12. Commitments & Contingent Liabilities

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

12. COMMITMENTS AND CONTINGENT LIABILITIES

Rents and Leases

Rental expense under operating leases was $43.6 million, $44.4 million and $45.0 million in 2017, 2016 and 2015, respectively. Leases are principally for facilities and automobiles. We had no sublease income.

Annual future minimum lease payments at December 31, 2017 under operating leases are as follows: 2018 - $39.3 million; 2019 - $33.2 million; 2020 - $27.1 million; 2021 - $17.8 million; and 2022 and beyond - $27.5 million.

Deferred Profit Sharing Retirement Plan

We have a profit sharing plan covering substantially all U.S. employees. Contributions are made at the discretion of the Board of Directors. Bio-Rad has no liability other than for the current year’s contribution. Contribution expense was $16.0 million, $15.1 million and $14.7 million in 2017, 2016 and 2015, respectively.

Other Post-Employment Benefits

In several foreign locations we are statutorily required to provide retirement benefits or a lump sum termination indemnity to our employees upon termination for virtually any reason. These plans are accounted for as defined benefit plans and the associated net benefit obligation at December 31, 2017 and 2016 of $74.9 million and $63.9 million, respectively, has been included in Accrued payroll and employee benefits and Other long-term liabilities in the Consolidated Balance Sheets. Most plans are not required to be funded, and as such, there is no trust or other device used to accumulate assets or settle these obligations. However, some of these plans require funding based on local laws in which there is a trust or other device administered by an external plan manager that is used to accumulate assets to assist in settling these obligations. The following disclosures include such plans, which are located in France, Switzerland, Germany, Korea, India, Thailand, Italy, Dubai and Japan.

Obligations and Funded Status

The following table sets forth the change in benefit obligations, fair value of plan assets and amounts recognized in the Consolidated Balance Sheets for the plans (in millions):



Change in benefit obligation:	2017		2016
Benefit obligation at beginning of year	$122.7		$120.8
Service cost	6.5		6.1
Interest cost	1.1		1.4
Plan participants' contributions	2.8		2.6
Actuarial (gain) loss	3.3		—
Gross benefits paid	(3.2	)	(3.3	)
Plan amendments	1.1		—
Special termination benefits	(2.0	)	—
Settlements	(5.1	)	(2.5	)
Change attributable to foreign exchange	9.4		(2.4	)

Benefit obligation at end of year	136.6		122.7

Change in plan assets:
Fair value of plan assets at beginning year	58.8		56.7
Actual return on plan assets	0.5		1.3
Employer contributions	4.0		4.7
Plan participants' contributions	2.8		2.6
Gross benefits paid	(2.3	)	(2.9	)
Settlements	(5.1	)	(2.5	)
Change attributable to foreign exchange	3.0		(1.1	)

Fair value of plan assets at end of year	61.7		58.8

Under funded status of plans	$(74.9)		$(63.9)

Amounts recognized in the consolidated balance sheets:
Current liabilities (Accrued payroll and employee benefits)	$(1.1)		$(0.5)
Noncurrent liabilities (Other long-term liabilities)	(73.8	)	(63.4	)

Net liability, end of fiscal year	$(74.9)		$(63.9)

Components of Net Periodic Benefit Cost

The following sets forth the net periodic benefit cost (income) for the periods indicated (in millions):



	2017		2016		2015
Service costs	$6.5		$6.1		$5.3
Interest costs	1.1		1.4		1.4
Expected returns on plan assets	(1.1	)	(1.0	)	(1.2	)
Amortization of actuarial losses	1.4		1.7		0.8
Amortization of prior service costs	—		—		0.4
Settlements	1.2		0.4		—

Net periodic benefit costs	$9.1		$8.6		$6.7

Assumptions

The weighted-average assumptions used in computing the benefit obligations are as follows:



	2017		2016
Discount rate	0.8	%	0.9	%
Compensation rate increase	1.8	%	1.6	%

The weighted-average assumptions used in computing the net periodic benefit costs are as follows:



	2017		2016		2015
Discount rate	0.9	%	1.1	%	1.3	%
Expected long-term rate of return on plan assets	1.9	%	1.6	%	2.3	%

In some foreign locations we have service award plans that are paid based upon the number of years of employment. Under these plans, the liability at December 31, 2017 and 2016 was $3.7 million and $3.5 million, respectively, and has been included in Accrued payroll and employee benefits and Other long-term liabilities in the Consolidated Balance Sheets.

Purchase Obligations

As of December 31, 2017, we had obligations that have been recognized on our balance sheet of $131.2 million, which include purchases of goods and services that are enforceable and legally binding to Bio-Rad and that specify all significant terms and exclude agreements that are cancelable without penalty. These obligations also include other post-employment benefits in some of our foreign locations as indicated above.

The annual future fixed and determinable portion of our purchase obligations that have been recognized on our balance sheet as of December 31, 2017 are as follows: 2018 - $10.3 million, 2019 - $14.3 million, 2020 - $10.6 million, 2021 - $6.9 million, 2022 - $2.6 million and after 2022 - $86.5 million.

As of December 31, 2017, we had purchase obligations that have not been recognized on our balance sheet of $24.5 million, which include agreements to purchase goods or services that are enforceable and legally binding to Bio-Rad and that specify all significant terms and exclude agreements that are cancelable without penalty.

The annual future fixed and determinable portion of our purchase obligations that have not been recognized on our balance sheet as of December 31, 2017 are as follows: 2018 - $3.7 million, 2019 - $3.8 million, 2020 - $3.7 million, 2021 - $3.8 million, 2022 - $3.7 million and after 2022 - $5.8 million.

Letters of Credit/Guarantees

In the ordinary course of business, we are at times required to post letters of credit/guarantees. The letters of credit/guarantees are issued by financial institutions to guarantee our obligations to various parties. We were contingently liable for $4.2 million of standby letters of credit/guarantees with financial institutions as of December 31, 2017.

Contingent Consideration

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. The current contingent consideration is built on a sales forecast of $78 million through December 31, 2020. In the third quarter of 2017, we paid $0.6 million upon reaching the first milestone and since 2016 we have decreased the valuation of the sales milestones by $6.0 million. The contingent consideration was accrued at its estimated fair value of $16.7 million as of December 31, 2017.

In 2014, we recognized a contingent consideration liability upon our acquisition of GnuBIO, Inc. The contingent consideration for the 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. This amount had been accounted for as a contingent liability as of December 31, 2016 in the amount of $10.0 million and was reversed to selling, general and administrative expense during the first quarter of 2017 due to reaching a favorable resolution of the contingency with the previous owners of GnuBIO, Inc.

In 2012, we recognized a contingent consideration liability for certain milestones of $44.6 million upon our acquisition of a new cell sorting system from Propel. Since 2012, we have paid $32.0 million upon reaching the milestones and have reduced the valuation of the milestones by $12.6 million. The remaining liability of $3.1 million was paid in February 2017.

Concentrations of Labor Subject to Collective Bargaining Agreements

At December 31, 2017, approximately seven percent of Bio-Rad's approximately 3,270 U.S. employees were covered by a collective bargaining agreement, which will expire on November 7, 2019. Many of Bio-Rad's non-U.S. full-time employees, especially in France, are covered by collective bargaining agreements.