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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | | | | |
For the quarterly period ended | September 30, 2023 |
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) | (I.R.S. Employer Identification No.) |
1000 Alfred Nobel Drive, | Hercules, | California | 94547 |
(Address of principal executive offices) | (Zip Code) |
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed since last report.)
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 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 | ☒ | No | ☐ |
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).
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 | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
.
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 October 20, 2023: | Class A - | 24,059,355 | Class B - | 5,085,815 |
BIO-RAD LABORATORIES, INC.
FORM 10-Q SEPTEMBER 30, 2023
TABLE OF CONTENTS
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Other than statements of historical fact, statements made in this report include forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements we make regarding our future financial performance, operating results, plans and objectives. 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, the impact of the COVID-19 pandemic, supply chain issues, global economic and geopolitical conditions, our ability to develop and market new or improved products, our ability to compete effectively, foreign currency exchange fluctuations, reductions in government funding or capital spending of our customers, international legal and regulatory risks, product quality and liability issues, our ability to integrate acquired companies, products or technologies into our company successfully, changes in the healthcare industry, natural disasters and other catastrophic events beyond our control, and other risks and uncertainties 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.
PART I – FINANCIAL INFORMATION
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
ASSETS: | (Unaudited) | | |
Cash and cash equivalents | $ | 457,850 | | | $ | 434,215 | |
Short-term investments | 1,301,143 | | | 1,356,457 | |
Restricted investments | 5,560 | | | 5,560 | |
Accounts receivable, less allowance for credit losses of $15,108 as of September 30, 2023 and $15,029 as of December 31, 2022 | 457,402 | | | 494,645 | |
Inventory | 775,818 | | | 719,316 | |
Prepaid expenses | 123,910 | | | 124,179 | |
Other current assets | 25,087 | | | 23,604 | |
Total current assets | 3,146,770 | | | 3,157,976 | |
Property, plant and equipment | 1,538,545 | | | 1,508,020 | |
Less: accumulated depreciation and amortization | (1,027,156) | | | (1,009,408) | |
Property, plant and equipment, net | 511,389 | | | 498,612 | |
Operating lease right-of-use assets | 200,013 | | | 180,952 | |
Goodwill, net | 406,953 | | | 406,488 | |
Purchased intangibles, net | 314,187 | | | 332,147 | |
Other investments | 7,218,161 | | | 8,830,892 | |
Other assets | 98,470 | | | 94,599 | |
Total assets | $ | 11,895,943 | | | $ | 13,501,666 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Balance Sheets
(continued)
(In thousands, except share data)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
LIABILITIES AND STOCKHOLDERS’ EQUITY: | (Unaudited) | | |
Accounts payable | $ | 111,859 | | | $ | 135,041 | |
Accrued payroll and employee benefits | 154,946 | | | 194,790 | |
Current maturities of long-term debt and notes payable | 476 | | | 465 | |
Income and other taxes payable | 103,978 | | | 32,428 | |
Current operating lease liabilities | 39,116 | | | 36,336 | |
Other current liabilities | 147,801 | | | 169,648 | |
Total current liabilities | 558,176 | | | 568,708 | |
Long-term debt, net of current maturities | 1,198,713 | | | 1,197,716 | |
Deferred income taxes | 1,369,556 | | | 1,770,481 | |
Operating lease liabilities | 167,179 | | | 153,597 | |
Other long-term liabilities | 186,121 | | | 195,912 | |
Total liabilities | 3,479,745 | | | 3,886,414 | |
| | | |
Stockholders’ equity: | | | |
Class A common stock, shares issued 25,163,999 and 25,162,075 as of September 30, 2023 and December 31, 2022, respectively; shares outstanding 24,059,355 and 24,521,583 as of September 30, 2023 and December 31, 2022, respectively | 2 | | | 2 | |
Class B common stock, shares issued and outstanding, 5,085,815 as of September 30, 2023 and 5,074,130 as of December 31, 2022, respectively | 1 | | | 1 | |
Additional paid-in capital | 439,455 | | | 447,454 | |
Class A treasury stock at cost, 1,104,644 and 640,492 shares as of September 30, 2023 and December 31, 2022, respectively | (436,620) | | | (263,586) | |
Retained earnings | 8,910,921 | | | 9,898,203 | |
Accumulated other comprehensive loss | (497,561) | | | (466,822) | |
Total stockholders’ equity | 8,416,198 | | | 9,615,252 | |
Total liabilities and stockholders’ equity | $ | 11,895,943 | | | $ | 13,501,666 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Income (Loss)
(In thousands, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | |
Net sales | $ | 632,124 | | | $ | 680,800 | | | $ | 1,990,078 | | | $ | 2,071,961 | |
Cost of goods sold | 296,441 | | | 308,233 | | | 929,495 | | | 901,728 | |
Gross profit | 335,683 | | | 372,567 | | | 1,060,583 | | | 1,170,233 | |
Selling, general and administrative expense | 201,199 | | | 211,113 | | | 634,576 | | | 615,598 | |
