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

FORM 10-Q
(Mark One)
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
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 incorporation or organization)
 
(I.R.S. Employer 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 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.
 
Yes     x
     No      o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232,405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes     x
     No      o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in  Rule 12b-2 of the Exchange Act.  (Check one):
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
(Do not check if smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes     o
     No      x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of Class
 
Shares Outstanding at July 27, 2011
Class A Common Stock, Par Value $0.0001 per share
 
22,907,689
Class B Common Stock, Par Value $0.0001 per share
 
5,155,016
 


BIO-RAD LABORATORIES, INC.

FORM 10-Q JUNE 30, 2011

TABLE OF CONTENTS


2


PART I – FINANCIAL INFORMATION
Item 1.          Financial Statements
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
Net sales
$
521,656

 
$
467,662

 
$
1,006,777

 
$
921,896

Cost of goods sold
228,520

 
199,354

 
436,030

 
396,461

Gross profit
293,136

 
268,308

 
570,747

 
525,435

Selling, general and administrative expense
176,740

 
156,270

 
344,503

 
309,887

Research and development expense
48,210

 
43,862

 
90,940

 
84,125

Income from operations
68,186

 
68,176

 
135,304

 
131,423

Interest expense
12,041

 
14,325

 
28,807

 
28,769

Foreign exchange losses, net
2,744

 
1,014

 
5,786

 
797

Other (income) expense, net
(4,418
)
 
(2,517
)
 
(5,369
)
 
(3,316
)
Income before income taxes
57,819

 
55,354

 
106,080

 
105,173

Provision for income taxes
(17,797
)
 
(16,833
)
 
(33,120
)
 
(31,260
)
Net income including noncontrolling interests 
40,022

 
38,521

 
72,960

 
73,913

Net loss (income) attributable to noncontrolling interests
26

 
(564
)
 
127

 
(1,095
)
Net income attributable to Bio-Rad
$
40,048

 
$
37,957

 
$
73,087

 
$
72,818

 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Net income per share basic attributable to Bio-Rad
$
1.43

 
$
1.37

 
$
2.61

 
$
2.64

Weighted average common shares - basic
28,014

 
27,606

 
27,959

 
27,575

 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
Net income per share diluted attributable to Bio-Rad
$
1.41

 
$
1.35

 
$
2.57

 
$
2.59

Weighted average common shares - diluted
28,495

 
28,125

 
28,443

 
28,097


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


3


BIO-RAD LABORATORIES, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
 
June 30,
2011
 
December 31, 2010
ASSETS:
 (Unaudited)
 
 
Cash and cash equivalents
$
670,301

 
$
906,551

Restricted cash
—

 
6,422

Short-term investments
215,947

 
118,636

Accounts receivable, net
394,913

 
387,996

Inventories:
 
 
 
Raw materials
99,238

 
82,270

Work in process
127,484

 
110,527

Finished goods
222,615

 
205,303

Total inventories
449,337

 
398,100

Prepaid expenses, taxes and other current assets
159,158

 
157,641

Total current assets
1,889,656

 
1,975,346

Property, plant and equipment, at cost
875,133

 
812,133

Less: accumulated depreciation and amortization
(526,694
)
 
(478,516
)
Property, plant and equipment, net
348,439

 
333,617

Goodwill, net
393,125

 
363,981

Purchased intangibles, net
201,425

 
203,881

Other assets
211,600

 
185,939

Total assets
$
3,044,245

 
$
3,062,764

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
 
 
 
Accounts payable
$
120,514

 
$
113,440

Accrued payroll and employee benefits
122,254

 
131,381

Notes payable and current maturities of long-term debt
1,363

 
233,181

Income and other taxes payable
49,373

 
50,935

Accrued royalties
26,387

 
23,944

Other current liabilities
122,953

 
113,746

Total current liabilities
442,844

 
666,627

Long-term debt, net of current maturities
731,331

 
731,100

Other long-term liabilities
144,155

 
124,518

Total liabilities
1,318,330

 
1,522,245

 
 
 
 
Stockholders’ equity:
 
 
 
Bio-Rad stockholders’ equity:
 
 
 
Class A common stock, issued and outstanding - 22,903,470 at 2011 and 22,677,300 at 2010
2

 
2

Class B common stock, issued and outstanding - 5,158,257 at 2011 and 5,175,343 at 2010
1

 
1

Additional paid-in capital
174,492

 
156,986

Retained earnings
1,254,774

 
1,181,687

Accumulated other comprehensive income
296,565

 
198,020

Total Bio-Rad stockholders’ equity
1,725,834

 
1,536,696

Noncontrolling interests
81

 
3,823

Total stockholders’ equity
1,725,915

 
1,540,519

Total liabilities and stockholders’ equity
$
3,044,245

 
$
3,062,764

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

4


BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Six Months Ended
 
June 30,
 
2011
 
2010
Cash flows from operating activities:
 
 
 
Cash received from customers
$
1,020,282

 
$
891,658

Cash paid to suppliers and employees
(842,830
)
 
(779,464
)
Interest paid
(33,296
)
 
(27,861
)
Income tax payments
(18,709
)
 
(28,169
)
Investment proceeds and miscellaneous receipts, net
6,405

 
3,023

Excess tax benefits from share-based compensation
(1,771
)
 
(532
)
Net cash provided by operating activities
130,081

 
58,655

Cash flows from investing activities:
 
 
 
Capital expenditures
(42,557
)
 
(35,874
)
Proceeds from sale of property, plant and equipment
114

 
319

Payments for acquisitions, net of cash received, and long-term investments
(5,228
)
 
(67,345
)
Payments on purchases of intangible assets
(143
)
 
(2,031
)
Purchases of marketable securities and investments
(237,984
)
 
(109,456
)
Sales of marketable securities and investments
43,327

 
1,149

Maturities of marketable securities and investments
94,925

 
96,940

(Payments for) proceeds from foreign currency economic hedges, net
(10,530
)
 
13,149

Net cash used in investing activities
(158,076
)
 
(103,149
)
Cash flows from financing activities:
 
 
 
Net borrowings (payments) on line-of-credit arrangements and notes payable
498

 
(449
)
Long-term borrowings
—

 
2,000

Payments on long-term borrowings
(226,368
)
 
(2,940
)
Proceeds from issuance of common stock
10,458

 
5,623

Debt issuance costs on long-term borrowings
(242
)
 
(575
)
Excess tax benefits from share-based compensation
1,771

 
532

Net cash (used in) provided by financing activities
(213,883
)
 
4,191

Effect of foreign exchange rate changes on cash
5,628

 
4,588

Net decrease in cash and cash equivalents
(236,250
)
 
(35,715
)
Cash and cash equivalents at beginning of period
906,551

 
649,938

Cash and cash equivalents at end of period
$
670,301

 
$
614,223

Reconciliation of net income including noncontrolling interests to net cash provided by operating activities:
 
 
 
Net income including noncontrolling interests
$
72,960

 
$
73,913

Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities excluding the effects of acquisitions:
 
 
 
Depreciation and amortization
57,743

 
53,633

Share-based compensation
5,304

 
4,824

Foreign currency economic hedges, net
10,530

 
(13,149
)
Excess tax benefits from share-based compensation
(1,771
)
 
(532
)
Decrease (increase) in accounts receivable
12,665

 
(9,710
)
Increase in inventories
(29,785
)
 
(12,970
)
Increase in other current assets
(11,962
)
 
(16,608
)
Decrease in accounts payable and other current liabilities
(9,344
)
 
(23,295
)
Increase in income taxes payable
11,078

 
9,555

Other
12,663

 
(7,006
)
Net cash provided by operating activities
$
130,081

 
$
58,655

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


5


BIO-RAD LABORATORIES, INC

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION AND USE OF ESTIMATES

Basis of Presentation

In this report, “Bio-Rad,” “we,” “us,” "the Company" and “our” refer to Bio-Rad Laboratories, Inc. and its subsidiaries.  The accompanying unaudited condensed consolidated financial statements of Bio-Rad have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) 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 balance sheet at December 31, 2010 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. The condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2010 .

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

Use of Estimates

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period.   Bio-Rad bases its estimates on historical experience and on various other market-specific and other relevant 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. Actual results could differ materially from those estimates.

Restricted Cash

Restricted cash of 6 million Swiss Francs , or approximately $6.4 million at December 31, 2010 , represented a deposit in an escrow account for the final lump sum payment under a building finance lease. That amount was paid in June 2011. There was no restricted cash balance as of June 30, 2011.

Recent Accounting Standards Updates

In May 2011, the Financial Accounting Standards Board (FASB) issued guidance in regard to fair value measurement. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between GAAP and International Financial Reporting Standards (IFRS). This guidance is effective for interim and annual periods beginning after December 15, 2011. We do not anticipate that the adoption of this guidance will have a material impact on our condensed consolidated financial statements.

In June 2011, the FASB issued guidance in regard to the presentation of comprehensive income. In the new

6


guidance an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other
comprehensive income, and a total amount for comprehensive income. The current option to report other comprehensive income and its components in the statement of changes in equity has been eliminated. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Bio-Rad is currently evaluating the alternative presentations, however the adoption of this guidance will not have a material impact on our condensed consolidated financial statements as it is for disclosure purposes only.

2. FAIR VALUE MEASUREMENTS

We determine the fair value of an asset or liability based on the assumptions that market participants would use in pricing the asset or liability.  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 on a recurring basis as of June 30, 2011 are classified in the hierarchy as follows (in millions):

 
Level 1
 
Level 2
 
Total
Financial Assets Carried at Fair Value:
 
 
 
 
 
Cash equivalents (a):
 
 
 
 
 
Commercial paper
$
—

 
$
107.7

 
$
107.7

Bonds
—

 
4.8

 
4.8

Foreign government obligations
—

 
10.0

 
10.0

Time deposits
31.5

 
5.0

 
36.5

Money market funds
129.2

 
—

 
129.2

Total cash equivalents
160.7

 
127.5

 
288.2

Available-for-sale investments (b):
 
 
 
 
 
Corporate debt securities
—

 
173.2

 
173.2

Brokered certificates of deposit
—

 
11.8

 
11.8

U.S. government sponsored agencies
—

 
14.3

 
14.3

Foreign government obligations
—

 
2.1

 
2.1

Municipal obligations
—

 
5.1

 
5.1

Marketable equity securities
130.8

 
—

 
130.8

Asset-backed securities
—

 
1.9

 
1.9

Total available-for-sale investments
130.8

 
208.4

 
339.2

Forward foreign exchange contracts (c)
—

 
0.7

 
0.7

Total financial assets carried at fair value
$
291.5

 
$
336.6

 
$
628.1

 
 
 
 
 
 
Financial Liabilities Carried at Fair Value:
 
 
 
 
 
Forward foreign exchange contracts (d)
$
—

 
$
6.7

 
$
6.7



7




Financial assets and liabilities carried at fair value on a recurring basis as of December 31, 2010 are classified in the hierarchy as follows (in millions):

 
Level 1
 
Level 2
 
Total
Financial Assets Carried at Fair Value:
 
 
 
 
 
Cash equivalents (a):
 
 
 
 
 
Commercial paper
$
—

 
$
179.6

 
$
179.6

Time deposits
16.7

 
25.0

 
41.7

Money market funds
266.3

 
—

 
266.3

Total cash equivalents
283.0

 
204.6

 
487.6

Available-for-sale investments (b):
 
 
 
 
 
Corporate debt securities
—

 
39.8

 
39.8

U.S. government sponsored agencies
—

 
54.7

 
54.7

Foreign government obligations
—

 
4.5

 
4.5

Municipal obligations
—

 
7.7

 
7.7

Marketable equity securities
102.2

 
—

 
102.2

Asset-backed securities:
 
 
 
 
 
Collateralized mortgage obligations
—

 
0.1

 
0.1

Other mortgage-backed securities
—

 
2.5

 
2.5

Other
—

 
0.3

 
0.3

Total available-for-sale investments
102.2

 
109.6

 
211.8

Forward foreign exchange contracts (c)
—

 
0.5

 
0.5

Total financial assets carried at fair value
$
385.2

 
$
314.7

 
$
699.9

 
 
 
 
 
 
Financial Liabilities Carried at Fair Value:
 
 
 
 
 
Forward foreign exchange contracts (d)
$
—

 
$
3.3

 
$
3.3


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

(b)
Available-for-sale investments (in millions):

 
June 30,
2011
 
December 31, 2010
 
 
 
 
Short-term investments
$
215.9

 
$
118.6

Other assets
123.3

 
93.2

Total
$
339.2

 
$
211.8


(c)
Forward foreign exchange contracts in an asset position are included in Prepaid expenses, taxes and other current assets in the Condensed Consolidated Balance Sheets.

