Bio-Rad(BIO_B) - 2019 Q1 - Quarterly Report

Part I – Financial Information Details the company's unaudited Q1 2019 financial statements, management's analysis, and market risk disclosures Financial Statements Presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2019 Condensed Consolidated Balance Sheets Total assets grew to $6.86 billion, influenced by a new lease accounting standard and increased investments Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | Total current assets | $2,031,643 | $2,023,478 | | Total assets | $6,862,914 | $5,611,068 | | Total current liabilities | $444,306 | $450,795 | | Total liabilities | $1,999,059 | $1,590,737 | | Total stockholders' equity | $4,863,855 | $4,020,331 | - The balance sheet reflects the adoption of the new lease accounting standard (ASC 842), resulting in the recognition of $221.6 million in Operating lease right-of-use assets and corresponding lease liabilities[8][9][50] Condensed Consolidated Statements of Income Net income rose to $865.2 million, driven by a significant gain from the change in fair value of equity securities Q1 2019 vs Q1 2018 Income Statement (in thousands, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net sales | $553,979 | $551,519 | | Gross profit | $311,762 | $302,203 | | Income from operations | $56,606 | $43,646 | | Change in fair market value of equity securities | $1,059,230 | $815,934 | | Net income | $865,195 | $656,774 | | Diluted earnings per share | $28.74 | $21.77 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased slightly to $42.9 million, with a net cash increase of $24.4 million Q1 2019 vs Q1 2018 Cash Flows (in thousands) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,943 | $40,346 | | Net cash used in investing activities | ($22,713) | ($18,816) | | Net cash provided by financing activities | $2,161 | $2,515 | | Net increase in cash | $24,373 | $22,662 | Notes to Condensed Consolidated Financial Statements Provides details on accounting changes, acquisitions, fair value measurements, and segment performance - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of material right-of-use assets and lease liabilities on the balance sheet[50] - In March 2019, the company acquired a small private company for approximately $20.0 million, which is included in the Life Science segment and resulted in $10.7 million of goodwill[55][56] - Unrealized gains on equity securities for Q1 2019 were $1,059.2 million, primarily due to the investment in Sartorius AG, and are recorded in the Condensed Consolidated Statements of Income[62] Segment Net Sales (in millions) | Segment | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Life Science | $215.7 | $197.8 | | Clinical Diagnostics | $334.1 | $350.8 | Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses a 4.0% currency-neutral sales increase, segment performance, margin improvement, and liquidity position Results of Operations Net sales grew 4.0% on a currency-neutral basis, driven by Life Science segment growth and improved gross margins Q1 2019 Sales Performance by Segment | Segment | Sales (in millions) | YoY Change | Currency-Neutral YoY Change | | :--- | :--- | :--- | :--- | | Life Science | $215.7 | +9.1% | +12.0% | | Clinical Diagnostics | $334.1 | -4.8% | -0.9% | | Total | $554.0 | +0.4% | +4.0% | - Consolidated gross margins increased to 56.3% in Q1 2019 from 54.8% in Q1 2018, primarily due to a 6.9 percentage point increase in Life Science segment gross margins[137] - The change in fair market value of equity securities, primarily from the investment in Sartorius AG, resulted in a gain of $1,059.2 million in Q1 2019, compared to a gain of $815.9 million in Q1 2018[143] Liquidity and Capital Resources The company maintains a strong liquidity position with $859.0 million in cash and a renewed credit facility - As of March 31, 2019, the company had $859.0 million in cash, cash equivalents, and short-term investments[149] - Net cash provided by operations for Q1 2019 was $42.9 million, up from $40.3 million in Q1 2018[152] - The company's $200.0 million credit agreement was renewed in April 2019 and will mature in April 2024, ensuring continued financial flexibility[147] Quantitative and Qualitative Disclosures about Market Risk Confirms no material changes to market risk disclosures from the prior year-end report - There were no material changes in market risk disclosures during the first quarter of 2019[163] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the quarter-end - The CEO and CFO concluded that as of March 31, 2019, the company's disclosure controls and procedures were effective[166] - No material changes to internal control over financial reporting were identified during the first quarter of 2019[166] Part II – Other Information Covers legal proceedings, risk factors, and other required disclosures for the reporting period Legal Proceedings Details the ongoing whistleblower retaliation lawsuit with the company's former general counsel - The company is involved in a lawsuit with its former general counsel, Sanford S. Wadler, alleging whistleblower retaliation[108] Risk Factors Outlines key risks including international operations, ERP system implementation, and healthcare industry changes - Risks from international operations are significant, with 59% of Q1 2019 net sales from foreign subsidiaries, including currency fluctuations, trade restrictions, and Brexit[173][179] - The multi-year implementation of a new global ERP system presents risks of significant delays, increased costs, and business disruption[181] - Changes in the healthcare industry, including cost-containment pressures and reduced reimbursement rates, could adversely affect the Clinical Diagnostics business[194][195][197] - The adoption of ASU 2016-01 requires measuring equity investments at fair value through earnings, which may continue to materially impact the Consolidated Statement of Income[235] Other Information Items (2, 3, 4, 5) Confirms no reportable events under unregistered sales, defaults, mine safety, or other information items - The company reported 'None' or 'Not applicable' for Items 2, 3, 4, and 5[254] Exhibits Lists the exhibits filed with the report, including required CEO and CFO certifications - Key exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[256]