XML 21 R9.htm IDEA: XBRL DOCUMENT
v2.4.0.8

3. Fair Value Measurements | 9 Months Ended
--- | ---
Sep. 30, 2014
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 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 September 30, 2014 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 | $ | — |  |  | $ | 8.4 |  |  | $ | — |  |  | $ | 8.4 |
Foreign time deposits | 14.9 |  |  | — |  |  | — |  |  | 14.9 |
Money market funds | 2.5 |  |  | — |  |  | — |  |  | 2.5 |
Total cash equivalents (a) | 17.4 |  |  | 8.4 |  |  | — |  |  | 25.8 |
Available-for-sale investments: |  |  |  |  |  |  |
Corporate debt securities | — |  |  | 132.6 |  |  | — |  |  | 132.6 |
Foreign brokered certificates of deposit | — |  |  | 5.2 |  |  | — |  |  | 5.2 |
U.S. government sponsored agencies | — |  |  | 46.0 |  |  | — |  |  | 46.0 |
Foreign government obligations | — |  |  | 4.4 |  |  | — |  |  | 4.4 |
Municipal obligations | — |  |  | 7.8 |  |  | — |  |  | 7.8 |
Marketable equity securities | 308.6 |  |  | — |  |  | — |  |  | 308.6 |
Asset-backed securities | — |  |  | 50.1 |  |  | — |  |  | 50.1 |
Total available-for-sale investments (b) | 308.6 |  |  | 246.1 |  |  | — |  |  | 554.7 |
Forward foreign exchange contracts (c) | — |  |  | 1.0 |  |  | — |  |  | 1.0 |
Total financial assets carried at fair value | $ | 326.0 |  |  | $ | 255.5 |  |  | $ | — |  |  | $ | 581.5 |
Financial Liabilities Carried at Fair Value: |  |  |  |  |  |  |
Forward foreign exchange contracts (d) | $ | — |  |  | $ | 0.3 |  |  | $ | — |  |  | $ | 0.3 |
Contingent consideration (e) | — |  |  | — |  |  | 23.1 |  |  | 23.1 |
Total financial liabilities carried at fair value | $ | — |  |  | $ | 0.3 |  |  | $ | 23.1 |  |  | $ | 23.4 |
Financial assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2013 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 | $ | — |  |  | $ | 7.0 |  |  | $ | — |  |  | $ | 7.0 |
Foreign time deposits | 11.1 |  |  | — |  |  | — |  |  | 11.1 |
U.S. government sponsored agencies | — |  |  | 1.2 |  |  | — |  |  | 1.2 |
Money market funds | 1.2 |  |  | — |  |  | — |  |  | 1.2 |
Total cash equivalents (a) | 12.3 |  |  | 8.2 |  |  | — |  |  | 20.5 |
Available-for-sale investments: |  |  |  |  |  |  |
Corporate debt securities | — |  |  | 132.5 |  |  | — |  |  | 132.5 |
Foreign brokered certificates of deposit | — |  |  | 8.9 |  |  | — |  |  | 8.9 |
U.S. government sponsored agencies | — |  |  | 39.1 |  |  | — |  |  | 39.1 |
Foreign government obligations | — |  |  | 5.6 |  |  | — |  |  | 5.6 |
Municipal obligations | — |  |  | 11.0 |  |  | — |  |  | 11.0 |
Marketable equity securities | 325.2 |  |  | — |  |  | — |  |  | 325.2 |
Asset-backed securities | — |  |  | 48.6 |  |  | — |  |  | 48.6 |
Total available-for-sale investments (b) | 325.2 |  |  | 245.7 |  |  | — |  |  | 570.9 |
Forward foreign exchange contracts (c) | — |  |  | 0.6 |  |  | — |  |  | 0.6 |
Total financial assets carried at fair value | $ | 337.5 |  |  | $ | 254.5 |  |  | $ | — |  |  | $ | 592.0 |
Financial Liabilities Carried at Fair Value: |  |  |  |  |  |  |
Forward foreign exchange contracts (d) | $ | — |  |  | $ | 1.1 |  |  | $ | — |  |  | $ | 1.1 |
Contingent consideration (e) | — |  |  | — |  |  | 20.8 |  |  | 20.8 |
Total financial liabilities carried at fair value | $ | — |  |  | $ | 1.1 |  |  | $ | 20.8 |  |  | $ | 21.9 |
(a) | Cash equivalents are included in Cash and cash equivalents in the Condensed Consolidated Balance Sheets.