(d)
Forward foreign exchange contracts in a liability position are included in Other current liabilities in the Condensed Consolidated Balance Sheets.

As of June 30, 2011 and December 31, 2010 , we did not hold any financial assets or liabilities that use Level 3 inputs to determine fair value.

To estimate the fair value of Level 2 debt securities, excluding commercial paper and U.S. Treasury bills and notes, we examine quarterly the pricing provided by two pricing services and we obtain indicative market prices when there is insufficient correlation between the pricing services.  To estimate the fair value of Level 2 commercial

8


paper and U.S. Treasury bills and notes we examine quarterly the pricing from our primary pricing service to ensure consistency with other similar securities.  As a result of our analysis as of June 30, 2011 and December 31, 2010 , we utilized our primary pricing service for all Level 2 debt securities for consistency since the results did not require the use of alternative pricing.

In addition, we review for investment securities that may trade in illiquid or inactive markets by identifying instances of a significant decrease in the volume and frequency of trades, relative to historical levels, as well as instances of a significant widening of the bid-ask spread in the brokered markets.  As of June 30, 2011 and December 31, 2010 , we did not have any investment securities in illiquid or inactive markets.

As of June 30, 2011 , our primary pricing service inputs for Level 2 cash equivalents (corporate bonds), U.S. government sponsored agencies, municipal obligations, corporate debt securities (bonds) and asset-backed securities consisted of market prices from a variety of industry standard data providers, security master files from large financial institutions and other third-party sources.  These multiple market prices were used by our primary pricing service as inputs into a distribution–curve based algorithm to determine the daily market value.

As of June 30, 2011 , our primary pricing service inputs for Level 2 cash equivalents (time deposits, commercial paper and foreign government obligations), corporate debt securities (commercial paper) and time deposits consisted of dynamic and static security characteristics information obtained from several independent security characteristic sources.  The dynamic inputs such as credit rating, factor and variable-rate are updated daily.  The static characteristics include inputs such as day count and first coupon upon initial security creation. These securities were typically priced via mathematical calculations reliant on these observable inputs. Available-for-sale foreign government obligations are based on indicative bids from market participants.

As of December 31, 2010 the inputs used by our primary pricing service for Level 2 cash equivalents, corporate debt securities, foreign government obligations, U.S. government sponsored agencies and municipal obligations, varied depending on the type of security being valued, but generally included benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, corporate actions or Nationally Recognized Municipal Securities Information Repository (NRMSIR) material event notices, plus new issue money market rates.

As of December 31, 2010 the inputs used by our primary pricing service in estimating the fair value of Level 2 collateralized mortgage obligations and other mortgage-backed securities included many of the inputs mentioned above in addition to monthly payment information.  These issues were priced by our primary pricing service against issues with similar vintage and credit quality with adjustments for tranche, average life and extension risk.

Forward foreign exchange contracts : As part of distributing our products, we regularly enter into intercompany transactions.  We enter into forward foreign currency exchange contracts to manage foreign exchange risk of future movements in foreign exchange rates that affect foreign currency denominated intercompany receivables and payables.  We do not use derivative financial instruments for speculative or trading purposes.  We do not seek hedge accounting treatment for these contracts.  As a result, these contracts, generally with maturity dates of 90 days or less and related primarily to currencies of industrial countries, are recorded at their fair value at each balance sheet date.  The fair value of these contracts was derived using the spot rates published in the Wall Street Journal on the last business day of the quarter and the points provided by counterparties.  The resulting gains or losses offset exchange gains or losses on the related receivables and payables, both of which are recorded as Foreign exchange losses (gains), net in the Condensed Consolidated Statements of Income. The cash flows related to these contracts are classified as Cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows.  

9


 
June 30,
 
2011
 
(in millions)
Contracts maturing in July through September 2011 to sell foreign currency:
 
Notional value
$
64.2

Unrealized loss
$
0.2

Contracts maturing in July through September 2011 to purchase foreign currency:
 
Notional value
$
455.3

Unrealized loss
$
5.8


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

 
June 30, 2011
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair
Value
Short-term investments:
 
 
 
 
 
 
 
Corporate debt securities
$
173.3

 
$
—

 
$
(0.1
)
 
$
173.2

Brokered certificates of deposit
11.8

 
—

 
—

 
11.8

Municipal obligations
5.1

 
—

 
—

 
5.1

Asset-backed securities
1.4

 
0.1

 
—

 
1.5

U.S. government sponsored agencies
14.3

 
—

 
—

 
14.3

Foreign government obligations
0.6

 
—

 
—

 
0.6

Marketable equity securities
7.9

 
1.5

 
—

 
9.4

 
214.4

 
1.6

 
(0.1
)
 
215.9

Long-term investments:
 
 
 
 
 
 
 
Marketable equity securities
51.0

 
71.0

 
(0.6
)
 
121.4

Asset-backed securities
0.5

 
—

 
(0.1
)
 
0.4

Foreign government obligations
1.5

 
—

 
—

 
1.5

 
53.0

 
71.0

 
(0.7
)
 
123.3

Total
$
267.4

 
$
72.6

 
$
(0.8
)
 
$
339.2



10


 
December 31, 2010
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair
Value
 
 
 
 
 
 
 
 
Short-term investments:
 
 
 
 
 
 
 
Corporate debt securities
$
39.8

 
$
—

 
$
—

 
$
39.8

Municipal obligations
7.7

 
—

 
—

 
7.7

Asset-backed securities
1.9

 
—

 
—

 
1.9

U.S. government sponsored agencies
54.7

 
—

 
—

 
54.7

Foreign government obligations
4.5

 
—

 
—

 
4.5

Marketable equity securities
8.8

 
1.3

 
(0.1
)
 
10.0

 
117.4

 
1.3

 
(0.1
)
 
118.6

Long-term investments:
 
 
 
 
 
 
 
Marketable equity securities
45.5

 
47.9

 
(0.9
)
 
92.5

Asset-backed securities
0.7

 
0.1

 
(0.1
)
 
0.7

 
46.2

 
48.0

 
(1.0
)
 
93.2

Total
$
163.6

 
$
49.3

 
$
(1.1
)
 
$
211.8


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

 
June 30,
2011
 
December 31, 2010
 
 
 
 
Fair value
$
76.1

 
$
4.5

Gross unrealized losses for investments in a loss position 12 months or more
$
0.4

 
$
0.6

Gross unrealized losses for investments in a loss position less than 12 months
$
0.4

 
$
0.5


The unrealized losses on these securities are due to a number of factors, including changes in interest rates, changes in economic conditions and changes in market outlook for various industries, among others.  Because Bio-Rad has the ability and intent to hold these investments with unrealized losses until a recovery of fair value, or for a reasonable period of time sufficient for a forecasted recovery of fair value, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at June 30, 2011 .

The following is a summary of the amortized cost and estimated fair value of our debt securities at June 30, 2011 by contractual maturity date (in millions):

 
Amortized
Cost
 
Fair
Value
 
 
 
 
Mature in less than one year
$
176.4

 
$
176.3

Mature in one to five years
30.2

 
30.2

Mature in more than five years
1.9

 
1.9

Total
$
208.5

 
$
208.4



11


The estimated fair value of financial instruments in the table below has been determined using available market information or other appropriate valuation methodologies.  Estimates are not necessarily indicative of the amounts that could be realized in a current market exchange as considerable judgment is required in interpreting market data used to develop estimates of fair value.  The use of different market assumptions or estimation techniques could have a material effect on the estimated fair value.  Other assets include some financial instruments that have fair values based on market quotations.  Long-term debt has an estimated fair value based on quoted market prices for the same or similar issues.

The estimated fair value of our financial instruments is as follows (in millions):

 
June 30, 2011
 
December 31, 2010
 
Carrying 
Amount 
 
Estimated 
Fair 
Value 
 
Carrying 
Amount 
 
Estimated 
Fair 
Value 
 
 
 
 
 
 
 
 
Other assets
$
178.2

 
$
261.6

 
$
145.6

 
$
205.6

Current maturities of long-term debt,
excluding leases
$
—

 
$
—

 
$
225.0

 
$
228.1

Total long-term debt, excluding leases
and current maturities
$
718.7

 
$
754.3

 
$
718.2

 
$
734.8


We own shares of ordinary voting stock of Sartorius AG, of Goettingen, Germany, a process technology supplier to the biotechnology, pharmaceutical, chemical and food and beverage industries.  We own over 30% of the outstanding voting shares (excluding treasury shares) of Sartorius as of June 30, 2011 .  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.  Therefore, we account for this investment using the cost method.  The carrying value of this investment is included in Other assets in our Condensed Consolidated Balance Sheets.

3. GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS

Changes to goodwill by segment were as follows (in millions):
 
Life
Science
 
Clinical
Diagnostics
 
Total
Balances as of January 1, 2011:
 
 
 
 
 
Goodwill
$
70.7

 
$
320.5

 
$
391.2

Accumulated impairment losses
(27.2
)
 
—

 
(27.2
)
Goodwill, net
43.5

 
320.5

 
364.0

 
 
 
 
 
 
Currency fluctuations
—

 
29.1

 
29.1

 
 
 
 
 
 
Balances as of June 30, 2011:
 
 
 
 
 
Goodwill
70.7

 
349.6

 
420.3

Accumulated impairment losses
(27.2
)
 
—

 
(27.2
)
Goodwill, net
$
43.5

 
$
349.6

 
$
393.1



12


Other than goodwill, we have no intangible assets with indefinite lives.  Information regarding our identifiable purchased intangible assets with definite lives is as follows (in millions):
 
June 30, 2011
 
Average
Remaining
Life (years)
 
Purchase
Price
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer relationships/lists
1-13
 
$
111.0

 
$
(31.4
)
 
$
79.6

Know how
6
 
103.0

 
(42.4
)
 
60.6

Developed product technology
1-11
 
51.1

 
(23.4
)
 
27.7

Licenses
1-9
 
35.5

 
(14.0
)
 
21.5

Tradenames
1-11
 
32.2

 
(20.9
)
 
11.3

Covenants not to compete
1-8
 
6.0

 
(5.3
)
 
0.7

Patents
—
 
1.0

 
(1.0
)
 
—

Other
—
 
0.1

 
(0.1
)
 
—

 
 
 
$
339.9

 
$
(138.5
)
 
$
201.4


 
December 31, 2010
 
Average
Remaining
Life (years)
 
Purchase
Price
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer relationships/lists
1-13
 
$
102.3

 
$
(24.8
)
 
$
77.5

Know how
1-6
 
92.6

 
(33.0
)
 
59.6

Developed product technology
1-11
 
47.9

 
(19.2
)
 
28.7

Licenses
1-10
 
35.4

 
(12.2
)
 
23.2

Tradenames
2-12
 
29.5

 
(15.9
)
 
13.6

Covenants not to compete
1-8
 
5.9

 
(4.6
)
 
1.3

Patents
—
 
1.0

 
(1.0
)
 
—

Other
1
 
0.1

 
(0.1
)
 
—

 
 
 
$
314.7

 
$
(110.8
)
 
$
203.9


Amortization expense related to purchased intangible assets is as follows (in millions):

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
Amortization expense
$
9.3

 
$
8.1

 
$
18.1

 
$
16.8


4. PRODUCT WARRANTY LIABILITY

We warrant certain equipment against defects in design, materials and workmanship, generally for a period of one year.  Upon delivery of that equipment, we establish, as part of Cost of goods sold, a provision for the expected costs of such warranty based on historical experience, specific warranty terms and customer feedback.  A review is performed on a quarterly basis to assess the adequacy of our warranty accrual.

