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 March 31, 2019

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 every Interactive Data File required to be submitted 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 files).

Yes    x      No     o

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

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

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

.

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, Par Value $0.0001 per share	BIO	New York Stock Exchange
Class B Common Stock, Par Value $0.0001 per share	BIOb	New York Stock Exchange

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

Common Shares Outstanding at May 1, 2019: Class A - 24,732,399 Class B - 5,087,678

BIO-RAD LABORATORIES, INC.

FORM 10-Q MARCH 31, 2019

TABLE OF CONTENTS

Part I – Financial Information	4
Item 1. Financial Statements	4
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Income	6
Condensed Consolidated Statements of Comprehensive Income	7
Condensed Consolidated Statements of Cash Flows	8
Condensed Consolidated Statements of Changes in Stockholders' Equity	9
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3. Quantitative and Qualitative Disclosures about Market Risk	37
Item 4. Controls and Procedures	38
Part II – Other Information	38
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3. Defaults Upon Senior Securities	52
Item 4. Mine Safety Disclosures	52
Item 5. Other Information	52
Item 6. Exhibits	53
Signatures	54

2

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

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,” “anticipate,” “may,” “will,” “intend,” “estimate,” “continue,” or similar expressions or the negative of those terms or expressions.  Such statements involve risks and uncertainties, which could cause actual results to vary materially from those expressed in or indicated by the forward-looking statements.  We have based these forward-looking statements on our current expectations and projections about future events.  However, actual results may differ materially from those currently anticipated depending on a variety of risk factors including, but not limited to, those identified under “Part II, Item 1A, Risk Factors” of this Quarterly Report on Form 10-Q. We caution you not to place undue reliance on forward-looking statements, which reflect an analysis only and speak only as of the date hereof.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

3

PART I – FINANCIAL INFORMATION

BIO-RAD LABORATORIES, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	March 31, 2019			December 31, 2018
ASSETS:	(Unaudited)
Cash and cash equivalents	$	455,890		$	431,526
Short-term investments	403,099			413,270
Restricted investments	5,560			5,560
Accounts receivable, less allowance for doubtful accounts of $26,257 at 2019 and $26,713 at 2018	391,699			392,443
Inventories:
Raw materials	105,683			108,008
Work in process	149,601			145,051
Finished goods	335,154			330,756
Total inventories	590,438			583,815
Prepaid expenses	163,959			187,249
Other current assets	20,998			9,615
Total current assets	2,031,643			2,023,478
Property, plant and equipment	1,330,536			1,326,829
Less: accumulated depreciation and amortization	(827,584		)	(818,139		)
Property, plant and equipment, net	502,952			508,690
Operating lease right-of-use assets	221,597			—
Goodwill, net	230,541			219,770
Purchased intangibles, net	139,382			133,123
Other investments	3,671,912			2,655,709
Other assets	64,887			70,298
Total assets	$	6,862,914		$	5,611,068

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

4

BIO-RAD LABORATORIES, INC.

Condensed Consolidated Balance Sheets

(continued)

(In thousands, except share data)

	March 31, 2019			December 31, 2018
LIABILITIES AND STOCKHOLDERS’ EQUITY:	(Unaudited)
Accounts payable, accrued payroll and employee benefits	$	239,018		$	265,960
Current maturities of long-term debt and notes payable	1,757			493
Income and other taxes payable	41,967			56,188
Current operating lease liabilities	34,413			—
Other current liabilities	127,151			128,154
Total current liabilities	444,306			450,795
Long-term debt, net of current maturities	437,606			438,937
Deferred income taxes	780,905			553,239
Operating lease liabilities	192,558			—
Other long-term liabilities	143,684			147,766
Total liabilities	1,999,059			1,590,737
Stockholders’ equity:
Class A common stock, shares issued 24,888,661 and 24,884,265 at 2019 and 2018, respectively; shares outstanding 24,728,923 and 24,704,772 at 2019 and 2018, respectively	2			2
Class B common stock, shares issued 5,092,021 and 5,096,421 at 2019 and 2018, respectively; shares outstanding 5,091,104 and 5,095,504 at 2019 and 2018, respectively	1			1
Additional paid-in capital	402,847			394,342
Class A treasury stock at cost, 159,738 and 179,493 shares at 2019 and 2018, respectively	(43,642		)	(49,040		)
Class B treasury stock at cost, 917 shares at 2019 and 2018	(89		)	(89		)
Retained earnings	4,585,701			3,722,073
Accumulated other comprehensive loss	(80,965		)	(46,958		)
Total stockholders’ equity	4,863,855			4,020,331
Total liabilities and stockholders’ equity	$	6,862,914		$	5,611,068