Research and development expense | 43,535 | | | 66,808 | | | 183,528 | | | 190,689 | |
| | | | | | | |
Income from operations | 90,949 | | | 94,646 | | | 242,479 | | | 363,946 | |
Interest expense | 12,398 | | | 11,663 | | | 37,078 | | | 26,431 | |
Foreign currency exchange (gains) losses, net | (1,680) | | | 4,364 | | | (5,280) | | | 3,133 | |
(Gains) losses from change in fair market value of equity securities and loan receivable | (36,425) | | | 288,999 | | | 1,576,542 | | | 6,172,306 | |
Other income, net | (20,446) | | | (3,062) | | | (87,365) | | | (42,369) | |
Income (loss) before income taxes | 137,102 | | | (207,318) | | | (1,278,496) | | | (5,795,555) | |
(Provision for) benefit from income taxes | (30,845) | | | 44,510 | | | 291,464 | | | 1,340,286 | |
Net income (loss) | $ | 106,257 | | | $ | (162,808) | | | $ | (987,032) | | | $ | (4,455,269) | |
| | | | | | | |
Basic earnings (loss) per share: | | | | | | | |
Net income (loss) per share | $ | 3.65 | | | $ | (5.48) | | | $ | (33.63) | | | $ | (149.41) | |
Weighted average common shares - basic | 29,102 | | | 29,733 | | | 29,349 | | | 29,819 | |
| | | | | | | |
Diluted earnings (loss) per share: | | | | | | | |
Net income (loss) per diluted share | $ | 3.64 | | | $ | (5.48) | | | $ | (33.63) | | | $ | (149.41) | |
Weighted average common shares - diluted | 29,223 | | | 29,733 | | | 29,349 | | | 29,819 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net income (loss) | $ | 106,257 | | | $ | (162,808) | | | $ | (987,032) | | | $ | (4,455,269) | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustments, net of income taxes | (126,165) | | | (305,666) | | | (34,342) | | | (653,301) | |
Foreign other post-employment benefits adjustments, net of income taxes | (342) | | | 481 | | | (72) | | | 1,004 | |
Net unrealized holding gain (loss) on available-for-sale debt investments, net of income taxes | 1,808 | | | (6,643) | | | 3,675 | | | (17,364) | |
Other comprehensive loss, net of income taxes | (124,699) | | | (311,828) | | | (30,739) | | | (669,661) | |
Comprehensive loss | $ | (18,442) | | | $ | (474,636) | | | $ | (1,017,771) | | | $ | (5,124,930) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| 2023 | | 2022 |
Cash flows from operating activities: | | | |
Cash received from customers | $ | 2,007,482 | | | $ | 1,981,952 | |
Cash paid to suppliers and employees | (1,722,173) | | | (1,800,487) | |
Interest paid, net | (46,394) | | | (23,974) | |
Income tax payments, net | (40,966) | | | (137,863) | |
Dividend proceeds and miscellaneous receipts, net | 81,828 | | | 51,146 | |
Proceeds from forward foreign exchange contracts, net | 14,119 | | | 44,016 | |
Net cash provided by operating activities | 293,896 | | | 114,790 | |
Cash flows from investing activities: | | | |
Payments for purchases of property, plant and equipment | (114,435) | | | (77,987) | |
Proceeds from dispositions of property, plant and equipment | 104 | | | 114 | |
Proceeds from divestiture of a division | — | | | 1,360 | |
Payments for acquisitions, net of cash received | — | | | (100,746) | |
| | | |
Payments for purchases of marketable securities and investments | (537,540) | | | (1,807,148) | |
Proceeds from sales of marketable securities and investments | 339,033 | | | 542,639 | |
Proceeds from maturities of marketable securities and investments | 260,849 | | | 292,727 | |
Net cash used in investing activities | (51,989) | | | (1,149,041) | |
Cash flows from financing activities: | | | |
Proceeds from issuance of Notes, net of debt financing costs | — | | | 1,186,220 | |
Payments on long-term borrowings | (349) | | | (367) | |
| | | |
Proceeds from issuance of common stock and from reissuance of treasury stock under the employee stock purchase plan and upon exercise of stock options | 14,168 | | | 13,218 | |
Tax payments from net share settlement | (10,118) | | | (13,876) | |
Payments for purchases of treasury stock | (228,728) | | | (125,000) | |
Net cash (used in) provided by financing activities | (225,027) | | | 1,060,195 | |
Effect of foreign exchange rate changes on cash | 6,891 | | | 21,167 | |
Net increase in cash, cash equivalents and restricted cash | 23,771 | | | 47,111 | |
Cash, cash equivalents and restricted cash at beginning of period | 434,544 | | | 471,133 | |
Cash, cash equivalents and restricted cash at end of period | $ | 458,315 | | | $ | 518,244 | |
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):
| | | | | | | | | | | |
| September 30, 2023 | | September 30, 2022 |
Cash and cash equivalents | $ | 457,850 | | | $ | 517,943 | |
Restricted cash included in Other current assets | 79 | | | 12 | |
Restricted cash included in Other assets | 386 | | | 289 | |
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ | 458,315 | | | $ | 518,244 | |
These restricted cash items are primarily related to performance guarantees and other restricted deposits.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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, 2022 | $ | 3 | | | $ | 447,454 | | | $ | (263,586) | | | $ | 9,898,203 | | | $ | (466,822) | | | $ | 9,615,252 | |
Net income | — | | | — | | | — | | | 68,962 | | | — | | | 68,962 | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 58,470 | | | 58,470 | |
| | | | | | | | | | | |
Stock compensation expense | — | | | 16,608 | | | — | | | — | | | — | | | 16,608 | |