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


13


 
 
 
 
December 31, 2010
$
18.3

Provision for warranty
9.7

Actual warranty costs
(10.0
)
June 30, 2011
$
18.0


5. LONG-TERM DEBT

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

 
June 30,
2011
 
December 31, 2010
 
 
 
 
7.5% Senior Subordinated Notes due 2013
$
—

 
$
225.0

8.0% Senior Subordinated Notes due 2016
296.0

 
295.6

4.875% Senior Notes due 2020
422.7

 
422.6

Capital leases and other debt
13.3

 
21.0

 
732.0

 
964.2

Less current maturities
(0.7
)
 
(233.1
)
Long-term debt
$
731.3

 
$
731.1


Senior Notes due 2020

In December 2010, Bio-Rad sold $425.0 million principal amount of Senior Notes due 2020.  The net proceeds from the issuance of the Senior Notes were used, together with cash on hand, to redeem all $200 million of our Senior Subordinated Notes due 2014 in December 2010 and all $225 million of our Senior Subordinated Notes due 2013 (as defined below) in January 2011.

Senior Subordinated Notes due 2013

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

Amended and Restated Credit Agreement (Credit Agreement)

In June 2010, Bio-Rad entered into a $200.0 million Credit Agreement. Borrowings under the Credit Agreement are on a revolving basis and can be used for acquisitions, for working capital and for other general corporate purposes. We had no outstanding borrowings under the Credit Agreement as of June 30, 2011 .  The Credit Agreement expires on June 21, 2014 .

The Credit Agreement is secured by substantially all of our personal property assets, the assets of our domestic subsidiaries and 65% of the capital stock of certain of our foreign subsidiaries.  It is guaranteed by all of our existing and future material domestic subsidiaries.  The Credit Agreement and the Senior Subordinated Notes due 2016 require Bio-Rad to comply with certain financial ratios and covenants, among other things.  These ratios and covenants include a leverage ratio test and an interest coverage test, as well as restrictions on our ability to declare or pay dividends, incur debt, guarantee debt, enter into transactions with affiliates, merge or consolidate, sell assets, make investments, create liens and prepay subordinated debt.  We were in compliance with all of these ratios and covenants as of June 30, 2011 .

14



6. NONCONTROLLING INTERESTS

Activity in noncontrolling interests is as follows (in millions):

January 1, 2011
$
3.8

Net loss attributable to noncontrolling interests
(0.1
)
Purchase of noncontrolling interests
(3.4
)
Currency fluctuations
(0.2
)
June 30, 2011
$
0.1


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

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


7. 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 are as follows (in thousands):

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
28,014

 
27,606

 
27,959

 
27,575

Effect of potentially dilutive stock options and restricted stock awards
481

 
519

 
484

 
522

Diluted weighted average common shares
28,495

 
28,125

 
28,443

 
28,097

Anti-dilutive shares
—

 
96

 
37

 
96


8. OTHER INCOME AND EXPENSE

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


15


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
Interest and investment income
$
(4.9
)
 
$
(2.8
)
 
$
(5.6
)
 
$
(3.6
)
Net realized losses (gains) on investments
0.1

 
—

 
(0.2
)
 
(0.3
)
Miscellaneous other (income) expense items
0.4

 
0.3

 
0.4

 
0.6

Other (income) expense, net
$
(4.4
)
 
$
(2.5
)
 
$
(5.4
)
 
$
(3.3
)



9. INCOME TAXES

Our effective tax rate was 31% and 30% for the three and six month periods ended June 30, 2011 and 2010 , respectively.  The effective tax rates for all periods presented were lower than the U.S. statutory rate due to tax benefits for nontaxable dividend income, research and development tax credits, and differences between U.S. and foreign statutory tax rates. The effective tax rate for the three months ended June 30, 2011 was higher than the rate for the same periods in 2010 primarily due to changes in estimates pertaining to differences between U.S. and foreign statutory tax rates. The effective tax rate for the six months ended June 30, 2011 was higher than the rate for the same period in 2010 primarily due to changes in estimates pertaining to foreign tax credits related to distributions from non U.S. subsidiaries as well as differences between U.S. and foreign statutory tax rates.

As of June 30, 2011, based on the expected outcome of certain examinations or as a result of the expiration of statute of limitations for certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $5 million to $9 million . Substantially all such amounts will impact our effective income tax rate.

We record liabilities related to uncertain tax positions. We do not believe any currently pending uncertain tax positions will have a material adverse effect on our Condensed 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.


10. COMPREHENSIVE INCOME (LOSS)

The components of our total comprehensive income (loss) are as follows (in millions):


16


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
Net income including noncontrolling interests
$
40.0

 
$
38.5

 
$
73.0

 
$
73.9

Foreign currency translation adjustments
63.3

 
(35.5
)
 
84.1

 
(56.3
)
Net unrealized holding gains (losses) on available-for-sale investments, net of tax expense of $2.0 million and tax benefit of $4.1 million for the three months ended June 30, 2011 and 2010, respectively, and tax expense of $8.2 million and tax benefit of $2.0 million for the six months ended June 30, 2011 and 2010, respectively.
3.5

 
(7.0
)
 
14.1

 
(3.4
)
Reclassification adjustments for gains included in net income including noncontrolling interests, net of tax expense of $0.1 million for the six months ended June 30, 2011 and 2010. There was no tax effect for the three months ended June 30, 2011 or 2010.
—

 
—

 
0.1

 
0.2

Total comprehensive income (loss)
106.8

 
(4.0
)
 
171.3

 
14.4

Comprehensive loss attributable to noncontrolling interests
0.2

 
1.1

 
0.3

 
0.7

Comprehensive income (loss) attributable to Bio-Rad
$
107.0

 
$
(2.9
)
 
$
171.6

 
$
15.1


Reclassification adjustments are calculated using the specific identification method.

11. SEGMENT INFORMATION

Information regarding industry segments for the three months ended June 30, 2011 and 2010 is as follows (in millions):

 
 
Life
Science
 
Clinical
Diagnostics
 
Other
Operations
 
 
 
 
 
 
 
Segment net sales 
2011
$
169.9

 
$
348.0

 
$
3.7

 
2010
$
150.7

 
$
314.1

 
$
2.9

 
 
 
 
 
 
 
Segment profit
2011
$
10.0

 
$
46.6

 
$
0.5

 
2010
$
7.7

 
$
46.8

 
$
0.2


Information regarding industry segments for the six months ended June 30, 2011 and 2010 is as follows (in millions):

 
 
Life
Science
 
Clinical
Diagnostics
 
Other
Operations
 
 
 
 
 
 
 
Segment net sales 
2011
$
324.4

 
$
675.2

 
$
7.2

 
2010
$
302.0

 
$
613.9

 
$
6.0

 
 
 
 
 
 
 
Segment profit
2011
$
13.1

 
$
94.6

 
$
0.7

 
2010
$
19.1

 
$
85.1

 
$
0.1



17



Segment results are presented in the same manner as we present our operations internally to make operating decisions and assess performance.  Net corporate operating expense consists of receipts and expenditures that are not the primary responsibility of segment operating management.  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
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
Total segment profit
$
57.1

 
$
54.7

 
$
108.4

 
$
104.3

Foreign exchange losses, net
(2.7
)
 
(1.0
)
 
(5.8
)
 
(0.8
)
Net corporate operating, interest and other expense not allocated to segments
(1.0
)
 
(0.8
)
 
(1.9
)
 
(1.6
)
Other income (expense), net
4.4

 
2.5

 
5.4

 
3.3

Consolidated income before taxes
$
57.8

 
$
55.4

 
$
106.1

 
$
105.2


12. LEGAL PROCEEDINGS

Based on an internal review, we have identified conduct in certain of our overseas operations that may have violated the anti-bribery provisions of the United States Foreign Corrupt Practices Act (FCPA) and is likely to have violated the FCPA’s books and records and internal controls provisions and our own internal policies.  In May 2010, we voluntarily disclosed these matters to the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), each of which commenced an investigation.  The Audit Committee of our Board of Directors (Audit Committee) has assumed direct responsibility for reviewing these matters and has hired experienced independent counsel to conduct an investigation and provide legal advice.  We have provided, and intend to continue to provide, additional information to the DOJ and the SEC as the Audit Committee’s investigation progresses.

The Audit Committee’s investigation and the DOJ and SEC investigations are continuing and we are presently unable to predict the duration, scope or results of the Audit Committee’s investigation, of any investigations by the DOJ or the SEC or whether either agency will commence any legal actions.  The DOJ and the SEC have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations including, but not limited to, injunctive relief, disgorgement, fines, penalties, modifications to business practices including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee compliance with the FCPA.  We are unable to estimate the outcome of this matter.  However, the imposition of any of these sanctions or remedial measures could have a material adverse effect on our business or financial condition.  We have not to date determined whether any of the activities in question violated the laws of the foreign jurisdictions in which they took place.

On April 13, 2011, a shareholder derivative lawsuit was filed against each of our directors in the Superior Court for Contra Costa County, California.  The case, which also names the Company as a nominal defendant, is captioned City of Riviera Beach General Employees’ Retirement System v. David Schwartz, et al., Case No. MSC11-00854.  In the complaint, the plaintiff alleges that our directors breached their fiduciary duties by failing to ensure that we had sufficient internal controls and systems for compliance with the FCPA.  Purportedly seeking relief on our behalf, the plaintiff seeks an award of unspecified compensatory and punitive damages, costs and expenses (including attorneys’ fees), and a declaration that our directors have breached their fiduciary duties. We and the individual defendants have filed a demurrer requesting dismissal of the complaint in this case, as well as a motion to dismiss the complaint and a motion to stay this matter pending resolution of the above-referenced investigations by the DOJ and SEC.

In addition, we are party to various other claims, legal actions and complaints arising in the ordinary course of business.  We do not believe, at this time, that any ultimate liability resulting from any of these other matters will

18


have a material adverse effect on our results of operations, financial position or liquidity.  However, we cannot give any assurance regarding the ultimate outcome of these other matters and their resolution could be material to our operating results for any particular period, depending on the level of income for the period.

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

This discussion should be read in conjunction with the information contained in both our Consolidated Financial Statements for the year ended December 31, 2010 and this report for the three and six months ended June 30, 2011 .

Other than statements of historical fact, statements made in this report include forward looking statements, such as statements with respect to our future financial performance, operating results, plans and objectives that involve risk and uncertainties.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as, “believe,” “expect,” “may,” “will,” “intend,” “estimate,” “continue,” or similar expressions or the negative of those terms or expressions.  Such statements involve risks and uncertainties, which could cause actual results to vary materially from those expressed in or indicated by the forward-looking statements.  We have based these forward looking statements on our current expectations and projections about future events.  However, actual results may differ materially from those currently anticipated depending on a variety of risk factors including among other things: changes in general domestic and worldwide economic conditions; our ability to successfully develop and market new products; our reliance on and access to necessary intellectual property; our ability to successfully integrate any acquired business; our substantial leverage and ability to service our debt; competition in and government regulation of the industries in which we operate; and the monetary policies of various countries. We caution you not to place undue reliance on forward-looking statements, which reflect an analysis only and speak only as of the date hereof.  We undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events, or otherwise except as required by Federal Securities law.

Overview .  We are a multinational manufacturer and worldwide distributor of our own life science research and clinical diagnostics products.  Our business is organized into two primary segments, Life Science and Clinical Diagnostics, with the mission to provide scientists with specialized tools needed for biological research and clinical diagnostics.  We sell more than 8,000 products and services to a diverse client base comprised of scientific research, healthcare, education and government customers worldwide. We 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.  Approximately 31% of our year-to-date 2011 consolidated net sales are from the United States and approximately 69% are from international locations.  The international sales are largely denominated in local currencies such as Euros, Swiss Franc, Japanese Yen and British Sterling.  As a result, our consolidated net sales expressed in dollars benefit when the U.S. dollar weakens and suffer when the 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.