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

5

BIO-RAD LABORATORIES, INC.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2019			2018
Net sales	$	553,979		$	551,519
Cost of goods sold	242,217			249,316
Gross profit	311,762			302,203
Selling, general and administrative expense	207,581			209,130
Research and development expense	47,575			49,427
Income from operations	56,606			43,646
Interest expense	5,986			5,782
Foreign currency exchange losses, net	1,280			1,254
Change in fair market value of equity securities	(1,059,230		)	(815,934		)
Other (income) expense, net	(18,696		)	(11,145		)
Income before income taxes	1,127,266			863,689
Provision for income taxes	(262,071		)	(206,915		)
Net income	$	865,195		$	656,774
Basic earnings per share:
Net income per basic share	$	29.03		$	22.05
Weighted average common shares - basic	29,801			29,787
Diluted earnings per share:
Net income per diluted share	$	28.74		$	21.77
Weighted average common shares - diluted	30,104			30,171

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

6

BIO-RAD LABORATORIES, INC.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2019			2018
Net income	$	865,195		$	656,774
Other comprehensive (loss) income:
Foreign currency translation adjustments	(36,402		)	46,547
Foreign other post-employment benefits adjustments, net of income taxes	359			(283		)
Net holding gain (loss) on equity securities and net unrealized holding gain (loss) on available-for-sale investments, net of income taxes	2,036			(1,716		)
Other comprehensive (loss) income, net of income taxes	(34,007		)	44,548
Comprehensive income	$	831,188		$	701,322

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

7

BIO-RAD LABORATORIES, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands, unaudited)

	Three Months Ended
	March 31,
	2019			2018
Cash flows from operating activities:
Cash received from customers	$	550,291		$	589,869
Cash paid to suppliers and employees	(507,160		)	(543,700		)
Interest paid, net	(459		)	(378		)
Income tax payments, net	(4,567		)	(3,245		)
Investment proceeds and miscellaneous receipts, net	4,496			2,158
Proceeds from (payments for) forward foreign exchange contracts, net	342			(4,358		)
Net cash provided by operating activities	42,943			40,346
Cash flows from investing activities:
Capital expenditures	(23,629		)	(27,184		)
Proceeds from dispositions of property, plant and equipment	74			18
Proceeds from divestiture of a product line	—			6,919
Payments for acquisitions, net of cash received	(16,083		)	—
Recovery of (payments for) purchases of intangible assets	7,403			(3		)
Payments for purchases of marketable securities and investments	(95,375		)	(61,443		)
Proceeds from sales of marketable securities and investments	22,324			17,391
Proceeds from maturities of marketable securities and investments	82,573			45,486
Net cash used in investing activities	(22,713		)	(18,816		)
Cash flows from financing activities:
Payments on long-term borrowings	(237		)	(87		)
Payments of contingent consideration	(1,433		)	(1,270		)
Proceeds from issuances of common stock for share-based compensation	—			3,872
Proceeds from reissuances of treasury stock for share-based compensation, net	3,831			—
Net cash provided by financing activities	2,161			2,515
Effect of foreign exchange rate changes on cash	1,982			(1,383		)
Net increase in cash, cash equivalents, and restricted cash	24,373			22,662
Cash, cash equivalents, and restricted cash at beginning of period	434,164			384,983
Cash, cash equivalents, and restricted cash at end of period	$	458,537		$	407,645

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

	March 31, 2019		March 31, 2018
Cash and cash equivalents	$	455,890	$407,272
Restricted cash included in Other current assets	113		90
Restricted cash included in Other assets	2,534		283
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	458,537	$	407,645

These restricted cash items are primarily related to performance guarantees.

