstanding 11-5/8% Senior Subordinated Notes due 2007 pursuant to a
tender offer completed on September 30, 2003 with the remainder
available for general corporate purposes, which may include
acquisitions.

Subsequent to September 30, 2003, the new Senior Subordinated Notes
have been exchanged for the new 7.5% Exchange Notes that have been
registered under the Securities Act of 1933, as amended, or
applicable state securities laws. This transaction was completed on
October 30, 2003, with the new Exchange Notes being virtually
identical in all material respects to the 7.5% Senior Subordinated
Notes originally issued only to qualified institutional buyers in
reliance of Rule 144A and in offshore transactions pursuant to
Regulation S under the Securities Act as amended.

During the third quarter of 2003, the Company completed a cash
tender and consent solicitation for all of its outstanding 11-5/8%
Senior Subordinated Notes due 2007. Holders received consideration
of 110.625% of the principal amount of notes, which included a
consent payment of 1.5% of the principal amount of the notes. In
accordance with the terms of the indenture governing the notes, any
notes still outstanding were called for redemption, redeemed and the
notes retired prior to September 30, 2003. This closes the last of
the financings originally used to primarily fund the 1999
acquisition by Bio-Rad of Pasteur Sanofi Diagnostics from Sanofi
Synthelabo and the Institut Pasteur.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the nine months ended September 30, 2003, there have been no
material changes from the disclosures about market risk provided in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2002.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the
Company's Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms and that such information is
accumulated and communicated to the Company's management, including
its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required

20

disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives,
and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), the Company carried out an
evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive
Officer and the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the quarter
covered by this report. Based on the foregoing, the Company's Chief
Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective at the
reasonable assurance level.

There has been no change in the Company's internal controls over
financial reporting during the Company's most recent fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, the Company's internal controls over financial reporting.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

The following documents are filed as part of this report:

Exhibit No.

31.1 Chief Executive Officer Section 302 Certification
31.2 Chief Financial Officer Section 302 Certification
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

Bio-Rad filed a current report on Form 8-K with the SEC on
July 21, 2003 announcing a tender offer for all $88,715,000
aggregate principal amount of its outstanding 11-5/8% Senior
Subordinated Notes due 2007.

Bio-Rad filed a current report on Form 8-K with the SEC on
July 30, 2003 announcing a private offering of new senior
subordinated notes.

Bio-Rad filed a current report on Form 8-K with the SEC on
August 8, 2003 announcing that it has agreed to sell $225,000,000
aggregate principal amount of its 7.50% Senior Subordinated Notes
due 2013 in a private offering.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.

BIO-RAD LABORATORIES, INC.
--------------------------
(Registrant)

Date: November 13, 2003 /s/ Christine A. Tsingos
----------------- -------------------------
Christine A. Tsingos, Vice President,
Chief Financial Officer

Date: November 13, 2003 /s/ Sanford S. Wadler
----------------- -------------------------
Sanford S. Wadler, Vice President,
General Counsel and Secretary

22