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

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
2010
 
Net sales
100.0
%
 
100.0
%
 
100.0
%
100.0
%
 
Cost of goods sold
43.8

 
42.6

 
43.3

43.0

 
Gross profit
56.2

 
57.4

 
56.7

57.0

 
Selling, general and administrative expense
33.9

 
33.4

 
34.2

33.6

 
Research and development expense
9.2

 
9.4

 
9.0

9.1

 
Net income attributable to Bio-Rad
7.7

 
8.1

 
7.3

7.9

 


19


Critical Accounting Policies and Estimates

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010 , we have identified accounting for income taxes, valuation of goodwill and long-lived assets, valuation of inventories, warranty reserves, valuation of investments, allowance for doubtful accounts and litigation accruals as the accounting policies and estimates critical to the operations of Bio-Rad.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements.  Management believes that there have been no significant changes during the six months ended June 30, 2011 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 .  For a full discussion of these policies and estimates, please refer to our Form 10-K for the period ended December 31, 2010 .

Three Months Ended June 30, 2011 Compared to
Three Months Ended June 30, 2010

Corporate Results -- Sales, Margins and Expenses

Net sales (sales) in the second quarter of 2011 increased to $521.7 million from $467.7 million in the second quarter of 2010 , a sales increase of 11.5% .  Excluding the impact of foreign currency, second quarter 2011 sales increased by approximately 4.2% compared to the same period in 2010 .  Currency neutral sales growth was reflected in all regions except for Europe.

The Life Science segment sales for the second quarter of 2011 were $169.9 million , an increase of 12.8% compared to the same period last year.  On a currency neutral basis, sales increased 6.7% compared to the second quarter in 2010. The electrophoresis and imaging product lines contributed to the sales growth supported by several recent product launches, including the Trans-Blot Turbo transfer system and the Gel Doc EZ imaging platform. Process chromatography media products also contributed to sales growth. Currency neutral sales growth in the Life Science segment was primarily in North America, eastern Europe and Asia, while Latin America sales have declined slightly. In many developed countries, constraints in government budgets has limited sales growth opportunities.

The Clinical Diagnostics segment reported sales for the second quarter of 2011 were $348.0 million , an increase of 10.8% compared to the same period last year.  On a currency neutral basis, sales increased 2.8% compared to the second quarter in 2010 .  Clinical Diagnostics product lines generating growth were diabetes, quality controls, Bio-Plex and clinical microbiology.  Sales growth was primarily in Asia, the U.S. and Latin America.

Consolidated gross margins were 56.2% for the second quarter of 2011 compared to 57.4% for the second quarter of 2010 .  Life Science segment gross margins for the second quarter of 2011 decreased from the same period last year by approximately 1.1% .  The decrease was primarily due to recording an estimated liability related to a patent infringement dispute.  Clinical Diagnostics segment gross margins for the second quarter of 2011 decreased by approximately 1.2% from the same period last year.  The decrease was primarily due to the favorable settlement of intellectual property disputes in the second quarter of 2010, which increased the gross margin in that quarter.

Selling, general and administrative expenses (SG&A) represented 33.9% of sales for the second quarter of 2011 compared to 33.4% of sales for the second quarter of 2010 .  Growth in the rate of SG&A spending was greater than the rate of sales growth.  Increases in the spending rate were affected by currency translation and primarily driven by employee-related costs, our largest cost and professional services partially due to the ERP platform, bad debt expense that was primarily associated with southern European receivables, facilities and travel.  

Research and development expense increased to $48.2 million or 9.2% of sales in the second quarter of 2011 compared to $43.9 million or 9.4% of sales in the second quarter of 2010 .  Life Science segment research and

20


development expense increased in the second quarter of 2011 from the prior year quarter with efforts concentrated on genomics, proteomics and process chromatography applications.  Clinical Diagnostics segment research and development expense increased in the second quarter of 2011 from the prior year period with efforts concentrated on blood virus, immunohematology and the development and cost reduction of instruments.

Corporate Results – Other Items

Interest expense for the second quarter of 2011 decreased by $2.3 million compared to the second quarter of 2010 primarily due to the refinancing of $425 million of debt in December 2010 through January 2011, lowering our borrowing rate. The interest rate or our current borrowings are fixed through 2016 at 8% and through 2020 at 4.875%.  

Foreign currency exchange gains and losses consist of foreign currency transaction gains and losses on intercompany net receivables and payables and the change in fair value of our forward foreign exchange contracts used to manage our foreign currency exchange risk.  Increased foreign currency exchange losses, net for the quarter ended June 30, 2011 was primarily attributable to market volatility, increasing costs to hedge, and the result of the estimating process inherent in the timing of shipments and payments of intercompany payables.

Other (income) expense, net for the second quarter of 2011 increased to $4.4 million compared to $2.5 million for the second quarter of 2010 .  The increase was primarily due to higher dividend income for holdings in Sartorius AG whose dividends almost doubled from the prior year period.

Our effective tax rate was 31% and 30% for the second quarter of 2011 and 2010 , respectively. The effective tax rates for both periods were lower than the U.S. statutory rate due to tax benefits for nontaxable dividend income, research and development tax credits, and differences between U.S. and foreign statutory tax rates.  The effective tax rate for the second quarter of 2011 was higher than the rate for the same period in 2010 primarily due to changes in estimates pertaining to differences between U.S. and foreign statutory tax rates.

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

Six Months Ended June 30, 2011 Compared to
Six Months Ended June 30, 2010

Corporate Results -- Sales, Margins and Expenses

Sales in the first half of 2011 increased to $1.0 billion from $921.9 million in the first half of 2010 , a sales increase of 9.2% .  Excluding the impact of foreign currency, the first half of 2011 sales increased by approximately 4.5% compared to the same period in 2010 .  Currency neutral sales growth was reflected in all regions, but primarily for Asia Pacific, Latin America and North America.

The Life Science segment sales for the first half of 2011 were $324.4 million , an increase of 7.4% compared to the same period last year.  On a currency neutral basis, sales increased 3.3% compared to the first half of 2010. Product groups showing growth included process chromatography media, imaging systems and electrophoresis. Currency neutral sales growth in the Life Science segment was primarily in North America, eastern Europe and Latin America, while in Europe and Japan sales have declined. In many developed countries, constraints in government budgets has limited sales growth opportunities.

The Clinical Diagnostics segment reported sales for the first half of 2011 were $675.2 million , an increase of 10.0% compared to the same period last year.  On a currency neutral basis, sales increased 5.0% compared to the first half of 2010 .  Clinical Diagnostics product lines generating growth were immunohematology, quality controls, Bio-Plex and clinical microbiology.  Sales growth was primarily in Asia, the U.S. and Latin America.


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Consolidated gross margins were 56.7% for the first half of 2011 compared to 57.0% for the first half of 2010 . Life Science segment gross margins for the first half of 2011 decreased from the same period last year by approximately 1.4% .  The decrease was primarily due to pricing pressures and lower manufacturing volumes not absorbing fixed costs.  Clinical Diagnostics segment gross margins for the first half of 2011 were relatively flat from the same period last year. The prior year period included a favorable settlement of intellectual property disputes in the second quarter of 2010, which increased the gross margin in that quarter.  

Selling, general and administrative expenses (SG&A) represented 34.2% of sales for the first half of 2011 compared to 33.6% of sales for the first half of 2010 .  Growth in the rate of SG&A spending was greater than the rate of sales growth.  Increases in the spending rate were primarily driven by professional services, facilities, travel, bad debt expense that was primarily associated with southern European receivables, and information technology.  Employee-related costs, our largest cost, rose at a rate less than sales growth. SG&A also included an increase in currency translation associated with the weaker dollar.

Research and development expense increased to $90.9 million or 9.0% of sales in the first half of 2011 compared to $84.1 million or 9.1% of sales in the first half of 2010 .  Life Science segment research and development expense increased in the first half of 2011 from the prior year period with efforts concentrated on genomics, proteomics and process chromatography applications.  Clinical Diagnostics segment research and development expense increased in the first half of 2011 from the prior year period with efforts concentrated on blood virus, immunohematology and the development and cost reduction of instruments.

Corporate Results – Other Items

Interest expense for the first half of 2011 was relatively flat compared to the first half of 2010 primarily due to the refinancing of our debt in December 2010 through January 2011 and should result in lower overall borrowing costs going forward provided no additional debt is incurred.  

Foreign currency exchange gains and losses consist of foreign currency transaction gains and losses on intercompany net receivables and payables and the change in fair value of our forward foreign exchange contracts used to manage our foreign currency exchange risk.  Increased foreign currency exchange losses, net for the first half of 2011 was primarily attributable to market volatility, increasing costs to hedge, and the result of the estimating process inherent in the timing of shipments and payments of intercompany payables.

Other (income) expense, net for the first half of 2011 increased to $5.4 million compared to $3.3 million for the first half of 2010 .  The increase was primarily due to higher dividend income for holdings in Sartorius AG whose dividends almost doubled from the prior year period.

Our effective tax rate was 31% and 30% for the first half of 2011 and 2010 , respectively. The effective tax rates for both periods were lower than the U.S. statutory rate due to tax benefits for nontaxable dividend income, research and development tax credits, and differences between U.S. and foreign statutory tax rates.  The effective tax rate for the first half of 2011 was higher than the rate for the same period in 2010 primarily due to changes in estimates pertaining to foreign tax credits related to distributions from non-U.S. subsidiaries and changes in estimates pertaining to differences between U.S. and foreign statutory tax rates.

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

Liquidity and Capital Resources

Bio-Rad operates and conducts business globally, primarily through subsidiary companies established in the markets in which we trade.  Goods are manufactured in a small number of locations, and are then shipped to local distribution facilities around the world.  Our product mix is diversified, and certain products compete largely on

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product efficacy, while others compete on price.  Gross margins are generally sufficient to exceed normal operating costs.  Funding for research and development of new products as well as routine outflows of capital expenditure, interest and tax expense are provided by cash flow from operations.  In addition to the annual positive cash flow from operating activities, additional liquidity is readily available via the sale of short-term investments and access to our $200.0 million Amended and Restated Credit Agreement (Credit Agreement) that we entered into in June 2010.  Borrowings under the Credit Agreement are on a revolving basis and can be used to make acquisitions, for working capital and for other general corporate purposes.  We had no outstanding borrowings under the Credit Agreement as of June 30, 2011 .  The Credit Agreement expires on June 21, 2014.

At June 30, 2011 , we had available $886.2 million in cash, cash equivalents and short-term investments.  Under domestic and international lines of credit, we had $226.0 million available for borrowing as of June 30, 2011 , of which $14.4 million is reserved for standby letters of credit issued by our banks to guarantee our obligations to various companies.  Management believes that this availability together with cash flow from operations, will be adequate to meet our current objectives for operations, research and development, capital additions for manufacturing and distribution, plant and equipment, information technology systems and an acquisition of reasonable proportion to our existing total available capital.

Cash Flows from Operations

Net cash provided by operations was $130.1 million and $58.7 million for the six months ended June 30, 2011 and 2010 , respectively.  The increase primarily represented higher cash received from customers from large fourth quarter 2010 sales.  During the second quarter of 2010, Bio-Rad made a large payment covering royalties for multiple years. We continue to focus on cash flow improvements as a global company-wide goal.

Cash Flows from Investing Activities

Capital expenditures totaled $42.6 million and $35.9 million for the six months ended June 30, 2011 and 2010 , respectively.  Capital expenditures represent the addition and replacement of production machinery and research equipment, ongoing manufacturing and facility additions for expansions, regulatory and environmental compliance, and leasehold improvements.  Also included in capital expenditures are investments in business systems and data communication upgrades and enhancements.  In addition, all periods included equipment placed with Clinical Diagnostics segment customers who then contract to purchase our reagents for use. We anticipate increasing expenditures in future periods to expand our e-commerce platform internationally and for implementation of a global single instance ERP platform. The ERP software was purchased in December 2010.  The estimated global implementation cost for the single instance ERP platform could reach approximately $150 million and is estimated to take approximately five years to implement.  