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

8

BIO-RAD LABORATORIES, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(In thousands)

(Unaudited)

	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance at December 31, 2018	$	3	$	394,342	$	(49,129	)	$	3,722,073		$	(46,958	)	$	4,020,331
Net income	—		—		—			865,195			—			865,195
Other comprehensive loss, net of tax	—		—		—			—			(34,007		)	(34,007		)
Stock compensation expense	—		8,505		—			—			—			8,505
Reissuance of treasury stock	—		—		5,398			(1,567		)	—			3,831
Balance at March 31, 2019	$	3	$	402,847	$	(43,731	)	$	4,585,701		$	(80,965	)	$	4,863,855

	Common Stock		Additional Paid-in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance at December 31, 2017	$	3	$	361,231	$	(217	)	$	1,830,439	$	738,794		$	2,930,250
Adoption of new accounting guidance								1,526,019		(679,257		)	846,762
Net income	—		—		—			656,774		—			656,774
Other comprehensive income, net of tax	—		—		—			—		44,548			44,548
Issuance of common stock	—		3,872		—			—		—			3,872
Stock compensation expense	—		5,885		—			—		—			5,885
Balance at March 31, 2018	$	3	$	370,988	$	(217	)	$	4,013,232	$	104,085		$	4,488,091

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

9

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, 2018 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, 2018.

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 of 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 periods. 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.

Revenue Recognition

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

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

10

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

At the time revenue is recognized, a provision is recognized for estimated product returns as this right is considered variable consideration. Accordingly, when product revenues are recognized, the transaction price is reduced to the estimated amount that we expect to receive in exchange for transferring control for those products.

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

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

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less and for contracts in which we recognize revenue at the amount to which we have the right to invoice for services performed. Our payment terms vary by the type and location of our customer, and the products and services offered. The term between invoicing and when payment is due is not significant.

Reagent Rental Agreements

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

11

As discussed further below under the captions “Leases” and “Recent Accounting Pronouncements Adopted,” as well as in Note 14, Leases, we adopted ASC 842, “Leases,” on a modified retrospective basis effective January 1, 2019 with practical expedients, and did not restate comparative prior periods. We concluded that the use of the instrument (referred to as “lease elements”) is not within the guidance of ASC 606 but rather ASC 842. Accordingly, we first allocate the transaction price between the lease elements and the non-lease elements based on relative standalone selling prices. The determination of the transaction price requires judgment and consideration of any fixed/minimum payments as well as estimates of variable consideration. After allocation, the amount of variable payments allocated to lease components will be recognized as income under ASC 842, while the amount of variable payments allocated to non-lease components will be recognized as income in accordance with ASC 606.

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

Historically, our reagent rental arrangements have been predominantly comprised of variable lease payments, as very few of such arrangements contain any fixed/minimum lease payments. As a result, our lease income is heavily variable in nature with only relatively insignificant amounts of lease income comprised of fixed or stated minimum lease payments. Further, our reagent rental arrangements are predominantly classified as operating leases, with only very insignificant lease income associated with sales-type leases. Hence, our reported lease income is primarily variable in nature and is recognized over time as the reagents are consumed by the customer or delivered.

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

Contract costs:

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

Disaggregation of Revenue:

The following table presents our revenues disaggregated by geographic region based primarily on the location of the use of the product or service (in millions, unaudited):

	Three Months Ended
	March 31,
	2019		2018
Europe	$	185.9	$	199.6
Pacific Rim	106.4		109.4
United States	226.1		209.9
Other (primarily Canada and Latin America)	35.6		32.6
Total Net sales	$	554.0	$	551.5

The disaggregation of our revenue by industry segment sources is presented in our Segment Information footnote (see Note 11).

12

Deferred revenues represent mostly unrecognized fees billed or collected for extended service arrangements. Deferred revenues are generally recognized ratably over the term of the service contract as our performance extends over the life of the arrangement. A majority of our deferred revenue balance is classified as current with an expected length of one year or less. The increase in our total deferred revenue balance from $37.3 million at December 31, 2018 to $41.1 million at March 31, 2019 is primarily driven by $15.2 million, net, of cash payments received or due in advance of satisfying our performance obligations, partially offset by $11.4 million of revenue recognized that were included in our deferred revenue balance as of December 31, 2018.

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

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

December 31, 2018	$	10.1
Provision for warranty	1.4
Actual warranty costs	(2.2		)
March 31, 2019	$	9.3

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our condensed consolidated balance sheet as of March 31, 2019. Finance leases are included in property, plant and equipment, other current liabilities, and other long-term liabilities in our condensed consolidated balance sheet as of March 31, 2019.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Where we act as lessee, we elected not to separate lease and non-lease components and are more fully described in Note 14, Leases.