(b) | Available-for-sale investments are included in the following accounts in the Condensed Consolidated Balance Sheets (in millions):
| September 30, 2014 |  | December 31, 2013
Short-term investments | $ | 278.0 |  |  | $ | 277.4 |
Other investments | 276.7 |  |  | 293.5 |
Total | $ | 554.7 |  |  | $ | 570.9 |
(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.
(e) | Contingent consideration liability is included in the following accounts in the Condensed Consolidated Balance Sheets (in millions):
| September 30, 2014 |  | December 31, 2013
Other current liabilities | $ | 9.6 |  |  | $ | 6.1 |
Other long-term liabilities | 13.5 |  |  | 14.7 |
Total | $ | 23.1 |  |  | $ | 20.8 |
During the third quarter of 2012, we recognized a contingent consideration liability upon our acquisition of a new cell sorting system from Propel Labs, Inc. The fair value of the contingent consideration was based on a probability-weighted income approach related to the achievement of certain development and sales milestones. The development milestone was achieved and paid in 2013. In the third quarter of 2014, the first sales milestone was reached with cell sorting system purchase orders resulting in a commitment to pay $2.4 million during the fourth quarter of 2014. Based on the most recent valuation, the sales milestones could potentially range from $0 to a maximum of 51.32% and 50.38% of annual cell sorting system purchase orders for September 2014 and September 2015, respectively, with payment to occur upon the anniversary of the completion of a certain number of cell sorting systems for two consecutive years, respectively. These maximum payout ratios begin at annual cell sorting system purchase orders in excess of $30 million and $45 million for the two consecutive years, respectively. The contingent consideration was revalued by a reduction of $4.9 million in 2014 to Selling, general and administrative expense to its estimated fair value of $15.9 million as of September 30, 2014. During the second quarter of 2014, we recognized a contingent consideration liability upon our acquisition of GnuBIO. At the acquisition date, the contingent consideration was based on a probability-weighted income approach that could reach $70.0 million upon the achievement of all development/regulatory and sales milestones. The contingent consideration for the development/regulatory milestones was valued at $10.7 million at the acquisition date based on assumptions regarding the probability of achieving the milestones, with such amounts discounted to present value. During the third quarter of 2014, the development/regulatory milestones were revalued to a fair value of $7.2 million as of September 30, 2014. The contingent consideration for the sales milestones at the acquisition date was determined to be negligible, using the risk-neutral probability of being in the money based on a Black-Scholes framework. The following table provides a reconciliation of the Level 3 contingent consideration liability measured at estimated fair value based on original valuations and updated quarterly for the nine months ended September 30, 2014 (in millions):
| 2014
January 1 | $ | 20.8 |
Decrease in estimated fair value of contingent consideration included in Selling, general and administrative expense - Cell sorting system | (4.9 | )
Acquisition of GnuBIO | 10.7 |
Decrease in estimated fair value of contingent consideration included in Selling, general and administrative expense - GnuBIO | (3.5 | )
September 30 | $ | 23.1 |
The following table provides quantitative information about Level 3 inputs for fair value measurement of our contingent consideration liability as of September 30, 2014. Significant increases or decreases in these inputs in isolation could result in a significantly lower or higher fair value measurement.