On January 6, 2010, we acquired certain diagnostic businesses of Biotest AG for 45 million Euros (approximately $64.9 million) in cash, which is included in our Clinical Diagnostics segment.  In February 2011, we acquired an additional 39% of Distribuidora de Analitica para Medicina Ibérica S.A. (DiaMed Spain) from multiple noncontrolling shareholders, increasing our ownership in DiaMed Spain to 90%.  We paid approximately 2.5 million Euros or $3.4 million in cash.  In June 2011, we acquired the remaining outstanding shares of DiaMed S.E.A. Limited (DiaMed Thailand) from multiple noncontrolling shareholders for approximately $0.2 million in cash. We continue to review possible acquisitions to expand both our Life Science and Clinical Diagnostics segments.  We routinely meet with the principals or brokers of the subject companies.  It is not certain that any of these transactions will advance beyond the preliminary stages to completion at this time.

Cash Flows from Financing Activities

Net cash used in financing activities was $213.9 million for the six months ended June 30, 2011 and net cash provided by financing activities was $4.2 million for the six months ended June 30, 2010 .  Cash used in 2011 was attributable to the redemption in January 2011 of our $225.0 million Senior Subordinated Notes due 2013, including a call premium.  During the fourth quarter of 2010 we placed $425.0 million Senior Notes that were used to retire our 2014 bonds and our 2013 bonds in December 2010 and January 2011, respectively.  Cash provided in 2010 was

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primarily proceeds from common stock, partially offset by repayments of other long-term debt.  We have outstanding Senior Notes of $425 million and Senior Subordinated Notes of $300 million, which are not due until 2020 and 2016, respectively.

Recent Accounting Standards Updates

In May 2011, the Financial Accounting Standards Board issued guidance in regard to fair value measurement. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between GAAP and International Financial Reporting Standards (IFRS). This guidance is effective for interim and annual periods beginning after December 15, 2011. We do not anticipate that the adoption of this guidance will have a material impact on our condensed consolidated financial statements.

In June 2011, the FASB issued guidance in regard to the presentation of comprehensive income. In the new guidance an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other
comprehensive income, and a total amount for comprehensive income. The current option to report other comprehensive income and its components in the statement of changes in equity has been eliminated. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Bio-Rad is currently evaluating the alternative presentations, however the adoption of this guidance will not have a material impact on our condensed consolidated financial statements as it is for disclosure purposes only.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the six months ended June 30, 2011 , there have been no material changes from the disclosures about market risk provided in our Annual Report on Form 10-K for the year ended December 31, 2010 .



Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, our
Chief Executive Officer and our Chief Financial Officer concluded that, although our disclosure controls and procedures were generally effective in timely alerting them to material information relating to us and our consolidated subsidiaries required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), they were not effective as disclosed below.

The conclusion that our disclosure controls and procedures were not effective relates in part to the results to date of our Audit Committee’s investigation with the assistance of independent special counsel of our compliance with the United States Foreign Corrupt Practices Act (FCPA).  Based on that investigation, we determined that our previous lack of a comprehensive FCPA compliance policy and training program and other inadequate entity-level controls, as discussed below, led us to fail to identify FCPA compliance issues that were presented.  

We have continued implementing our remediation plan with respect to our disclosure controls and procedures to provide greater assurance of future compliance with the requirements of the FCPA and to ensure that potential FCPA issues are appropriately identified, reported and evaluated in the future.  These remediation efforts include:

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Company-wide, comprehensive training of our personnel in the requirements of the FCPA, including training with respect to those areas of our operations that are most likely to raise FCPA compliance

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concerns;

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With the assistance of special counsel to the Audit Committee, which has extensive experience in the area of FCPA compliance, our adoption of a comprehensive FCPA compliance policy that is appropriate for us in light of our worldwide operations, particularly in geographical areas that present challenges to regulatory compliance because of less mature legal frameworks;

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Our hiring of an additional person to assist in FCPA compliance; and

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Our determination that, in the future, FCPA compliance will be a point of emphasis to be evaluated quarterly by our internal legal group and our internal audit group, and that a report on our FCPA compliance will be provided regularly to the Audit Committee.

Changes in Internal Control Over Financial Reporting

Our management concluded in its last annual assessment that our internal control over financial reporting was not effective as of December 31, 2010 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America, to the extent and for the reasons set forth below.

In connection with our Audit Committee’s investigation of our compliance with the FCPA discussed above, our management identified three significant deficiencies in our internal control over financial reporting that, when considered and taken together, constitute a material weakness in our internal control over financial reporting.  A significant deficiency is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.  A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

These three significant deficiencies were the result of:  (i) a number of entity-level control deficiencies, including our lack of a comprehensive FCPA policy and training program; our lack of a formal, effective disclosure committee to facilitate our compliance with Section 302 of the Sarbanes-Oxley Act of 2002; inadequate policies regarding enterprise-wide risk assessment and management related to doing business in high-risk, emerging markets; our failure to perform background checks on certain parties prior to entering into material contracts with such parties; our lack of compliance with our existing Code of Business Ethics and Conduct in certain countries; and ineffective disclosure of significant exceptions to compliance with company policies through our quarterly management sub-certification process; (ii) a number of control deficiencies related to our expenditure processes at certain of our international subsidiaries and (iii) a number of control deficiencies related to our revenue and accounts receivable processes at certain of our international subsidiaries.

During the quarter ended June 30, 2011 , we continued to remediate the significant deficiencies identified above and the resulting material weakness.  In addition to our FCPA-related remediation efforts described above under “Disclosure Controls and Procedures,” these efforts included activities by our recently formed disclosure committee to facilitate our compliance with Section 302 of the Sarbanes-Oxley Act of 2002 and our continued implementation of procedures for performing background checks on certain parties prior to entering into material contracts with such parties.  We are also in the process of evaluating the initiation of additional actions to remediate these significant deficiencies and the resulting material weakness, including developing and implementing additional policies, further strengthening our disclosure processes and increasing the resources that we devote to our internal compliance and audit functions.

While our remediation efforts are in process, they have not been completed.  Accordingly, our management has concluded that our internal control over financial reporting is not effective as of June 30, 2011 and that we continue to have a material weakness in our internal control over financial reporting.  Our conclusion is not based on

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quantified misstatements in our historical financial statements or our financial statements as of and for our quarter ended June 30, 2011 , but instead on the risk that we may be unable to prevent or detect on a timely basis potential material errors in our future financial statements. We do not presently anticipate that the material weakness in our internal control over financial reporting as of June 30, 2011 will have any material effect on our previously reported financial results or our financial results for the quarter ended June 30, 2011 .

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

Other than the changes discussed above, we identified no changes in our internal control over financial reporting that occurred during our quarter ended June 30, 2011 that have materially affected, or that are reasonably likely materially to affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Note 12, “Legal Proceedings” in the Notes to Condensed Consolidated Financial Statements of Part 1, Item 1 of this Form 10-Q.



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Item 1A. Risk Factors

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

Based on an internal review, we have identified conduct in certain of our overseas operations that may have violated the anti-bribery provisions of the United States Foreign Corrupt Practices Act (FCPA) and is likely to have violated the FCPA’s books and records and internal controls provisions and our own internal policies.  In May 2010, we voluntarily disclosed these matters to the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), which each commenced an investigation.  The Audit Committee of our Board of Directors (Audit Committee) has assumed direct responsibility for reviewing these matters and has hired experienced independent counsel to conduct an investigation and provide legal advice.  We have provided, and intend to continue to provide, additional information to the DOJ and the SEC as the Audit Committee’s investigation progresses.

The Audit Committee’s investigation and the DOJ and SEC investigations are continuing and we are presently unable to predict the duration, scope or results of the Audit Committee’s investigation, of the investigations by the DOJ or the SEC or whether either agency will commence any legal actions. The DOJ and the SEC have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations including, but not limited to, injunctive relief, disgorgement, fines, penalties, modifications to business practices including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee compliance with the FCPA.  The imposition of any of these sanctions or remedial measures could have a material adverse effect on our business, including our results of operations, cash balance and credit ratings.  We have not to date determined whether any of the activities in question violated the laws of the foreign jurisdictions in which they took place.

We have not completed our actions to remediate previously identified significant deficiencies in our internal control over financial reporting that, when considered and taken together, constitute a material weakness in our internal control over financial reporting as of June 30, 2011 .  Our failure to establish and maintain effective internal control over financial reporting could result in our failure to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of our common stock to decline.

In connection with our Audit Committee’s investigation of our compliance with the FCPA discussed above, our management identified three significant deficiencies in our internal control over financial reporting that, when considered and taken together, constitute a material weakness in our internal control over financial reporting as of June 30, 2011 .  A significant deficiency is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.  A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The three significant deficiencies that we identified are the result of: (i) a number of entity-level control deficiencies, including our lack of a comprehensive FCPA policy and training program; our lack of a formal, effective disclosure committee to facilitate our compliance with Section 302 of the Sarbanes-Oxley Act of 2002; inadequate policies regarding enterprise-wide risk assessment and management related to doing business in high-risk, emerging markets; our failure to perform background checks on certain parties prior to entering into material contracts with such parties; our lack of compliance with our existing Code of Business Ethics and Conduct in certain countries; and ineffective disclosure of significant exceptions to compliance with company policies through our quarterly management sub-certification process; (ii) a number of control deficiencies related to our expenditure processes at certain of our international subsidiaries and (iii) a number of control deficiencies related to our revenue and accounts receivable process at certain of our international subsidiaries.  For more information about these three

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significant deficiencies and the resulting material weakness in our internal control over financial reporting and the remediation efforts that we have initiated and intend to initiate to attempt to remediate these three significant deficiencies and the resulting material weakness, please see Item 4 (“Controls and Procedures”) in this report.

We cannot assure you that we will be able to remediate these significant deficiencies and the resulting material weakness or that additional significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future.  Any failure to maintain or implement new or improved internal controls, or any difficulties that we may encounter in their maintenance or implementation, could result in additional significant deficiencies or material weaknesses, result in material misstatements in our financial statements and cause us to fail to meet our reporting obligations, which in turn could cause the trading price of our common stock to decline.  Any such failure could also adversely affect the results of our periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002.

On April 13, 2011, a shareholder derivative lawsuit was filed against each of our directors in the Superior Court for Contra Costa County, California.  The case, which also names us as a nominal defendant, is captioned City of Riviera Beach General Employees’ Retirement System v. David Schwartz, et al., Case No. MSC11-00854.  In the complaint, the plaintiff alleges that our directors breached their fiduciary duties by failing to ensure that we had sufficient internal controls and systems for compliance with the FCPA.  Purportedly seeking relief on our behalf, the plaintiff seeks an award of unspecified compensatory and punitive damages, costs and expenses (including attorneys’ fees), and a declaration that our directors have breached their fiduciary duties. We and the individual defendants have filed a demurrer requesting dismissal of the complaint in this case, as well as a motion to dismiss the complaint and a motion to stay this matter pending resolution of the above-referenced investigations by the DOJ and SEC.

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

Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions, slower growth and recession in most major economies. Although signs of recovery may exist, there are continued concerns about the systemic impact of inflation, the availability and cost of credit, a declining real estate market and geopolitical issues that contribute to increased market volatility and uncertain expectations for the global economy. These conditions, combined with declining business activity levels and consumer confidence, increased unemployment and volatile oil prices, contributed to unprecedented levels of volatility in the capital markets in recent years.  Any additional, continued or recurring disruptions in the capital and credit markets may adversely affect our business, results of operations, cash flows and financial condition.

As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads.  Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers.  These factors have led to a decrease in spending by businesses and consumers alike. Our customers and vendors may experience cash flow concerns and, as a result, customers may modify, delay or cancel plans to purchase our products and vendors may increase their prices, reduce their output or change terms of sales. Additionally, if customers’ or vendors’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers may not be able to pay, or may delay payment of, amounts owed to us.

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


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

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

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

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assimilate the operations and personnel of acquired companies;
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retain acquired business customers;
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minimize potential disruption to our ongoing business;
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retain key technical and management personnel;
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integrate acquired companies into our strategic and financial plans;
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accurately assess the value of target companies, products and technologies;
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comply with new regulatory requirements;
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harmonize standards, controls, procedures and policies;
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minimize the impact to our relationships with our employees and customers; and
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assess, document and remediate any deficiencies in disclosure controls and procedures and internal controls over financial reporting

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

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

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

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

A significant portion of our sales are made outside of the United States. Our foreign subsidiaries generated 69% of our net sales for the six months ended June 30, 2011 .  Our international operations are subject to risks common to foreign operations, such as general economic and market conditions in the countries in which we operate, changes

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in governmental regulations, political instability, import restrictions, additional scrutiny over certain financial instruments and currency exchange rate risks.  We cannot assure you that shifts in currency exchange rates, especially significant strengthening of the U.S. dollar compared to the Euro, will not have a material adverse effect on our operating results and financial condition.