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

13

Recent Accounting Pronouncements and Securities and Exchange Commission ("SEC") Rule Adopted

In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." ASU 2018-15 amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. The internal-use software guidance states that only qualifying costs incurred during the application development stage can be capitalized. We prospectively adopted ASU 2018-15 effective January 1, 2019. During the first quarter of 2019, we capitalized $0.7 million of implementation costs for cloud computing arrangements, net of accumulated amortization, primarily for business analytics software, and is recorded in Other current assets and Other assets in the Condensed Consolidated Balance Sheet.

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

In February 2016, the FASB issued ASU 2016-02, "Leases," and related accounting standard updates, which requires, among other items, lease accounting to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosures are enhanced to better understand the amount, timing and uncertainty of cash flows arising from leases. We adopted ASU 2016-02 on a modified retrospective basis effective January 1, 2019 with practical expedients, and did not restate comparative prior periods. Where we act as a lessee, the adoption of the standard resulted in material additions to the balance sheet for right-of-use assets and the associated liabilities, see Note 14, Leases. The practical expedients include, among other items, for leases that existed prior January 1, 2019, to not reassess whether any contracts are or contain embedded leases, reassessing the classification of existing leases, and reassessing whether previously capitalized initial direct costs qualify for capitalization. Where we act as a lessee, we also elected not to separate lease and non-lease components. Where we act as a lessor in reagent rental arrangements, there was an insignificant impact to our condensed consolidated financial statements, which is more fully described above under the caption "Reagent Rental Agreements."

Recent Accounting Pronouncements to be Adopted

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

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

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

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In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." ASU 2016-13 will replace the current incurred loss approach with an expected loss model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount under the current other-than-temporary impairment model. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the effect ASU 2016-13 will have on our consolidated financial statements.

2.ACQUISITIONS

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

The preliminary allocation of the payments were $12.0 million to definite-lived intangibles, $10.7 million to goodwill, and a deferred tax liability of $2.7 million related to the purchased intangibles. The purchase price allocation is preliminary as additional time is required to complete the valuation of the intangibles.

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

3.FAIR VALUE MEASUREMENTS

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

• Level 1: Quoted prices in active markets for identical instruments

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

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

Financial assets and liabilities carried at fair value and measured on a recurring basis as of March 31, 2019 are classified in the hierarchy as follows (in millions):

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	Level 1		Level 2		Level 3		Total
Financial Assets Carried at Fair Value:
Cash equivalents:
Commercial paper	$	—	$	96.1	$	—	$	96.1
Asset backed	—		0.4		—		0.4
Time deposits	10.0		10.0		—		20.0
Money market funds	39.7		—		—		39.7
Total cash equivalents (a)	49.7		106.5		—		156.2
Restricted investment	5.6		—		—		5.6
Equity securities (b)	3,692.7		—		—		3,692.7
Available-for-sale investments:
Corporate debt securities	—		194.2		—		194.2
U.S. government sponsored agencies	—		79.9		—		79.9
Foreign government obligations	—		3.0		—		3.0
Other Foreign Obligations	—		2.8		—		2.8
Municipal obligations	—		10.9		—		10.9
Asset-backed securities	—		66.8		—		66.8
Total available-for-sale investments (c)	—		357.6		—		357.6
Forward foreign exchange contracts (d)	—		0.6		—		0.6
Total financial assets carried at fair value	$	3,748.0	$	464.7	$	—	$	4,212.7
Financial Liabilities Carried at Fair Value:
Forward foreign exchange contracts (e)	$	—	$	0.7	$	—	$	0.7
Contingent consideration (f)	—		—		6.5		6.5
Total financial liabilities carried at fair value	$	—	$	0.7	$	6.5	$	7.2