| | | | | | | | | | | |
Issuance of treasury stock | — | | | (660) | | | 5,290 | | | (206) | | | — | | | 4,424 | |
Balance at March 31, 2023 | $ | 3 | | | $ | 463,402 | | | $ | (258,296) | | | $ | 9,966,959 | | | $ | (408,352) | | | $ | 9,763,716 | |
Net loss | — | | | — | | | — | | | (1,162,251) | | | — | | | (1,162,251) | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 35,490 | | | 35,490 | |
| | | | | | | | | | | |
Stock compensation expense | — | | | 12,559 | | | — | | | — | | | — | | | 12,559 | |
Purchase of treasury stock | — | | | — | | | (207,407) | | | — | | | — | | | (207,407) | |
Issuance of treasury stock, net of shares withheld | — | | | (2,089) | | | 6,919 | | | (44) | | | — | | | 4,786 | |
Balance at June 30, 2023 | $ | 3 | | | $ | 473,872 | | | $ | (458,784) | | | $ | 8,804,664 | | | $ | (372,862) | | | $ | 8,446,893 | |
Net income | — | | | — | | | — | | | 106,257 | | | — | | | 106,257 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (124,699) | | | (124,699) | |
Issuance of common stock, net of shares withheld | — | | | (5,111) | | | — | | | — | | | — | | | (5,111) | |
Stock compensation expense | — | | | 15,952 | | | — | | | — | | | — | | | 15,952 | |
Purchase of treasury stock | — | | | — | | | (23,608) | | | — | | | — | | | (23,608) | |
Issuance of treasury stock, net of shares withheld | — | | | (45,258) | | | 45,772 | | | — | | | — | | | 514 | |
Balance at September 30, 2023 | $ | 3 | | | $ | 439,455 | | | $ | (436,620) | | | $ | 8,910,921 | | | $ | (497,561) | | | $ | 8,416,198 | |
BIO-RAD LABORATORIES, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(continued)
(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, 2021 | $ | 3 | | | $ | 441,733 | | | $ | (106,290) | | | $ | 13,525,343 | | | $ | (175,553) | | | $ | 13,685,236 | |
Net loss | — | | | — | | | — | | | (3,367,347) | | | — | | | (3,367,347) | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (132,303) | | | (132,303) | |
Issuance of common stock | — | | | 4,177 | | | — | | | — | | | — | | | 4,177 | |
Stock compensation expense | — | | | 13,521 | | | — | | | — | | | — | | | 13,521 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance at March 31, 2022 | $ | 3 | | | $ | 459,431 | | | $ | (106,290) | | | $ | 10,157,996 | | | $ | (307,856) | | | $ | 10,203,284 | |
Net loss | — | | | — | | | — | | | (925,114) | | | — | | | (925,114) | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (225,530) | | | (225,530) | |
Issuance of common stock, net of shares withheld | — | | | (443) | | | — | | | — | | | — | | | (443) | |
Stock compensation expense | — | | | 13,571 | | | — | | | — | | | — | | | 13,571 | |
Purchase of treasury stock | — | | | — | | | (125,000) | | | — | | | — | | | (125,000) | |
Issuance of treasury stock, net of shares withheld | — | | | (696) | | | 4,950 | | | 13 | | | — | | | 4,267 | |
Balance at June 30, 2022 | $ | 3 | | | $ | 471,863 | | | $ | (226,340) | | | $ | 9,232,895 | | | $ | (533,386) | | | $ | 8,945,035 | |
Net loss | — | | | — | | | — | | | (162,808) | | | — | | | (162,808) | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (311,828) | | | (311,828) | |
Issuance of common stock, net of shares withheld | — | | | (7,550) | | | — | | | — | | | — | | | (7,550) | |
Stock compensation expense | — | | | 15,735 | | | — | | | — | | | — | | | 15,735 | |
| | | | | | | | | | | |
Issuance of treasury stock, net of shares withheld | — | | | (49,501) | | | 48,079 | | | 305 | | | — | | | (1,117) | |
Balance at September 30, 2022 | $ | 3 | | | $ | 430,547 | | | $ | (178,261) | | | $ | 9,070,392 | | | $ | (845,214) | | | $ | 8,477,467 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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, 2022 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, 2022.
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. Such estimates include, but are not limited to, revenue recognition, the valuation of inventory, the valuation of acquired intangible assets, valuation of accounts receivable, estimation of warranty reserve, estimation of legal reserves, the recognition and measurement of current and deferred income tax assets and fair value measurement of the Loan receivable. Actual results could differ materially from those estimates.
Revenue Recognition
We recognize revenue from operations through the sale of products, services, license of intellectual property 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. Revenue is recognized net of any taxes collected from customers (sales tax, value added tax, etc.), which are subsequently remitted to government authorities.
We enter into contracts that can include various combinations of products and services, which are generally accounted for as distinct performance obligations. A product or service is considered distinct if it is separately identifiable from other deliverables in the arrangement and if a customer can benefit from such product or service on its own or with other resources that are readily available to the customer. The transaction consideration is allocated between separate performance obligations of an arrangement based on the standalone selling price for
each distinct product or service. The method used to determine the standalone selling prices for product and service revenues is based on the observable prices when the product or services have been sold separately.