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

Our customers include universities, clinical diagnostics laboratories, government agencies, hospitals and pharmaceutical, biotechnology and chemical companies.  The capital spending programs of these institutions and companies have a significant effect on the demand for our products.  Such policies 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 among various types of equipment and the policies regarding capital expenditures during industry downturns or recessionary periods.  If government funding to our customers were to decrease, or if our customers were to decrease or reallocate their budgets in a manner adverse to us, our business, financial condition or results of operations could be materially adversely affected.

Healthcare reform and the growth of managed care organizations have been and continue to be significant factors in the clinical diagnostics market.  The trend towards managed care, together with healthcare reform of the delivery system in the United States and efforts to reform in Europe, has resulted in increased pressure on healthcare providers and other participants in the healthcare industry to reduce costs.  Consolidation among healthcare providers has resulted in fewer, more powerful groups, whose purchasing power gives them cost containment leverage.  These competitive forces place constraints on the levels of overall pricing, and thus could have a material adverse effect on our profit margins for products we sell in clinical diagnostics markets.  To the extent that the healthcare industry seeks to address the need to contain costs by limiting the number of clinical tests being performed, our results of operations could be materially and adversely affected.  If these changes in the healthcare markets in the United States and Europe continue, we could be forced to alter our approach in selling, marketing, distributing and servicing our products.

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

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

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

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

Our ability to implement our business plan in a rapidly evolving market requires effective planning, reporting and analytical processes.  We expect that we will need to continue to improve and further integrate our IT systems, reporting systems and operating procedures by training and educating our employees with respect to these improvements and integrations on an ongoing basis in order to effectively run our business.  If we fail to successfully manage and integrate our IT systems, reporting systems and operating procedures, it could adversely

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affect our business or operating results.

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

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

We are subject to substantial government regulation.

Some of our products (primarily diagnostic products), production processes and marketing are subject to federal, state, local and foreign regulation, including the FDA and its foreign counterparts.  We are also subject to government regulation of the use and handling of a number of materials and controlled substances.  Failure to comply with present or future regulations could result in substantial liability to us, suspension or cessation of our operations, restrictions on our ability to expand at our present locations or require us to make significant capital expenditures or incur other significant expenses.

We are currently subject to environmental regulations and enforcement proceedings.

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

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

Loss of key personnel could hurt our business.

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

31


damage our business.  Additionally, if we were to lose a sufficient number of our research and development scientists and were unable to replace them or satisfy our needs for research and development through outsourcing, it could adversely affect our business.

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

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

As of February 15, 2011, the Schwartz family collectively held approximately 16% of our Class A Common Stock and 90% of our Class B Common Stock.  As a result, the Schwartz family is able to elect a majority of the directors, effect fundamental changes in our direction and control matters affecting us, including the allocation of business
opportunities that may be suitable for our company.  In addition, this concentration of ownership and voting power may have the effect of delaying or preventing a change in control of our company.

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

Our business could be adversely impacted if we have further deficiencies in our disclosure controls and procedures or internal control over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations.  We cannot assure you that our disclosure controls and procedures over internal control of financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, particularly a material weakness in internal control over financial reporting, which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operation, financial condition or liquidity.

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

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

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

We have positions in a variety of financial instruments including asset backed securities and other similar instruments. Financial markets are quite volatile and the markets for these securities can be illiquid.  The value of these securities will continue to be impacted by external market factors including default rates, changes in the value of the underlying property, such as residential or commercial real estate, rating agency actions, the prices at which observable market transactions occur and the financial strength of various entities, such as financial guarantors who provide insurance for the securities.  Should we need to convert these positions to cash, we may not be able to sell

32


these instruments without significant losses due to current debtor financial conditions or other market considerations.

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

As of June 30, 2011 we and our subsidiaries have approximately $732.7 million of outstanding indebtedness.  In addition, we are permitted to incur additional debt provided we comply with the limitation on the incurrence of additional indebtedness and disqualified capital stock covenants contained in the indenture governing our Senior Subordinated Notes due 2016 (8.0% Notes).


The following chart shows certain important credit statistics.

 
At June 30, 2011
 
($'s in millions)
Total debt
$
732.7

Bio-Rad’s stockholders’ equity
$
1,725.8

Debt to equity ratio
0.4


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

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

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

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

•
incur additional debt;
•
acquire other businesses or assets through merger or purchase;
•
create liens;
•
make investments;
•
enter into transactions with affiliates;

33


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

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

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 5. Other Information

None.

Item 6. Exhibits
(a)  Exhibits

The following documents are filed as part of this report:


34


Exhibit
No.
 
 
 
10.9
2011 Employee Stock Purchase Plan
 
 
31.1
Chief Executive Officer Section 302 Certification
 
 
31.2
Chief Financial Officer Section 302 Certification
 
 
32.1
Chief Executive Officer Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
32.2
Chief Financial Officer Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
101
The following materials from this report, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.


35



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:
August 3, 2011
 
/s/ Norman Schwartz
 
 
 
Norman Schwartz, President,
 
 
 
Chief Executive Officer
 
 
 
 
Date:
August 3, 2011
 
/s/ Christine A. Tsingos
 
 
 
Christine A. Tsingos, Vice President,
 
 
 
Chief Financial Officer

36


Exhibit 10.9

    

BIO-RAD LABORATORIES, INC.
2011 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose . The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries and Designated Affiliates with an opportunity to purchase Shares of the Company. This Plan includes two components: a Code Section 423 Component (the “423 Component”) and a non-Code Section 423 Component (the “Non-423 Component”). It is the intention of the Company to have the 423 Component qualify as an “employee stock purchase plan” under Section 423 of the Code. The provisions of the 423 Component, accordingly, shall be construed so as to extend and limit participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code. In addition, this Plan authorizes the grant of purchase rights under the Non-423 Component that does not qualify as an “employee stock purchase plan” under Section 423 of the Code; such purchase rights shall be granted pursuant to rules, procedures or subplans adopted by the Administrator designed to achieve tax, securities laws or other objectives for Eligible Employees and the Company. Except as otherwise provided herein, the Non-423 Component will operate and be administered in the same manner as the 423 Component.
2. Definitions .
(a) “ Administrator ” means the Board, the Committee or one or more persons selected by the Board or Committee to administer and interpret the Plan in its sole discretion, including the authority to make factual determinations. Any such interpretation or determination shall be conclusive and binding on all Participants.
(b) “ Affiliate ” means (a) any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Administrator, whether now or hereafter existing.
(c) “ Board ” means the Board of Directors of the Company.
(d) “ Change in Control ” means a change in ownership or control of the Company effected through any of the following transactions or series of transactions:
(i) any person or related group of persons (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer for securities of the Company;
(ii) a merger or consolidation of the Company with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or another entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or
(iii) the sale or disposition by the Company of all or substantially all of the Company's assets.
(e) “ Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto, and the regulations promulgated thereunder.
(f) “ Committee ” means the compensation committee of the Board, or such other committee of the Board as may be designated by the Board to administer the Plan.
(g) “ Company ” means Bio-Rad Laboratories, Inc., a Delaware corporation.

1



(h) “ Compensation ” means all base gross earnings excluding commissions, income from stock options or equity benefits, amounts received for the exchange of options or equity benefits, bonuses, overtime pay, shift premiums, long-term disability or workers compensation payments and similar amounts, but includes elective qualified contributions by the Participant to employee benefit plans, unless otherwise determined by the Administrator. For Participants outside the United States, Compensation shall include 13th/14th month payments or similar payments as required under applicable law. The Administrator shall have the discretion to determine the application of this definition to Employees outside the United States.
(i) “ Contributions ” means the payroll deductions (to the extent permitted under applicable local law) and other additional payments that the Company may allow to be made by a Participant to fund the purchase of Shares pursuant to the Plan if payroll deductions are not permitted or advisable under applicable law.
(j) “ Cutoff Date ” means the date other than the Offering Date established by the Administrator as the deadline for enrolling or re-enrolling in the Plan pursuant to Section 5, or withdrawing from the Plan pursuant to Section 10.
(k) “ Designated Affiliate ” means any Affiliate selected by the Administrator as eligible to participate in the Non-423 Component. For the avoidance of doubt, the Administrator may not delegate this task to any other entity or individual.
(l) “ Designated Subsidiary ” means any Subsidiary selected by the Administrator as eligible to participate in the 423 Component. For the avoidance of doubt, the Administrator may not delegate this task to any other entity or individual.
(m) “ Director ” means a member of the Board.
(n) “ Effective Date ” shall mean the date the Plan becomes effective in accordance with Section 24.
(o) “ Eligible Employee ” means any individual who is an Employee on the first Offering Date following six months of employment by the Company or any Designated Affiliate or Designated Subsidiary, or such other period of employment as may be designated by the Administrator from time to time. The Administrator, in its discretion, from time to time may, prior to an Offering Date for a particular Offering and for all purchase rights to be granted on such Offering Date under such Offering, determine that the definition of Eligible Employee will or will not include an individual if he or she customarily works not more than twenty (20) hours per week or not more than five (5) months in any calendar year (or, in each case, such lesser period of time as may be determined by the Administrator in its discretion), provided that any such exclusion is applied with respect to each Offering in a uniform manner to all similarly-situated employees who otherwise would be Eligible Employees for that Offering. For purposes of the 423 Component, the employment relationship shall be treated as continuing intact while the individual is on military or sick leave or other bona fide leave of absence approved by the Company or the Designated Subsidiary so long as the leave does not exceed three (3) months or if longer than three (3) months, the individual's right to reemployment is provided by statute or has been agreed to by contract or in a written policy of the Company which provides for a right of reemployment following the leave of absence. The employment relationship shall be treated as continuing intact where an Eligible Employee transfers employment between the Company, Designated Subsidiaries and/or Designated Affiliates; provided , however , that an individual who is not employed by the Company or a Designated Subsidiary on the Offering Date and through a date that is no more than three (3) months prior to the Purchase Date will participate only in the Non-423 Component unless the individual continues to have a right to reemployment with the Company or a Designated Subsidiary provided by statute or contract or in a written policy of the Company which provides for a right of reemployment following the leave of absence. The Administrator shall establish rules to govern other transfers into the 423 Component, and between any separate Offerings established thereunder, consistent with the applicable requirements of Section 423 of the Code.
(p) “ Employee ” means any individual who is an employee of the Company or a Designated Affiliate or Designated Subsidiary within the meaning of Section 3401(c) of the Code and the regulations promulgated thereunder or as otherwise determined under applicable law.