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

	Level 1		Level 2		Level 3		Total
Financial Assets Carried at Fair Value:
Cash equivalents:
Commercial paper	$	—	$	77.8	$	—	$	77.8
Time deposits	22.7		10.0		—		32.7
Asset-backed securities	—		0.3		—		0.3
Money market funds	36.9		—		—		36.9
Total cash equivalents (a)	59.6		88.1		—		147.7
Restricted investment	5.6		—		—		5.6
Equity securities (b)	2,672.9		—		—		2,672.9
Available-for-sale investments:
Corporate debt securities	—		215.0		—		215.0
U.S. government sponsored agencies	—		80.3		—		80.3
Foreign government obligations	—		3.6		—		3.6
Municipal obligations	—		11.0		—		11.0
Asset-backed securities	—		63.3		—		63.3
Total available-for-sale investments (c)	—		373.2		—		373.2
Forward foreign exchange contracts (d)	—		0.6		—		0.6
Total financial assets carried at fair value	$	2,738.1	$	461.9	$	—	$	3,200.0
Financial Liabilities Carried at Fair Value:
Forward foreign exchange contracts (e)	$	—	$	0.7	$	—	$	0.7
Contingent consideration (f)	—		—		8.4		8.4
Total financial liabilities carried at fair value	$	—	$	0.7	$	8.4	$	9.1

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

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

	March 31, 2019
Short-term investments	$	45.7
Other investments	3,647.0
Total	$	3,692.7

The unrealized gains on our equity securities for the first quarter of 2019 are $1,059.2 million and are primarily due to our investment in Sartorius AG and is recorded in our Condensed Consolidated Statements of Income.

(c)Available-for-sale investments are included in the following accounts in the Condensed Consolidated Balance Sheets (in millions):

	March 31, 2019		December 31, 2018
Short-term investments	$	357.5	$	373.0
Other investments	0.1		0.2
Total	$	357.6	$	373.2

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(d) Forward foreign exchange contracts in an asset position are included in Other current assets in the Condensed Consolidated Balance Sheets.

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

(f) Contingent consideration liability is included in the following accounts in the Condensed Consolidated Balance Sheets (in millions):

	March 31, 2019		December 31, 2018
Other current liabilities	$	3.4	$	3.2
Other long-term liabilities	3.1		5.2
Total	$	6.5	$	8.4

During the first quarter of 2016, we recognized a contingent consideration liability upon our acquisition of a high performance analytical flow cytometer platform from Propel. At the acquisition date, the amount of contingent consideration was determined based on a probability-weighted income approach related to the achievement of sales milestones, ranging from 39% to 20% for the calendar years 2017 through 2020. The sales milestones could potentially range from $0 to an unlimited amount. In the first quarter of 2019, we paid $1.4 million per the purchase agreement. Since 2016 we have decreased the cumulative valuation of the sales milestones by net $12.7 million. The contingent consideration was accrued at its estimated fair value of $6.5 million as of March 31, 2019.

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

December 31, 2018	$	8.4
Payment of sales milestone	(1.4		)
Decrease in estimated fair value of contingent consideration included in Selling, general and administrative expense	(0.5		)
March 31, 2019	$	6.5

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

	Valuation Technique	Unobservable Input
Analytical flow cytometer platform	Probability-weighted income approach	Sales milestones:
		Discount rate	12.0	%
		Cost of debt	4.7	%

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To estimate the fair value of Level 2 debt securities as of March 31, 2019, our primary pricing provider uses Reuters as the primary pricing source. Our pricing process allows us to select a hierarchy of pricing sources for securities held. If Reuters does not price a Level 2 security that we hold, then the pricing provider will utilize our custodian supplied pricing as the secondary pricing source.

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

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

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

	March 31, 2019
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate debt securities	$	194.1	$	0.5	$	(0.4	)	$	194.2
Municipal obligations	10.9		—		—			10.9
Asset-backed securities	66.8		0.1		(0.2		)	66.7
U.S. government sponsored agencies	80.1		0.3		(0.5		)	79.9
Foreign government obligations	3.0		—		—			3.0
Other foreign obligations	2.8		—		—			2.8
	357.7		0.9		(1.1		)	357.5
Long-term investments:
Asset-backed securities	0.1		—		—			0.1
	0.1		—		—			0.1
Total	$	357.8	$	0.9	$	(1.1	)	$	357.6

The following is a summary of the amortized cost and estimated fair value of our debt securities at March 31, 2019 by contractual maturity date (in millions):

	Amortized Cost		Estimated Fair Value
Mature in less than one year	$	129.9	$	129.8
Mature in one to five years	175.8		175.8
Mature in more than five years	52.1		52.0
Total	$	357.8	$	357.6

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

	December 31, 2018
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate debt securities	$	216.2	$	0.1	$	(1.3	)	$	215.0
Municipal obligations	11.1		—		(0.1		)	11.0
Asset-backed securities	63.5		—		(0.4		)	63.1
U.S. government sponsored agencies	80.9