Bio-Rad(BIO) - 2023 Q3 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements This section presents Bio-Rad Laboratories' unaudited condensed consolidated financial statements and detailed notes Condensed Consolidated Balance Sheets This section details the company's financial position, including assets, liabilities, and equity, at period-end Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $3,146,770 | $3,157,976 | | Total Assets | $11,895,943 | $13,501,666 | | Total Current Liabilities | $558,176 | $568,708 | | Total Liabilities | $3,479,745 | $3,886,414 | | Total Stockholders' Equity | $8,416,198 | $9,615,252 | - Total assets decreased from $13.5 billion at year-end 2022 to $11.9 billion as of September 30, 2023, primarily driven by a decrease in the value of 'Other investments'. Total stockholders' equity also decreased from $9.6 billion to $8.4 billion during the same period[277][279] Condensed Consolidated Statements of Income (Loss) This section details the company's financial performance, including net sales, gross profit, and net income or loss Income Statement Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $632,124 | $680,800 | $1,990,078 | $2,071,961 | | Gross Profit | $335,683 | $372,567 | $1,060,583 | $1,170,233 | | Income from Operations | $90,949 | $94,646 | $242,479 | $363,946 | | Net Income (Loss) | $106,257 | ($162,808) | ($987,032) | ($4,455,269) | | Diluted EPS | $3.64 | ($5.48) | ($33.63) | ($149.41) | - The company reported a net income of $106.3 million in Q3 2023, a significant turnaround from a net loss of $162.8 million in Q3 2022. This was largely driven by a gain from the change in fair market value of equity securities, compared to a large loss in the prior-year period[15] Condensed Consolidated Statements of Cash Flows This section outlines the company's cash flows from operating, investing, and financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $293,896 | $114,790 | | Net cash used in investing activities | ($51,989) | ($1,149,041) | | Net cash (used in) provided by financing activities | ($225,027) | $1,060,195 | | Net increase in cash | $23,771 | $47,111 | - Cash from operations increased significantly to $293.9 million for the first nine months of 2023 from $114.8 million in the prior year period. Cash used in investing activities decreased substantially, while financing activities used cash primarily for treasury stock purchases, in contrast to the prior year which included proceeds from debt issuance[282] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of accounting policies and financial details supporting the statements - Revenue from reagent rental agreements attributed to lease elements was approximately 3% of total revenue for both the three and nine-month periods ended September 30, 2023 and 2022[176] - The company owns approximately 38% of the ordinary outstanding shares and 28% of the preference shares of Sartorius AG as of September 30, 2023. Changes in the market value of this investment significantly impact the income statement, with a gain of $42.5 million in Q3 2023 and a loss of $1,556.1 million for the nine months ended September 30, 2023[160][161] - In 2023, management approved two restructuring plans (February and June) to streamline operations, incurring total expenses of $15.4 million and $9.0 million respectively, primarily for employee termination benefits[34][53] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, segment results, liquidity, and capital resources Overview This section introduces Bio-Rad's business, operational segments, and key financial performance factors - Bio-Rad is a multinational manufacturer and distributor of life science research and clinical diagnostics products, organized into two reportable segments: Life Science and Clinical Diagnostics[59] - For the first nine months of 2023, approximately 43% of consolidated net sales were from the United States and 57% from international locations, with Europe being the largest international region. International sales are largely denominated in local currencies, exposing the company to foreign exchange risk[60] - The business is negatively impacted by economic constraints in China and ongoing challenges in the biopharma market, which are expected to persist through at least the remainder of 2023[346] Results of Operations This section analyzes the company's sales performance, segment contributions, and profitability drivers Q3 2023 vs Q3 2022 Performance | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $632.1M | $680.8M | -7.1% | | COVID-related Sales | $0.3M | $17.2M | -98.3% | | Currency Neutral Sales (ex-COVID) | - | - | -5.5% | Nine Months 2023 vs Nine Months 2022 Performance | Metric | Nine Months 2023 | Nine Months 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.99B | $2.07B | -4.0% | | COVID-related Sales | $3.4M | $95.7M | -96.4% | | Currency Neutral Sales (ex-COVID) | - | - | +1.6% | - Life Science segment sales for Q3 2023 decreased 17.1% (17.8% currency neutral) due to demand constraints from biopharma customers and a large drop in COVID-related sales[349] - Clinical Diagnostics segment sales for Q3 2023 increased 1.7% (1.0% currency neutral), driven by demand for diagnostic testing systems for blood typing, diabetes, and quality controls[95] Liquidity and Capital Resources This section assesses the company's ability to meet financial obligations, detailing cash, operating cash flow, and share repurchases - As of September 30, 2023, the company had $1.76 billion in cash, cash equivalents, and short-term investments. Management believes this liquidity, along with cash flow from operations and available credit, is adequate to meet current objectives[102][380] - Net cash from operations increased to $293.9 million for the first nine months of 2023, up from $114.8 million in the same period of 2022, primarily due to lower income tax payments and lower payments to suppliers and employees[357] - During Q3 2023, the company repurchased 58,478 shares of Class A common stock for $21.3 million. As of September 30, 2023, $478.7 million remained available under the share repurchase program[73] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states no material changes to market risk disclosures from the 2022 Annual Report on Form 10-K - There have been no material changes in the company's market risk exposures since the disclosures in the 2022 Annual Report on Form 10-K[361] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2023, with no material internal control changes - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[135] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[108] Part II – Other Information Item 1. Legal Proceedings The company is involved in various legal proceedings, not expecting a material adverse effect on financial position or liquidity - The company is involved in various legal proceedings in the ordinary course of business but does not expect any to have a material adverse effect on its financial results, position, or liquidity[109] Item 1A. Risk Factors This section details significant risks including pandemics, supply chain, international operations, competition, cybersecurity, and Sartorius AG investment - Pandemic and Supply Chain: The COVID-19 pandemic has affected and could again materially adversely affect business operations. The company is experiencing moderating challenges with the supply of raw materials and components, which has led to order backlogs and product development delays[110][113][139] - International Operations: With 57% of net sales from foreign entities, the company is exposed to complex foreign and U.S. laws, including the FCPA, data privacy requirements, and trade restrictions, which increase costs and risks[114][142] - Market and Competition: The life science and clinical diagnostics markets are highly competitive, with some competitors having greater financial resources. Pricing pressures and the inability to pass on higher costs could adversely affect business[116][117] - Cybersecurity: The company has experienced and expects to continue to experience cyberattacks. A significant data security breach could lead to misappropriation of confidential information, business disruption, and financial losses[119][146] - Sartorius AG Investment: Changes in the market value of the company's significant investment in Sartorius AG materially impact financial results and can cause share price volatility independent of the company's operating performance[186][187] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities, including Q3 2023 repurchases and remaining authorization Share Repurchases in Q3 2023 | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | | Jul 1 - Jul 31, 2023 | — | $— | $500.0M | | Aug 1 - Aug 31, 2023 | — | $— | $500.0M | | Sep 1 - Sep 30, 2023 | 58,478 | $364.61 | $478.7M | - As of September 30, 2023, $478.7 million remained available for stock repurchases under the program authorized by the Board in July 2023[225]