2



(q) “ Exchange Act ” means the U.S. Securities Exchange Act of 1934, as amended, from time to time, or any successor law thereto, and the regulations promulgated thereunder.
(r) “ Fair Market Value ” means, as of any given date, (a) if Shares are traded on the NYSE or any other established stock exchange or national market system, the closing price of a Share as reported in the Wall Street Journal (or such other source as the Administrator may deem reliable for such purposes) for such date, or if no sale occurred on such date, the first trading date immediately prior to such date during which a sale occurred; or (b) if Shares are not traded on an exchange but is quoted on a quotation system, the mean between the closing representative bid and asked prices for a Share on such date, or if no sale occurred on such date, the first date immediately prior to such date on which sales prices or bid and asked prices, as applicable, are reported by such quotation system; or (c) if Shares are not publicly traded, the fair market value established by the Board acting in good faith.
(s) “ NYSE ” means the New York Stock Exchange.
(t) “ Offering ” means an offer under the Plan of a purchase right that may be exercised during an Offering Period as further described in Section 2(v). Unless the Administrator determines otherwise, for purposes of the 423 Component, each Designated Subsidiary or Designated Affiliate will be deemed to participate in its own separate Offering under the Plan (the terms of which need not be identical to other separate Offerings for other Designated Subsidiaries or Designated Affiliates), even if the dates of the applicable Offering Periods of each separate Offering and/or the terms of separate Offerings are otherwise identical.
(u) “ Offering Date ” means the first Trading Day of each Offering Period.
(v) “ Offering Period ” means a period set by the Administrator containing a Purchase Period or multiple Purchase Periods, provided, however, that in no event will an Offering Period exceed 27 months. Unless otherwise determined by the Administrator, an Offering Period shall consist of a single Purchase Period.
(w) “ Parent ” means a “parent corporation” of the Company whether now or hereinafter existing as defined in Section 424(e) of the Code and any applicable regulations promulgated thereunder.
(x) “ Participant ” means any Eligible Employee who participates in the Plan as described in Section 5.
(y) “ Participation Election ” means any written agreement, enrollment form, contract or other instrument or document (in each case in paper or electronic form) evidencing that an Eligible Employee has elected to become a Participant in the Plan, which may, but need not, require execution by a Participant.
(z) “ Plan ” means this Bio-Rad Laboratories, Inc. 2011 Employee Stock Purchase Plan, including both the 423 and Non-423 Components.
(aa) “ Purchase Date ” means the last Trading Day of each Offering Period.
(bb)    “ Purchase Period ” means a period commencing on the first Trading Day of each fiscal quarter of the Company and ending on the last Trading Day of such fiscal quarter, unless otherwise designated by the Administrator. The duration and timing of Purchase Periods may be changed pursuant to Section 4.
(cc)    “ Purchase Price ” means a per-Share amount to be paid by a Participant to purchase a Share on the Purchase Date. Such Purchase Price shall be established by the Administrator for each Offering prior to an Offering Period and shall be no less than the lower of (i) eighty-five percent (85%) of the Fair Market Value of a Share on the Offering Date for the relevant Offering Period or (ii) eighty-five percent (85%) of the Fair Market Value of a Share on the Purchase Date for the relevant Offering Period. Such Purchase Price may be established by the Administrator by any manner or method the Administrator determines, pursuant to Section 16, and subject to (i) with respect to the 423 Component, compliance with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule) or (ii) with respect to the Non-423 Component, pursuant to such manner or method as determined by the Administrator to comply with applicable local law.

3



(dd)    “ Share ” means a share of Class A common stock of the Company, $0.0001 par value, or such other security of the Company (i) into which such share shall be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar transaction or (ii) as may be determined by the Administrator pursuant to Section 16.
(ee)“     Subsidiary ” means any “subsidiary corporation” of the Company whether now or hereinafter existing, as defined in Section 424(f) of the Code and any applicable regulations promulgated thereunder.
(ff)    “ Trading Day ” means a day on which the NYSE or, if the Shares are no longer listed on the NYSE, but are listed on any other national stock exchange or national market system, a day on which such other national stock exchange or national market system on which the Shares are listed is open for trading.
3. Eligibility . Any Eligible Employee on a given Offering Date shall be eligible to participate in the Plan, provided , however , that employees who are citizens or residents of a non-U.S. jurisdiction may be excluded from participation in the Plan or an Offering if the participation of such Employees is prohibited under the laws of the applicable jurisdiction or if complying with the laws of the applicable jurisdiction would cause the Plan or an Offering to violate Section 423 of the Code. Further, notwithstanding any provisions of the Plan to the contrary, no Eligible Employee shall be granted a purchase right under the 423 Component of the Plan (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding purchase rights to purchase capital stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase capital stock under all employee stock purchase plans of the Company and its Subsidiaries accrues at a rate that exceeds Twenty-Five Thousand Dollars (US$25,000) worth of such stock (determined at the fair market value of the shares of such stock at the time such purchase right is granted) for each calendar year in which such purchase right is both outstanding and exercisable.
4. Offering Periods . The Plan shall be implemented by consecutive Offering Periods (each consisting of a single Purchase Period) with a new Purchase Period commencing on the first Trading Day on or after each fiscal quarter of each year, or on such other date as the Administrator shall determine, and continuing thereafter to the last Trading Day of the respective fiscal quarter or until terminated in accordance with Section 20. Within the limitations set forth in Section 2(v), the Administrator shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.
5. Participation . Any Eligible Employee may enroll or re-enroll (and thus become a Participant) in the Plan by completing and submitting to the Company a Participation Election (either through the Company's online Plan enrollment process or in paper form) and/or any other forms and following any procedures for enrollment in the Plan as may be established by the Administrator from time to time by the Offering Date, the Cutoff Date, or such other date as the Administrator may establish from time to time before an Offering Date. Any Participation Election received by the Company before an Offering Date, the Cutoff Date, or such other date as the Administrator may establish from time to time before an Offering Date, will be effective on that Offering Date.
6. Contributions .
(a) Election of Contribution Amount . Each Participant may elect to make Contributions at a bi-weekly rate equal to any whole percentage up to a maximum of 10%, or such other maximum percentage as the Administrator may establish from time to time before an Offering Date for all purchase rights to be granted on such Offering Date, of his or her Compensation. The rate of Contribution shall be designated by the Participant in the Participant Election. A Participant may elect to increase or decrease the rate of Contribution effective as of the next Offering Period by delivery to the Company no later than the relevant Offering Date ,the related Cutoff Date, or such other date as the Administrator may establish from time to time before the next Offering Date, of a new Participation Election indicating the revised rate of Contribution. However, except to the extent necessary to comply with Section 423(b)(8) of the Code as described in Section 3, a Participant's Contributions may not be increased or decreased during an Offering Period unless otherwise determined by the Administrator in its discretion. A Participant's enrollment in the Plan shall remain in effect for successive Offering Periods unless terminated as provided in Section 10.

4



(b) Credit to Participant's Account . Contributions shall be credited to a Participant's account as soon as administratively feasible after payroll withholding or other additional payments are made. The Company shall be entitled to use of the Contributions immediately after they are made, except where applicable law requires that Contributions to the Plan from Participants be segregated from general corporate funds and/or deposited with an independent third party. No interest shall be paid or credited to the Participant with respect to his or her Contributions, unless required by applicable law.
(c) Discontinuing Contributions . A Participant may discontinue Contributions and thus discontinue his or her participation in the Plan as provided in Section 10 by completing any forms and following any procedures for withdrawal from the Plan as may be established by the Administrator from time to time.
(d) Payment of Taxes by Participant . At the time that Shares are purchased under the Plan, or upon disposition of some or all of the Shares acquired under the Plan (or at any other time that a taxable event related to the Plan occurs), the Participant must make adequate provision for the Company's, the Designated Affiliate's or the Designated Subsidiary's federal, state, foreign or any other tax liability payable to any authority, national insurance, social security, payment-on-account or other tax obligations, if any, which arise as a result of participation in the Plan, including, for the avoidance of doubt, any liability of the Participant to pay an employer tax or social insurance contribution obligation, which liability has been shifted to the Participant as a matter of law or contract. At any time, the Company or the Designated Affiliate or Designated Subsidiary, as applicable, may, but shall not be obligated to, withhold from the Participant's Compensation the amount necessary for the Company, the Designated Affiliate or the Designated Subsidiary, as applicable, to meet applicable withholding obligations, including any withholding required to make available to the Company, the Designated Affiliate or the Designated Subsidiary, as applicable, any tax deductions or benefits attributable to sale or early disposition of Shares by the Eligible Employee. In addition, the Company, the Designated Affiliate or the Designated Subsidiary, as applicable, may withhold from the proceeds of the sale of Shares, may withhold a sufficient whole number of Shares otherwise issuable following purchase having an aggregate fair market value sufficient to pay applicable withholding obligations or may withhold by any other means set forth in the applicable Participation Election. Where necessary to avoid negative accounting treatment, the Company or its Subsidiary or Affiliate shall withhold taxes at the applicable statutory minimum withholding rates.
7. Grant of Purchase Right . On the Offering Date of each Offering Period, each Eligible Employee participating in such Offering Period shall be granted a purchase right to purchase on each Purchase Date during such Offering Period (at the applicable Purchase Price) up to a number of Shares determined by dividing such Eligible Employee's Contributions accumulated prior to such Purchase Date by the applicable Purchase Price; provided , however , that for any Offering Period, the Administrator may set a minimum, a maximum, or both a minimum and a maximum number of Shares that may be subscribed for during such Offering Period, provided further that the maximum number of Shares may not in any event exceed 1,000 Shares per Offering Period or per calendar year, subject to adjustment pursuant to Section 15, and provided further that such purchase shall be subject to the limitations set forth in Sections 3 and 14. The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of Shares that an Eligible Employee may purchase during each Offering Period. The purchase of Shares pursuant to the purchase right shall occur as provided in Section 8, unless the Participant has withdrawn pursuant to Section 10. The purchase right shall expire on the last day of the Offering Period. Any Participant whose purchase right expires and who has not withdrawn pursuant to Section 10 will automatically be re-enrolled in the Plan and granted a new purchase right on the Offering Date immediately following the date on which the prior purchase right expires.
8. Purchase of Shares .
(a) Unless a Participant withdraws from the Plan as provided in Section 10, on the Purchase Date, the maximum number of Shares, including fractional Shares, as may be purchased with the accumulated Contributions in the Participant's account shall be purchased for such Participant at the applicable Purchase Price, subject to the limitations in Section 7 and Section 8(b). In the Administrator's discretion, fractional Shares shall not be purchased and in such event, any Contributions accumulated in a Participant's account which are not sufficient to purchase a full Share shall, at the discretion of the Administrator, be returned to the Participant or be retained in the Participant's account for the subsequent Offering Period, subject to earlier withdrawal by the Participant as provided in Section 10. During a Participant's lifetime, Shares may be purchased pursuant to the Participant's purchase right only by the Participant.

5



(b) No Participant in the 423 Component of the Plan is permitted to purchase shares under all employee stock purchase plans of the Company and its Subsidiaries at a rate that exceeds $25,000 in fair market value of stock (determined at time the purchase right is granted) for each calendar year in which any stock purchase right is both outstanding and exercisable.
(c) If the Administrator determines that, on a given Purchase Date, the number of Shares with respect to which purchase rights are to be exercised may exceed (i) the number of Shares that were available for sale under the Plan on the Offering Date of the applicable Offering Period, or (ii) the number of Shares available for sale under the Plan on such Purchase Date, the Administrator may provide, in its sole discretion, that the Company shall make a pro-rata allocation of the Shares available for purchase on such Purchase Date in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants exercising purchase rights on such Purchase Date. The Company may make a pro-rata allocation of the Shares available on the Offering Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional Shares for issuance under the Plan by the Company's stockholders subsequent to such Offering Date.
9. Delivery . By enrolling in the Plan, each Participant shall be deemed to have authorized the establishment of a brokerage account on his or her behalf at a securities brokerage firm selected by the Administrator. Alternatively, the Administrator may provide for Plan share accounts for each Participant to be established by the Company or by an outside entity selected by the Administrator which is not a brokerage firm. As soon as reasonably practicable after each Purchase Date on which a purchase of Shares occurs, the Company shall arrange for the delivery to each Participant of the Shares purchased upon exercise of his or her purchase right to the Participant's brokerage or Plan share account in a form determined by the Administrator. The Administrator may require that shares be retained with the securities brokerage firm or transfer agent selected by the Administrator for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares, or for such other reason as the Administrator may determine is advisable. Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by any applicable law, rule or regulation, the Company shall not deliver to any Participant certificates evidencing Shares issued in connection with any purchase under the Plan, and instead such Shares shall be recorded in the books of the brokerage firm selected by the Administrator or, as applicable, the Company, its transfer agent, stock plan administrator or such other outside entity which is not a brokerage firm.
10. Withdrawal .
(a) A Participant may decide not to purchase Shares on future Purchase Dates and opt to withdraw all, but not less than all, the Contributions credited to his or her account and not yet used to purchase Shares under the Plan by giving notice in a form or manner prescribed by the Administrator from time to time by the next Offering Date, Cutoff Date, or such other date as the Administrator may establish from time to time, and subject to any further limitations or requirements approved by the Administrator; except that no withdrawals shall be permitted for the then-current Purchase Period or as otherwise may be specified by the Administrator in its discretion. All of the Participant's Contributions credited to his or her account shall, at the discretion of the Administrator, be retained in Participant's account and used to purchase Shares at the next Purchase Date. If a Participant withdraws from the Plan, Contributions shall not resume at the beginning of the succeeding Purchase Period unless he or she completes the process to re-enroll in the Plan as prescribed by the Administrator from time to time.
(b) A Participant's withdrawal from a Purchase Period shall not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or in succeeding Purchase Periods which commence after the termination of the Purchase Period from which he or she has withdrawn.
11. No Right to Employment . Participation in the Plan by a Participant shall not be construed as giving a Participant the right to be retained as an employee of the Company, a Subsidiary, or an Affiliate, as applicable. Furthermore, the Company, a Subsidiary, or an Affiliate may dismiss a Participant from employment at any time, free from any liability or any claim under the Plan.
12. Termination of Employment . Unless otherwise determined by the Administrator, upon a Participant's ceasing to be an Eligible Employee, for any reason, he or she shall be deemed to have elected to withdraw from the Plan and the Contributions credited to such Participant's account during the Offering Period but not yet used to purchase


6


Shares under the Plan shall be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 17, and such Participant's purchase right shall be terminated automatically.
13. Interest . No interest will accrue on the Contributions of a Participant in the Plan, except as may be required by applicable law, as determined by the Administrator, and if so required by the laws of a particular jurisdiction, shall apply to all Participants in the relevant Offering except to the extent otherwise permitted by U.S. Treasury Regulation Section 1.423-2(f).
14. Shares Available for Purchase under the Plan .
(a) Basic Limitation . Subject to adjustment pursuant to Section 15, the aggregate number of Shares authorized for sale under the Plan is 600,000 Shares. For avoidance of doubt, the limitation set forth in this section may be used to satisfy purchases of Shares under either the 423 Component or the Non-423 Component.
(b) Rights as an Unsecured Creditor . Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly-authorized transfer agent of or broker selected by the Company), a Participant shall only have the rights of an unsecured creditor with respect to such Shares, and no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to such Shares.
(c) Sources of Shares Deliverable at Purchase . Any Shares issued after purchase may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.
15.
Adjustments for Changes in Capitalization and Similar Events .
(a) Changes in Capitalization . Subject to any required action by the stockholders of the Company, the maximum number of Shares that shall be made available for sale under the Plan, the maximum number of Shares that each Participant may purchase during the Offering Period (pursuant to Section 7) or over a calendar year under the $25,000 limitation (pursuant to Section 8(b)) and the per Share price used to determine the Purchase Price shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from any nonreciprocal transaction between the Company and its stockholders, (such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend), that affects the Shares (or other securities of the Company) or the price of Shares (or other securities) and causes a change in the per share value of the Shares underlying outstanding purchase rights. Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to a purchase right.
(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company as contemplated by Section 2(e)(iv), the Offering Period then in progress shall be shortened by setting a new Purchase Date (the “New Purchase Date”), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Purchase Date shall be before the date of the Company's proposed dissolution or liquidation. The Administrator shall notify each Participant in writing, at least ten (10) U.S. business days prior to the New Purchase Date, that the Purchase Date for the Participant's purchase right has been changed to the New Purchase Date and that Shares shall be purchased automatically for the Participant on the New Purchase Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10.
(c) Change in Control . In the event of a Change in Control, each outstanding purchase right shall be assumed or an equivalent purchase right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the purchase right, the Offering Period then in progress shall be shortened by setting a New Purchase Date and shall end on the New Purchase Date. The New Purchase Date shall be before the date of the Company's proposed merger or Change in Control. The Administrator shall notify each Participant in writing, at least ten (10) U.S. business days prior to the New Purchase Date, that the Purchase Date for the Participant's purchase right has been changed to the New Purchase Date


7


and that Shares shall be purchased automatically for the Participant on the New Purchase Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10.
16. Administration .
(a) Authority of the Administrator . Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Administrator by the Plan, the Administrator shall have sole and plenary authority to administer the Plan, including, without limitation, the authority to (i) construe, interpret, reconcile any inconsistency in, correct any default in and supply any omission in, and apply the terms of the Plan and any Participation Election or other instrument or agreement relating to the Plan, (ii) determine eligibility and adjudicate all disputed claims filed under the Plan, including whether Eligible Employees shall participate in the 423 Component or the Non-423 Component and which entities shall be Designated Subsidiaries or Designated Affiliates, (iii) determine the terms and conditions of any purchase right to purchase Shares under the Plan, (iv) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan, (v) amend an outstanding purchase right or grant a replacement purchase right for a purchase right previously granted under the Plan if, in the Administrator's discretion, it determines that (A) the tax consequences of such purchase right to the Company or the Participant differ from those consequences that were expected to occur on the date the purchase right was granted, or (B) clarifications or interpretations of, or changes to, tax law or regulations permit purchase rights to be granted that have more favorable tax consequences other than initially anticipated, and (vi) make any other determination and take any other action that the Administrator deems necessary or desirable for the administration of the Plan. Notwithstanding any provision to the contrary in this Plan, the Administrator may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for jurisdictions outside of the United States. Without limiting the generality of the foregoing, the Administrator specifically is authorized to adopt rules, procedures and subplans, which, for purposes of the Non-423 Component, may be outside the scope of Section 423 of the Code, regarding, without limitation, eligibility to participate, the definition of Compensation, making and handling of Contributions to the Plan, establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, withholding procedures and handling of Share issuances, which may vary according to local requirements. The Administrator may not delegate its authority to make adjustments pursuant to Section 15(a).
(b) Administrator Decisions . Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any purchase right to purchase Shares granted under the Plan shall be within the sole and plenary discretion of the Administrator, may be made at any time and shall be final, conclusive, and binding upon all persons, including the Company, any Designated Subsidiary or Designated Affiliate, any Participant or any Eligible Employee, as applicable.
(c) Indemnification . To the extent allowable pursuant to applicable law, each member of the Board, the Administrator or any employee of the Company, a Designated Subsidiary, or a Designated Affiliate (each such person, a “ Covered Person ”) shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such Covered Person in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Covered Persons may be entitled pursuant to the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
17. Death . Unless otherwise provided in an enrollment form or procedures established by the Administrator from time to time, in the event of the Participant's death, any accumulated Contributions not used to purchase Shares shall be paid to Participant's heirs or estate as soon as reasonably practicable following the Participant's death.
18. Transferability . Neither Contributions credited to a Participant's account nor any rights with regard to the purchase of Shares pursuant to a purchase right or to receive Shares under the Plan may be assigned, alienated, pledged, attached, sold or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as


8


provided in Section 17) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10.
19. Use of Funds . All Contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions except as may be required by applicable local law, as determined by the Administrator, and if so required by the laws of a particular jurisdiction, shall apply to all Participants in the relevant Offering except to the extent otherwise permitted by U.S. Treasury Regulation Section 1.423-2(f). Until Shares are issued, Participants shall only have the rights of an unsecured creditor, although Participants in specified Offerings may have additional rights where required under local law, as determined by the Administrator.
20. Amendment and Termination .
(a) Subject to any applicable law or government regulation and to the rules of the NYSE or any successor exchange or quotation system on which the Shares may be listed or quoted, the Plan may be amended, modified, suspended or terminated by the Board or the Administrator without the approval of the stockholders of the Company. Except as provided in Section 15, no amendment may make any change in any purchase right theretofore granted which adversely affects the rights of any Participant without the consent of the affected Participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval of any amendment in such a manner and to such a degree as required.
(b) Without stockholder approval and without regard to whether any Participant rights may be considered to have been “adversely affected,” the Administrator shall be entitled, inter alia, to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant to adjust for delays or mistakes in the Company's processing of properly completed enrollment forms, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Shares for each Participant properly correspond with amounts withheld from the Participant's Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion advisable which are consistent with the Plan.
21. Notices . All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form and manner specified by the Administrator at the location, or by the person, designated by the Administrator for the receipt thereof.
22. Conditions Upon Issuance of Shares .
(a) Shares shall not be issued with respect to a purchase right unless the purchase of Shares pursuant to such purchase right and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, U.S. and non-U.S. and state and local provisions, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Any Contributions shall be promptly refunded to the relevant Participant.
(b) As a condition to the purchase of Shares pursuant to a purchase right, the Company may require the person on whose behalf Shares are purchased to represent and warrant at the time of any such purchase that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the applicable provisions of law described in subsection (a) above.

23. Share Issuance . All Shares delivered under the Plan pursuant to the exercise of a purchase right to purchase Shares shall be subject to such stop-transfer orders and other restrictions as the Administrator may deem


9


advisable under the Plan or the rules, regulations, and other requirements of the U.S. Securities and Exchange Commission, the NYSE or any other stock exchange or quotation system upon which such Shares or other securities are then listed or reported and any applicable Federal or state laws, and the Administrator may take whatever steps are necessary to effect such restrictions.
24. Term of Plan . This Plan was originally approved by the Board of Directors on February 23, 2011 and by the holders of a majority of the voting power of all outstanding shares of the Company on April 26, 2011. The Plan became effective on April 26, 2011. Unless sooner terminated by the Board or the Administrator in accordance with Section 20, the Plan shall terminate on the date on which all purchase rights are exercised in connection with a dissolution or liquidation pursuant to Section 15(b) or Change in Control pursuant to Section 15(c). No further purchase rights shall be granted or Shares purchased, and no further Contributions shall be collected under the Plan following such termination.
25. Stockholder Approval . The Plan will be subject to the approval by stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under applicable law.
26. Code Section 409A; Tax Qualification . Purchase rights granted under the 423 Component are exempt from the application of Section 409A. Purchase rights granted under the Non-423 Component to U.S. taxpayers are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to Section 26(b), purchase rights granted to U.S. taxpayers under the Non-423 Component shall be subject to such terms and conditions that will permit such purchase rights to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the Shares subject to a purchase right be delivered within the short-term deferral period. Subject to Section 26(b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Administrator determines that a purchase right or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the purchase right shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Anything in the foregoing to the contrary notwithstanding, the Company shall have no liability to a Participant or any other party if the purchase right that is intended to be exempt from, or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Administrator with respect thereto.
(a) Although the Company may endeavor to (i) qualify a purchase right for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment ( e.g. , under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Section 26(a). The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
27. Severability . If any particular provision of this Plan is found to be invalid or otherwise unenforceable, such provision shall not affect the other provisions of the Plan, but the Plan shall be construed in all respects as if such invalid provision were omitted.
28. Governing Law . Except to the extent that provisions of this Plan are governed by applicable provisions of the Code or any other substantive provision of federal law, this Plan shall be construed in accordance with the laws of the State of California, U.S.A., without giving effect to the conflict of laws principles thereof.
29. Headings . Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan.


10


Exhibit 31.1

Certification of Chief Executive Officer Required By
Exchange Act Rules 13a-14(a) and 15d-14(a)

I, Norman Schwartz, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Bio-Rad Laboratories, Inc.

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report fairly present, in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date:
August 3, 2011
 
/s/ Norman Schwartz
 
 
 
Norman Schwartz
 
 
 
Chief Executive Officer





Exhibit 31.2

Certification of Chief Financial Officer Required By
Exchange Act Rules 13a-14(a) and 15d-14(a)

I, Christine A. Tsingos, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Bio-Rad Laboratories, Inc.

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report fairly present, in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date:
August 3, 2011
 
/s/ Christine A.Tsingos
 
 
 
Christine A. Tsingos
 
 
 
Vice President,
 
 
 
Chief Financial Officer




Exhibit 32.1




Certification of Periodic Report


I, Norman Schwartz, Chief Executive Officer of Bio-Rad Laboratories, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:


(1)
the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:
August 3, 2011
 
/s/ Norman Schwartz
 
 
 
Norman Schwartz
 
 
 
Chief Executive Officer




Exhibit 32.2




Certification of Periodic Report


I, Christine A. Tsingos, Chief Financial Officer of Bio-Rad Laboratories, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:


(1)
the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:
August 3, 2011
 
/s/ Christine A. Tsingos
 
 
 
Christine A. Tsingos
 
 
 
Vice President,
 
 
 
Chief Financial Officer