We recognize revenue from product sales at the point in time when we have satisfied our performance obligation by transferring control of the product to the customer. We use judgment to evaluate whether and when control has transferred and consider the right to payment, legal title, physical possession, risks and rewards of ownership, and customer acceptance if it is not a formality, as indicators to determine the transfer of control to the customer. For products that include installation, the product and installation are separate performance obligations. The product revenue is recognized when control has transferred to the customer, generally upon delivery, and installation service revenue is recognized when the product installation is completed.
At the time revenue is recognized, a provision is recorded for estimated product returns as this right is considered variable consideration. Accordingly, when product revenues are recognized, the transaction price is reduced by the estimated amount of product returns.
Service revenues on extended warranty contracts are recognized ratably over the life of the service agreement as a stand-ready performance obligation.
We recognize revenues for a functional license of intellectual property at a point in time when the control of the license and technology transfers to the customer. For license agreements that include sales or usage-based royalty payments to us, we recognize revenue at the later of (i) when the related sale of the product occurs, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied, or partially satisfied.
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. 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
Our reagent rental agreements provide our customers the ability to use an instrument and consumables (reagents) on a per test basis. These agreements may also include maintenance of the instruments placed at customer locations as well as initial training. We initially determine if a reagent rental arrangement contains a lease at contract commencement. Where we have determined that such an arrangement contains a lease, we then determine the lease classification as operating or sales-type lease. The lease term used in performing the lease classification test, includes the noncancellable period of the lease together with those periods covered by lease extension options if the customer is reasonably certain to exercise that option, the periods covered by lease termination options if the customer is reasonably certain to not exercise that option, and the periods covered by the option to extend (or to not terminate) the lease when exercise of such option is controlled by the Company. The assessment of the lease term for reagent rental agreements, including the impact from any associated contractual termination penalties, is subject to an estimation process. While most of our reagent rental arrangements contain either the option for a lessee to extend and/or cancel the agreement, the period in which the contract is enforceable is very short so the lease term has been limited to the noncancellable period. Generally, these arrangements do not contain an option for the lessee to purchase the underlying asset.
We concluded that the use of the instrument (referred to as “lease elements”) in our reagent rental agreements is not governed by the revenue recognition guidance of ASC 606 but instead is addressed by the lease guidance in 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 we have allocated the transaction price to the lease and non-lease elements, the amount of variable payments allocated to such elements are recognized as income in accordance with ASC 842 or ASC 606, as applicable.
Maintenance services and reagents are allocated to the non-lease elements. Maintenance services are recognized ratably over the period whereas reagents revenue is recognized upon transfer of control when either (i) the consumables are delivered or (ii) the consumables are consumed by the customer.
Our reagent rental arrangements are predominantly comprised of variable lease payments that fluctuate depending on the volume of reagents purchased, as such arrangements generally do not contain any fixed or minimum lease payments. Our reagent rental arrangements are predominantly classified as operating leases and any sales-type leases have historically been immaterial, and we do not enter into direct finance leases.
Revenue attributed to the lease elements of our reagent rental arrangements represented approximately 3% of total revenue for both the three and nine months ended September 30, 2023 and September 30, 2022. Such revenue forms part of the Net sales in our condensed consolidated statements of income (loss).
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 include our internal sales force and certain partner sales incentive programs and are recorded within Selling, general and administrative expense in our condensed consolidated statements of income (loss).
Disaggregation of Revenue:
The following table presents our revenues disaggregated by geographic region (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
United States | | $ | 275.4 | | | $ | 284.1 | | | $ | 858.8 | | | $ | 848.2 | |
EMEA | | 193.1 | | | 200.1 | | | 609.1 | | | 636.3 | |
APAC | | 118.9 | | | 156.8 | | | 398.9 | | | 470.3 | |
Other (primarily Canada and Latin America) | | 44.7 | | | 39.8 | | | 123.3 | | | 117.2 | |
Total net sales | | $ | 632.1 | | | $ | 680.8 | | | $ | 1,990.1 | | | $ | 2,072.0 | |
The disaggregation of our revenue by geographic region is based primarily on the location of the use of the product or service, and by industry segment sources. The disaggregation of our revenues by industry segment sources are presented in our Segment Information footnote (see Note 11).
Deferred revenues primarily represent unrecognized fees billed or collected for extended service arrangements, including installation services. The deferred revenue balance at September 30, 2023 and December 31, 2022 was $66.5 million and $71.9 million, respectively. The short-term deferred revenue balance at September 30, 2023 and December 31, 2022 was $49.1 million and $52.2 million, respectively.
We warrant certain equipment against defects in design, materials and workmanship, generally for a period of one year. We estimate the cost of warranties at the time the related revenue is recognized based on historical experience, specific warranty terms and customer feedback. These costs are recorded within Cost of goods sold in our condensed consolidated statements of income (loss).
Warranty liabilities are included in Other current liabilities and Other long-term liabilities in the condensed consolidated balance sheets. Change in our warranty liability for the nine months ended September 30, 2023 and 2022 were as follows (in millions):
| | | | | | | | |
| Nine Months Ended |
| September 30, |
| 2023 | 2022 |
Balance at beginning of period | $ | 10.6 | | $ | 12.7 | |
Provision for warranty | 6.4 | | 6.7 | |
Actual warranty costs | (9.0) | | (8.8) | |
Balance at end of period | $ | 8.0 | | $ | 10.6 | |
Accounts Receivable and Allowance for Credit Losses
We record trade accounts receivable at the net invoice value and such receivables are non-interest bearing. We consider receivables past due based on the contractual payment terms. Amounts later determined and specifically identified to be uncollectible are charged or written off against the allowance for credit losses.