|  |  | Range
| Valuation Technique | Unobservable Input | From | To
Cell sorting system | Probability-weighted income approach | Sales milestones: |  |
|  | Credit adjusted discount rates | 0.82% | 1.29%
|  | Projected volatility of growth rate | 20% | NA
|  | Market price of risk | 1.90% | N/A
GnuBIO | Probability-weighted income approach | Development/regulatory milestones: |  |
|  | Cumulative milestones probability | 50.0% | 28.1%
|  | Discount Rate | 0.10% | 0.54%
|  | Sales milestones: |  |
|  | Cumulative milestones probability | 0.00089% | 0.00000%
|  | Discount Rate | 0.98% | 2.22%
To estimate the fair value of Level 2 debt securities as of September 30, 2014 and December 31, 2013, our primary pricing provider uses S&P Capital IQ as the primary pricing source. Our pricing process allows us to select a hierarchy of pricing sources for securities held. The chosen pricing hierarchy for our Level 2 securities, other than certificates of deposit and commercial paper, is S&P Capital IQ as the primary pricing source and then our custodian as the secondary pricing source. If S&P Capital IQ does not price a Level 2 security that we hold, then the pricing provider will utilize our custodian supplied pricing. For commercial paper as of September 30, 2014 and December 31, 2013, pricing is determined by a straight-line calculation, starting with the purchase price on the date of purchase and increasing to par at maturity. Interest bearing certificates of deposit and commercial paper are priced at par. In addition to the above, our primary pricing provider performed daily reasonableness testing of the S&P Capital IQ prices to custodian reported prices. Prices outside a tolerable variance of approximately 1% are investigated and resolved. Available-for-sale investments consist of the following (in millions):
| September 30, 2014
| Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value
Short-term investments: |  |  |  |  |  |  |
Corporate debt securities | $ | 132.3 |  |  | $ | 0.4 |  |  | $ | (0.1 | ) |  | $ | 132.6 |
Foreign brokered certificates of deposit | 5.2 |  |  | — |  |  | — |  |  | 5.2 |
Municipal obligations | 7.9 |  |  | — |  |  | (0.1 | ) |  | 7.8 |
Asset-backed securities | 49.8 |  |  | — |  |  | (0.1 | ) |  | 49.7 |
U.S. government sponsored agencies | 46.0 |  |  | 0.1 |  |  | (0.1 | ) |  | 46.0 |
Foreign government obligations | 4.4 |  |  | — |  |  | — |  |  | 4.4 |
Marketable equity securities | 26.7 |  |  | 5.7 |  |  | (0.1 | ) |  | 32.3 |
| 272.3 |  |  | 6.2 |  |  | (0.5 | ) |  | 278.0 |
Long-term investments: |  |  |  |  |  |  |
Marketable equity securities | 54.5 |  |  | 221.8 |  |  | — |  |  | 276.3 |
Asset-backed securities | 0.4 |  |  | — |  |  | — |  |  | 0.4 |
| 54.9 |  |  | 221.8 |  |  | — |  |  | 276.7 |
Total | $ | 327.2 |  |  | $ | 228.0 |  |  | $ | (0.5 | ) |  | $ | 554.7 |
| December 31, 2013
| Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Estimated Fair Value
Short-term investments: |  |  |  |  |  |  |
Corporate debt securities | $ | 132.6 |  |  | $ | 0.3 |  |  | $ | (0.4 | ) |  | $ | 132.5 |
Foreign brokered certificates of deposit | 8.9 |  |  | — |  |  | — |  |  | 8.9 |
Municipal obligations | 11.1 |  |  | — |  |  | (0.1 | ) |  | 11.0 |
Asset-backed securities | 48.4 |  |  | 0.1 |  |  | (0.2 | ) |  | 48.3 |
U.S. government sponsored agencies | 39.1 |  |  | 0.1 |  |  | (0.1 | ) |  | 39.1 |
Foreign government obligations | 5.6 |  |  | — |  |  | — |  |  | 5.6 |
Marketable equity securities | 26.6 |  |  | 5.4 |  |  | — |  |  | 32.0 |
| 272.3 |  |  | 5.9 |  |  | (0.8 | ) |  | 277.4 |
Long-term investments: |  |  |  |  |  |  |
Marketable equity securities | 54.5 |  |  | 238.7 |  |  | — |  |  | 293.2 |
Asset-backed securities | 0.4 |  |  | — |  |  | (0.1 | ) |  | 0.3 |
| 54.9 |  |  | 238.7 |  |  | (0.1 | ) |  | 293.5 |
Total | $ | 327.2 |  |  | $ | 244.6 |  |  | $ | (0.9 | ) |  | $ | 570.9 |
The following is a summary of investments with gross unrealized losses and the associated fair value (in millions):
| September 30, 2014 |  | December 31, 2013
Fair value of investments in a loss position 12 months or more | $ | 12.6 |  |  | $ | 2.3 |