Any adjustments made to our historical loss experience reflect current differences in asset-specific risk characteristics, including, for example, accounts receivable by customer type (public or government entity versus private entity) and by geographic location of customer.
Changes in our allowance for credit losses were as follows (in millions):
| | | | | | | | |
| Nine Months Ended |
| September 30, |
| 2023 | 2022 |
Balance at beginning of period | $ | 15.0 | | $ | 15.1 | |
Provision for expected credit losses | 0.9 | | 1.2 | |
Write-offs charged against the allowance | (1.3) | | (2.3) | |
Recoveries collected | 0.5 | | 0.1 | |
Balance at end of period | $ | 15.1 | | $ | 14.1 | |
Recent Accounting Pronouncements Issued and to be Adopted
There are no new accounting pronouncements recently issued or newly effective that had, or are expected to have, a material impact on the Company's condensed consolidated financial statements.
2. 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, 2023 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 | $ | — | | | $ | 7.5 | | | $ | — | | | $ | 7.5 | |
Time deposits | — | | | 44.7 | | | — | | | 44.7 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Money market funds | 120.1 | | | — | | | — | | | 120.1 | |
Total cash equivalents (a) | 120.1 | | | 52.2 | | | — | | | 172.3 | |
Restricted investments (b) | 6.9 | | | — | | | — | | | 6.9 | |
Equity securities (c) | 6,947.6 | | | — | | | — | | | 6,947.6 | |
Loan under the fair value option (d) | — | | | — | | | 290.5 | | | 290.5 | |
Available-for-sale investments: | | | | | | | |
Corporate debt securities | — | | | 590.6 | | | — | | | 590.6 | |
U.S. government sponsored agencies | — | | | 283.7 | | | — | | | 283.7 | |
Foreign government obligations | — | | | 10.0 | | | — | | | 10.0 | |
| | | | | | | |
| | | | | | | |
Municipal obligations | — | | | 13.9 | | | — | | | 13.9 | |
Asset-backed securities | — | | | 342.5 | | | — | | | 342.5 | |
Total available-for-sale investments (e) | — | | | 1,240.7 | | | — | | | 1,240.7 | |
Forward foreign exchange contracts (f) | — | | | 0.7 | | | — | | | 0.7 | |
Total financial assets carried at fair value | $ | 7,074.6 | | | $ | 1,293.6 | | | $ | 290.5 | | | $ | 8,658.7 | |
| | | | | | | |
Financial liabilities carried at fair value: | | | | | | | |
Forward foreign exchange contracts (g) | $ | — | | | $ | 1.0 | | | $ | — | | | $ | 1.0 | |
Contingent consideration (h) | — | | | — | | | 17.1 | | | 17.1 | |
Total financial liabilities carried at fair value | $ | — | | | $ | 1.0 | | | $ | 17.1 | | | $ | 18.1 | |
Financial assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2022 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 | $ | — | | | $ | 21.1 | | | $ | — | | | $ | 21.1 | |
Time deposits | 5.7 | | | — | | | — | | | 5.7 | |
Asset-backed securities | — | | | 1.4 | | | — | | | 1.4 | |
| | | | | | | |
| | | | | | | |
U.S. government sponsored agencies | — | | | 6.0 | | | — | | | 6.0 | |
Money market funds | 31.5 | | | — | | | — | | | 31.5 | |
Total cash equivalents (a) | 37.2 | | | 28.5 | | | — | | | 65.7 | |
Restricted investments (b) | 6.8 | | | — | | | — | | | 6.8 | |
Equity securities (c) | 8,530.4 | | | — | | | — | | | 8,530.4 | |
Loan under the fair value option (d) | — | | | — | | | 322.6 | | | 322.6 | |
Available-for-sale investments: | | | | | | | |
Corporate debt securities | — | | | 699.3 | | | — | | | 699.3 | |
U.S. government sponsored agencies | — | | | 230.7 | | | — | | | 230.7 | |
Foreign government obligations | — | | | 13.5 | | | — | | | 13.5 | |
| | | | | | | |
Municipal obligations | — | | | 23.1 | | | — | | | 23.1 | |
Asset-backed securities | — | | | 333.4 | | | — | | | 333.4 | |
Total available-for-sale investments (e) | — | | | 1,300.0 | | | — | | | 1,300.0 | |
Forward foreign exchange contracts (f) | — | | | 1.5 | | | — | | | 1.5 | |
Total financial assets carried at fair value | $ | 8,574.4 | | | $ | 1,330.0 | | | $ | 322.6 | | | $ | 10,227.0 | |
| | | | | | | |
Financial liabilities carried at fair value: | | | | | | | |
Forward foreign exchange contracts (g) | $ | — | | | $ | 6.2 | | | $ | — | | | $ | 6.2 | |
Contingent consideration (h) | — | | | — | | | 35.6 | | | 35.6 | |
Total financial liabilities carried at fair value | $ | — | | | $ | 6.2 | | | $ | 35.6 | | | $ | 41.8 | |
(a)Cash equivalents are included in Cash and cash equivalents in the condensed consolidated balance sheets.
(b) Restricted investments are included in the following accounts in the condensed consolidated balance sheets (in millions):
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Restricted investments | $ | 5.6 | | | $ | 5.6 | |
Other investments | 1.3 | | | 1.2 | |
Total | $ | 6.9 | | | $ | 6.8 | |
(c) Equity securities are included in the following accounts in the condensed consolidated balance sheets (in millions):
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Short-term investments | $ | 60.3 | | | $ | 56.5 | |
Other investments | 6,887.3 | | | 8,473.9 | |
Total | $ | 6,947.6 | | | $ | 8,530.4 | |
(d) The Loan under the fair value option is included in Other investments in the condensed consolidated balance sheets.
(e) Available-for-sale investments are included in Short-term investments in the condensed consolidated balance sheets.
(f) Forward foreign exchange contracts in an asset position are included in Other current assets in the condensed consolidated balance sheets.
(g) Forward foreign exchange contracts in a liability position are included in Other current liabilities in the condensed consolidated balance sheets.
(h) Contingent considerations in a liability position are included in Other long-term liabilities in the condensed consolidated balance sheets. The changes in the fair value of contingent consideration included in Research and development expense and Selling, general and administrative expense amounted to $14.8 million and $4.1 million in the consolidated statements of income (loss) for the three months ended September 30, 2023, respectively. The changes in the fair value of contingent consideration included in Research and development expense and Selling, general and administrative expense amounted to $14.4 million and $4.1 million in the consolidated statements of income (loss) for the nine months ended September 30, 2023, respectively. No conditions triggering payment of the contingent consideration were met as of September 30, 2023.
Level 1 Fair Value Measurements
As of September 30, 2023, we own 12,987,900 ordinary voting shares and 9,588,908 preference shares of Sartorius AG (Sartorius), of Goettingen, Germany, a process technology supplier to the biotechnology, pharmaceutical, chemical and food and beverage industries. We own approximately 38% of the ordinary outstanding shares (excluding treasury shares) and 28% of the preference shares of Sartorius as of September 30, 2023. The Sartorius family trust (Sartorius family members are beneficiaries of the trust) holds a majority interest of the outstanding ordinary shares of Sartorius. We do not have the ability to exercise significant influence over the operating and financial policies of Sartorius primarily because we do not have any representative or designee on Sartorius' board of directors and have tried and failed to obtain access to operating or financial information necessary to apply the equity method of accounting.
The changes in fair market value of our investment in Sartorius for the three and nine months ended September 30, 2023 was a gain of $42.5 million and a loss of $1,556.1 million respectively, which is recorded in our condensed consolidated statements of income (loss).
Level 2 Fair Value Measurements
To estimate the fair value of Level 2 debt securities as of September 30, 2023, our primary pricing provider uses Refinitiv as the primary pricing source. Our pricing process allows us to select a hierarchy of pricing sources for securities held. If Refinitiv 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.
Available-for-sale investments consist of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | | Estimated Fair Value |
Short-term investments: | | | | | | | | |
Corporate debt securities | $ | 598.0 | | | $ | 0.3 | | | $ | (7.7) | | | | $ | 590.6 | |
Municipal obligations | 14.1 | | | — | | | (0.2) | | | | 13.9 | |
Asset-backed securities | 347.3 | | | — | | | (4.8) | | | | 342.5 | |
U.S. government sponsored agencies | 287.1 | | | — | | | (3.4) | | | | 283.7 | |
Foreign government obligations | 10.2 | | | — | | | (0.2) | | | | 10.0 | |
| | | | | | | | |
| | | | | | | | |
| $ | 1,256.7 | | | $ | 0.3 | | | $ | (16.3) | | | | $ | 1,240.7 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
The following is a summary of the amortized cost and estimated fair value of our debt securities at September 30, 2023 by contractual maturity date (in millions):
| | | | | | | | | | | |
| Amortized Cost | | Estimated Fair Value |
Mature in less than one year | $ | 473.6 | | | $ | 469.5 | |
Mature in one to five years | 636.7 | | | 627.8 | |
Mature in more than five years | 146.4 | | | 143.4 | |
Total | $ | 1,256.7 | | | $ | 1,240.7 | |
Available-for-sale investments consist of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | | Estimated Fair Value |
Short-term investments: | | | | | | | | |
Corporate debt securities | $ | 709.9 | | | $ | 0.2 | | | $ | (10.8) | | | | $ | 699.3 | |
Municipal obligations | 23.4 | | | — | | | (0.3) | | | | 23.1 | |
Asset-backed securities | 339.6 | | | 0.1 | | | (6.3) | | | | 333.4 | |
U.S. government sponsored agencies | 233.9 | | | — | | | (3.2) | | | | 230.7 | |
Foreign government obligations | 13.8 | | | — | | | (0.3) | | | | 13.5 | |
| | | | | | | | |
Total | $ | 1,320.6 | | | $ | 0.3 | | | $ | (20.9) | | | | $ | 1,300.0 | |
As of September 30, 2023, there were no significant continuous unrealized losses greater than 12 months.
Our evaluation of credit losses for available-for-sale investments included the extent to which the fair value is less than the amortized cost basis, adverse conditions specifically related to the debt security, an industry or geographic area, and any changes in the rating of a security by a rating agency. Credit loss impairments are limited to the amount that the fair value of an instrument is less than its amortized cost basis.
At September 30, 2023, we have concluded that all payments related to our available-for-sale investments are expected to be made in full and on time at par value. The diminution of value in the intervening period is due to market conditions such as illiquidity and interest rate movements and not due to significant, inherent credit concerns surrounding the issuer. As a result, we have no allowances for credit losses on our available-for-sale investments portfolio as of September 30, 2023.
Included in Other current assets are $11.2 million and $11.6 million of interest receivable as of September 30, 2023 and December 31, 2022, respectively, primarily associated with securities in our available-for-sale investments portfolio. The interest on these securities is typically payable semi-annually. Due to the short-term nature of our interest receivable asset, we have made an accounting policy election not to measure an allowance for credit losses for accrued interest receivable. We consider any uncollected interest receivable that is overdue greater than one year to be impaired for purposes of write-off. For the nine months ended September 30, 2023, we have not written-off any uncollected interest receivable.
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, are recorded at their fair value at each balance sheet date. The notional amounts provide one measure of foreign exchange exposures as of September 30, 2023 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 and forward points from Refinitiv on the last business day of the quarter. The resulting gains or losses from foreign exchange contracts offset gains or losses from foreign currency remeasurement of the related receivables and payables, both of which are included in Foreign currency exchange (gains) losses, net in the condensed consolidated statements of income (loss).
The following is a summary of our forward foreign exchange contracts (in millions):
| | | | | |
| September 30, |
| 2023 |
Contracts maturing in October through December 2023 to sell foreign currency: | |
Notional value | $ | 701.5 | |
Unrealized loss | $ | (0.4) | |
Contracts maturing in October through December 2023 to purchase foreign currency: | |
Notional value | $ | 80.1 | |
Unrealized gain | $ | 0.1 | |
Level 3 Fair Value Investments
During the fourth quarter of 2021, we extended a collateralized loan to Sartorius-Herbst Beteiligungen II Gmbh ("SHB"), a private limited company incorporated under the laws of Germany, with a principal amount of €400 million due on January 31, 2029, subject to certain events which could trigger payment prior to maturity (the “Loan”). SHB used the Loan proceeds to partially finance the acquisition of interests under the Sartorius family trust (“Trust”) from a beneficiary of the Trust. The Loan is collateralized by the pledge of certain of the Trust interests, which upon termination of the Trust in mid-2028 represent the right to receive Sartorius ordinary shares. Interest on the loan is payable annually in arrears at 1.5% per annum, and the entire principal amount is due at maturity. In addition to contractual interest, we are entitled to certain value appreciation rights associated with the acquired Trust interests, which upon termination of the Trust represent the right to receive Sartorius ordinary shares, that is due upon repayment of the Loan. We elected the fair value option under ASC 825, Financial Instruments for accounting of the Loan to SHB to simplify the accounting. The fair value of the Loan and value appreciation right is estimated under the income approach using a discounted cash flow, and option pricing model, respectively, which results in a fair value measurement categorized in Level 3. The significant assumptions used to estimate fair value of the Loan include an estimate of the discount rate and cash flows of the Loan and the significant assumptions used to estimate the fair value of the value appreciation right include volatility, the risk-free interest rate, expected life (in years) and expected dividend. The inputs are subject to estimation uncertainty and actual amounts realized may materially differ. An increase in the expected volatility may result in a significantly higher fair value, whereas a decrease in expected life may result in a significantly lower fair value. All subsequent changes in fair value of the Loan and value appreciation right, including accrued interest are recognized in (Gains) losses from change in fair market value of equity securities and loan receivable in our condensed consolidated statements of income (loss).
The overall change in fair market value reflected in (Gains) losses from change in fair market value of equity securities and loan receivable during the three months ended September 30, 2023 was a loss of $4.9 million, which includes a $10.8 million loss from change in fair market value of the Loan and a $5.9 million gain from change in fair market value of the value appreciation right. The overall change in fair market value reflected in (Gains) losses from change in fair market value of equity securities and loan receivable during the nine months ended September 30, 2023 was a loss of $28.9 million, which includes a $0.4 million loss from change in fair market value of the Loan and a $28.5 million loss from change in fair market value of the value appreciation right. The decrease in the fair market value of the value appreciation right was due to a decline in the value of the Sartorius ordinary shares. As of September 30, 2023, the €400 million principal amount of the loan is still due on January 31, 2029.
The following table provides a reconciliation of the Level 3 Loan measured at estimated fair value (in millions):
| | | | | |
December 31, 2022 | $ | 322.6 | |
| |
Net decrease in estimated fair market value of the loan included in (Gains) losses in fair market value of equity securities and loan receivable | $ | (28.9) | |
Foreign currency exchange gains (losses), net | $ | (3.2) | |
| |
September 30, 2023 | $ | 290.5 | |
3. GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS
Changes to goodwill by segment are as follows (in millions):
| | | | | | | | | | | | | | | | | |
| Life Science | | Clinical Diagnostics | | Total |
Balances as of December 31, 2022: | | | | | |
Goodwill | $ | 333.3 | | | $ | 408.4 | | | $ | 741.7 | |
Accumulated impairment losses | (41.8) | | | (293.4) | | | (335.2) | |
Goodwill, net | 291.5 | | | 115.0 | | | 406.5 | |
| | | | | |
Acquisitions | — | | | 0.4 | | 0.4 | |
| | | | | |
| | | | | |
Foreign currency adjustments | — | | | 0.1 | | | 0.1 | |
Period increase, net | — | | | 0.5 | | | 0.5 | |
| | | | | |
Balances as of September 30, 2023: | | | | | |
Goodwill | 333.3 | | | 408.9 | | | 742.2 | |
Accumulated impairment losses | (41.8) | | | (293.4) | | | (335.2) | |
Goodwill, net | $ | 291.5 | | | $ | 115.5 | | | $ | 407.0 | |
Information regarding our identifiable purchased intangible assets with finite and indefinite lives is as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 |
| Weighted-Average Remaining Amortization Period (years) | | Purchase Price | | Accumulated Amortization | | Net Carrying Amount |
Customer relationships/lists | 5.2 | | $ | 104.3 | | | $ | (93.6) | | | $ | 10.7 | |
Know how | 2.0 | | 165.1 | | | (156.2) | | | 8.9 | |
Developed product technology | 12.2 | | 215.5 | | | (128.4) | | | 87.1 | |
Licenses | 5.1 | | 58.8 | | | (41.1) | | | 17.7 | |
Tradenames | 5.8 | | 6.0 | | | (4.5) | | | 1.5 | |
Covenants not to compete | 2.5 | | 6.5 | | | (4.7) | | | 1.8 | |
| | | | | | | |
| | | | | | | |
Total finite-lived intangible assets | | | 556.2 | | | (428.5) | | | 127.7 | |
In-process research and development | | | 186.5 | | | — | | | 186.5 | |
Total purchased intangible assets | | | $ | 742.7 | | | $ | (428.5) | | | $ | 314.2 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Weighted-Average Remaining Amortization Period (years) | | Purchase Price | | Accumulated Amortization | | Net Carrying Amount |
Customer relationships/lists | 5.0 | | $ | 104.7 | | | $ | (89.9) | | | $ | 14.8 | |
Know how | 2.8 | | 166.2 | | | (153.9) | | | 12.3 | |
Developed product technology | 12.8 | | 211.1 | | | (121.6) | | | 89.5 | |
Licenses | 5.8 | | 59.0 | | | (38.5) | | | 20.5 | |
Tradenames | 6.6 | | 6.1 | | | (4.5) | | | 1.6 | |
Covenants not to compete | 3.1 | | 6.4 | | | (4.0) | | | 2.4 | |
| | | | | | | |
| | | | | | | |
Total finite-lived intangible assets | | | 553.5 | | | (412.4) | | | 141.1 | |
In-process research and development | | | 191.0 | | | — | | | 191.0 | |
Total purchased intangible assets | | | $ | 744.5 | | | $ | (412.4) | | | $ | 332.1 | |
Amortization expense related to purchased intangible assets is as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | |
Amortization expense | $ | 6.2 | | | $ | 6.2 | | | $ | 18.1 | | | $ | 18.8 | |
4. INVENTORY
Following are the components of Inventory at September 30, 2023 and December 31, 2022 (in millions):
| | | | | | | | | | | | | | | | | |
| | | September 30, 2023 | | December 31, 2022 |
Inventory: | | | | | |
Raw materials | | | $ | 230.4 | | | $ | 228.8 | |
Work in process | | | 244.5 | | | 220.9 | |
Finished goods | | | 300.9 | | | 269.6 | |
Total Inventory | | | $ | 775.8 | | | $ | 719.3 | |
5. SUPPLEMENTAL CASH FLOW INFORMATION
The reconciliation of net loss to net cash provided by operating activities is as follows (in millions):
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2023 | | September 30, 2022 |
Net loss | $ | (987.0) | | | $ | (4,455.3) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
Depreciation and amortization | 108.7 | | | 101.8 | |
Reduction in the carrying amount of right-of-use assets | 30.7 | | | 29.8 | |
Share-based compensation | 45.1 | | | 42.8 | |
| | | |
Losses from change in fair market value of equity securities and loan receivable | 1,576.5 | | | 6,172.3 | |
Gain on divestiture of a division | — | | | (1.4) | |
Changes in fair value of contingent consideration | (18.5) | | | — | |
Payments for operating lease liabilities | (30.4) | | | (28.1) | |
(Increase) decrease in accounts receivable | 31.6 | | | (44.5) | |
Increase in inventories | (61.7) | | | (150.6) | |
(Increase) decrease in other current assets | 15.0 | | | (11.9) | |
Decrease in accounts payable and other current liabilities | (72.4) | | | (69.7) | |
Increase (decrease) in income taxes payable | 56.4 | | | (39.2) | |
Decrease in deferred income taxes | (397.4) | | | (1,439.1) | |
Increase (decrease) in other long-term liabilities | 3.9 | | | (2.0) | |
Other | (6.6) | | | 9.9 | |
Net cash provided by operating activities | $ | 293.9 | | | $ | 114.8 | |
| | | |
Non-cash investing activities: | | | |
Purchased property, plant and equipment | $ | 2.9 | | | $ | 3.3 | |
Purchased marketable securities and investments | $ | — | | | $ | |