Fair value of investments in a loss position less than 12 months | $ | 56.8 |  |  | $ | 73.9 |
Gross unrealized losses for investments in a loss position 12 months or more | $ | 0.2 |  |  | $ | 0.1 |
Gross unrealized losses for investments in a loss position less than 12 months | $ | 0.3 |  |  | $ | 0.8 |
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 September 30, 2014 or at December 31, 2013. As part of distributing our products, we regularly enter into intercompany transactions. We enter into forward foreign 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 denominated primarily in currencies of industrial countries, are recorded at their fair value at each balance sheet date. The notional principal amounts provide one measure of the transaction volume outstanding as of September 30, 2014 and do not represent the amount of Bio-Rad's exposure to loss. The estimated fair value of these contracts was derived using the spot rates from Reuters 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 included in Foreign exchange losses, net in the Condensed Consolidated Statements of Operations. The following is a summary of our forward foreign exchange contracts (in millions):
| September 30,
| 2014
Contracts maturing in October through December 2014 to sell foreign currency: |
Notional value | $ | 89.4 |
Unrealized gain | $ | 0.3 |
Contracts maturing in October through December 2014 to purchase foreign currency: |
Notional value | $ | 345.0 |
Unrealized gain | $ | 0.3 |
The following is a summary of the amortized cost and estimated fair value of our debt securities at September 30, 2014 by contractual maturity date (in millions):
| Amortized Cost |  | Estimated Fair Value
Mature in less than one year | $ | 96.0 |  |  | $ | 96.1 |
Mature in one to five years | 110.5 |  |  | 110.6 |
Mature in more than five years | 39.5 |  |  | 39.4 |
Total | $ | 246.0 |  |  | $ | 246.1 |
The estimated fair value of financial instruments that are not recognized at fair value in the Condensed Consolidated Balance Sheets and are included in Other investments, are presented in the table below. Fair value has been determined using significant observable inputs, including quoted prices in active markets for similar instruments. 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 investments include financial instruments, the majority of which have fair value based on similar, actively traded stock adjusted for various discounts, including a discount for marketability. Long-term debt, excluding leases and current maturities, has an estimated fair value based on quoted market prices for the same or similar issues. The estimated fair value of the financial instruments discussed above and the level of the fair value hierarchy within which the fair value measurement is categorized are as follows (in millions):
| September 30, 2014 |  | December 31, 2013
| Carrying Amount |  | Estimated Fair Value |  | Fair Value Hierarchy Level |  | Carrying Amount |  | Estimated Fair Value |  | Fair Value Hierarchy Level
Other investments | $ | 81.6 |  |  | $ | 367.9 |  |  | 2 |  | $ | 77.5 |  |  | $ | 382.9 |  |  | 2
Total long-term debt, excluding leases and current maturities | $ | 423.4 |  |  | $ | 452.3 |  |  | 2 |  | $ | 423.2 |  |  | $ | 433.0 |  |  | 2
We own shares of ordinary voting stock of Sartorius AG (Sartorius), of Goettingen, Germany, a process technology supplier to the biotechnology, pharmaceutical, chemical and food and beverage industries. We own over 35% of the outstanding voting shares (excluding treasury shares) of Sartorius as of September 30, 2014. 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. We account for this investment using the cost method. The carrying value of this investment is included in Other investments in our Condensed Consolidated Balance Sheets. As the stock is thinly traded and in conjunction with the valuation method discussed above, we have classified the estimated fair value as Level 2. The Level 2 classification is appropriate given the valuation method employed, which incorporates an observable input of the fair value of the Sartorius’ actively traded preferred stock.

X
- Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration